Windfall taxes are a ghastly idea. They are a sop to prejudice, a burden on risk-taking and a form of arbitrary confiscation. No sensible person should support them. So why do I now find the idea of a windfall tax on banks so appealing? Well, this time, it really does look different. Continue reading "Tax the windfall banking bonuses"

From the FT:
Obama seeks change Beijing can believe in - David Pilling
How to reinvent China’s growth - John Gapper
Modesty would become Europe’s new duo - Jacques Delors

From elsewhere:
The effectiveness of fiscal and monetary stimulus in depressions - VoxEU
A Yuan-sided argument - Economist
Balancing fiscal support with fiscal solvency - IMFDirect

From the FT:
America must start treating China as a friend - Bill Owens
How the market proved no panacea for BT - John kay

From elsewhere:
Uncertainty and the tale of two depressions - VoxEU
Lecturing each other on trade - Michael Pettis

Barack Obama, president of the US, met Hu Jintao, president of the People’s Republic of China, for a private meeting on Tuesday. The agenda was long, covering the world economy, climate change and non-proliferation of nuclear weapons. The last two are the most important, over the long run. But the first is the most urgent. If we do not achieve a healthy global economic recovery, hope of a co-operative relationship is likely to prove vain. Yet such a recovery is far from ensured. Worse, some of what is now happening – particularly China’s decision to depreciate the renminbi along with the dollar – makes healthy recovery less likely.

This, then, was an opportunity for Mr Obama to tell some brutal truths. I hope he did, after careful briefing from his staff, on the following lines.

“Mr President, as I said in Japan, ‘the US does not seek to contain China, nor does a deeper relationship with China mean a weakening of our bilateral alliances. On the contrary, the rise of a strong, prosperous China can be a source of strength for the community of nations’. For the foreseeable future, our two countries will be the leading players on the world stage. We must approach our challenges in a spirit of co-operation and accommodation. But that is, alas, not happening over your exchange rate policies.

The remainder of the article can be read here. Please post comments below.

From the FT:
China’s on-off American romance - Simon Schama
Muddling through with money and morals - Michael Skapinker

From elsewhere:
China and the American job machine - Economist’s View
America’s Preeminence by Default - Free Exchange
What should be the goal of a fiscal exit strategy - IMFdirect
Euro-area sovereign risk during the crisis - VoxEU

From the FT:
A Franco-German marriage of convenience - Wolfgang Munchau
The American dream needs repair - Clive Crook
How Europe can be heard in Washington - Jeremy Shapiro and Nick Witney

From elsewhere:
World out of balance - Paul Krugman, New York Times
China lambastes Dollar Carry trade - Naked Capitalism
Unemployed Americans should hunker down for more job losses - Nouriel Roubini
Treasury wants to hold on to TARP money - Naked Capitalism

From the FT:
Simple truths about the economy - Samuel Brittan
Ethics alone will not prevent financial crises - Philip Booth

From Elsewhere:
Politico does Economic Analysis - Econbrowser
Paul Krugman: Free lo Lose - Economist’s View
Tim Geithner, double talker - Free exchange
Asia and the IMF: Toward a deeper engagement - IMFDirect
Krugman on the Need for Jobs Policies - Naked Capitalism

By Paul De Grauwe

The recent decline of the dollar against major currencies such as the euro and the Japanese yen has been spectacular. Even more spectacular, but often forgotten, is the long run decline of the dollar against the major currencies in the world. Since 1960 the dollar lost two thirds of its value against the Japanese yen, the Swiss franc and the German mark (since 1999 the euro).

The long-term decline of the dollar appears to be quite surprising especially considering that at least since the early 1990s the US has been seen to produce superior economic results, ie a higher productivity growth than most of Europe and Japan with more or less the same rates of inflation. Yet despite the appearance of superior economic performance the dollar has gone on losing value against currencies of countries deemed to have an inferior economic system. Where does this paradox come from? Continue reading "The dilemma for the dollar"