Danger... danger... China.... China... the sky is falling!!!

Is China Threatening to Stop "Manipulating" Its Currency?

The NYT reports that China has been buying up fewer dollars in recent months to hold as reserves. It suggests that this may be due to growing concern about the potential loss in value on its dollar holdings. It is worth noting that China must buy up dollars in order to keep down the value of its currency against the dollar. China has maintained a managed exchange rate where the value of the yuan is below the market rate. This reduces the cost of China's imports to people in the United States. This managed exchange rate is exactly what the U.S. government has complained about for years as currency "manipulation." If China decided to stop buying up dollars for whatever reason, then it would mean that China's currency would rise against the dollar. Ostensibly, this is what U.S. government wants to see happen. It is not something that should provoke fear.

Posted via web from jimnichols's posterous

McCain economic adviser points out the obvious...

McCain’s former economic adviser flips on Bush tax cuts.

Throughout the presidential campaign, Sen. John McCain’s (R-AZ) top economic adviser and former CBO director, Douglas Holtz Eakin, argued passionately for McCain’s proposal to extend the Bush tax cuts (and cut some more taxes for the wealthy on top of it). Holtz-Eakin, however, has now come out against making the tax cuts permanent, acknowledging that it would explode the deficit:

Though economist Douglas Holtz-Eakin spent the 2008 presidential campaign advising Sen. John McCain to defend the Bush-era tax cuts, he now thinks they should be allowed to expire on Dec. 31, 2010 due to “the prospect of an Argentina-style fiscal meltdown.” Said Holtz-Eakin: “If you ask: ‘Who pays the taxes?’, it’s the first step toward not having the answer be: ‘Our kids.’”

Recall, McCain also flip-flopped on the Bush tax cuts, but he opposed the cuts in 2001 and argued for them in 2008.

Posted via web from jimnichols's posterous

Ocean of debt

Jason Pye is on the long term deficit crisis meme... I'll outsource to economist Brad Delong on this one...

We need to worry about the deficits in 2015, 2020, 2025, and beyond--not about the deficits in 2009, 2010, and 2011...

The key to dealing with the deficits in 2015, 2020, 2025, and beyond is--you guessed it--health care. That is the entire ballgame...

[These] long-run deficits...are not much, much worse than they were in 2003--they are somewhat better. Obama has cut the long-run deficit. Bush boosted it. It remains a big problem--but it's not a problem of Clinton's or Obama's or Pelosi's or Reed's creation, it's a problem created by Bush and his cheerleaders

CEPR's done the leg work regarding this with their IOUSA Budget Deficit Calculator which:

allows you to see what the projected U.S. budget deficit would be, as a percentage of GDP, if the United States had the same per person health care costs as various other countries which enjoy longer life expectancies than the United States.

Its time we join the rest of the industrialized world and have some form of Universal Health Care reform--those who oppose competition in the marketplace, which would hurt the profits of insurance companies and help lower the costs for consumers--are the ones creating this long term crisis.

As if ranking 37th in the world for health care isn't bad enough for people... our kids are paying to subsidize private profits...

To see more on our progress in regards to the budget itself you can check out Congressional Budgets Pass Early Tests on Deficits and Economy, but Questions Remain from CBPP

On the whole, the budget plans that the House and Senate approved yesterday pass the twin tests of: (1) beginning to address long-term deficits, or at least not making these deficits worse; and (2) not undermining the fiscal stimulus Congress recently passed. [i] The Senate’s adoption, however, of amendments that are intended both to facilitate a further large tax cut for the estates of the nation’s wealthiest individuals and to make it less likely that Congress will allow the Bush tax cuts to expire for people at the top of the income scale suggests that significant dangers lie ahead. The adoption of these measures raises questions about Senators’ professed concerns about deficits and debt and about whether Congress has the fortitude to begin making hard choices.

deficit spending

The Economist on the deficit

This danger does not justify penny-pinching now: that could merely prompt a bigger collapse in economic activity and even larger deficits.