The Gold Standard  

Lord Skidelsky writes that Keynes felt that we needed different economic models for different times. That is as it should be, in social sciences.

That is what John Hussman alluded to last week when he said financial asset prices too have a context that went into the judgement of whether they were too high or too low.

Holger Schmieding, the Head of European Economics at Bank of America Merrill Lynch defends the German response to the crisis. That is a nice hedge for an American financial institution.

Over at The Baseline Scenario (one of my favourite blogs), Simon Johnson points to an interesting possibility: that the Obama administration might have tactically retreated on banking reform only to wait for a strategic kill later. 24-hours later, he was sceptical of his own hypothesis.

Link to a good Joe Nocera piece on Geithner Plan on Executive Compensation in NYT is found in the above post by Simon Johnson:

And unlike other companies, where people glow with pride at the introduction of a new product, the key moment in the life of a banker is when he finds out what his bonus is for the year. None of this will be easy to change. [More here]

Touché

Would recommend David Leonhardt’s piece for some clear writing on the state of the US fiscal deficit:

The solution, though, is no mystery. It will involve some combination of tax increases and spending cuts. And it won’t be limited to pay-as-you-go rules, tax increases on somebody else, or a crackdown on waste, fraud and abuse. Your taxes will probably go up, and some government programs you favor will become less generous.

That is the legacy of our trillion-dollar deficits. Erasing them will be one of the great political issues of the coming decade.