Monday, September 27, 2010

Monday items.

In advance of Wednesday’s congressional vote on China, Nobel Laureate and supply-side economics creator Robert Mundell says forcing the yuan significantly higher would be disastrous for China and the U.S.

In The Financial Times, Mundell student Komal Sri-Kumar
argues for expanded access to Chinese markets, rather than yuan manipulation.

In pioneering work on exchange rates done during the 1960s, my Columbia University doctoral dissertation adviser, Robert Mundell, showed that if exchange rates are fixed, adjustment by the trading economies occurs in terms of changes in domestic costs and prices. The inflationary pressures evident in China validate Professor Mundell’s theories. There is, therefore, nothing “manipulative” about simply maintaining fixed exchange rates. Keep in mind that under the Bretton Woods system of exchange rates from the end of the Second World War until the early 1970s, keeping the rates fixed with respect to the dollar was a sign of good economic housekeeping!

The conservative Heritage Foundation releases its own detailed policy agenda. Sound money is not included:

At Bloomberg, Steve Forbes
predicts weak growth but doubts a double dip recession.

On Forbes, John Tamny suggests emulating rather than bashing the rich.

At NRO, Kevin Williamson
makes the vital distinction that production, not consumption, is the heart of economic progress.

The problem of economic policy is not getting people to consume. It is getting them to produce. You can train a monkey to consume. (In fact, he requires no training, especially once you get him coked up on the taxpayers’ dime.) Americans are extraordinarily productive people, but our economy has taken a hit because we have a couple of trillion dollars’ worth of capital locked up in dead real estate, dead securities, and the swelling sovereign debt upon which our pet Leviathan battens. If you have a trillion dollars locked up in residential real estate that still is over-valued — its inflated price being sustained by hook and by crook by the geniuses in Washington — that capital can’t be put to real productive uses. (Also, people who could otherwise buy or rent cheap real estate will be paying too much for housing, taking yet more potentially productive capital out of the markets.)

At Econ Log, Arnold Kling discusses Paul Volcker’s early-1980s tenure as Fed chairman.

The WSJ reports on policy differences among European policy makers on how to save the euro.

Also in the Journal, former GW Bush economic advisor Edward Lazear
suggests limiting federal spending to inflation minus one percent will balance the budget in less than a decade.

Cato’s Dan Mitchell
promotes spending cuts, not faster economic growth, as the key to balancing the budget.

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