Tuesday round up.

At RCM, John Tamny criticizes Treasury Secretary Geithner’s plan to manipulate trade balances through continued dollar weakness.

In The WSJ, University of Chicago’s John H. Cochrane analyzes Geithner’s trade balance argument.

Since when is every trade surplus or deficit an "external imbalance" in need of correction? It makes sense for a country that has good investment prospects to import a lot of goods, run trade deficits, and borrow money. Years later, the country puts the resulting products on boats to pay the lenders back. The U.S. borrowed abroad to finance our railroads in the 19th century and ran surpluses when Europe was rebuilding after World War II. Were these "imbalances"?

Or consider a country (say, China) with a lot of middle-aged workers who need to save for retirement. It makes perfect sense for them to put stuff on boats and send it to a second country (say, the United States) whose people want to consume the goods. The people in the first country invest their earnings, say, by buying the bonds issued by the second country. And as they retire, they cash in the bonds and buy goods flowing the other way.

Do these and similar stories exactly account for current trade patterns? I don't know. But nobody else does, either. In particular, the army of economists in the basements of the International Monetary Fund (IMF) has no clue exactly how much each country should be saving, or where the best untapped global investment opportunities are around the world—including whether trade patterns are "normal" or "imbalanced."

On CNBC, Keynesian Stephen Roach lashes China currency bashers:




Cato’s Steve Hanke recounts the history of US efforts to destabilize China’s currency.

Investor’s Business Daily offers non-monetary ways to increase exports.

At NRO, Stephen Spruiell comments on Paul Krugman’s claim that lower revenue due to contraction, not abnormally high spending, accounts for the budget deficit:




On The Washington Times, Richard Rahn argues taxes already have been increased by $352 billion.

At Alhambra Investments, Joseph Y. Calhoun, III assesses the economy.

On The Kudlow Report, Steve Forbes suggests the budget deficit can be reduced with strong growth:




Reprinted from First Things, David Goldman and Reuven Brenner analyze the Keynesian roots of the current crisis. (H/T: Dick Fox at Supply-Side Forum.)