Krugman about US debt

Paul Krugman on the US national debt: 
"And you don’t have to be a right-winger to acknowledge that yes, very high marginal tax rates act as a disincentive to productive activity. So real GDP may well fall significantly.

This is what I mean when I say that the burden of debt is about incentives, not about having to deliver resources to other people.

Private debt, by the way, creates a different kind of problem: again, it doesn’t directly make us poorer, but it increases our macroeconomic vulnerability.

The general point is that the analogy with a family that owes too much is all wrong. Unfortunately, this dumb analogy dominates our national discourse."

The cost of Obama's friendship... ($3)

By making a $3 contribution to the Obama's campaign Americans can enter the lottery, which will choose three of them to dine with the President and his family. There are a couple of paragraphs in this article that I found interesting:

1. The President's letter apparently says:
"We don’t take a dime from D.C. lobbyists or special-interest PACs -- never have and never will. Instead, we believe in the kind of politics that gives everyone a seat at the table -- so we’re literally offering these seats at dinner to folks who are willing to step forward and be a part of it."

A report by the Washington Post however provides a different picture of the reality:
"Despite frosty relations with the titans of Wall Street, President Obama has still managed to raise far more money this year from the financial and banking sector than Mitt Romney or any other Republican presidential candidate, according to new fundraising data."

2. Here is an interesting accounting trick:
"Now click the line that reads, “Chip in $3 or whatever you can today -- and you’ll automatically be entered to be one of our dinner guests.” You’ll immediately be entered into the real dynamics of campaign contributions. They’re no longer talking $3 contributions. They are now talking $5,000 contributions. Yes, I know, you thought that $2,500 was the maximum you could give. But, you see, there are two stages to the Obama campaign: the primary elections and the general elections. What primary elections? you ask. Well, that’s the neatness of the trick. Obama won’t spend a dime on the primaries anywhere. Still, you can give $2,500 twice."

You've just made a choice... (Or supported someone who has made it for you)

While the consolidation of power by the new North Korean dictator is an entertaining to watch political chess game, the West has already made its most important decision. (By "the West" I mean America, Europe, Japan, South Korea - all the countries that may benefit from the democratization in the North Korea, and who take  pride in their commitment to defending human rights.):
The North Korean weakness that resulted from the death of Kim change of the regime presented a unique choice of seizing the moment to force a regime change - militarily, like in Afghanistan, Iraq, and Libya, or by using political pressure, in Pakistan (forcing the departure of Pervez Musharraf), as the early Obama administration attempted to do in Honduras, and finally as it happened when the West refused to support its long-term ally in Egypt.

Please note that I am not advocating the use of force, but pointing that there was a clear choice (albeit complicated by the spectacular intelligence failures): use the weakness of the power transition in North Korea to topple the regime, or wait till the regime consolidates its power in order to negotiate with the new dictator.
The world, weary of the wars in Afghanistan and Iraq, immediately chose the second option. We can now only wait and see whether the future negotiations with the new Korean dictator will succeed in helping Korean people and reducing the danger that the dictatorship poses to its neighbors. But every choice implies a share of responsibility for its consequences...

Nothing personal - just business

A new package of financial agreements between Japan and China is suprizing in two ways:

1. There is an argument to be made against the possibility that the Chinese yuan will supplant anytime soon the US dollar as the principal international currency - the main ones are the political uncertainty resulting from the nature of the Chinese political system. However, the agreement shows that neither yuan nor yen need to become the major reserve currency in order to make the dollar less relevant:
"The agreements include a plan for a Japanese government-backed entity to sell yuan-denominated bonds in China, a boost to Beijing's campaign to deepen its domestic capital markets. Other measures are designed to make it easier for companies to convert the Chinese and Japanese currencies directly into the other, without requiring an intermediate conversion into dollars, the current common practice. About 60% of all Japan-China trade is currently settled in American dollars, according to a Japanese government official who briefed reporters on the agreements."

2. It is remarkable that Japan is willing to overlook its political disagreements with and the military danger posed by China for the sake of business. This may be just another indication that the traditional Japanese reliance on the military American protection is diminishing - it sees more security in having better relations with its neighbors:

"Still, the accords were striking, given recent tensions between China and Japan, including a prolonged diplomatic standoff just over a year ago in a territorial dispute, and hawkish comments by Mr. Noda and aides earlier this year about their concerns of a Chinese military threat. While China has reached agreements with other countries to encourage investment in its bond market and to encourage convertibility from the yuan into other currencies, this appears to be the most comprehensive such bilateral package. The moves suggest the two leaders may now see the need to downplay political differences and focus on reinforcing their economies, particularly at a time when Europe's debt turmoil and flagging global growth threaten Asian growth."