Really great links - Germany - Dysfunctional Fed - Greece

George Soros - Germany - "To be sure, Germany cannot be blamed for wanting a strong currency and a balanced budget but it can be blamed for imposing its predilection on other countries that have different needs and preferences - like Procrustes, who forced other people to lie in his bed and stretched them or cut off their legs to make them fit. The Procrustes bed inflicted on the eurozone is called deflation.
        Unfortunately Germany does not realize what it is doing. It has no desire to impose its will on Europe; all it wants to do is to maintain its competitiveness and avoid becoming the deep pocket to the rest of Europe. But as the strongest and most creditworthy country it is in the driver's seat. As a result Germany objectively determines the financial and macroeconomic policies of the eurozone without being subjectively aware of it. When all the member countries try to be like Germany they are bound to send the eurozone into a deflationary spiral. That is the effect of the policy pursued by Germany and - since Germany is in the driver's seat - these are the policies imposed on the eurozone."

Scott Sumner - Fed and fiscal policy - "My point is that fiscal stimulus must always be examined in the context of monetary policy. If you have conservative central banks that are rigidly targeting the price level, then fiscal stimulus may be ineffective. But in fairness to the other side, I’m sure you could build a plausible argument that under the sort of dysfunctional Fed described above, it might have a stimulative effect. Perhaps Bernanke is not strong enough to take any unconventional policy initiatives, but is strong enough to prevent the conservatives from inhibiting fiscal stimulus through a premature exit strategy. But as I said, I don’t think fiscal policy is very powerful even if there is no push-back from the Fed."

Michael Pettis - Greece - "Greece’s insolvency will not be recognized for many years.
When most of the obligations of an insolvent sovereign were widely dispersed among a wide variety of bondholders, market forces acted relatively quickly to force debt forgiveness. Defaulted bonds trade at deep discounts, and it is a lot easier for someone who bought the debt at one-quarter its face value to agree to 50% debt forgiveness than for someone who made the original loan.
        But things are different with the current crop of insolvent European sovereign debts, as they were with the sovereign loans of the 1970s. They are heavily concentrated within the banking system, and the banks cannot recognize the losses without themselves collapsing into insolvency.
        That cannot be allowed to happen. The LDC debt crisis of the 1980s raged on nearly a full decade – a decade of stopped payments, capital flight, and agonizingly low growth – before creditors formally acknowledged that most struggling borrowers could not repay their debt and would need partial debt forgiveness. The first formal recognition of debt forgiveness occurred with Mexico’s Brady Plan restructuring in 1990. Growth returned to most countries only after it became clear that they would receive debt forgiveness."