Really good links - Trade wars - Basel III - Sustainable external deficits - Woodhill curve - Peer Steinbrück

Scott Sumner - Trade wars - "In 1985 Paul Krugman (p. 7) argued that the dollar needed to fall sharply in order to prevent chronic CA deficits, which he said would lead to “infeasible” foreign debt levels. He was right about the dollar, it did fall sharply after 1985. But we’ve had 25 years of almost nonstop CA deficits, and no sign of a light at the end of the tunnel. Why? Because the falling dollar didn’t address the fundamental cause of the CA deficit, a saving/investment imbalance produced by a fiscal regime that is profoundly anti-saving. You can’t fix that with a band-aid. "

Economist.com - Basel III - "The most serious failure in Basel III is that it doesn't address the principal contribution of Basel II to the last financial crisis, namely, the calculation of risk-weights. One of the key components of Basel II was to increase the amount of capital banks had to hold against riskier assets. Extremely low-risk assets, meanwhile, could be held with very little or even no capital. Risk, moreover, was calculated primarily by reference to the rating assigned by one of the recognised ratings agencies. The consequence of this Basel II reform was to discourage banks from lending to risky enterprises, and to encourage the accumulation of apparently risk-free assets. This was a primary contributor to the structured finance craze, as securitisation was a way to "manufacture" apparently risk-free assets out of risky pools. What brought banks like Citigroup and Bank of America to their knees wasn't direct exposure to sub-prime loans, but exposure to triple-A-rated debt backed by pools of such loans, debt which turned out not to be risk-free at all."

Claus Vistesen - Sustainable external deficits - "Economists trained in the art of general equilibrium would immediately point out that it does not matter much since if there is one thing that we can be sure off it is that at all points in time the sum of external deficits will equal the sum of external surpluses. I cannot but agree, but this also means that speaking of surplus nations as the good guys and deficit nations as the bad guys does not make sense. What we really need here is economies with ability to run sustainable external deficits; this basically means economies who need to borrow to maintain trend economic growth and a proper rate of investment given the intrinsic return of the economies investment pool."

Louis Woodhill - Laffer curve - "The Woodhill Curve extends the concept of the Laffer Curve in two ways: 1) It takes into account the element of time-the fact that the future matters; and, 2) It focuses on the impact of tax changes on total Federal revenues rather than on the revenue generated by an individual tax.
        The principle behind the Woodhill Curve can be stated as follows: "There are an infinite number of combinations of "tax take" (Federal revenues as a percent of GDP) and average annual real economic growth rate that will yield the same present value (PV) of future Federal revenues." While the shape of the Laffer Curve is a matter for speculation, it is possible to quantify the shape of the Woodhill Curve."

Peer Steinbrück - In a SPIEGEL interview, former German Finance Minister Peer Steinbrück talks about his role in fighting the financial crisis, how he pressured America to stop a second Lehman Brothers and why Greece is not out of the woods yet