A couple of days ago, I noted the “developing attitude of the Republican establishment towards government debt, which is essentially that of banana republic populism. “. Now the same characterization has hit the pages of the NYT, in a piece by Floyd Norris on the decline of the dollar

To John Paul Rathbone, an economics commentator on breakingviews.com*, such borrowing is evidence that the United States is “taking on the financial characteristics of a banana republic.”

That’s a hostile view from Britain. But borrowers need to worry about what lenders think of them.

Norris is careful to put exactly the right amount of distance between himself and the “banana republic” characterization. But who would have imagined, in the late 20th era of US economic triumphalism, that such a thing would be said at all, let alone in the NYT Business section.

*The breakingviews.com site requires registration -free for a 30 day trial. The article to which Norris refers discusses the shift from direct FDI into the US to debt, then goes on to observe

In a typical emerging markets crisis, this deterioration would go two steps further. Investors would require ever shorter maturity debt, which then has to be rolled over. And increasingly they would demand that the debt be denominated in a foreign currency, which removes any chance that the country inflates away the problem by printing money. The US doesn’t have the latter problem. But the steepness of the yield curve does suggest some investors are turning to shorter-term bonds.

Furthermore, as State Street strategists point out, the US is not an obvious home for value-conscious bond investors anyway. For one, the Federal Reserve has a high tolerance for inflation, at least compared to the European Central Bank. That suited the US when equity capital flows ruled the currency markets. But it doesn’t in these risk averse, bond-driven days. From that point of view then, it doesn’t matter for the euro that the European economy is struggling. Indeed, quite the contrary is true. The euro will probably continue to rally against the dollar, despite a worsening eurozone economy, simply because euroland bonds are a safer bet.

This is all spot on, though I don’t rule out the final stage of a resort to the printing press and a flight from dollar-denominated assets.

Bertram is back after a hiatus of a couple of months, with a new software setup called Bloxsom. And d-squared digest is allegedly produced by a “A fat young man without a good word to say for anyone”. Check out his one-line summaries of mammoth posts by Steven Den Beste

I’ve nominated Ari Fleischer for Slate’s Whopper of the Week feature. His latest big lie is even bigger than the one that won him last week’s award. In referring to Iraq’s Al-Samoud missiles, Fleischer says

Well, here’s the Catch-22 that Saddam Hussein has put himself in: he denied he had these weapons, and then he destroys things he says he never had. If he lies about never having them, how can you trust him when he says he has destroyed them? … It also contradicts the fact that he said he doesn’t have any weapons in violation of the United Nations resolutions.

Every part of this is untrue. Saddam openly admitted having the missiles and has consistently maintained that they don’t violate the resolutions and that, in destroyng them, he is simply deferring to the judgement of the UN inspectors that they do. This is all on the public record, as Hans Blix observed (quote from NYT)

In another sign of the poisoning of relations between the inspectors and the United States, Mr. Blix directly contradicted the White House spokesman, Ari Fleischer, who said on Monday that Mr. Hussein had earlier denied he had “these weapons,” meaning the missiles. Mr. Blix said the missiles “were declared” and that “they were not clandestine.”

He was referring to Iraq’s original arms declaration in December. “

And from Fleischer’s own mouth in response to Saddam’s interview with Dan Rather

Fleischer said Saddam’s comments about the Al Samouds represented “open defiance” of the United Nations. “He refuses even to acknowledge that the weapons are prohibited,” Fleischer said.

The fact that Fleischer is a blatant liar is not surprising and does not mean that Saddam is truthful. But how can anybody advocate following people like Fleischer (and Bush and Rumsfeld and Cheney) to war. And regrettably, the only credible person in the Administration, Colin Powell, now seems to have signed on to the Fleischer line that whatever is convenient to the demands of the day is true.

A US case in which a man was arrested for wearing a T-shirt bearing the slogan “Give Peace a Chance” has attracted a fair bit of attention. To be more precise, the man in question went to a T-shirt shop in a mall, had the shirt made to order and put it on. He was then approached by mall security guards who asked him to leave. On refusing, he was arrested for trespass. There’s a news story here. This kind of incident reinforces one of my main reasons for opposing privatisation of public spaces, including universities. In a piece entitledFree speech sits ill with a free market, I observed

Freedom of speech, in universities, public spaces and elsewhere, is ultimately incompatible with privatisation and unfettered freedom of action for corporations.

The piece was motivated by an article by CIS board member Steven Schwartz, attacking academic freedom.

Kevin Drum has more on this, noting that in California, shopping malls are required to allow reasonable exercise of free speech. I’m more and more inclined to the view that Australia needs an equivalent to the First Amendment.

This NYT report on a compromise being floated by the British is consistent with the analysis I’ve been pushing for some time. The difficulty is of course that the US Administration will do its best to rule out any compromise in the form of a clearly stated final demand “Do this, or else”, no matter how stringent the conditions, for fear that Saddam will actually do it. By contrast, the French want a compromise of this form, but would prefer one with conditions that have a fair probability of being met (unrestricted interviews, production of documents etc).

But game-theoretic reasoning helps us here. If the French believe that the US will reject any compromise in the form of a clearly stated final demand, they have no reason to quibble about the precise wording of the demand. This in turn increases the likelihood that any compromise proposed by the British will be accepted, with the result that the US will be forced to veto (or kill with the threat of veto) a British proposal.

Two possible inferences. The first is that the British government is prepared to pull out of war if necessary. The alternative is that they think they can persuade the US to accept a “final demand” compromise. The second seems more likely as a statement about British beliefs, but Bush has disappointed them before, and is likely to do so again.

Update The Guardian also has this story, supporting the second interpretation

The British government, which expects to secure the backing of the US for the change, is to offer a reworked resolution that would give Iraq “a little more time” and set a deadline on which most of the UN security council could agree.

I’ve added a bunch of book reviews. Feel free to review my reviews. If there’s any interest, I will post some extracts from the reviews over the next few days. Also, I’ve been updating the recent journal articles and working papers, reflecting a few acceptances and some long-awaited publications. Here’s a list of reviews I’ve added:

John Quiggin on progressive reform: review of Boris Frankel’s When the Boat Comes in, Pluto Press, 2002′, Arena 60(August–September), 47–49.

Myths of the Market; Review of: Thomas Frank, One Market Under God, Sydney, Vintage, 2001 & William Baumol, The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism, Princeton, Princeton University Press, 2002 ‘, The Drawing Board (Digest)

Economics of the Dark Side: Review of Jack Hirshleifer, The Dark Side of the Force: Economic Foundations of Conflict Theory, Cambridge University Press, Cambridge, 2001′, The Drawing Board (Digest)

A rough ride to freedom for information. Review of The Future of Ideas: The Fate of the Commons in a Connected World, by Lawrence Lessig, Random House (US), Australian Financial Review, 8 November

Review of Refashioning the Rag Trade: Internationalising Australia’s Textiles, Clothing and Footwear Industries by Michael Webber and Sally Weller, UNSW Press, 2001′, 21(1), 56–7.

Review of Debunking Economics: The Naked Emperor of he Social Sciences by Steve Keen, Pluto Press, 2001′, Economic Record 78(241)

Review of At the Crossroads – three essays by Jane Kelsey, New Zealand Economic Papers.

Most of the discussion on Monday’s Message Board concerned various personalities of the Hawke-Keating Labor government, elected 20 years ago. Yesterday’s Fin ran a picture of the incoming Cabinet in 1983, along with a ‘where are they now’ feature. While, as I’ve noted, I have mixed feelings about this government’s policies, the quality of the Ministry was exceptional. Position for position,I don’t think any member of the current government outclasses the corresponding minister in 1983. Even without considering positions, it’s hard to see many of the current ministry justifying a place. You’d have to include Howard himself, but that’s about it.

Another striking observation is how little renewal there was. The ministry that went out in 1996 was a lot weaker than the one that came in 1983. The effects can be seen on Labor’s frontbench today. Although it’s only seven years since they were in office, most of the prominent figures (with the exception of Crean himself) are newcomers who were not ministers in the last Labor government.

Turning to a more detailed assessment, I agree with the bulk of the recent commentary in ranking Hawke ahead of Keating. It’s often suggested that Keating was the ideas man while Hawke was the ‘chairman” but I think this was wrong. Hawke’s focus on consensus was an idea about process rather than policy, and it was what enabled Australia to implement a more moderate and sustainable version of the neoliberal policies that were pretty much inevitable in the 1980s. Keating, on the other hand, was not fundamentally driven by ideas. Rather, he picked up whatever ideas seemed useful to him at the time (neoliberalism or ‘economic rationalism’ in the 1980s, reconciliation and the republic in the 1990s) and expounded them with his characteristic vigour and intensity.

Keating’s case is helped by the fact that he was by far the most able Australian politician of the past thirty years and by the fact that, out of office, he has conducted himself, in private and public, with dignity and good sense, in marked contrast to Hawke’s personal follies (for example, doing the remarried celebrity bit for the women’s magazines) and sleazy political conduct like doing PR for Burmese dictators.

Of the others, my favorite was probably John Button. An engaging character, and someone who managed to maintain Labor principles while adapting them to new conditions. My least favorite of the major figures was probably Peter Walsh. Politically, I agree with him on a lot of things and disagree on even more, but, as was observed in the Monday comments thread, he is basically driven by hate. ‘Good haters’ can be an asset in politics at times, but over time the hate tends to drive out the positive concerns that originally generated it.