So let me see if I understand this latest round of eurozone mania. The crack dealers and the police have gotten two junkies onto methadone and we are supposed to celebrate? The junkies are still hooked. The dealers are still peddling their poison. The cops are still unable to address the core issues that are key to solving the long-term bigger drug problem. There's no political leadership to speak of the question. And therefore, no real progress has actually been made. Yet, down at Delancey's bar and stock exchange it's drinks all around.

What the heck, folks? Do we need to shove markets into a cold shower of perspective every day now? They veer from irrational fear to irrational exuberance with such regularity that I am starting to think that the solution to Europe's financial problems -- for which the above was an ever so subtle metaphor -- may actually be drugs. Like lithium maybe.

Today, the markets swing back to hope because Italy has taken steps to embrace austerity, Don Bunga Bunga is headed his next career as a professional defendant, and the Greeks and Italians both seem to be opting for technocrats to right their capsized economies. That these same technocrats bought into the mainstream delusions and misrepresentations and miscalculations that led to these problems in the first place is no matter. All that markets care about is that it seems like they will follow the banks' prescriptions for preserving bank cash flows at the expense of the people of their home countries. Or as it was put in my favorite tweet of the morning, from Dave Johnson retweeted by Markos Moulitsas, founder of the Daily Kos, "Greek PM says let PEOPLE vote, immediately booted, replaced by a BANKER."

(It's remarkable that the "moral" obligation of countries to repay debt that never should have been made available to them in the first place is actually so immoral -- both because it rewards enabling malefactors and because it penalizes innocents. The banks again make money coming and going as they did playing both sides on the volatile trading in between. Wouldn't the world be a better place if those who underwrote government debt couldn't also engage in trading it -- which creates the opportunity to profit from deals they might not otherwise do? I'm just saying...)

Meanwhile there is still no progress on the eurozone's larger structural issues. There is still no consensus about how to restore growth to the damaged economies of the south and those nearby who they are dragging down. There has really been no change ... except for the worse ... with regard to the financial soundness of many of Europe's big banks. There is still no orderly path by which a country can opt out of the eurozone ... even though the existence of such a path would have helped nip this problem in the bud even before it began. There is still no clarity about whether or not the countries of Europe want the ECB to have the resources and regulatory tools needed to actually effectively play the role of lender of last resort. And frankly, it seems ever less likely that the IMF will actually get the additional capital it needs to play the role for which it was envisioned.

Look, I've dated people who were more or less bipolar. I learned a few things from the experience. One was that while you were in the relationship it made sense to try make the most of the highs. They could be great. But I also learned that the lows were when you had moments of real clarity about the unsustainability of it all. The highs would always be a lie until you fixed the core problem. I also learned that took time and patience and often a radical restructuring of the relationship...by which I mean I discovered how healthy an exit can be for all interested parties. (On this point, see Paul Krugman's very good piece today entitled: "Legends of the Fail.")

I also discovered that you can't live on the roller coaster forever. It's just too damn exhausting. That's how I'm starting to feel about this problem in the Eurozone. And I am inclined to think that's how the world is starting to feel too. Patience with authorities who don't deal with the big issues and seek to frame every minor triumph as something larger than it is will wear thin. It won't just be the Papandreous and Berlusconis who won't survive all this. Absent real progress on the bigger issues, Eurocrisis fatigue will soon start doing in the Merkels, Sarkozys, and Camerons. That's the one thing that is clear. One way or another, as far as this crisis goes, it's probably best to stand clear of the door marked "Exit."

Europe is a generalization. As recent events have demonstrated yet again, sharing a continent with someone doesn't necessarily make you their countryman … or even capable of cooperating with them when it is in your mutual self-interest. Yet, despite all evidence to the contrary, when we talk about the crisis in Europe, we talk about it as if it were a Europe-wide crisis. Worse, recently, political opportunists on the right have begun to argue that the problems in Greece, Italy, and Spain are an indictment of Europe as a whole and of "European" ideas like the welfare state.

But of course, the economic mess in which the Greeks, the Italians and others find themselves has nothing to do with their being European. It has to do with them being financially irresponsible. It has to do with them being baited into reckless practices by bankers with whom they were too cozy … and who themselves were so eager to lend that they suspended sensible risk assessment practices. Admittedly, the problems within these states have pan-European consequences and they have revealed serious shortcomings both within European Union institutions and among EU leaders. But it would not only be misleading to lump all the countries of Europe into one basket in terms of the issues that have been raised, it would also obscure the fact that within Europe itself exist superb examples of what these floundering countries might aspire to. (And the contrast between the success stories and the failures needs to be understood to begin to grapple with the real problems of economic and political integration that have not been sufficiently addressed to date in the context of the European Union.)

What's more, Europe's success stories not only quash absurd assertions that having a state with a strong social safety net is the problem, they offer examples that might be well followed outside Europe; say, in the United States, home to another broken, corrupted version of capitalism.

It is a point that Jeffrey Sachs absolutely correctly noted on "Morning Joe" this morning and that needs to be better understood. Not only is the "European model" or "Eurocapitalism" not dead -- it, to the extent it is defined by Europe's best performing countries, may well be the solution to balancing every state's desire for growth, their need for fiscal responsibility and the obligations of a moral, equitable, empowering social contract.

So, to begin where much of today's discussion stops, there are a group of high-performing northern European countries that rate higher than the United States or Southern Europe on the "Sovereign Fiscal Responsibility Index." Estonia ranks number 3 after Australia and New Zealand. Sweden is 4. Luxembourg is 6. Denmark and Britain are 8 and 9. Poland, the Netherlands, Norway and Slovakia are 13, 14, 15, and 16. Austria is 21, Finland is 22, Germany is 25, Italy is 27, and the United States is 28. Iceland, Greece, and Portugal are 32, 33, and 34. The SFRI report notes that in terms of "fiscal space" the amount of additional debt a country could add before getting into trouble "Scandinavian countries as well former British colonies appear well positioned with fiscal space in excess of 100 percent of GDP." They add that "Central and Northern European powers are currently in decent shape" but that "the PIIIGS" are already close to their debt limits and that the United States in the space just above that but at risk of deteriorating.

But these countries are not fiscally responsible at the extent of promoting either growth or providing social services. For example, Finland, Luxembourg, Germany, and Sweden all grew substantially faster than the United States in 2010. The United States ranks worse than Norway, Belgium, the Netherlands, and Finland in the OECD education rankings with countries like Germany, Estonia, Switzerland, Poland, and others finishing ahead of the United States in math scores. Virtually all northern European countries, plus Germany and Britain, have lower unemployment than the United States. Further, Europe's composite GINI (inequality) score is better than the United States with both northern and southern countries finishing well ahead of the United States, which ranks between Jamaica and Cameroon. And whereas the U.S. only invests 2.4 percent of GDP in infrastructure, Europe on the whole invests 5 percent.

And as I pointed out in the New York Times piece I did a couple weeks ago "Redefining the Meaning of Number 1" most of these countries in the northern and central parts of Europe finish well ahead of their struggling neighbors and the United States in terms of quality of life rankings. They achieve success and a balance between growth and fulfilling the terms of a robust social contract by performing neat tricks like guaranteeing health care to all and still spending a smaller percentage of their GDP on health than the U.S. and by relying on collective security to allow them to spend less on defense.

The point is that some parts of Europe are not only working well, but can be examples worth emulating -- both by the continent's more reckless debtors and the United States itself.

Please don't tell anyone. I'm not a spoilsport. I don't want to ruin anyone's weekend.

I know we are all celebrating. The European Union has a deal! This could be the biggest month in almost 80 years at the New York Stock Exchange. The U.S. economy grew at a sizzling 2.5 percent last quarter. Pop a cork! Time to order your Maserati from the same place the broke Italian government seems to be buying theirs.

Happy Days are....

Ok, enough snark. Our little secret is that there is actually not much to celebrate in all this. Yes, the European Union struck a deal to deal with some of its immediate problems. Of course, when you look at the deal, you see that there are plenty of loose ends. And that the deal doesn't address the fundamental structural problems the EU face. And that the deal doesn't address the impact austerity programs and tightening capital flows will have on countries like Spain and Italy ... or what they may mean for their debt problems and how it may make future problems more likely. Nor does the deal reduce many of the fault lines in the foundations of European banking ... under-reported risk, faux-stress tests, debts soon to go bad. Nor does it address the problems in global derivative markets that have existed since well before the crisis of 2008-2009 and about which serious measures have yet to be taken.

While the deal does have the advantage of finally getting the banks to recognize they have to pay a price for their lending recklessness ... for being the pushers that helped get these crack-addict countries hooked on easy debt and look-the-other-way terms, it simply is the latest last-ditch halfway measure to be cooked up by the financial wizards of Europe. Remember when some among their numbers they were called the Gnomes of Zurich? Garden gnomes would do a better job.

As for the good month on the stock market, we all know better than reading too much into that, don't we? Don't we? There are schools of fish that are more rational than the stock market. Further, while they look all beady-eyed and serious, Wall Street players are as deeply biased toward childish optimism as they are toward over-reaching greed. We all need regular reminding of this. That's why I keep on my desk, as I have said before, a little cartoon given to me by a very smart Wall Street guy that shows Peter Pan flying out the window with Wendy and her brothers and Peter says "We're going someplace where everything is wonderful and nothing has anything to do with reality" and the littlest boy whispers to his brother, "You mean we're going to Wall Street?"

Finally as for that caffeine jolt of 2.5 percent growth last quarter let's remember the following: First, we have a recent track record of over-estimating our quarterly growth and then adjusting the numbers downward when no one is looking. Second, I was just kidding about that being a caffeine jolt. It will have precisely the same stimulative effect on job-creation as the average episode of "Two and a Half Men" will have on your cerebral cortex. It's a big dubious nothing burger ... or to be fair, a not-so-much burger ... like one of those black bean things you get a health food restaurant, you know, the kind that looks and tastes as if its last owner was a dyspeptic cat.

Which is not to say that you shouldn't enjoy the little economic sugar rush if you want. Go for it. There's no reason to dwell on the fact that on other fronts, the economy is sclerotic, leaders in Europe, the United States, and Japan don't know how to play well together, the banking system is still the same old casino full of hucksters, egomaniacs and some folks who just plain belong in the slammer. Why ruin your weekend thinking about how we still aren't dealing meaningfully with the big problems on the either side of the Atlantic? Or in Japan. Or in the emerging world.

Go on folks, let a smile be your umbrella. You know just how dry that will keep you, right?

If you have been wondering where America's Commerce Secretary was, I have finally found the answer. Hillary Clinton ate him.

The evidence for this assertion is that once again Hillary Clinton has demonstrated just the kind of leadership and insight into international economic policies that one might hope for from a Commerce Secretary if Congress actually thought the position important enough to confirm one.

Of course, I am kidding. About Hillary Clinton eating the Commerce Secretary. Not about anyone thinking the job was important enough to fill. Clearly, the Republicans in Congress don't seem to think that confirming a business leader like John Bryson to add needed heft and his considerable and useful experience to the President's team is a good idea in the middle of the kind of economic crisis we are currently enduring.

No, I make the comment about Clinton because once again she has stepped up and shown herself to be both an innovative Secretary of State and President Obama's most valuable cabinet member. For the second week in a row she is devoting her Friday to demonstrating how central she sees economic work to be to the job of the State Department and the international standing of the United States. Last week, the interaction turned on a meeting with the President's job council at which the focus was how to help America grow through international economic engagement, such as the smart initiative led by her Under Secretary Bob Hormats to promote more foreign investment in the United States. (It's what I call the OPM Stimulus...in which OPM stands for "other people's money.")

Today, Clinton spoke at the Economic Club of New York, delivering a speech entitled "Economic Statecraft for a New Era." The speech is part of a series of four she is delivering on key themes of this key dimension of the administration's foreign policy agenda. As she noted in the speech, according to a pre-delivery draft I reviewed:

...Economic forces are transforming foreign policy realities around the globe. We have seen governments toppled by economic crisis. Revolutions born in a Tunisian marketplace have swept across an entire region. Europe faces its strongest test in a generation, thanks to recession and debt. And everywhere I travel, I see countries gaining influence not because of the size of their armies, but because of the growth of their economies.

She then went on to say,

Simply put, America's economic strength and our global leadership are a package deal. A strong American economy has long been a quiet pillar of our power in the world. It gives us the leverage we need to exert influence and advance our interests. It gives other countries confidence in our leadership and a greater stake in a deeper partnership with us. And over time, it underwrites all the elements of "smart power": robust diplomacy and development and the strongest military the world has ever seen.

The speech turned on four key points -- that the administration is "updating foreign policy priorities to include economics every step of the way", that the State Department is "honing" its "ability to find and execute economic solutions to strategic challenges" (from energy to supporting democracy in the Middle East), that the Obama team is "modernizing our agenda on trade, investment and commercial diplomacy to deliver jobs and growth", and that they are focusing on the challenge of growing wealth being wielded by state controlled funds and companies.

That a Secretary of State asserts an economic agenda is not news. Clinton's predecessors have regularly done so and the reality of course is that economics has always played a big role in foreign policy from wars fought over oil to the centrality of revitalizing economies to enhance security as during the Marshall Plan. That a leading figure in a government whose fate depends on job creation and restarting growth would raise such an issue is also not that shocking. What makes this speech different is that Clinton is not just talking the talk she is walking the walk, restructuring State to enhance its economic resources significantly, placing economic issues more central to our policies in places like the Middle East where promoting reforms that create opportunity is seen as a better alternative than say, invasion, when it comes to enhancing stability, mobilizing her team and embassies around the world on these issues and simply by actually credibly engaging with the business community in a way that has eluded many of her predecessors.

Like her excellent Hong Kong speech regarding the administration's "pivot" toward Asia-another element of foreign policy with important economic consequences and in which economics is among the most vital levers -- the New York Economic Club leader provides among the very best examples of the Obama Administration taking its international economic policies and putting them in a coherent framework. Take Clinton's good work in this regard, the recent trade deals and Tim Geithner's excellent and, one might add, courageous engagement with the Europeans in the recent crisis, and you have the most impressive sustained international economic initiative the U.S. has mounted in years.

And early in this administration it was hardly a foregone conclusion there was ever going to be such an initiative. I recall eating a soggy tuna fish on whole wheat toast sandwich in the White House mess with a former senior Obama official who said, "this administration isn't like we were back in the Clinton administration. Back then, international economics was one of our central priorities. Today, it seldom comes up except in terms of financial markets." That was in the wake of the 2008-2009 crisis and the focus on stimulus and health care had put domestic issues center stage. Inevitably however, what has happened is that the administration has come to realize that there are no such thing as domestic economic issues that don't have important international components -- nor are there security interests worldwide without economic components.

The Clinton speech therefore is not only a sign of a successful Secretary of State continuing to work to reinvent the department she leads -- to "think different" in the words of Steve Jobs which she quoted in today's remarks -- it is also the sign of an administration maturing and developing better priorities and vital competencies where they are needed. (Although it still might help to have a Secretary of Commerce. I'm just sayin'...)

In fact, the Clinton speech has to be seen as a big success except for one egregious error. Seeking to describe the changes she seeks within State, Clinton asserted, "We need to be a Department where more people can read both Foreign Affairs and a Bloomberg Terminal." I get the bit about a Bloomberg Terminal. But I think she misspoke. A really forward-thinking State Department should probably be turning to a different foreign policy-focused media organization, don't you think?

I'm feeling curiously optimistic this morning which has me thinking it may be time for a CAT scan.

But I can actually see a way that things don't turn out so bad for the world.

First, to deal with the wolf closest to the sled, the Europeans will have to get their act in order. While they have thus far resisted this tooth and nail, I've heard some modestly encouraging rumblings from folks in the center of the negotiations. I want to point out the people with whom I have been speaking are not terribly optimistic themselves.  But they have offered a few crumbs of optimism for those of us who starved for it to scarf up.

First, in the words of one participant, European leaders have begun to work themselves through "the stages of grief associated with the crisis. First, even just a few weeks ago, they were purely in denial. Then, they entered a phase of denial in which it was clear they didn't even believe their own denials. Finally, last week we entered what might be called the ‘silly ideas' phase. And I am hopeful that means now we can get down to serious ideas."

What kind of ideas? Coming up with a program that takes a big chunk, perhaps $250 billion, of ESFS money and uses it as "equity" in funding a "firewall" that might then include a trillion or so capital available to the ECB in the event a big economy -- Italy or Spain -- stumbles. The plan would also need other elements such as Europe dealing with the structural issues associated with achieving something like monetary union and a recognition that no firewall can protect against all threats, especially those that could be associated with a fixation on austerity. Governments in Europe need to focus on getting growth restarted in places like Spain or Italy or bigger problems are inevitable. A final element of an effective plan would then include a significant recapitalization of the IMF which currently is not funded properly to deal with the new forms of risk and contagion which confront global markets.

At some point, banks will need to pay for the insurance policies they are expecting their governments to provide for them and whether that is done by a Tobin tax or some levy on non-deposit liabilities, grappling with that issue will be key to winning political support for further government involvement. And while countries and the IMF are at it, they ought to start to tally what sovereign exposures are to those "implied liabilities", their unwritten but real "obligation" to bail out the too big to fail institutions that are the nuclear charges set at the fault lines of the global economy.

That might in turn trigger a recognition that we will not be well and truly out of the woods of this crisis until we demand more transparency from these banks in terms of their liabilities (including counter-party risks in all manner of derivative transactions), regulations that enforce responsible provisions for dealing with those risks, and perhaps even globally agreed upon limits on the size and activities of such institutions.

But one step at a time. While the insiders with whom I spoke were only cautiously optimistic that progress might be made on putting together an interim solution-firewall for Europe -- or to be more accurate, while they did not outright dismiss the possibility -- they did emphasize that there was a long way to go, the Germans and the French were not playing nicely with each other, and there were deep cultural barriers to even having an intellectually honest conversation among the players about what ails them.

Still, since the focus is optimism, another encouraging sign were the glowing reports I have been hearing of the work that both new IMF Managing Director Christine Lagarde and U.S. Treasury Secretary Tim Geithner having been doing trying to hammer some sense into Europe's fiscal policy pygmies. No, not pygmies ... lemmings. Well, blundering action-phobic bureaucrats. (The problem, according to a friend, is "lots of leaders, not enough leadership.") By one account, about a third of the progress made during the last few weeks is due to circumstance, the growing direness of the situation, and the rest is due to the compelling arguments and forceful interventions of Lagarde and Geithner.

Read on

Daniel Yergin's latest book, The Quest: Energy, Security and the Remaking of the Modern World would have been essential reading for energy industry insiders simply as a consequence of Yergin's status as one of the field's foremost commentators and analysts. He is, after all, the author of one award-winning volume on the subject, The Prize, not just a great history of energy but one of the best history books of any sort of the past quarter century or so. And he has built an important energy consultancy that every year convenes many of the industry's most important leaders for a week of must-attend discussions.

But this new book is such an exceptional achievement, a work of scholarship that is full of compelling story-telling, an exploration of some of the most vital issues of our time that frames them in a sound history and penetrating analysis, that its publication has much greater resonance. Appearing at number four on the New York Times best-seller list in its first week on the market, showered with well-deserved critical acclaim, the book is essential reading for policymakers, business leaders, and anyone in the public who wants to understand forces that are transforming global politics, driving the rise of some nations and conflicts among others.

As someone who in his spare time runs a consultancy with a considerable energy practice, I was drawn to the book for professional reasons but I have to be clear, I'm going to recommend it to many people I know in Washington because not only does it address issues that link politics, economics, business, today and tomorrow -- but it does so with unusual objectivity and wisdom. It's rather long, but not only is it a read that offers plenty of rewards but it is likely to be a book to which readers will return over and over. (Which is why, if you want my unsolicited opinion, you should buy a hard copy. Easier to dip in and out of.)

I particularly was struck with its core theme -- that while headlines blare of an energy revolution and great paradigm shifts, real change in this field happens gradually. The search for breakthrough technologies is not only not unique to our time; virtually everything that is buzzworthy and "new" today has roots that stretch back a century or so if not longer. That said, although a realist about the pace of change, Yergin is keenly aware of the profound shifts that are taking place as well as those that make take decades more to unfold. He proves the adage that the best guides to the future are those who understand the past well.

To get a better understanding of Yergin's views as they pertain to the issues of greatest important to the readers of Foreign Policy -- and because I always welcome the chance to discuss these issues with Dan -- I sat down with Yergin for a conversation about the book, its key conclusions, and his views on the state of energy politics and economics at the moment. We covered a great deal of ground, highlights of which will be covered in two parts. Today, the discussion focuses on some of the core ideas in Yergin's book, those pertaining to the search for new ways to provide the energy the planet needs. In Part II, the discussion turns to the geopolitics of energy in the century ahead.

David Rothkopf: Early in the Obama administration there was a sense that a new energy paradigm was going to be central to American growth, and the president himself was framing new approaches to energy as a primary driver of the next phase of U.S. growth. Yet more recently, expectations have been dramatically reset. What do you think is behind that change?

Daniel Yergin: We have gone through periods of great optimism about how quickly a transition to a different kind of energy system can come about. But our $65 trillion global economy rests on a very big and complex energy foundation. And it's governed by two laws. One is the law of long lead-times. Because of the scale and nature of energy, it doesn't change overnight. And the second is the law of scale. To be significant, it has to be large. And the renewable sector, the alternative sector, is still developing within those constraints. It's certainly a lot farther ahead than it was a decade ago, and indeed it has become a big business and a global business in its own right. But, when you look out 15 or 20 years based on what we know, our energy mix won't change too dramatically. It's really around 2030 that we could see the really significant changes.

DR: Is that because 20 years from now we're going to have great breakthroughs; 20 years from now we will have scaled up to the point that the breakthroughs are possible; or because 20 years from now, we'll all be dead or retired?

Read the rest of the interview here.

A voice of reason and leadership has emerged in recent days among those addressing the economic crisis in Europe, currently the most urgent and dire challenge facing the international community.

Unlike in the past, that voice is not however, the president of the United States, who has remained strangely quiet on this subject despite its direct implications for virtually all of the core U.S. economic issues that are his stated top priorities. Nor is it that of his secretary of the treasury who, though more visible on this issue recently, has not instilled confidence with statements that have, for example, asserting that under no circumstances would European leaders let their institutions fail, even though that has been precisely what they have been doing for years now.

Instead, the new voice comes from rather unlikely roots -- a scandal-rocked organization whose future value to the international community had, in the not-so-distant past, been questioned and a prior post that can only be seen as a potential drag on her credibility.

That voice however, belongs to IMF chief Christine Lagarde, and it has been so direct and crystal clear, so unafraid and so thoughtful, that within mere weeks of assuming office she has quickly gained recognition as one of the most important of the world's leaders.

Take her most recent remarks on the euro crisis and its international implications. In the first instance, she has crisply and accurately warned that a "vicious circle is gaining momentum" that could not only upset european efforts at bailing out its weakest economies but that also poses a threat to the world's financial system and to many of its so-called strongest economies, such as those that are the engines of european growth and that of the United States. At the center of that vicious circle she placed "political dysfunction" that had produced what has amounted to policy paralysis and may have us on the verge of a "dangerous new phase" of this on-going economic calamity.

Further, even as Central Banks agreed to pump in more money to prop up faltering banks, she suggested more might be needed. "Balance sheet uncertainty" was the immediate culprit, she observed, noting it existed at the government, bank and household levels. She accurately cited this as the core risk we face but then, with wisdom greater than most European and American political leaders, noted that debt solutions should not be so severe that they undermine the equally crucial issue of growth in Western economies.

She specifically and directly assailed "fiscal austerity that chips away at social protections; perceptions of unfairness in Wall Street being given priority over Main Street; and legacies of growth in many countries that predominantly benefited the top echelons of society." One can only hope her remarks resonated with all her new neighbors in Washington.

Read on

If you're like many people in the White House, you cringe every time you hear the term "leading from behind." It's become one of the slams du jour here in Washington. But, you have to admit, at least it implied there was some leading happening somewhere.

Watching the clown college that is modern Washington during yesterday's speech scheduling follies, it is clear our glittering prizes are leading us nowhere fast. That's bad for the economy. Bad for the American people. Bad for the world. But having said that, given the visionless self-absorption these folks are currently displaying, I'm not sure we would want to follow even if they knew where to go.

The spat over scheduling the President's address next week was a combination of politics as usual, shoddy planning, pettiness and slapstick comedy. Frankly, I'm not sure Speaker Boehner did his party any favors by booting the President to next Thursday. If he had let him go as scheduled, the Republican debaters who would have followed him on the air could then have torn his speech apart before a national audience thereby upstaging him and giving their alternative views greater visibility at the same time. That said, isn't it time we had a moratorium on tearing ideas and opponents apart for a while. Isn't this one of those "we're all in this together moments?" Maybe we ought to just listen to each other for a while ... and if the pols don't come up with any good ideas, then maybe we should listen to see if someone else does.

For that reason, I am really looking forward to the Republican debate, Governor Romney's scheduled economic speech, the President's jobs speech, and the newly scheduled jobs speech from Speaker Boehner in the hopes that a few ideas may emerge that are of material significance to the economy. But I will admit I am skeptical.

Every sign is that -- as was the case for Herman's Hermits with regard to Mrs. Brown's lovely daughter -- the second verse will be the same as the first (as will be, I fear, all subsequent verses). We'll get tired rhetoric and demagoguery flavored with idea-bits, school-uniform sized initiatives that are almost always less than meets the eye.

The Republicans at the debate will call for cutting the deficit without raising revenues or really scrutinizing defense spending. And the President will offer an array of earnest, modest ideas that may, based on current rumors, produce a million new, primarily short-term jobs. He probably won't make any bold new revenue proposals or for that matter any bold proposals of any sort. He certainly won't volunteer needed cuts to entitlement programs. We'll get a too small infrastructure initiative, too little stimulus, too many compromises. We'll welcome his seriousness and to the extent Mitt Romney, Rick Perry, and other individual Republican candidates also provide concrete, job-creating ideas that will be more than welcome, it will be essential to having any kind of constructive public policy dialogue in the next few months.

I worry this will be the case in part because I am getting the impression that some of the President's advisors are recommending he only make proposals that can actually pass. This in turn leads to a lot of folks around the President negotiating with themselves before they even start discussions with the opposition. This dilutes everything.

It's how we are likely to end up with a million dollar patch for a 25 million job hole. And since Hill Republicans will clearly oppose much of it from, the pre-digested compromises will only succeed in producing in smaller failures rather than the larger variety.

As Eugene Robinson wisely noted in the Washington Post earlier this week, the President needs to recognize this, make the best case he can for the big ideas we need to the Congress and then, if they drop the ball as they very well might, then he should plan on taking his ideas not just to the dysfunctional Congress but to the American people. He and those around him should believe in his ability as a leader.  He should be out there pushing for a really big infrastructure program, a major investment in American competitiveness through committing to building the next generation smart highway system, smart energy grids, advanced air traffic control network, the underpinnings for our IT future. He should be talking only in terms of programs that created multiple millions of jobs while enhancing productivity and helping to attract new investment. If it means a payroll tax holiday and a repatriation of earnings plan that works, he should go for it. If it means major regulatory reform to accelerate projects waylaid by sluggish approval processes, he should make it happen. But please, frame it in a vision, paint a picture of what America can do to lead again in the world.  

He should plan on spending the next 12 months out on the road selling his big ideas directly to the American people so the next election is a ratification of his vision and a mandate for his action. It is literally the only path out of this mess.

We have to recognize that will take a year. Will markets tolerate it? Of course, they will. Especially if they see some kind of real big thinking going on. Especially if real progress seems possible in the foreseeable future. And I continue to hope that President Obama's likely opponent will be Mitt Romney or some other responsible actor and that the ensuing debate might actually be considerably more rational and thoughtful than the food fight that seems to be taking place up and down Pennsylvania Avenue these days.

Finally, to those of you who say Obama is too measured or Romney, for example, is too bland, it's worth remembering that the modern president who may have done the most creating the infrastructure we have today, laying the foundation for modern American competitiveness, was also accused of both traits. His name was Dwight Eisenhower and it is only half a century later that people truly began to appreciate the consequences of what he accomplished with America's highway system, air traffic system, aerospace industry, even some of the foundations of our venture capital system. He wasn't a career politician. He wasn't a charismatic speaker. He was just serious and dogged and experienced. He was also, of course, the one thing that seems in shortest supply these days. He was unquestionably and down to the marrow of his bone a leader.

And if they don't make them like that any more we are all in deep, deep trouble.

Happy birthday, Mr. President.

Admittedly, there has not been a lot to celebrate lately.

With market losses in this slide now exceeding the 10 percent level, so-called correction territory (London's FTSE is down over 11 percent since April), weak employment numbers in the United States, troubling global economic indicators wherever you look, the Arab Spring stalling, the Libya intervention in slow motion, AfPak a source of deep worry and frustration, China rising, global warming, Justin Bieber, the bad reviews received by Cowboys & Aliens, it might well be, Mr. President, that you feel like there is very little to celebrate.

Well, not only do I think you've got a wide range of accomplishments that deserve celebration, but I think it is high time that those of us who actually believe government can do some good start making our case as actively as are those who are simultaneously talking it down and taking it down. That's why every week until I run out, I'm going to try to focus on at least one significant area of accomplishment, a success story.

This week, the gift wrapping around the success story is that which comes hard to some of us up here in the blogosphere's peanut gallery: an admission that I was wrong. Now readers of this blog will be the first to note that I'm wrong all the time. But in this instance, I am even willing to acknowledge it.

When you announced your National Export Initiative, I thought it was just a rehash of the National Export Strategy we did back in the Clinton days. What's more, since I thought the administration did very little on trade policy in its first year or two, I felt that the announcement, made in your 2010 State of the Union, was little more than a rhetorical device, that there was not meat on its bones nor was there likely to be any.

Read on

President Obama and Speaker of the House Boehner both wasted their opportunities to address the American people Monday night. They repeated familiar formulations, made no progress, offered no hope. Indeed, they offered the American people a display of empty petulance that will only confirm their darkest fears that Washington is now hopelessly broken. Obama's call for compromise and balance was far more lucid, rational and constructive, but, even as one who is very supportive of the approach offered by the President, watching the remarks I was forced to acknowledge that neither man led us one inch closer to the resolution of the unnecessary, man-made crisis that now holds the United States and the global economy in its thrall.

As Melissa Harris-Perry stated accurately in wrap-up comments on MSNBC, if this kind of display served anyone at all, it was the Republicans who argue that government is the problem. To them, it hardly matters that they are the ones who have guaranteed that theirs is a self-fulfilling prophecy. Which of course, would be just breathtakingly cynical were it not so dangerous.

It's dangerous of course, because government is not the problem. Indeed, for those who expect a functioning national defense, or stewardship of our national resources, or care for those who cannot help themselves, or education for our children, or the infrastructure we need to compete in the world, government is an essential part of the solution. In fact, in times like these, it is an even more important part of the solution than it is when the economy is more robust.

Read on

Last night I attended a dinner of old Washington hands. Some had served in high government offices, some were lobbyists, some were think tankers, some were still running for office, others were active in campaigns of one sort or another.  These were seasoned players who had seen it all … and there was fear and outrage in their eyes.

They felt the leaders of both parties had lost any sense of accountability. They were appalled by the degree to which, at a moment of national crisis, twisted notions of ideological purity and cynical politics had obliterated any focus on solving the problems at hand, on public service. Whether or not the country averts fiscal default, that we had come to this point was a sign to all that a leadership default had already taken place.

Read on

Here at Les Recontres Economiques d'Aix-en-Provence we are ostensibly discussing "The States of the World" but in reality the buzz around the event is about the global economic ugly pageant. Although much of the conversation among delegates --whether at the venerable conference sites like the law school of the Universite Paul Cezanne or the local outpost of Sciences Po -- focuses on the harrowing state of the Eurozone, one can regularly hear concern expressed for the other contestants in the current perverse competition among the world's economies.

To understand the competition, you just have to understand the old joke about the group of friends whose picnic is disturbed by a hungry grizzly bear. As the friends bolt from their campsite, one stops to put on his sneakers. The others ask what he is doing, worried that he will never be able to outrun the bear if he stops. The one in the sneakers observes as he starts sprinting away, "I don't have to outrun the bear, I just have to outrun the rest of you."

So it is now with the global economic ugly pageant. While most of the major economies of the world are spluttering and the possibility of an unprecedented geoeconomic disaster remains palpably real, what money there is does have to go somewhere. That place is likely to be the least ugly of the world's economies. In other words, absent a true safe haven, capital will seek the safest haven of those available. It's one reason the dollar has done fairly well recently, for example. While the U.S. government seems to do everything in its power to screw things up economically, investors buy dollars because the managers of the world's other big currencies, the Europeans and the Japanese, are screwing things up worse.

The question now is will our "luck" remain the same going forward? How will the world's economies fare in the next round of this contest? Here's the current betting line based on my scientific eavesdropping on conversations here in Provence, appropriate discounting for self-interest and biases of the speakers and my own reading of the tea leaves that get floated as economic news in the world's newspapers. (Note: I am focusing only on national and regional economies here. Suffice it to say that almost certainly the big losers of the coming months -- whether policymakers accidentally blow up the world economy or they dodge disaster through a judicious combination of austerity and stimulus -- will be the poor. They have no voices advocating for them (as do, for example, the makers of private jets currently lobbying to keep the corporate tax breaks their purchasers receive under present U.S. law). Austerity programs will squeeze them further. Disaster will crush them. And almost certainly the biggest winners will be big corporations and the super-rich who will venue-shop and use their access to cash to buy up devalued assets including fire-sales among privatizing formerly state-owned bric a brac like roads, ports, powerplants and water rights.)

Read on

Thomas Straubhaar, a top economist from Germany, attacked U.S. credit agencies after they lowered Greece's credit rating to junk status, down there with the Pakistans of this world. In fact, in the spirit of Greek street protesters, Straubhaar called for the "violent overthrow" of the credit rating companies like Moody's or Standard & Poor's, arguing that these companies actually undermine stability in markets.

Come on, Thomas, don't shoot the messenger. The problem isn't the credit rating agencies -- although one does wonder if they don't have itchy trigger fingers after having been late with their warnings during the 2008-2009 phase of the current protracted economic crisis.

The problem isn't the Greek finance ministry. The problem isn't the Greek legislature. The problem isn't the Europeans who are being dragged kicking and screaming toward helping Greece. The problem isn't even Goldman Sachs and the other banks who lent Greece more money than they could afford and even helped them hide a bunch of the financings off the books.

Nope, the problem is Greek nuclear scientists and radical terror groups affiliated with the Greek intelligence services -- or rather, the lack thereof.

Because if Greece had nuclear weapons and crazed terrorists hiding in every luxury housing development, you can bet we wouldn't be going through this long drawn-out process of figuring out whether the country was going to default or not.

We know this because of Pakistan. Pakistan is an absolute financial basket case. It is in many respects in as bad a shape as Greece -- and in some it is even much worse off. But do you hear anyone talking about Pakistan's financial problems? Heck no.

Of course, talking about Pakistan's financial problems is like talking about whether Anthony Weiner's socks match. It's not exactly the first issue that comes to mind. Having said that, the reason we are not sweating the meltdown of Pakistan's financial markets is that there is no way the United States or the world would let it happen. Because a financial collapse could trigger the kind of unrest that would put Pakistani nukes at risk, and that's just not tolerable. So the United States pumps billions into Pakistan knowing full well that it is this aid that helps keep the ship of state afloat. (And, money being fungible, if it also pays for expanding Pakistan's nuclear arsenal … well, apparently we're willing to look the other way. Again.)

Once again, one of the main messages of modern international affairs comes through loud and clear: Nukes pay. From Pyongyang to Tehran, enterprising leaders know that the easiest way to boost your country's profile, gain political leverage, and win cash and prizes is to toss a little enriched uranium in the old Cuisinart, let the satellites take a few snaps, and start rattling your radioactive saber.

The problem with Greece is that if the economy collapsed, if the government collapsed, if the country descended into chaos, no one is worried that a nuclear catastrophe would follow. An ouzo-induced hangover maybe -- which can be a pretty horrific thing -- but it's the specter of a mushroom cloud that really is the attention grabber.

Admittedly, if Greece goes down and takes a few big French banks with it (as the ratings agencies warned this week) and markets get jittery and the firewall around Spain gives way and then a bunch more French and maybe German banks fail and a new global banking crisis and maybe a depression ensues -- well, that would be bad. And would produce instability in many corners of the world, including, possibly, in Pakistan. And if the downturn is bad enough it might force the U.S. and others to give less the next time Club Nuke comes to extort. So, well, yeah, that would be worse.

But, that's all speculation. What we know for sure is this: If there were a centrifuge or a hundred under the Parthenon, the Greek government would right now be sitting on piles of cash and not squirming, knowing that their fate depends on the famously warm hearts and generosity of the German people (among others).

The coming depression was avoidable. The instability it will trigger, turning fragile regions from the Middle East to China to the United States' inner cities into caldrons of violence, was avoidable. The nationalism and fear-driven politics it will produce were avoidable.

All it would have taken was honesty, courage and a shred of decency from the leaders of the world's most important economies -- the honesty to acknowledge that the numbers didn't add up and that old approaches weren't working, the courage to ask as much of their rich benefactors as they do of the weakest in their societies, and the decency to step outside themselves and their narrow self-interests for long enough to do what was right no matter the political cost.

But the politicians were dishonest, timid and self-serving. Even today, with the world teetering on the brink not of a gentle-sounding "double dip" but of something much worse, they are collectively whistling past the graveyard.

Yesterday, U.S. House Budget Committee Chairman Paul Ryan accused the White House of engaging in demagoguery about cuts to Medicare. What dark irony. Because whatever the demagoguery of the White House ... and no doubt there is some there, is there any as reckless as that of so-called "deficit hawks" like Ryan who decry the United States' fiscal mess but who simply refuse to consider the absolutely essential revenue side of the equation? They would sacrifice the entire U.S. economy and in particular the welfare of the neediest in the United States to their own misguided ideological purity.

We have seen misguided ideology driven frenzies in U.S. politics before. But when you think about it none -- and I include McCarthyism on the list -- were as potentially damaging to so many Americans as this one.

But the problem is not just with Republicans. Democrats are not serious about making the cuts that are necessary. And neither side has been serious about addressing the underlying problems-associated with housing markets and under-regulated, risk-happy financial markets-that led to the last crisis and will ultimately fuel the coming one.

Read on