Moral hazard...a way out

I think Dodd's mechanism is a good way to get the non-FDIC banking system under an umbrella that would pay for the "insurance" in case of a large bankruptcy. In other words, creating a fund to pay for "bailouts" from the banks themselves. This shifts the costs from all taxpayers and into the consumers of these institutions.

Dodd's proposal

Lets pass this.

Renmibi wars

Krugman posts an explanation of the renmibi-dollar issue that is one of his best.

Capital Export, Elasticity Pessimism, and the Renminbi

I think he is right on. China is pursuing a "beggar thy neighbor" policy against the world, and no one is willing to engage in what we all expect such policies to lead to: competitive devaluation.

If China insists on promoting capital exports, they cannot defend the point that they are not influencing the markets.

Krugman's tariff scenario is also a plausible one, but politically I don't see how Obama would get this done with the dysfuncional Senate. I can already hear the Republicans (and a good number of Democrats) accuse him of being anti-trade.

One thing is sure, though. This is not sustainable for the other large economies.