“the G20, brings together finance ministers and central bankers from the big rich nations, several big oil exporters and some big emerging markets. . . At the G20 meeting in Berlin, the group called on Asian economies to take “steps towards greater exchange-rate flexibility”, repeating a call made several times before. They hope that China will eventually allow the yuan to crawl upwards, either against the dollar or a basket of currencies.”

“Europe’s finance ministers can do little about this [the pain of having an uncompetitive currency]. They have surrendered control of the currency to an independent central bank that targets inflation, not the exchange rate. The European Central Bank has not intervened directly on behalf of the euro for four years. It is unlikely to do so again without American backing. Japan’s monetary authorities have no such compunction. . . printing yen to buy dollars is one way to inject liquidity into Japan’s moribund financial system.” http://www.economist.com/agenda/displayStory.cfm?story_id=3397847

It looks as though governance of the global economy should be top of the priorities for the G7/8.

Of course, the cap on the payroll tax should in time be raised. I think the cap at present is about $87,000. But, this Administration and Congress have been adament about not shifting taxes towards higher middle and upper income households. There is a terrific precedent in California. Gray Davis and the Legislature thought there was a serious enough debt problem to raise taxes on vehicle registrations. Arnold Schwarzenegger, as a result, becomes Governor and the would be tax increase is set aside, and despite more debt being issued California suddenly does not have a debt crisis.

Anne

Anne — one interesting option: raise the cap on payroll subject to social security taxes (currently about 75K I think, after that, no payroll, but I would need to look up the number) and lower the rate on everyone else …

The UK set up a website today for their chairmanship of the G7/8 in 2005 (www.g8.gov.uk). The priorities are said to be Africa, climate change, countering terrorism, non-proliferation and supporting reform in the Middle East.

You wrote: “if (an enormous if, one that goes to objectives) the G-7 decided to get serious about global economic governance/policy coordination to manage the orderly unwinding of the US external deficit. . .” But the absence of global economic governance from the list suggests it is of little concern. And this is the cause of so much pain to Europe, especially.

Borrow, Speculate and Hope
By PAUL KRUGMAN

The National Association of Securities Dealers,” The Wall Street Journal reports, “is investigating whether some brokerage houses are inappropriately pushing individuals to borrow large sums on their houses to invest in the stock market.” Can we persuade the association to investigate would-be privatizers of Social Security?

Secretary Snow

Treasury Secretary John Snow, like so many others around President Bush, is nothing more than a messenger.