The US-China Ponzi scheme

By Jon Markman
MSN Money

Imagine becoming so successful at your job that you stack up $2 trillion in income, which you conservatively place in short-term U.S. Treasury bonds for safekeeping.

Now imagine that when you try to cash in those bonds to buy a few things for your kids, the clerk at the bank abruptly shuts her window and tells you to go away. That is essentially the situation faced by China these days as it wonders whether its plan to manufacture goods for U.S. consumers over the past two decades in exchange for a pile of credit slips was really such a hot idea. Full Story

What went wrong with economics ??

OF ALL the economic bubbles that have been pricked, few have burst more spectacularly than the reputation of economics itself. A few years ago, the dismal science was being acclaimed as a way of explaining ever more forms of human behaviour, from drug-dealing to sumo-wrestling. Wall Street ransacked the best universities for game theorists and options modellers. And on the public stage, economists were seen as far more trustworthy than politicians. John McCain joked that Alan Greenspan, then chairman of the Federal Reserve, was so indispensable that if he died, the president should “prop him up and put a pair of dark glasses on him.”

In the wake of the biggest economic calamity in 80 years that reputation has taken a beating. In the public mind an arrogant profession has been humbled. Though economists are still at the centre of the policy debate—think of Ben Bernanke or Larry Summers in America or Mervyn King in Britain—their pronouncements are viewed with more scepticism than before. The profession itself is suffering from guilt and rancour. In a recent lecture, Paul Krugman, winner of the Nobel prize in economics in 2008, argued that much of the past 30 years of macroeconomics was “spectacularly useless at best, and positively harmful at worst.” Barry Eichengreen, a prominent American economic historian, says the crisis has “cast into doubt much of what we thought we knew about economics.”Full Story