Paul Krugman is a very smart and very annoying person. Over the past few years he's been hammering away at political and economic advocates for austerity policies with unmitigated glee and derision. He does so with a brio and condescension that some people can find off-putting -- but that doesn't mean that he's wrong.

His latest salvo is a New York Review of Books essay, which among other things discusses Mark Blyth's excellent new book Austerity: The History of a Dangerous Idea.

After pummeling "austerians" for much of the essay, Krugman then endeavors to explain why so many policymakers and pundits still favor such policies:

The turn to austerity was very real, and quite large.

On the face of it, this was a very strange turn for policy to take. Standard textbook economics says that slashing government spending reduces overall demand, which leads in turn to reduced output and employment. This may be a desirable thing if the economy is overheating and inflation is rising; alternatively, the adverse effects of reduced government spending can be offset. Central banks (the Fed, the European Central Bank, or their counterparts elsewhere) can cut interest rates, inducing more private spending. However, neither of these conditions applied in early 2010, or for that matter apply now. The major advanced economies were and are deeply depressed, with no hint of inflationary pressure. Meanwhile, short-term interest rates, which are more or less under the central bank’s control, are near zero, leaving little room for monetary policy to offset reduced government spending. So Economics 101 would seem to say that all the austerity we’ve seen is very premature, that it should wait until the economy is stronger.

The question, then, is why economic leaders were so ready to throw the textbook out the window.…

Everyone loves a morality play. “For the wages of sin is death” is a much more satisfying message than “Shit happens.” We all want events to have meaning.

When applied to macroeconomics, this urge to find moral meaning creates in all of us a predisposition toward believing stories that attribute the pain of a slump to the excesses of the boom that precedes it—and, perhaps, also makes it natural to see the pain as necessary, part of an inevitable cleansing process. When Andrew Mellon told Herbert Hoover to let the Depression run its course, so as to “purge the rottenness” from the system, he was offering advice that, however bad it was as economics, resonated psychologically with many people (and still does).

By contrast, Keynesian economics rests fundamentally on the proposition that macroeconomics isn't a morality play—that depressions are essentially a technical malfunction.

Now this sounds a little far-fetched -- I mean, it's not as if pundits and policymakers can be that economically illiterate, right?

And then, as if Krugman planned it all along, along comes Michael Kinsley in the New Republic -- responding to a different Krugman essay that makes similar points -- with an essay titled "Paul Krugman's Misguided Moral Crusade Against Austerity." I think one of the points Kinsley is trying to make is that the policy divide between austerians and anti-austerians in Washington isn't as great as Krugman portrays. That's likely correct in Washington. During debates this year, even austerity "advocates" like John Boehner have made noises about not wanting to turn off the fiscal tap too soon, and even austerity "critics" like Barack Obama have talked about the need for fiscal rectitude. So yes, even austerity's critics sound austerity-curious at times.

Still, the guts of Kinsley's essay are … problematic. Some highlights:

It’s easier to describe what the anti-austerians believe than the austerians themselves. Anti-austerians believe that governments around the world need to stop worrying about their debts for a while and continue pouring money into the economy until the threat of recession or worse is well and truly over. Austerians want the opposite. But what is the opposite? Is President Barack Obama, for example, an austerian? To Republicans and conservatives, no: He pushed through a stimulus package of almost a trillion dollars early in his first term, and remains a symbol of “big spending.” To liberals and Democrats, yes: They feel we need a second and much larger stimulus and Obama has let us all down.…

Austerians believe, sincerely, that their path is the quicker one to prosperity in the longer run. This doesn’t mean that they have forgotten the lessons of Keynes and the Great Depression. It means that they remember the lessons of Paul Volcker and the Great Stagflation of the late 1970s. “Stimulus” is strong medicine—an addictive drug—and you don’t give the patient more than you absolutely have to.…

Krugman also is on to something when he talks about paying a price for past sins. I don’t think suffering is good, but I do believe that we have to pay a price for past sins, and the longer we put it off, the higher the price will be. And future sufferers are not necessarily different people than the past and present sinners. That’s too easy. Sure let’s raise taxes on the rich. But that’s not going to solve the problem. The problem is the great, deluded middle class—subsidized by government and coddled by politicians. In other words, they are you and me. If you make less than $250,000 a year, Obama has assured us, you are officially entitled to feel put-upon and resentful. And to be immune from further imposition.

Austerians don’t get off on other people’s suffering. They, for the most part, honestly believe that theirs is the quickest way through the suffering. They may be right or they may be wrong. When Krugman says he’s only worried about “premature” fiscal discipline, it becomes largely a question of emphasis anyway. But the austerians deserve credit: They at least are talking about the spinach, while the Krugmanites are only talking about dessert. [Emphasis added.]

OK, so, a few things:

1) No Republican or conservative, anywhere in the United States, will claim that Barack Obama is an austerian. I'm just gonna assume that this is a typo and move on. [Editor's note: The typo has been cleared up on the New Republic's website, and the block quote above has been corrected.]

2) Stagflation in the 1970s was caused primarily by an inward shift of the aggregate supply curve due to a surge in commodity prices, particularly energy. Some central banks responded with accommodating monetary policies that accelerated inflation even further. Fiscal policy was an innocent bystander to this whole shebang. So I honestly don't know what the hell Kinsley is talking about.

More importantly, the current macroeconomic climate is really, really different from the 1970s. Inflation was a Big Bad Problem during that decade. It is not a problem right now. If inflation were spiking, then a genuine debate could be had on macroeconomic policy options. But that's not the case.

3) In his final paragraphs, Kinsley has managed to epitomize the exact critique that Krugman has served up.

The irony of this whole thing is that the Congressional Budget Office's recent figures put the lie to Kinsey's hidden assumption that the federal budget deficit is getting bigger and bigger. Right now it's shrinking at the fastest rate in postwar economic history.

The CBO also warns that the deficit will start to balloon up again due to entitlement spending, which suggests that Kinsley has half a point about thinking through entitlement reform. The thing is, that's a structural problem, not a business cycle problem. Kinsley et al. are acting as if the current fiscal climate demands immediate budgetary actions. And it doesn't -- it really, really doesn't.

Look, I think Paul Krugman has a few policy blind spots. His method of argumentation alienates as many people as it attracts. But he's not wrong when he's talking about austerity. In his response, Michael Kinsley has managed to embody the conventional wisdom in Washington -- and in doing so, embody every policy caricature of Paul Krugman's worldview.

Am I missing anything?

Despite Fareed Zakaria's best efforts, it seems that foreign policy commentators can't stop offering advice on American grand strategy. 

Richard Haass provides the latest salvo in Time.  After arguing that no other great power can offer a serious revisionist challenge to the current system, concluding, "Today's great powers are not all that great."  With that set-up, he proposes a grand strategy of "Restoration": 

The U.S. would continue to carry out an active foreign policy—to create international arrangements to manage the challenges inherent in globalization, to invigorate alliances and partnerships, to deal with the threats posed by an aggressive North Korea, a nuclear-armed Iran and a failing Pakistan.

But under a doctrine of restoration, there would be fewer wars of choice—armed interventions when either the interests at stake are less than vital or when there are alternative policies that appear viable. Recent wars of choice include Vietnam, the second Iraq war and the current Libyan intervention. There would, however, continue to be wars of necessity, which involve vital interests when no alternatives to using military force exist. Modern wars of necessity include the first Iraq war and Afghanistan after 9/11....

Restoration is not just about acting more discriminating abroad; it is even more about doing the right things at home. The principal focus would be on restoring the fiscal foundations of American power. The current situation is unsustainable, leaving the U.S. vulnerable either to market forces that could impose higher interest rates and draconian spending cuts or to the pressures of one or more central banks motivated by economic or conceivably political concerns.

Reducing discretionary domestic spending would constitute one piece of any fiscal plan. But cuts need to be smart: domestic spending is desirable when it is an investment in the U.S.'s human and physical future and competitiveness. This includes targeted spending on public education, including at the community-college and university levels; modernizing transportation and energy infrastructures; and increasing energy efficiency while decreasing dependence on Middle East oil. Spending cuts should focus on entitlements and defense. Further deficit reductions can be achieved by reducing so-called tax expenditures such as health care plans and mortgage deductions. The goal should be to reduce the deficit by some $300 billion per year until the budget is balanced but for interest payments on the debt.

Adopting a doctrine of restoration for several years would help the U.S. shore up the economic foundations of its power.

Over at Democracy Arsenal, Jacob Stokes thinks restoration (or some variant of it) sounds peachy: 

[Hasss' argument is] derivative of what journalist Peter Beinart called a “solvency doctrine” back in 2009. He wrote, “No matter what grand visions Obama may harbor to remake the world, the central mission of his foreign policy--at least at first--will be to get it out of the red.” None of these plans or explanations is perfect, of course, but taken together, they seem to me good starting points for what a grand strategy for the U.S. should look like, namely a focus on tending to the sources of American power rather than on making more commitments that draw on it.

Color me skeptical.  It's not that I don't like the ideas behind Haass' argument -- they're sympatico with a welter of realpolitik-friendly strategies that have been promulgated at regular intervals. 

There are two currently insurmountable political problems with Haass' strategy, however.  The first is that it is ridiculously hard for the U.S. government to draw down military commitments -- particularly if the U.S. military doesn't want to do it.  It's worth remembering that Barack Obama entered office with a worldview that closely matched Haass' restoration idea -- and yet, in the end, he expanded U.S. operations in Afghanistan and attacked Libya to boot.  The U.S. military strongly supported the former, while Obama's foreign policy advisors jump-started the latter.  [So, you're saying that if a powerful executive-branch foreign-policy actor favors the use of military statecraft, it's gonna happen?--ed.  Um... yeah, I guess I am.]

The second is that a restoration strategy is really a focus on domestic policy.  And, as I noted in the pages of Foreign Affairs:

The most significant challenge to Obama's grand strategy is likely to emerge at home rather than abroad. Viable grand strategies need to rest on a wellspring of domestic support. The biggest problem with Obama's new grand strategy is its troublesome domestic politics....

By focusing on renewing the United States' domestic strength, the Obama administration has introduced more partisan politics into the equation. There is still some truth to the aphorism that politics stops at the water's edge. But if the administration argues that the key to U.S. foreign policy is the domestic economy, then it increases the likelihood of domestic discord. Based on the tenor of the debates about the rising levels of U.S. debt, the possibility that the president can hammer out a grand bargain over fiscal and tax policies is looking increasingly remote.

I wrote that a few months ago, and of course as the debtopocalypse approaches, I'm sure things will improve in our domestic political discour--- HA HA HA HA HA HA HA... I'm sorry, I couldn't finish that sentence, I was crying bitter tears laughing too hard. 

Restoration won't be happening anytime during this session of Congress... or perhaps ever.  The real problem in today's political climate is devising a grand strategy that is sustainable both domestically and internationally.  I'm reluctantly coming around to Peter Trubowitz and Charles Kupchan's conclusion that the bipartisan political foundations for a viable grand strategy are badly eroded. 

Paul Krugman's column today has been getting a lot of love from the left side of the blogosphere, but I'm not sure how grounded it is in reality. 

Krugman's argument is that the messes of the developed world are the fault of elites and not the mass public:

The fact is that what we’re experiencing right now is a top-down disaster. The policies that got us into this mess weren’t responses to public demand. They were, with few exceptions, policies championed by small groups of influential people — in many cases, the same people now lecturing the rest of us on the need to get serious....

President George W. Bush cut taxes in the service of his party’s ideology, not in response to a groundswell of popular demand — and the bulk of the cuts went to a small, affluent minority.

Similarly, Mr. Bush chose to invade Iraq because that was something he and his advisers wanted to do, not because Americans were clamoring for war against a regime that had nothing to do with 9/11. In fact, it took a highly deceptive sales campaign to get Americans to support the invasion, and even so, voters were never as solidly behind the war as America’s political and pundit elite.

Finally, the Great Recession was brought on by a runaway financial sector, empowered by reckless deregulation. And who was responsible for that deregulation? Powerful people in Washington with close ties to the financial industry, that’s who. Let me give a particular shout-out to Alan Greenspan, who played a crucial role both in financial deregulation and in the passage of the Bush tax cuts — and who is now, of course, among those hectoring us about the deficit.

So it was the bad judgment of the elite, not the greediness of the common man, that caused America’s deficit.

Hey, you know what would help assess this hypothesis?  Some actual data. 

First, let's consider the tax cut question.  Take a gander at this chart from Gallup: 

Gee, as it turns out, the public did seem to think a tax cut was a swell idea around about 2001.  Indeed, the problem the American public had was that they were skeptical the tax cuts would actually come to pass:

Although the public has not been asked specifically about the Gramm/Zeller bill, a CNN/USA Today/Gallup poll conducted January 5-7, 2001, showed that over half -- 52% -- of Americans favor Bush's tax plan, based on what they have read or heard. However, the public is generally pessimistic about the new administration's ability to actually pass the tax cut -- only 38% of Americans think Bush will be able to pass such legislation (50% do not and 12% have no opinion on the matter).

Now, to be fair, the Gallup data also suggests that tax cuts were not the #1 priority of Americans in 2001.  Based on that chart, however, it seems pretty clear that there was a fair degree of enthusiasm for tax cuts.

Similarly, on Iraq, again, the Gallup poll data shows that a majority of Americans supported "invading Iraq with U.S. ground troops in an attempt to remove Saddam Hussein from power."  The numbers between June 2002 and March 2003 fluctuate between a low of 53% and a high of 64%, but every poll demonstrated majority support for the policy option. 

Krugman may or may not be correct on the financial deregulation question, though I suspect the best answer on that issue is that the public was rationally ignorant about the issue.  And for the record I think he is right on the Europe side of the equation. 

The point of this post is not to let American policy elites off the hook.  The point is that Krugman's notion of a passive, innocent American public doesn't wash either.  Political leaders only implement the kinds of Big Policies like the Bush tax cuts and Iraq invasion if there's an American public that's copacetic with these policies.  The majority of the American public supported the key policy decisions that led to the current macroeconomic situation, and suggesting otherwise is tendentious. 

Am I missing anything? 

UPDATE:  Kevin Drum thinks I am missing something:  public support for tax cuts/invading Iraq were constants, and it took the Bush administration to execute these policies: 

Despite this broad support, nobody was crying out for either huge tax cuts or invading Iraq until George Bush and the rest of the GOP started talking them up. Without that, the public would have continued to vaguely think that taxes were too high and Saddam Hussein was a bad guy before switching the TV to Monday Night Football and forgetting about it.

It's true that public support was probably necessary in order to pass the Bush tax cuts and invade Iraq. But the polling evidence is pretty clear that it was far from sufficient. Nothing about public opinion changed in 2001. The only thing that changed was the occupant of the Oval Office. The public isn't blameless in all this, but the polling evidence makes it pretty clear that it was a minor player.

I completely agree with Drum about the "necessary but not sufficient" quality of American public opinion.  I'm not sure "minor player" is correct, however.  First, bear in mind that George W. Bush was re-elected rather handily after implementing both of these policy choices, so it's not like the public was experiencing buyer's remorse in 2000. 

Second, in my recollection, politicians in democracies have a strong incentive to translate majority public sentiments into concrete policies that favor their particular political coalition.  George W. Bush took a popular sentiment for tax cuts and ran with it; Barack Obama took a popular sentiment to address health care and ran with it.  Neither outcome was quite in line with the public sentiment that animated it, but that's public policy for you. 

To reiterate, I'm not disagreeing with Krugman that policy elites must shoulder the burden for their mistakes; I'm just pushing back against his implied argument that the American public is blameless -- hence the "unindicted co-conspirator" language.   

Your humble blogger is taking a brief break from teaching and zombie book-whoring publicizing recently-released research to start work on new research.  This requires me to be in Europe for the week.  So, for some local color, it's worth asking how things are in the land of the euro, the eurozone, and the eurocracy. 

Last year, during the epth of the Greek crisis, I argued that, "When going backwards isn't an option, and muddling through is no longer viable, the only thing left to do is move further along the integration project." 

Last week, it seemed that France and Germany had come to the same conclusion.  The Guardian's John Palmer provided a cogent summary on the deal that was being negotiated at Friday's European leaders' summit:

Angela Merkel, Nicolas Sarkozy and the other EU chiefs will sound out the parameters of a breakthrough deal which could take the euro area – at the heart of the EU – towards a de facto economic government. The deal will offer massive financial support for countries under the currency market cosh in return for governments accepting that national economic policy in future will first have to secure the broad approval of the rest of the euro area.

[You must be feeling sooooo vindicated right now!!--ed.]  Oh, you betcha, got this one right on the money... wait, what's this Financial Times story by Peggy Hollinger and Peter Spiegel saying? 

New cracks emerged at a summit of European leaders on Friday, as the prime ministers of several countries raised strong objections to a Franco-German plan that would commit all 17 users of the single currency to co-ordinating their economic policies....

[T]heir initiative triggered a backlash from other European Union leaders anxious to defend their national economic, labour and welfare policies.

In the summit’s concluding communiqué, European leaders also appeared to back off a commitment to give the eurozone’s €440bn bail-out fund new tools to help shore up struggling “peripheral” economies.

An initial version of the conclusions committed the EU to giving the fund more “flexibility” – a code word for new authorities such as buying sovereign bonds of struggling countries on the open market. After extensive debate, that language was taken out, however, and now only binds members to give the fund “necessary effectiveness”, a clear watering-down.

What happened?  The Wall Street Journal's Irwin Stelzer explains:

Most countries profess broad agreement of the need for reforms along the lines Germany is demanding. Yet when confronted with the German-French package—the French have always favored some form of centralized economic management of the EU, including strict regulation and heavy taxation of the financial services sector that is centered in Britain—they balked.

Austria, with one of the lowest effective retirement ages in the euro zone, won't go along with an increase in the retirement age. Portugal won't buy into the end of wage indexation with inflation because it wants to offer a sop to public-sector workers whose wages have been cut by 5%. Neither will Belgium, Spain and Luxembourg. All in all, almost 20 countries at Friday's EU summit objected to the Germanization of their countries for one reason or another. So Germany refused to sign on to an increase in the size of the euro-zone bailout fund. "It was truly a surreal summit," commented Yves Leterme, Belgium's prime minister.

Stezler goes on to predict that there will be yet more Euro-muddling as a result of this deadlock.  I'm sticking to my original prediction, however.  As much as the European periphery dislikes the proposed grand bargain, some form of it will likely be accepted because  the alternative outcomes seem even more unappetizing. 

Developing....

OK, apparently the Wall Street Journal now has a policy to publish an op-ed every quarter asserting that:

1)  U.S. defense spending is woefully inadequate compared to the Cold War era;

2)  Those advocating further defense cuts are advocating taking the United States back to the 1930's; and

3)  Today's threat environment is really, really bad. 

Last quarter it was the Arthur Brooks/Edwin Feulner/William Kristol op-ed.  Today it's Mark Helprin.  The gist of his argument:

Based upon nothing and ignoring the cautionary example of World War II, we are told that we will never face two major enemies at once. Despite the orders of battle of our potential adversaries and the fact that our response to insurgency has been primarily conventional, we are told that the era of conventional warfare is over. And we are told that we can rest easy because military spending is an accurate index of military power, and we spend as much as the next however many nations combined.

But this takes no account of the nature of our commitments, the fading contributions of our allies, geography, this nation's size and that of its economy, conscription or its absence, purchasing power parity, exchange rate distortions, the military trajectories of our rivals individually or in combination, and the masking effects of off-budget outlays and unreported expenditures. Though military spending comparisons are of lesser utility than assessing actual capabilities, they are useful nonetheless for determining a country's progress relative to itself.

Doing so reveals that from 1940 to 2000, average annual American defense expenditure was 8.5% of GDP; in war and mobilization years 13.3%; under Democratic administration 9.4%; under Republican 7.3%; and, most significantly, in the years of peace 5.7%. Today we spend just 4.6% of GDP—minus purely operational war costs, 3.8%. That is, 66% of the traditional peacetime outlays. We have been, and we are, steadily disarming even as we are at war.

Hmm... I'll concede Helprin's point about fading contributions from allies from Western Europe -- but not elsewhere.  Furthermore, I'm pretty sure that if a sober analyst took into account geography, purchasing power parity, off-budget outlays, conscription, and actual military readiness, the argument in favor of moderated defense spending becomes stronger and not weaker.  When the closest great power rival to the United States has difficulties supplying an anti-piracy flotilla, I think it's safe to say that the gap in capabilities is not going to shrink all that dramatically anytime soon. 

More, importantly, it's not the same threat environment as the Cold War.  If the Wall Street Journal is going to recycle the same tired argument about going back to Cold War era defense spending, then I'll just cut and paste what I said the first time this argument was made:

Terrorism and piracy are certainly security concerns -- but they don't compare to the Cold War. A nuclear Iran is a major regional headache, but it's not the Cold War. A generation from now, maybe China poses as serious a threat as the Cold War Soviet Union. Maybe. That's a generation away, however.... 

I'm about to say something that might be controversial for people under the age of 25, but here goes. You know the threats posed to the United States by a rising China, a nuclear Iran, terrorists and piracy? You could put all of them together and they don't equal the perceived threat posed by the Soviet Union during the Cold War. And until I see another hostile country in the world that poses a military threat in Europe, the Middle East and Asia at the same time, I'm thinking that current defense spending should be lower than Cold War levels by a fair amount. 

The "we're-not-spending-enough-on-defense" argument reminds me that I'd like to see the foreign policy community make some New Year's resolutions.  To be specific, there are arguments and memes that commentators have made over the past year that I'd like to see less of in 2011.  More about this later. 

Am I missing anything? 

My latest bloggingheads diavlog is with The Atlantic's newly-betrothed Megan McArdle.  The topics covered include Weigelgate, the Rolling Stone story on McChrystal, the Russian spy ring story, whether austerity or deficit spending is the thing to do right now, and the geekiest things we brought on our honeymoons. 

Your humble blogger is listening in to a Q&A with Treasury Secretary Timothy Geithner, courtesy of the Council on Foreign Relations, which has said, "Chatham House Rules be damned" and is allowing bloggers like me to prattle on.  This post will be updated through the next hour.  On to the show!!

9:15 AM:  We're also allowed to e-mail questions.  I resist the temptation to write, "Just how much do you want to gut-punch Paul Krugman?" and instead submit a question about China.  Let's see if it gets in the queue! 

9:20:  Roger Altman is moderating, and opens by noting that the Fed has provided an estimated $14 trillion in various of guarantees and injections of capital into the global financial system.  Gulp. 

9:22:  Geithner opens with a shout-out to his old staff at the New Yor Fed.  This is one reason why past staffers like him so much. 

9:23: Quotes former Mexican president Ernesto Zedillo:  "Markets overreact, so policy should overreact."  Says we've borowed too much, taken on too much risk, and ordinary Americans are now bearing the cost, which makes it fundamentally unfair.  American people are justifiably pissed (he did not use that word).  Notes that the absence of a serious recession over the past two decades created false expectations of continued prosperity. 

9:24-9:31:  Basically a reprise of his testimony from yesterday. 

9:31:  Now pushing for global coordination of standards at the G-20. 

9:32:  OK, let's get to the actual Q&A!!

9:37:  Altman asks about the future of the plan if Congress does not authorize any additional TARP funds.  Geithner tap-dances, basically says that they would need to muddle through. 

9:43:  Oh, sweet Jesus, Benjamin Barber is asking a question.  And Timothy Geithner just said he sounded like an economist!!!

Seriously, Barber asks a semi-decent question about whether the bank plan socializes losses and privatizes the benefits.  Why not nationalize? 

Geithner responds by saying that governments, in a time of crisis, have to be prepared to assume risks that private actors cannot absorb -- but still have o avoid assuming too much risk.  The complexity and scale of these financial institutions would force the government to assume way too much risk if nationalized. 

9:46:  A lawyer asks whether the Treasury has an estimate of the value of the toxic assets held by the ten largest financial institutions.  Geithner responds :  "If that was a knowable, high enough number, we wouldn't have a crisis."  Then says that they're relying on a range of public sector and private sector estimates.  States that the market value of these assets now is probably much less than they might be in a less panicked future. 

9:52:  Geithner is asked about China (not my question) and the IMF's new proposals for expanded lending.  He responds by praising Zhou Xiaochuan, China's central bank governor, but claims that he hasn't read his proposal in detail.  Geithner makes it clear that he is quite open to expanding the IMF's Special Drawing Rights for less developed countries.  Still, he wants it to evolve and be integrated within the current international monetary system -- as opposed to the de novo creation of a new global currency. 

I've read the report (Tim, it's not that long, take a look!) and Zhou is not proposing anything so radical so soon, so this is a bit of a red herring.  Still, Geithner's statement here carries the same kind of firm pushback that Obama gave yesterday about any move ending the dollar as the global reserve currency.   

Geithner follows up by saying that the future of the dollar in the international system is really a function of long-range U.S. fiscal policies.  Wants to keep U.S. debt-to-GDP ratio stable, and asserts that there is now a consensus in Washington about fiscal rectitude.  This is juuuust a little strange to hear given this year's fiscal balance sheet.

10:00:  Asked a question about what he expects from the G-20.  Boilerplate response, which is not encouraging.  Wonder if he's read the Czech PM's recent statements. 

10:08:  A good follow-up to the G-20 boilerplate, asked about the Scandanavian plan to rescue banks.  Geithner's response:  "We are not Sweden," though looking at the  Seems his chief concern is that there will be a premature withdrawal of rescue efforts

10:09:  Herb Levin asks the extent to which exchange rates play a role in these decisions.  Geithner:  "Is this a trick question?"  and laughs it off.  A little too much tap-dancing here.

10:10:  Asked if there is a limit to the Fed's balance sheet, and Treasury's ability to backstop that balance.  Geithner punts it to Bernanke, then references this joint Treasury/Fed statement. 

10:13:  Asked what headline he wants from the upcoming G-20 summit, and he replies something like "Broad, coordinated action across range of issues by G-20."  And this is why Geithner is not in the newspaper industry. 

10:14:  Last question.  Roger Altman asks Geithner "on behalf of the markets" to clarify his response to the PBoC plan on the future of the dollsar.  Says he continues to see the dollar as the world's reserve currency for both the short-term and the long-term.  Also stresses the need for macro-fundamentals to be strong enough to ensure that this continues to be the case. 

That's a wrap!