Reading

• In defense of Geithner's phone calls.
• More reasons on why a weaker dollar isn't all bad. Some interesting points here:

  A lower dollar is desirable because it would help America achieve the right kind of recovery. The US economy is severely constrained by household and financial sector deleveraging and possibly by a permanent fall in potential growth. In the absence of another housing bubble and consumer boom, an export-led recovery is the best growth strategy the US could employ. ...The sensible goal of a more balanced world economy is entirely consistent with a weaker dollar and a stronger euro. I am not trying to make a short-term prediction. Foreign exchange markets are crazy, and I have been wrong too many times. But what persuades me that the dollar has further to devalue is the observation that, for once, politics and economics are pushing in the same direction.
  

  
  
• And immediately, a rebuttal to the weaker dollar argument:

  ...a certain amount of dollar weakness is a good thing and consistent with global rebalancing. On one level, this is a sensible and defensible view. But this view is implicitly based on the idea that the dollar will somehow find its “correct” level, more or less. ...But currencies are known for their propensity to overshoot and stay for long periods at levels not warranted by fundamentals.
  

  
  
• An argument for why fiscal stimulus is the right way to go, and worries about debt are misplaced:

  The textbook argument for fiscal stimulus still applies. We face a large output gap -- the difference between the amount the economy could produce and the amount it is producing -- because demand from households (for consumption) and companies (for investment) is low. The government should therefore increase spending in order to increase demand and help close the output gap. This should be balanced by lower spending or higher taxes when the economy has recovered. The fact that our baseline amount of debt has changed does not affect the validity of this principle.
  

  
  
• Of course, it's not clear that the fiscal stimulus has been executed properly. Good read at Models & Agents.
• More from Models & Agents (neat new blog I just discovered) ... a proposal for bank reform. It also includes critiques of other proposals. Really great read. Her proposal follows:

  So here is an idea: Extend the FDIC’s deposit-insurance framework to the entire financial sector. In other words, get financial institutions (i.e. not just commercial banks) to pay a fee to a dedicated FDIC-like fund, which would be financial subsumed to the Treasury. This fund would be available to cover the liabilities of a financial institution (i.e. its creditors, up to a given amount and level of seniority), if that institution failed.
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  Importantly, the scheme could be so designed to address the need to discourage excessive risk-taking as well as a heavily procyclical behavior on the part of financial institutions: For example, the fee could be a function on an institution’s leverage, appropriately defined; and it could also be time-varying, in tune with the business cycle, to discourage heavily procyclical behavior.

  
  
  
  
  
• Not sure I totally follow this one, but here's an argument that M&A will make for a new bubble.