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July 22, 2005

I love the smell of newsprint in the morning

Man oh man. It's a great time to be a newshound. Here are some brief thoughts on a few of the huge things going on right now:

On John Roberts: I'd totally love to have him and his wife over for dinner, but I'm still not sure I want him on the Supreme Court (possibly) for the next 40 years. Even if it was someone I was sure I liked, I still wouldn't want to have a Bush appointee with that kind of longevity. He doesn't deserve a legacy like that.

On China's revaluation of the renminbi: It's a good first step, and hopefully it will shut Chuck Schumer and his protectionist colleagues up for a while. Still, since China has opened the monetary door a crack, they need to throw it way the eff open so as to avoid a bubble from an inflow of speculative foreign currency. Basically, China is at a precipice where they can choose to either fall into a debt crisis or to assume the responsibilities of a world economic leader.

What this is going to mean for the US is further monetary tightening. Markets had thought that the overnight rate would top off at 4.25% in November, but since China no longer needs to prop up the dollar, a sell-off of their US debt holdings and currency reserves is likely (which I said a while ago), and as China goes, so does the rest of Asia, as Malaysia showed when they abandoned their peg yesterday.

Whatever happens, the bottom is going to fall out from underneath the US bond market, and is unlikely to gain any ground in the forseeable future. Expect equity to soundly outpace debt in the US until something really cataclysmic happens.

Personally, I think a better reform move for Chinese currency would've been to take Mao's picture off of it.

On Corporate Tax: John Kerry (you remember him) has an opinion piece in today's FT (paid subscription required) in which he argues that the answer to America's gloablization blues is to remove tax incentives for companies to send jobs abroad, and to extend incentives and remove disincentives for them to repatriate their earnings. He's right as far as he goes (and should go farther in the latter case), but he misses the point on what the problem will be for the US in the global economy of tomorrow. The main problem isn't corporate tax structure (although that could be a huge part of a necessary short-term band-aid that would also dramatically increase tax revenue), the problem is education. Until we get serious about closing the massive education gaps in this country, then we're hurling ourselves towards global serfhood. We can keep teaching our kids just enough to be able to drive a forklift or assemble a chassis, but those jobs are going, going, gone, and they're never coming back (no matter how many tariffs we want to impose on China, or India, or Venezuela...). Unless we can get our kids to start performing in math, science, and technology, it's going to be a long, miserable century.

On The Sox!: Despite the emotional rollercoaster that is Curt Schilling's comeback so far, Boston is 1/3 of the way to showing the undisputed AL Central leaders who the real Sox are.

Okay, that was a mouthful. I promise I have fun things to talk about, too, but there's a lot going on right now, and it needed to be mentioned.

Posted by matt at July 22, 2005 09:42 AM

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