Quotes of the day

I was really surprised, because I remembered [Kyle Chandler] as this fresh-faced, boyish, charming young man. And here he was looking like one of the Baldwin brothers after a hard weekend.--Peter Berg

A group of German banking associations to EU banking officials conducting ‘stress tests’ to see how many European banks are in trouble: “Given the tense situation which already exists in money and capital markets, we believe publishing the results with the present level of detail would exacerbate the sovereign debt crisis. ”Translated into English that means, “If the public ever finds out what a mess we are in, they will panic. So shut up.”--Walter Russell Mead

The limited consumer and mortgage financing in China means that china will not have a US-style financing problem, and the large amount of reserves means that China won’t have a Korean-style financing problem, but no one has ever seriously argued that those are the kinds of risks China faces. What matters is the level of debt, whether or not its growth is sustainable, and the kinds of contingent structures that are embedded. I would argue that all three measures are worrying.--Michael Pettis

As former Senator Phil Gramm once told us, never take a hostage you're not prepared to shoot. Republicans aren't prepared to stop a debt-limit increase because the political costs are unbearable. Republicans might have played this game better, but the truth is that Mr. Obama has more cards to play. The entitlement state can't be reformed by one house of Congress in one year against a determined President and Senate held by the other party. It requires more than one election. The Obama Democrats have staged a spending blowout to 24% of GDP and rising, and now they want to find a way to finance it to make it permanent. Those are the real stakes of 2012.--WSJ Editorial Board

First, the relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies. Second, emerging markets face lower thresholds for external debt (public and private)—which is usually denominated in a foreign currency. When external debt reaches 60 percent of GDP, annual growth declines by about two percent; for higher levels, growth rates are roughly cut in half. Third, there is no apparent contemporaneous link between inflation and public debt levels for the advanced countries as a group (some countries, such as the United States, have experienced higher inflation when debt/GDP is high.) The story is entirely different for emerging markets, where inflation rises sharply as debt increases.--Reinhart and Rogoff

[Obama appointed] Chairman [Erskine] Bowles found that, to get three Senate Republicans to support a net tax increase, he needed to repeal an expensive new health program, tick off the trial lawyers with malpractice reform, establish a pilot program for Ryan-Rivlin style Medicare reform, and place a cap on total health spending. He needed to increase the eligibility age not just for Medicare, but also for Social Security, and he needed to slow Social Security spending growth through changes to the benefit formula. He needed to tick off government worker unions by prospectively repealing their special exemption from Social Security. And he needed to agree to tax reform that would raise total revenues while dramatically lowering top individual and corporate rates. President Obama has been unwilling to make any of these changes, and yet suggests Republicans are being unreasonable for not agreeing to net tax increases. The President refuses to discuss changes to the trillion dollar new health entitlement he and Congress created last year. He refuses to discuss changes to Social Security beyond a CPI correction. He insists that top tax rates go up. He attacked Paul Ryan for his long-term Medicare reform and refuses to consider it. At least as important, Bowles & Simpson offered a long-term fiscal solution in exchange for this net tax increase, under which spending would never have exceeded 22% of GDP and deficits would have quickly dropped below 2% of GDP and eventually reached balance. That’s too much spending (and too high taxes) for my taste, but it’s qualitatively different from and far superior to the President’s proposal, which is to trade permanent tax increases for only a temporary slowdown in government spending growth and budget deficits.--Keith Hennessey

There is some machine moving now that I do not understand, and I won’t be the one to stop it. I have chosen this particular person, only ever, with whom to try for a child. Goodbye to the possibilities of knee tapping. Goodbye to all of that. If I am to become a father I have no choice but to forget everything outside of this room. And to produce.--Paul Ford

Infants seem to perceive reliable adults as capable of rational action, whose novel, unfamiliar behaviour is worth imitating. In contrast, the same behaviour performed by a previously unreliable adult is interpreted as irrational or inefficient, thus not worthy of imitating.--Diane Poulin-Dubois