This piece published today by Project Syndicate is as insightful a critique as I've seen of the consensus that has emerged among policymakers that government deficits must be cut to restore economic growth.

Not that we haven't taken a stab at that ourselves.

Paul Krugman today once again bemoans the lack of Keynesianism in what passes for economic policymaking discussions these days, and I share that complaint.

However, Krugman may be missing part of the problem here, which is that those who pooh-pooh the prospect of deflation may actually not much care if it materializes, though they would be mistaken to do so.

I've avoided rehearsing the on-going debate over the bleak macroeconomic picture, because it quickly descends into endless political back and forth along with the usual name-calling, as my colleague Steve Taub and I have been discussing internally today.  But it's time to make an exception:

Is the private sector not hiring because it fears more aggressive action from the public sector, and so the public sector (read Obama administration) should leave the economy to itself, as those on the right claim? Or is the lack of private sector hiring a reflection of a lack of private sector hiring, and thus a vicious circle and market failure that requires the public sector (read Obama administration) to step in with a serious jobs program involving infrastructure, alternative energy and schools, as those on the left insist?

Not to speak for Steve, but my sense is he tends to agree with the first perspective, at least for the most part, and I can safely report that I agree with the second, and would recommend James Surowiecki's recent column to help make my case if I could find it. Since I can't, suffice it to say Surowiecki made the useful observation that the two sectors where hiring is picking up, banking and health care, are those where the government has taken the most aggressive regulatory action.

There's a political debate heating up about companies' hesitancy to invest the cash they're sitting on.

Essentially, the Democrats--or at least those in favor of further government stimulus measures such as a jobs program or at least extended unemployment benefits--argue that companies are wary of spending because of the lack of aggregate consumer demand.

A survey released today by the Association of Financial Professionals will do nothing to dampen the austerity versus stimulus debate.

To wit: Forty-three percent of US corporations had larger US cash and short-term investment holdings this May than they did six months earlier. Only 24 percent of respondents reported that their short-term holdings had shrunk during the past six months.

At long last, one writer has seriously addressed the potential problems with more stimulus spending. (I sent Paul Krugman a question about this more than a week ago, via a comment on his blog, but from what I can see he has yet to address it. And Dean Baker too easily dismisses the issue, in my opinion.)

The problem is not the federal budget deficit, not at least in the short term, but the potential political fallout from bad decision making. That way, says Steve Randy Waldman, indeed lay a possible US currency crisis. And this is ultimately where Friedrich Hayek and his associates were coming from in blaming Weimar for the disasters that followed.

Rising labor strife in China has potentially significant implications for US companies and financial markets. The irony is that what companies want isn't necessarily the same thing that markets do.

Yves Smith over at Naked Capitalism does a good job of explaining why.

Before I get to the news (which involves the problems of European banks), let me bury the lede and offer up a bit of perspective. Yes, that's totally bass ackwards, but indulge me for a few grafs. (Hey, this is the web.)

We've recently gotten grief from friends here and there about being too negative about the economy. So we've been doing our damndest of late to ensure a "balanced" approach, seeing the glass half full as often as empty, so to speak, or walking on the sunny side of the street in addition to the shady one. You get the picture. Well, sorry, folks, but sometimes reality won't budge.

I really don't understand what the Times means when it says the European Central Bank lacks certain powers that the Federal Reserve has.

Yes, the ECB lacks the Fed's dual mandate: The ECB's mission is price stability alone, not that plus full employment. Nor does it have access to a government treasury. But what practical effect does any of this have? None that I can see.

Capital expenditure among US companies fell more than anticipated in 2009 and although the trend is expected to reverse this year and next, growth is most likely to be modest.

Capex fell by 16.6 percent in 2009, compared with a 9.9 percent decrease projected by Fitch Ratings. The difference was largely driven by the fact that revenue was 4 percent lower than Fitch forecasted for 2009.