The key thing I took away from the memo is that it does not read at all like the current story the administration gives for the inadequate size of the stimulus, which is that they knew it should be larger but had to face political reality.

Instead, the memo argues that a bigger stimulus would be counterproductive in economic terms, because of the “market reaction”. That is, Summers et al were afraid of the invisible bond vigilantes.

And to the extent that there is a political judgment, it’s all in the opposite direction: if the stimulus is too big, we’ll have trouble scaling it back, but if it’s too small, we can always go back to Congress for more.

via Larry and the Invisibles – NYTimes.com.

[...]

As a share of the US economy, China’s fiscal stimulus measures this year are larger even than America’s. While the loosening of credit conditions is greater than any that O’Neill has ever seen.

All this policy seems to be having an effect. He’s just raised Goldman Sachs’ forecast for Chinese growth this year from 6% to more than 8%, and next year’s from 9% growth to nearly 11%.

This optimism gets support from stories on the ground. Qu Hongbin and Sun Junwei, of HSBC, just returned from a tour of three big cities in inland provinces, which were never as dependent on exports as the coast.

They say that firms there are already benefiting from all the new infrastructure projects that the government is putting on stream. And consumer spending is holding up as well, growing at annual rates of close to 20%.

The national picture is also looking up. The volume of bank loans grew by nearly 30% in the first three months of the year. While the British were obsessing over their finances, China also reported a record month for car sales in March.

[From BBC - Stephanomics: Optimism about China's economy]