Greg Ip

Articles by The Economist’s U.S. Economics Editor

Archive for October 2008

Think the Bailout Is Radical? Just Wait.

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Greg Ip
1710 words
19 October 2008

The Washington Post

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English
Copyright 2008, The Washington Post Co. All Rights Reserved

 

In the past month, the unprecedented has become routine. The Treasury Department and the Federal Reserve, headed by Republicans, have intervened in the U.S. economy to an extent that would have shocked liberals a year ago. The Treasury is now a major shareholder of U.S. banks, the Fed is a principal lender to private business, and the American taxpayer stands behind huge swaths of the financial system, from home mortgages to business bank accounts. “Socialism has now washed over free-market capitalism,” Sam Donaldson of ABC News recently sighed.

Momentous? Sure. Socialism? Hardly. Breathtaking though these past weeks have been, they’re nothing compared to what both the United States and other Western countries have experimented with in the past. But even though they have often departed from free markets in response to crisis, they eventually find their way back. Let’s not get hysterical about changing the very nature of our system over the long haul. But in the meantime, don’t rule out even more radical action. Read the rest of this entry »

Written by gregip

October 19, 2008 at 9:21 pm

America catches up

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Bank recapitalisation


Oct 14th 2008 | WASHINGTON, DC
From Economist.com

America’s Treasury announces a package of equity injections and loan guarantees to save the banks

Reuters
crisistalk

 

WITH luck, the American government’s bank recapitalisation plan will save the financial system, but it is probably too late to save the economy from succumbing to the combined impact of shrinking wealth and the credit crunch. Read the rest of this entry »

Written by gregip

October 14, 2008 at 10:13 pm

Quantitative easing, Fed style

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Not yet the last resort

Oct 9th 2008
From The Economist print edition

 

 

The Fed tries its own version of quantitative easing
 

Illustration by Jac Depczyk
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WHEN, on October 3rd, America’s Congress eventually approved the Bush administration’s $700 billion plan to buy troubled mortgage assets, lawmakers earned not only the gratitude of Ben Bernanke, but also a promise from him. The Federal Reserve, its chairman declared, would do its part with “all of the powers at our disposal”.

He has certainly kept his word. On October 6th the Fed doubled, to $900 billion, the planned size of the loans it auctions to banks. A day later it said it would for the first time in its history make unsecured loans to companies, including banks, by buying commercial paper that they are unable to refinance. In theory, this tactic could be used to allow the Fed to make any kind of loan, including to state and local governments and in the interbank funds market. And a day after that it joined other leading central banks in cutting interest rates, lowering its target for the federal funds rate from 2% to 1.5%. It is unlikely to stop there. The rate could end up at zero.

The rate cut was a conventional response to the growing risk of a deep recession. The other steps take the Fed farther into uncharted territory. Read the rest of this entry »

Written by gregip

October 9, 2008 at 7:35 pm

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