Global rebalancing: The clock ticks

American pressure for China to revalue the yuan is reviving. Others are less fussed

Jun 17th 2010 | HONG KONG AND WASHINGTON, DC

[Greg Ip and our Asia Economics Correspondent] LIKE his leggier boss in the White House, Tim Geithner, America’s treasury secretary, is fond of basketball. In April he called a timeout in America’s long campaign for a stronger Chinese exchange rate, postponing a report that might have accused China of currency manipulation. His objective, he said, was to use his talks with China in May and the G20 gatherings in June to make “material progress” on rebalancing the world economy. The last of those meetings, the G20 summit in Toronto, will take place on June 26th and 27th.

Public finances: Can pay, won’t pay

America’s most profligate states do not owe as much, proportionately, as Greece. But their politics are just as problematic

Jun 17th 2010 | WASHINGTON, DC

[Greg Ip] THE state of Illinois has a rather crude way of coping with its ballooning budget deficit. It stops paying bills. Already, it has failed to pay more than $5 billion-worth. State legislators are paying their own office rent to avoid eviction. Schools and public universities are having their budgets cut.

Illinois owes Shore Community Services, a non-profit agency in suburban Chicago, some $1.6m for services to the mentally disabled. The agency has had to lay off a dozen staff. Jerry Gulley, the executive director, says his outfit’s line of credit could be exhausted soon. The bank will not accept the state’s IOUs as collateral. “That’s how sad it is,” shrugs Mr Gulley.

Comparisons between incontinent American states and Greece are all the rage.

Unemployment insurance: Extension deficit disorder

The pros and cons of longer-lasting unemployment benefits

Jun 10th 2010 | WASHINGTON, DC

 

[Greg Ip] FACES seldom fall when employment shows its biggest gain for a decade. But the vast majority of the 431,000 non-farm jobs created in May were temporary hires for the ten-yearly census. Private employment rose a meagre 41,000, an anticlimax after other signs that America’s recovery was gathering steam. True, the unemployment rate dropped to 9.7% from 9.9%, but this was mostly because many job-seekers had given up the hunt and were no longer counted as unemployed. Those still counted as jobless have been so, on average, for a post-war record of 34 weeks.

 

One of a few small mercies was that Congress had allowed them to collect unemployment insurance (UI) payments for much longer than usual. But on June 2nd even that concession expired.

Economics focus: A winding path to inflation

Even if governments could create inflation, they may not want to

Jun 3rd 2010

 [Greg Ip] IN THE short run inflation is an economic phenomenon. In the long run it is a political one. This week The Economist asked a group of leading economists whether they reckoned inflation or deflation was the greater threat; this was our inaugural question in “Economics by invitation”, an online forum of more than 50 eminent economists. The rough consensus was that in the near term, as Western economies struggle to recover, the bigger worry there is deflation. But as the time horizon lengthened, more experts cited inflation, because it seems the most plausible exit strategy for governments trying to deal with crushing debts. “Deflation is not a lasting threat,” wrote Arminio Fraga, a former president of Brazil’s central bank. “The more interesting question is whether they can manage to keep inflation down over time under the regime of fiscal irresponsibility now prevailing almost everywhere.”