Archive for July 2010
Jul 23rd 2010, 18:07 by G.I. | WASHINGTON
[Greg Ip] Asked Wednesday what he’d do if the economy needed more stimulus, Ben Bernanke was noncommittal: “We are going to continue to monitor the economy closely and continue to evaluate the alternatives that we have.”
Mark Thoma (here and here) is dismayed that Mr Bernanke, given the time the Fed has had to study this, doesn’t seem to know what he’ll do. Robin Harding says Mark is unfair: what Bernanke does will depend on what happens, and then on developing a consensus with his colleagues.
Can the American mortgage market survive without taxpayer support?
Jul 22nd 2010 | Washington, dc
[Greg Ip] THE hefty financial overhaul that Barack Obama signed into law on July 21st (pictured) left behind one big piece of unfinished business. In 2008 Fannie Mae and Freddie Mac, mortally wounded from losses on loans acquired during the bubble, were placed in “conservatorship”, a halfway house between bankruptcy and outright nationalisation. There they remain, their losses duly covered with new injections of capital by the Treasury—$145 billion so far. Tim Geithner, the treasury secretary, has promised to address the matter of Fannie and Freddie by early next year but so far he has no answers, only questions (literally so: in April he asked the public to comment on seven of them). Read the rest of this entry »
Deflation is not imminent but the rich world’s central banks must be ready to do what they can to fend it off
Jul 15th 2010
[Greg Ip] FOR people who pride themselves on being boring and cautious, the rich world’s central bankers have in the past few years proved to be a flamboyant bunch. Responding aggressively to financial panic, recession and the threat of deflation, they lowered short-term interest rates close to zero and many then plunged into the realm of the unconventional, buying government debt and extending vast new loans to banks. For the most part, they have avoided the rancorous disagreement that now consumes the debate over fiscal policy.
That consensus is fraying. Read the rest of this entry »
The nature of the recession, not government schemes, may explain why some countries lost so few jobs
Jul 8th 2010
[Greg Ip] GERMANY’S gross domestic product fell by 4% in the two years to the end of 2009, twice as much as in America. Yet its employment rose by 0.7% while America’s plunged by 5.5% (see left-hand chart). When German politicians contemplate why a gruelling recession produced almost no increase in unemployment, they usually have a one-word answer: Kurzarbeit. “It is only thanks to Kurzarbeit that more jobs were not lost,” Angela Merkel, the chancellor, told Germany’s parliament in November. Read the rest of this entry »
Jul 7th 2010, 20:58 by G.I. | WASHINGTON, DC
[Greg Ip] IF YOU’RE making a call on a double-dip recession, you must also make a call on the credibility of the yield curve. Read the rest of this entry »
Jul 6th 2010, 16:45 by G.I. | WASHINGTON, DC
[Greg Ip] TWO articles in today’s Wall Street Journal speculate that low interest rates are doing more harm than good. George Melloan argues they are punishing savers and rewarding high-rolling risk-taking hedge funds. David Reilly says they are choking off interbank lending because banks with excess cash don’t feel compensated for lending to other banks.
I think both evidence and theory are against both these arguments. Read the rest of this entry »
Jul 1st 2010 | WASHINGTON, DC
[Greg Ip] BARACK OBAMA’S plea to stimulate economic growth now and cut deficits later got a mixed response from world leaders at the G20 summit in Toronto last weekend. And the reception back home was a lot worse. Read the rest of this entry »
A somewhat clumsy bill is hardly a panacea, though it fixes some important things
Jul 1st 2010
Jul 1st 2010, 13:02 by G.I. | WASHINGTON, DC
FISCAL austerity in a time of near recession is a bad idea when monetary policy is helpless as Brad DeLong has been pointing out for oh, several years now. Let’s broaden this debate about procyclicality beyond fiscal and monetary policy. As we saw during the crisis, both regulatory policy (forbearance) and credit policy (bail-outs and liquidity) can also be used for macroeconomic stimulus. How are they doing now: still stimulating? Unfortunately, no: they are showing symptoms of the same inchoate procyclicality as fiscal policy. Read the rest of this entry »