Greg Ip

By succumbing to domestic pressures, America has started an alarming trade row with China

Illustration by KAL

[GREG IP and The Economist's Beijing Correspondent] IN RAW economic terms Barack Obama’s imposition of tariffs on Chinese tyres hardly registers. The number of jobs affected is barely a rounding error in measurements of the mighty American workforce. The cost to consumers is also slight. But in geopolitical terms, it is a whopper. Read the rest of this entry »

The original article is linked here.

By Greg Ip

Can America wean itself off consumption? The first of a series on how the world’s four biggest economies must change to ensure sustainable global growth

GENERAL ELECTRIC has historically been a manufacturer, but in the long boom leading up to the financial crisis it became more like a bank. Half its profit came from its finance arm, GE Capital, which among other things had a lucrative business issuing mortgages and credit cards to American consumers. GE’s chief executive, Jeffrey Immelt, now talks like a man chastened. With GE Capital acting as a drag on the company, he vows that in the future finance will be a smaller part of the company. In its place GE touts its manufacturing and exporting prowess. Mr Immelt boasts of record aircraft engine orders at the Paris Air Show in June, none of them to American airlines.

Like GE, the entire American economy is at an inflection point. For decades, its growth has been led by consumer spending. Read the rest of this entry »

The original article is linked here.

Economics focus

Put out

Uncertainty over the size of the output gap complicates the task of central banks

HAVING raised the alarm on deflation, the Federal Reserve has now begun to sound the all clear. The statement it released after its policy meeting on June 24th notably omitted the warning from its three prior meetings that “inflation could persist for a time below rates that best foster economic growth and price stability”. To be sure, with the economy gradually finding a bottom and the rate of decline in home prices slowing, the chances of a downward spiral of deflation and economic activity have diminished. Yet it seems premature to write off the threat as long as a large output gap persists. Read the rest of this entry »

The original story is linked here.

THE president Apr 30th 2009 | WASHINGTON, DC
From The Economist print edition 

Though Barack Obama has shown less protectionism than was feared, he needs to do more to resist it in Congress and to press forward on Doha

THE president has shown signs of shedding the protectionist baggage he brought to the White House. As presidential candidate, Barack Obama wanted to punish China for manipulating its currency to boost exports. On April 15th President Obama’s treasury secretary quietly issued a report that pointedly did not declare China to be a currency manipulator. Read the rest of this entry »

The original blog post is linked here.
IN THE prelude to the G20 meeting, many commenters, including this newspaper, worried of a repeat of the London Conference of 1933. Franklin Roosevelt is often accused of wrecking it with his refusal to return to the gold standard. The resulting disarray, it is said, deepened the Depression.

Yet one could argue that in its failure to return the world to gold, the 1933 conference was a success. Markets greeted Roosevelt’s July bombshell “enthusiastically”, notes economic historian Allan Meltzer. They correctly anticipated “reflation, rising output, and a vigorous policy of domestic expansion.” As Barry Eichengreen has demonstrated, the gold standard was a monetary straitjacket that transmitted deflation between countries; each country’s recovery is highly correlated with when it abandoned gold.

On this front, I see a parallel (though perhaps a tortured one) with the G20’s decision to boost the IMF’s lending resources from $250 billion to $1 trillion. Read the rest of this entry »