Greg Ip

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

Archive for December 2009

The Worst Ideas of the Decade: Housing Prices Always Rise

leave a comment »

by Greg Ip

[Washington Post Outlook Section, Dec. 20, 2009]

Countless delusions and mistakes brought on our financial crisis, but none did as much damage as the belief that home prices never go down.

People have long seen real estate as a safe investment. The notion is intuitive – the supply of land is limited, and the population is always growing – and until 2007, national home prices had not fallen significantly since the Great Depression.

Yet at the start of this decade, this belief became the lynchpin of an entire investment philosophy, as survivors of the dot-com bubble sought a refuge for their money. Read the rest of this entry »


Written by gregip

December 20, 2009 at 9:00 am

America’s municipal-bond market: State of pay

leave a comment »


Dec 10th 2009 | WASHINGTON, DC
From The Economist print edition

A federal subsidy may change the market for good



[Greg Ip] THE federal government may have astronomical deficits but it can still borrow with ease at rock-bottom rates. Not so states, municipal governments and other government agencies, such as school districts and public-transport bodies, which have historically borrowed at lower rates than the Treasury. That is because interest on municipal bonds is generally tax-exempt. Investors accept a lower yield on a muni-bond than on a comparable Treasury bond on which they pay tax.

Thanks to the financial crisis, however, that position has changed: municipal yields are much closer to and, in some cases, above those on Treasuries (see chart). Some borrowers have scaled back or shelved planned borrowing. Read the rest of this entry »

Written by gregip

December 10, 2009 at 8:00 pm

A roadmap for more Fed easing

leave a comment »

 Dec 4th 2009, 0:35 by The Economist | WASHINGTON

[Greg Ip] THE Federal Reserve by law is supposed to strive for stable prices and full employment. It has had great success on the first part, but with unemployment around 10%, it’s been an abysmal failure on the second. My colleague across the hall has noted the oddity of Ben Bernanke being grilled at today’s confirmation hearing on how to regulate banks but not on how he plans to get unemployment down.

Mr Bernanke might answer that with the federal funds rate around zero he is already doing all he can. He’d be wrong. Joseph Gagnon at the Peterson Institute (and a former senior staffer for Mr Bernanke at the Fed) has a new paper (PDF) that offers very specific advice on what more the Fed can do. Read the rest of this entry »

Written by gregip

December 4, 2009 at 9:00 pm