Greg Ip

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

Archive for October 2010

Skilled immigration: Green-card blues

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A backlash against foreign workers dims business hopes for immigration reform

Oct 28th 2010 | WASHINGTON, DC

[Greg Ip] BAD as relations are between business and the Democrats, immigration was supposed to be an exception. On that topic the two have long had a marriage of convenience, with business backing comprehensive reform in order to obtain more skilled foreign workers.

That, at least, was what was meant to happen. In March Chuck Schumer, a Democratic senator, and Lindsey Graham, a Republican, proposed a multi-faceted reform that would toughen border controls and create a path to citizenship for illegal immigrants while granting two longstanding goals of business: automatic green cards (that is, permanent residence) for students who earned advanced degrees in science, technology, engineering or maths in America, and an elimination of country quotas on green cards. The quotas bear no relationship to demand, leaving backlogs of eight to ten years for applicants from China and India. Barack Obama immediately announced his support.

But the proposal never became a bill, much less law. Mr Graham developed cold feet and withdrew his support; he was concerned that the Democrats were moving too quickly, as the economic misery that has turned Americans against foreign trade spread to dislike of foreign workers.

The entire article is linked here.


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October 28, 2010 at 3:16 pm

Economics focus: Level Worship

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Price-level targeting could make monetary policy more potent—or just more confusing

Oct 28th 2010

[Greg Ip] EVER since Ben Bernanke, the chairman of the Federal Reserve, signalled in the summer that he stood ready to keep using unconventional monetary policy to shore up America’s fragile economic recovery, expectations have been building that the Fed will launch a second programme of quantitative easing (QE)—the purchase of bonds with newly printed money. That moment is likely to come at the Fed’s meeting on November 2nd-3rd. Whether QE2 can live up to the hype is another matter. QE aims to stimulate demand by lowering nominal long-term interest rates, much as conventional monetary easing works by lowering short-term nominal rates. But with short-term rates already close to zero and long-term rates also very low, the room for further reductions in nominal rates is tight.

There may in any case be another way to achieve the same stimulus. What matters for boosting demand is the real interest rate—the nominal rate minus expected inflation—since inflation reduces the burden of repaying debt. If nominal rates cannot fall any further, why not raise expected inflation? Central bankers have roundly rejected the most obvious way to do that. Raising official inflation-rate targets, they say, would destroy years of hard-won credibility. But they are more receptive to another idea: targeting the level of prices rather than the inflation rate.

The entire article is linked here.

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October 28, 2010 at 3:13 pm

Think this economy is bad? Wait for 2012.

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By Greg Ip

Washington Post Outlook, Sunday, October 24, 2010; B03

We’re barely two years past the banking crisis, still weathering the mortgage crisis and nervously watching Europe struggle with its sovereign debt crisis. Yet every economic seer has a favorite prediction about what part of the economy the next crisis will come from: Municipal bonds? Hedge funds? Derivatives? The federal debt?

I, for one, have no idea what will cause the next economic disaster. But I do have an idea of when it will begin: 2012.

Yes, an election year. Economic crises have a habit of erupting just when politicians face the voters. The reason is simple: They are born of long-festering problems such as lax lending, excessive deficits or an overvalued currency, and these are precisely the sort of problems that politicians try to ignore, hide or even double down on during campaign season, hoping to delay the reckoning until after the polls close or a new government takes office. Read the rest of this entry »

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October 24, 2010 at 12:00 pm

Sovereign-debt managers: Rollover roulette

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[Greg Ip] WHEN financial turmoil threatened to engulf Ireland last month, the government took an unusual step: it scrapped bond auctions for the rest of the year. The move was possible because the country has enough cash to last until next May.

Over the past two years Ireland’s National Treasury Management Agency (NTMA), which manages the state’s debt, has maintained a cash cushion of €20 billion ($27.7 billion), equivalent to 12% of GDP. It did the bulk of its borrowing through long-term bond auctions, resulting in a relatively long average maturity for the national debt. The IMF reckons that next year Ireland must finance the rich world’s largest budget deficit as a share of GDP. But it needs to refinance only a modest amount of maturing debt (see chart). In contrast, huge refinancing needs helped drive Greece into the arms of the fund and of its euro-zone peers in May.

The entire article is linked here.


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October 14, 2010 at 3:25 pm

The economy: It’s all up to the Fed

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The Fed will try to force the economy into orbit with more bond purchases

Oct 14th 2010 | Washington, dc

[Greg Ip] ROCKET science may be out of fashion on Wall Street, but it still has a following at the Federal Reserve. All year long officials there have looked for signs that the economy has reached “escape velocity”: growth that is strong enough to bring down unemployment once the propellants of government stimulus and inventory replenishment are spent.

Such signs remain maddeningly elusive.

The entire  article is linked here.

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October 14, 2010 at 3:22 pm