Archive for January 2011
[Greg Ip] THE dollar’s ascendance to the rank of world’s most important currency is often remembered as having been slow and gradual, mirroring the decline of sterling and Britain’s historic economic dominance. In fact, it was surprisingly swift. From a standing start in 1914, the dollar had overtaken sterling in international importance by 1925. The first world war played a part, but so did a lesser-known factor. America had surpassed Britain as the world’s largest economic power as early as 1870, but it had a stunted financial system: its banks could not open branches abroad, it had no central bank and panics were common. All these things discouraged international use of the dollar. Read the rest of this entry »
The regulatory state is expanding sharply. But Barack Obama hints that there may be moderation ahead
Jan 20th 2011 | WASHINGTON, DC | from the print edition
[Greg Ip] EVER since his thumping in the mid-term elections, Barack Obama has been busily mending relations with business folk. He has extended existing tax cuts, introduced new ones, completed a free-trade deal and appointed a banker as chief of staff. Now he is attending to their biggest grievance: that he has enmeshed them in stifling new rules, from health care and finance to oil-drilling and greenhouse gases.
Unlike many charges lobbed at Mr Obama, this one is well grounded. In his first two years in office the federal government issued 132 “economically significant” rules, according to Susan Dudley of George Washington University. (“Economically significant” means that either the rule’s costs, or its benefits, exceed $100m a year.) That is about 40% more than the annual rate under both George Bush junior and Bill Clinton. Many rules associated with the newly passed health-care and financial-reform laws are still to come. Read the rest of this entry »
Talk of America defaulting on its debt is just that
Jan 13th 2011 | WASHINGTON, DC | from the print edition
[Greg Ip] FOR most finance ministers default is usually a subject to be avoided at all costs. Not so in America, where Tim Geithner, the treasury secretary, sent Congress a letter on January 6th describing in gory detail the “catastrophic economic consequences” such an event would entail.
The letter was part of the dance that takes place whenever the administration asks Congress to raise the ceiling on the national debt. America is unusual in requiring a vote both to adopt a budget, and to issue any debt necessary to finance it. Grandstanding legislators typically demand concessions from the administration before raising the ceiling. There is obvious potential for a stand-off, just as there was in 1995-96, when Bill Clinton rejected the budget cuts proposed by congressional Republicans as a condition for raising the debt ceiling.
A similar confrontation now looms. Read the rest of this entry »
Jan 7th 2011, 23:06 by G.I. | WASHINGTON, DC
[Greg Ip] FOR politicians, power is usually its own reward. But doing the right thing sometimes comes at the expense of power, which means they need other incentives, too. This seems to be the thinking behind the “FI$CY“, awarded to policymakers who lead “on confronting our fiscal challenges.”
The Committee for a Responsible Federal Budget, the Comeback America Initiative and the Concord Coalition handed out the awards Wednesday night. Two of the three recipients make sense: Mitch Daniels, Indiana’s Republican governor, has balanced his state’s budget with tough but judicious spending cuts and tax increases. Kent Conrad, the long-serving Democratic chairman of the Senate Budget Committee, was a driving force behind what eventually became the Bowles-Simpson deficit commission.
The third choice, Paul Ryan, is more of a puzzle.
Read the entire post here.
[Greg Ip] THE latest book on the financial crisis has an odd title. You begin reading “All the Devils Are Here”, a line from Shakespeare’s “The Tempest”, expecting to encounter satanic bankers and corrupt government cronies preying on a defenceless public. In fact the people who emerge are infinitely more interesting: arrogant, desperate, even clueless—but, with a few exceptions, not devils. Read the rest of this entry »