Daily Archives: March 23, 2008

Ron Brownstein asks whether the Democrats’ increasingly strident anti-trade line might be a political mistake as well as an economic one (the link expires in a week). Writing from Miami, he notes the signs of international connectedness wherever he looks. Can Democrats plausibly tell their supporters in such places that they would be better off if the US retreated from world markets?

This is the side of the international economic story that Barack Obama and Hillary Rodham Clinton obscured in Ohio with their spiraling denunciations of free trade. But many of America’s most vibrant communities are benefiting enormously from their connections to the global economy. What’s more, most of these communities, the places that would suffer most if America tried to wall out the rest of world, are becoming Democratic strongholds. This means that in seeking to retreat from globalization, Democrats are threatening the interests of voters and communities increasingly central to their electoral coalition. “The Democrats are in all the globally connected places,” says Robert Lang, director of the Metropolitan Institute at Virginia Tech University. “They are biting the hands that feed them.”

Lang and his colleagues, in a paper dated March 21, identified the 20 American metropolitan areas most thoroughly integrated into the global economy. The researchers ranked the cities along four dimensions: the presence of global service firms (such as advertising, law, and financial services); whether the area has a major port; whether it has an international airport; and the value of exports that pass through it.

At the top of the list stand New York, Chicago, Los Angeles, San Francisco, and Miami. They are followed by Atlanta, Washington, Boston, Dallas, and Houston. The second 10 start with Seattle and Philadelphia and end with Phoenix and San Jose, Calif.

These globally connected cities retain many differences. But they generally share an expansive outlook marked by receptivity to foreign markets, foreign investment, immigration, and ethnic diversity. “They are the places where when you walk into a building, they have clocks set all around the world,” Lang says. In the 1980s, as Hispanic immigration surged, a popular South Florida bumper sticker read, “Will the last American to leave Miami bring the flag?” Today, notes Ojeda, most Miami leaders of all races recognize “that our international [population] base has given us the economy we have.”

In this new column for National Journal, I discuss the Fed’s latest manoeuvres:

If banks are too scared to lend and consumers too scared to borrow regardless of interest rates, even the most aggressive easing of monetary policy might fail to push the economy out of recession. That is why, separately from the push to lower interest rates, the Fed is struggling so hard to maintain structural confidence in the financial system — by keeping Bear Stearns in business and by promising to give banks (and now, for the first time, many nonbanks) the assurance of access to short-term loans they are no longer willing to extend to each other.

Where does it all end? If the Fed could be granted one wish, it would be that house prices start to bottom out. That would begin to put a floor under losses on mortgage-backed securities, and help to restore banks’ confidence in one another. Its biggest fear, conversely, is that house prices fall further and faster. A particular risk in that case is that many more borrowers would find they owed more than their house is worth, so that it would make sense for them to default on their mortgage. (Most mortgages are nonrecourse loans, meaning that in case of default the lender gets the house and has no further claim.) If mortgage defaults catch on in a big way, causing a flood of foreclosures and forced sales, it is hard to say where the floor for house prices might be — and the losses for lenders could dwarf current estimates.

You can read the whole column here (the link expires at the end of the week).

Clive Crook’s blog

This blog is no longer updated but it remains open as an archive.

I have been the FT's Washington columnist since April 2007. I moved from Britain to the US in 2005 to write for the Atlantic Monthly and the National Journal after 20 years working at the Economist, most recently as deputy editor. I write mainly about the intersection of politics and economics.

Clive Crook’s blog: A guide

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