Comment, analysis and other offerings from Friday’s FT,
Gillian Tett: Lisbon move points to end of risk-free sovereigns
Another week, another bout of angst about sovereign and municipal risk. But as investors fret about Spain and Belgium – or Illinois and California – they should take a close look at a fascinating little development in Lisbon, writes the FT columnist. On Wednesday, the Portuguese debt management agency formally announced that it would start posting collateral (such as cash or government bonds) on derivatives trades that it cuts with banks. This might sound dull and technical, but it carries considerable symbolic and practical significance.
Samuel Brittan: The inflation ‘nutters’ are only half right
How should western central banks react if inflation rates in their countries continue to creep up above target?, asks the FT columnist. Certainly not by depressing their economies until commodity prices face a demand check. Still less by trying to depress domestic prices to make up for rising prices for raw materials and fuel from outside their area. Indeed, high prices for these items, relative to world prices in general, are the best possible incentive for investment to remove these supply bottlenecks.
Takeo Hoshi and Anil Kashyap: Only tough reforms can save the land of the rising debt
Attention to the risk of default on sovereign bonds has been largely confined to European countries, Hoshi and Kashyap, professors at the University of San Diego and Chicago Booth School, write. Yet the problems Japan faces merit as much scrutiny. On Tuesday Kaoru Yosano, the new minister for economic and fiscal policy, warned that his country’s “fiscal status is at a critical point”. Yet this follows a 20-year government spending binge that has moved its debt position from about the best of developed countries to about the worst, and which now needs urgent action.
Analysis: Beijing and troubled nations
As the 2008 Olympics approached, China underwent a crash course in the politics of overseas investments when human rights groups accused Beijing of holding a “Genocide Games” on the grounds that its oil investments in Sudan were sustaining a scorched earth campaign in Darfur. For the Chinese leadership, however, its Sudanese headache is only just beginning, the FT’s Geoff Dyer reports.
Lex on Google
For the second time this week, sunny results out of techland have been overshadowed by management changes, Lex says. But whereas Apple’s news was genuinely dark, it is hard to say anything other than “fair enough” to the announcement that – after a decade building one of the world’s most successful companies – Google’s chief executive, Eric Schmidt, plans to spend more of his days trying, hopelessly, to make a dent in his fortune.
Gavyn Davies: China has exceeded its speed limit
China’s economic data for December, released on Thursday, clearly suggest that the authorities have not yet succeeded in slowing the economy enough to bring inflation pressures under control, the FT columnist says. The economy has been overheating for a while now, and more monetary tightening is certainly on the way. However, much of the immediate reaction to the figures seems to me to have exaggerated the severity of the over-heating pressures which now confront China. The government can probably bring this problem under control before the end of 2011.
Gideon Rachman: Hu Jintao in Washington
President Obama sounded more like salesman-in-chief than commander-in-chief when he told Hu Jintao, his Chinese opposite number – “We want to sell you planes, we want to sell you cars, we want to sell you software.” And I’m sure the Americans could probably do the Chinese president a good deal on central heating, if he was interested, says the FT columnist.