Comment, analysis and other offerings from Friday’s FT:
Money market funds (1): The Short View: One-way bets
There are no one-way bets in markets – but occasionally the government can create some. The news that holdings of Lehman Brothers had forced one fund into a loss, from $1 to 97 cents, triggered an exodus from money market funds. This is not rational. Money market funds are still, even after Lehman, much safer than most alternatives. Their downside is limited.
Money market funds (2): Interactive analysis
FT.com’s interactive feature explains how money market funds work and looks at the implications of the recent problems for the wider market.
Gillian Tett: The financial world has lost its compass
As markets trembled on Thursday, Standard & Poor’s detonated another small grenade. After announcing in March it expected banks to write off $285bn of mortgage assets, it casually raised that estimate by $100bn-odd, owing to falling asset values. Compared with recent dramas, that $100bn might not look so disastrous. But the revision highlights a problem that explains much about the current storm: namely that recent events have left investors and financial institutions so utterly disorientated that there is widespread confusion about what anything might now be worth. The financial world, in a sense, has lost its compass
Comment: Charles Goodhart: it’s not the time to worry about moral hazard
The continued closure of wholesale financial markets has been the main cause of the financial turmoil and the reason why HBOS has had to seek the protection of a merger with a stronger bank, writes Goodhart, of the London School of Economics and a former member of the Bank of England’s monetary policy committee. The first priority is to get out of the present hole. Worrying about moral hazard in current circumstances is rather like refusing to sell fire insurance just after the Great Fire of London for fear of adversely affecting future behaviour.
Daily View, video: Liquidity operations
The FT’s economics editor Chris Giles explains why and how the world’s key central banks are pumping money into financial markets, and what effect the move is likely to have
Editorial comment: Central banks, a survival guide
Central banks are called lenders of last resort, for good reason. They have now duly become the last resort in a generalised panic in the core of the world’s financial system on a scale not seen at least since the 1930s. In this situation, the rule is simple, clear and well-known ever since the days of Walter Bagehot. Central banks must lend freely against collateral of even borderline value.
Interactive graphic: Russia’s financial fallout
The recent fall in Russia’s stock market is the sharpest since its financial crisis of 1998. Our interactive timeline charts the key moments of the recent turmoil and compares it to the previous crisis.
Lex: Asian markets wilt – but why?
Asian banks broadly dodged the subprime bullet and corporate balance sheets are admirably low on debt. So why are Asian markets falling further and faster than their more egregious peers?
Insight: Crunch goes bump in the night
If the credit crisis were a stable of horror movies, it would be the most successful franchise ever – we must already be into the third or fourth sequel in little over a year, notes Paul J Davies, the FT’s capital markets correspondent.
Analysis: Bleak Britain
How bank turmoil is compounding woes in Labour’s laggard economy and fuelling expectations that the government will breach its fiscal rule not to let net public sector debt exceed 40 per cent of national income.
Podcast: The FT Money Show
A special edition of the Money Show discusses the effects of the financial crisis on savers, mortgage-holders and shareholders and also looks at pensions for eight-year-olds.