Comment, analysis and other offerings from Friday’s FT,
Chancellor Alistair Darling: Shocks to system show need for fresh answers
It was John Maynard Keynes who said that “the difficulty lies not so much in developing new ideas as in escaping from the old ones”. In recent months, economies have faced challenges of unprecedented proportions. They need exceptional solutions.
John Gapper: Some of the fault lies closer to home
“Small island, big problem” was the headline in some editions of the Financial Times on Wednesday. It referred to Iceland, which has almost gone bust and had to seek a €4bn loan from Russia. But it could have been about the UK, which has pumped £50bn of equity into its biggest banks.
Samuel Brittan: Keynes, thou shoulds’t be living…
I realise that people find it psychologically difficult to take on board a crisis that calls for more spending rather than belt-tightening.
Lex: Depression economics
It is time to get real. The western financial system is now, perhaps, stabilised. Banks are in retreat. Civil servants are taking the place of bankers. The US Federal Reserve, for example, can now lend directly to companies. That leaves the most important policy objective: supporting economic growth.
Paul De Grauwe: Temporary full state ownership is only solution
The temporary nationalisation of the banking system and the substitution of private debt by public debt will allow us to reach a new equilibrium. When this happens, a fundamental reform of the banking system will be necessary in order to remain in this benign equilibrium. When this is achieved the governments will be able to privatise the banking system again.
Editorial: Reaching for the stop button
Anyone whose appetite for drama has not been sated by the events on Wall Street or in London should get out a bit more. There they will be able to watch the spectacle of the stock markets of emerging economies getting truly hammered. Trading was halted in Iceland, Indonesia, Romania, Russia and Ukraine this week as share prices crashed. Moscow announced yet another market closure on Thursday but then compounded the sense of an arbitrary decision by changing its mind and reopening.
Philip Stevens: Crisis marks out a new geopolitical order
Blame greedy bankers. Blame Alan Greenspan’s careless stewardship of the US Federal Reserve. Blame feckless homeowners who took out loans they could never expect to repay. Blame politicians and regulators everywhere for closing their eyes to the approaching tempest. The west can no longer assume the global order will be remade in its own image.
Lex: Shorts are back
They won’t be trying that again. On Thursday, the US market was the first to lift its ban on the short selling of financial stocks. Most five-year-olds would conclude that the idea did not work. From the day before the ban came into effect on September 19, the banking sector has lost a quarter of its market value. More institutions have disappeared off the map. If anything, the severity of the meltdown has increased.