Comment, analysis and other offerings from Friday’s FT,
Comment: Keynes’ magic can work for the sunrise industries
David Smith, CEO of Jaguar Land Rover, writes: For those of us who were at Cambridge during the great Monetarist v Keynesian debates of the early 1980s, it is good to see the old man’s ideas making a political comeback. It is just a shame that he is not around himself to tell us exactly how to get out of this storm we find ourselves in. What is clear is that the decisive action taken so far by the government and the Bank of England will not be enough.
Detroit bail-out: a nation in denial
Almost 30 years ago I reported for my first job in the Fisher Building in Detroit, a gilt-laden, art deco marvel conceived by Albert Kahn, which stood across the street from the headquarters of General Motors. Today, the Fisher Building remains but General Motors long ago decamped for a smaller perch near the Detroit River in a building whose mortgage is now being offloaded on to a destitute city. As a lackey in Time Magazine’s Detroit bureau, my assignment was to assume a plausible manner and tag along with my more senior colleagues while we reported on what, in retrospect, was the first convulsive death rattle of the US automobile industry. During the past few weeks, as the heads of the auto companies have started pleading for federal funds, I have found myself thinking about those long ago times.
The Short View: Loss of confidence
The five-year rally in US stocks that began shortly before the invasion of Iraq and peaked last October can now be dismissed as an aberration. Yesterday, the S&P 500, the most important index of the US market, fell 6.5 per cent, dropping through the low it set in October 2002, and bringing it to levels it last saw in April 1997. It is back to a level it last recorded a month before Amazon.com went public. Both the dotcom bubble and what is now known to be the credit bubble have burst – but there is no clarity as to where stock valuations may come to rest.
Lex on UK unemployment
Labour isn’t working. Thirty years after the Conservative party unveiled the poster that swept Margaret Thatcher to power, dole queues are lengthening. Rolls-Royce and AstraZeneca on Thursday joined the list of big British companies to take an axe to their employment rolls. At 1.82m, unemployment is already at its highest in more than 10 years and rising fast. But will the UK see a rise in unemployment more like the jump of the early 1990s or the savage blow-out of the early 1980s? The answer will depend on the depth of the forthcoming recession and the speed of recovery.
Editorial Comment: Off-target Aim
Aim, London’s junior market, has fewer new members and a paucity of fundraising. There have been only 26 new listings from foreign companies so far this year, and in October no new money was raised. For the first time in its 13-year history, the number of quoted companies in the lightly regulated market is falling. Trading volumes have slipped and market values have collapsed. Is investors’ flight to safety turning what was once seen as the Wild West of shareholding into a ghost town?
Comment:We need a ‘safe-fail’ approach against crises
Ben Steil, director of international economics at the Council on Foreign Relations, writes: The global financial crisis is rightly prompting calls for a rethink of how we regulate financial institutions and markets. Most such calls are focused on what might be called “fail-safe” regulations, designed to reduce the risk that institutions will make reckless lending and investment decisions. Even libertarian-leaning policymakers and thinkers, such as Alan Greenspan, are now concerned with the capacity of our globally connected financial system to spread failures of risk management from one institution to another.
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