Comment, analysis and other offerings from Tuesday’s FT,
George Magnus: Older societies will have to retire later
UBS’s senior economic adviser writes: The debate about longer working lives is normally framed in terms of the rights or the capacity of individuals to do so. However, this debate goes further than humanitarian issues. It is forcing us to think about the unique change in age structure that is evolving and how we can deliver economic growth in the future, given the forthcoming waves of retiring baby boomers, who will not be replaced in the workforce by their progeny.
Insight: Andrew W. Lo on regulating human nature
The Harris & Harris Group professor at the MIT Sloan School of Management writes: The push for financial regulatory reform has highlighted an important debate surrounding the Efficient Markets Hypothesis (EMH), the idea that market prices are rationally determined and fully reflect all available information. If true, the EMH implies that regulation is largely unnecessary because markets allocate resources and risks efficiently via the “Invisible Hand”.
Richard Bernstein: America is for now still blowing bubbles
The CEO of Richard Bernstein Capital Management writes: Although many market and economic observers quarrel over whether the Obama administration’s involvement in the private sector upholds the American principals of contract law, private investment and capitalism, this discussion misses the most important point for investors. The question is not whether there is a battle between socialism and capitalism, but whether the US economy is on a path to mimic Japan’s.
Analysis: Not made in Japan
The plunge in global demand and a sharp rise in the yen have thrown Japanese manufacturers into crisis, and reignited a debate about the country’s reliance on the sector. That is because it was not finance that transmitted this recession to Japan – it was manufacturing. In spite of having no real estate bubble or banking trauma to speak of, the slump in exports – down by half at their nadir in February – helped push output down by 14 per cent in annualised terms during the first quarter, making Japan’s recession one of the deepest in the developed world.
Editorial comment: The United States of spending cuts
The state of the states is dismal. As the FT reports on Tuesday, many states’ hard-fought battles to balance their budgets were not over with the fiscal year-end in June. Worsening revenue numbers are making the 50 Capitols into recession-aggravating machines.
John Authers’ The Short View: A turn in sentiment
In the space of a week, the market’s sentiment has turned on a dime. From threatening to test the year’s lows a week ago, the S&P 500 yesterday closed at a new high for the year, and its highest since November, egged on by upgrades from strategists at several big banks. To explain what happened, we need to know the new information of the past week and to understand investors’ sentiment when the bounce started last Monday.
Lex on defiCIT financing
It has been many months since America spent the weekend on bank deathwatch. This time CIT, the lender to small and mid-market businesses, is fighting on. A group of bondholders has reportedly agreed to a $3bn secured loan at an eye-watering interest rate of 10 percentage points over Libor. That lifeline should enable the company to struggle through a $1bn bond maturity next month, buying it some time to negotiate other debt exchanges and pursue regulatory approval for the transfer of more assets into its bank subsidiary.
Letters:
- Bankers’ raw material belongs to all of us
- Society pays too much for financial institutions’ services
- Banks should be allowed to suffer