Comment, analysis and other offerings from Wednesday’s FT,
Willem Buiter: Forget Tobin tax — there is a better way to curb finance
Lord Turner, chairman of the UK’s Financial Services Authority, has set the cat among the financial pigeons by making highly critical comments about the City of London and financial intermediation in general. He recommended some drastic remedies, and suggested considering a global tax on financial transactions – a generalised Tobin tax. Tobin was a genius, but the Tobin tax was probably his one daft idea. Creating a viable and socially useful UK financial sector does not require this unfortunate fiscal intervention.
John Kay: In magic or in markets, it is never rational to be wrong
Last week the anthropologist Keir Martin described on this page how Papua New Guinea farmers would plant only half their land, believing that envious neighbours might employ witchcraft if they did more. This behaviour was evidently not profit-maximising, yet made sense in the context of the beliefs and customs of Papua New Guinea. I knew what the response would be, and it was not long in coming.
Europe must not cut hedge funds at the root
Peter Montagnon, director of investment affairs at the Association of British Insurers, writes: As the European parliament on Wednesday embarks on its deliberations into the proposed directive on hedge funds and private equity, the real battle is about to begin on the shape of the most important regulatory initiative to come out of Brussels since the onset of the global financial crisis.
Texas leads as California dreams on
Newt Gingrich, former speaker of the US House of Representatives and chairman of American Solutions for Winning the Future, writes: What California, New York and the other 42 states facing budget deficits show us is that America needs to rethink its long-term budgeting strategies. To have successful budgeting, we must start with a popular vision of the successful society. Leaders should not plan forward from today, but instead plan backwards from the type of society Americans hope to see decades down the road.
Analysis: Circle in a spiral
Like the Spanish empire of the 16th and 17th centuries, the European Union is an elaborately constructed multinational entity striving to hold its own against an array of powerful competitors. Like the Spanish empire, too, the EU is a place where sophisticated administrative procedures largely invisible to the public count for a great deal: councils, consultations and committees are its lifeblood. Sometimes, however, an obsession with process prevails over a concern for substance, causing the EU’s friends to fret and critics to crow that the 27-nation bloc risks drifting into irrelevance rather than mastering the economic and security challenges that face it.
Energy Source: Guest Post by Paul Segal — Searching in vain for the oil shock effect
The research fellow at the Oxford Institute for Energy Studies writes: Do high oil prices cause recessions? The US economist James Hamilton is famous for his 1983 finding that oil price spikes had preceded all but one post-war US recession. Hamilton recently claimed that the current recession can be fully accounted for by the high oil prices of 2007-08. But while oil prices are certainly an important macroeconomic variable, it is just not plausible that they have anything like the impact that Hamilton suggests.
Editorial comment: Brown’s agenda deserves a hearing
At the inaugural Group of 20 summit last April, world leaders united to keep the global economy ticking over with a volley of emergency measures. The G20 finance ministers are gathering once again this week in London, ahead of a full summit in Pittsburgh later this month. This time round, their task is to work out how to withdraw those policies while avoiding crumbling back into crisis. They should pay attention to some of the prudent suggestions put forward by Gordon Brown.
The Short View: September stocks
September is a month with a market track record so dire as to strike fear into the heart of even the staunchest stock bull. So it would seem as stocks greeted some of the strongest signs yet of a global recovery with a hefty sell-off.
Letters to the Editor:
- Turner should devote a chapter to CDS
- True meaning of QE is to increase net credit creation
- Study of property miscalculation