Comment, analysis and other offerings from Friday’s FT,
Philip Stephens: Four things you must know about the global puzzle
To my mind, four things stood out from this week’s surfeit of summitry: China’s, albeit reluctant, embrace of multilateralism; the rising challenge from the Middle East to western and, especially, US power; Barack Obama’s effort to frame new rules for the global game; and Europe’s place on the margins of influence.
Tax trades to share the costs of the crisis
Peer Steinbrück, German finance minister, asks: what went wrong with global financial markets? In a nutshell,the implosion of the brave new world of modern finance, and the economic crisis that followed, was rooted in the idea that free capital markets are all that is needed for economic prosperity. The prologue to the crisis was a combination of cheap money, deregulation, and a race for returns by executives undeterred by the risks.
Analysis: The dragon stirs
Turn on the television news next Thursday and on display will be the sort of images from China that used to capture the imagination in the days of the Soviet Union. Dozens of tanks will roll down Beijing’s main avenue and past Tiananmen Square, followed by immaculate ranks of goose-stepping soldiers. New military hardware will be proudly paraded, from mobile missile launchers that can reach Washington to J-10 fighter jets produced at a Chinese plant.
We need to rationalise the rules on capital
Howard Davies, Sir Howard Davies is director of the London School of Economics, writes that one area of the Pittsburgh agenda where there appears to be an emerging consensus is on the need for more capital in the global banking system. Some of the Group of 20 leaders, attending a summit in the US city, may differ on when capital regulations should be tightened, but there is agreement on the direction of change.
Editorial comment: Single market rules
Commenting on the Icesave debacle, Lord Turner, chairman of the UK’s Financial Services Authority, said that Europeans must choose between “more Europe” — more pan-European regulation — or “less Europe” — scaling back the single market in financial services. The European Commission, unsurprisingly, is proposing more Europe — but not too much. Member countries should accept its proposals.
Markets Insight: The ghosts of AIG prosper
The FT’s Gillian Tett says what is striking about AIG is that a well-respected Fitch survey before the collapse of the credit bubble suggested that firm was just the 20th largest credit default swap player in the sector, based on gross notional outstanding volumes. No wonder those billions of lossmaking contracts subsequently came as such a shock.
Lex on China’s bad debts
China may be garlanding bankers as “model workers” but, as models know, fashion can be fickle. This year’s explosion of fresh credit has many fretting over an eventual rise in bad debts. And with good reason: at 31 per cent of gross domestic product, the Rmb8,185bn of loans pumped out between January and August is more than was seen in Japan in the late 1980s, or in the US during Alan Greenspan’s bubble.
FT Money Supply Blog: The unwinding starts
This is not the start of an “exit strategy” as such. But recent central bank moves highlight how some of the emergency instruments in place will die a natural death. As I wrote at the time, an ECB offer of 84-day dollar liquidity earlier this month attracted no bids – the first time that has happened in an ECB liquidity providing operation since its launch a decade ago.