Comment, analysis and other offerings from Thursday’s FT,
Analysis: New monetary target
It is an unlikely rallying cry. At marches and meetings against big government across the US, where some placards damn the president, others bear a catchy slogan: “End the Fed”. That was before the financial crisis. In the aftermath, the signs and slogans have become more widespread, the anger more vitriolic.
John Authers: Financialisation genie set loose
Not long ago, there were three asset classes: stocks, bonds and cash. Some were not even sure if cash counted as an asset class. The last few decades, however, have seen the “financialisation” of swathes of the world economy where prices were not previously set by markets, or at least not by markets led by the same investors who also set the prices of stocks and bonds.
The crisis demands we finish what we started
Christine Lagarde, France’s minister for the economy, industry and employment, writes: When do we declare the recession over? Everyone has his own yardstick. Mine is simple: when we have started creating jobs and have restored discipline in the financial sector. Only then, when we have cut unemployment, can we say the crisis is finished. Today, despite talk of green shoots, this is not the case.
A curb on bank bonuses misses the point
Matthew Robinson, professor of finance and co-editor of the NYU School of business book project, writes: Wall Street is in quite a quandary. On the one hand, all signs point to record revenues, which in normal times would point to a massive bonus pool. On the other hand, the communiqué of the recent G20 meetings in Pittsburgh left no doubt where the member countries pin the blame for the financial crisis: “Excessive compensation in the financial sector has both reflected and encouraged excessive risk-taking.”
Editorial comment: Equal opportunity derivatives trading
Defending banks has become hard in polite society. So as non-financial companies come to their rescue in protests against Washington’s and Brussels’ proposed rules for derivatives trading, they take care to agree with the broad sweep of the plans – but ask that those using derivatives for “legitimate risk management” be exempt. Polite or not, this is a mistake.
Lex on the muni market conundrum
It has been more than four years since Alan Greenspan mused about the conundrum of persistently low long-term Treasury yields. A new conundrum has now emerged over a 40-year low in non-federal government borrowing rates. At a time when states and cities are facing their largest budget shortfalls since the Great Depression, new issues by even riskier borrowers in the $2,800bn municipal bond market are meeting ravenous demand.
Insight: Russell Napier — Crisis leads to conflict
Russell Napier, consultant strategist with CLSA and author of Anatomy of The Bear, writes: One consequence of the financial crisis is that fund managers are increasingly going to come into conflict with governments. Actions taken in the best interest of fund managers’ clients are likely to be considered against the national interest. Preserving clients’ capital in the “great recession” is a big enough challenge. But this ignores the much more important structural change that has just occurred.
Money Supply: Bank of England decision preview
The Monetary Policy Committee will announce its decision on interest rates at noon London time on Thursday. Almost everyone expects no change. The Bank will leave interest rates on hold at 0.5 per cent and maintain its target to buy a total of £175bn assets (roughly 13 per cent of national income) by the end of October. The vast majority of the assets purchased are government bonds and the running total of purchases stands currently at £158bn.