Comment, analysis and other offerings from Friday’s FT,
Philip Stephens: Enough of the politics of pessimism
Something has gone wrong in Britain. Elections are a time to cheer up the voters, even, dare one say it, to bribe them. Britain’s politicians seemed joined instead in a bidding war to beat them up. With an election due next summer, competing visions of sunlit uplands have made way for promises of long winters of austerity. Britain risks being drowned in pessimism.
Insight: Gillian Tett — The dangers of silo thinking
When Larry McDonald, a former bond trader at Lehman Brothers, recently wrote an exposé of that broker’s collapse, it seems that his main intention was to reveal the extraordinary folly and ineptitude of the former Lehman bosses. In practice, though, his colourful tale also highlights — almost inadvertantly — another crucial problem that haunts the modern financial world: the curse of silos.
Comment: Let institutions fail in an orderly way
Financial policymakers focused on rewriting the rulebook for financial markets have spent months debating issues from consumer protections to regulatory co-ordination. None, however, is as important as what to do when a large financial institution is failing, writes Arthur Levitt, adviser at the Carlyle Group and Goldman Sachs and former chairman of the SEC.
Martin Wolf: Britain’s phony debate on slashing spending
the UK is right to plan for a structural fiscal tightening of at least 8 per cent of GDP. But it is unnecessary — and almost certainly a huge error — to implement such a tightening in short order. What is needed instead is a set of structural reforms that are sure to deliver the tightening over an extended period.
Chrystia Freeland: Investors had little choice but to keep on dancing
Most post-mortems of the financial crisis have diagnosed one of two causes of near-death: greed or stupidity. Both arguments are right. But individual ignorance and avarice are just sideshows; the biggest driver of the crisis was systemic. The boom — and bust — happened because investors obeyed the logic of financial markets. That logic was what Citigroup’s Chuck Prince had in mind when he made his notorious remark to the FT in July 2007. “… As long as the music is playing, you’ve got to get up and dance. We’re still dancing.”
Markets: Analysis – They must plan their exits
Investors will soon face a period when they can no longer rely on central banks to backstop the financial system, writes the FT’s Michael Mackenzie. That could ignite volatile changes in market interest rates, with the risk that investors in a swathe of different asset classes could be badly wrong footed. There is a clear danger of another sell-off once stimulus measures are removed and once tax rises and spending cuts to reduce deficits are implemented.
Analysis: Europe, a voyage of discovery
The way to a reformed structure is now largely clear for the European Union, but questions surround not just who will gain the top jobs in the 27-strong bloc but how it will all operate at a difficult time, writes the FT’s Brussels bureau chief Tony Barber.
Lex: Deficit-ting uncomfortably
The Free Enterprise Nation is a group dedicated to publicising details of excessive US government spending in the hope of challenging public ambivalence. It is certainly unlikely that Federal employees themselves will want to rein things in — their average annual wages and benefits are twice the $59,000 made in the private sector, according to the FEN. But investors might want to ponder the implications for the US economy of continuing the status quo.
Money Supply blog: The ECB in Venice
Two main news lines emerged from the ECB press conference in Venice, writes the FT’s Ralph Atkins. First, some linguistic innovation from Jean-Claude Trichet, ECB president, on the euro exchange rate. Authorities on both sides of the Atlantic would “co-operate as appropriate,” he said – a form of words that he has not used before. The markets don’t seem impressed, however, the euro has strengthened. Second, Trichet toughened his calls for fiscal consolidation by eurozone governments. Whether he will be more successful on that front is questionable.
Trading Room (video): Terry Duffy of CME Group
Terry Duffy, chief executive of the CME Group, the world’s largest US futures exchange, discusses the opportunities to develop futures markets in India and China.