Comment, analysis and other offerings from Monday’s FT,
Wolfgang Münchau: Countdown to the next crisis is already under way
We did not need to wait until the Dow Jones Industrial Average hit 10,000. It has been clear for some time that global equity markets are bubbling again. On the surface, this looks like 2003 and 2004 when the previous housing, credit, commodity and equity bubbles started to inflate, helped by low nominal interest rates and a lack of inflation. There is one big difference, though. This bubble will burst sooner.
Analysis: The dollar — down but not out
A mood of what one expert calls “dollar declinism” is widespread, with expectations of a growing gap between interest rates in the US and elsewhere lumped together with concerns about America’s fiscal outlook, inflation and the future role of the dollar in the world reserve system.
Geoff Dyer: Beijing sees opportunity in dollar’s fall
Scepticism about US financial policy is widespread in China. With its $2,270bn in foreign currency reserves, an estimated 70 per cent of which are in US dollar assets, Beijing’s pride in its own relative ascendancy against the US over the past year is mixed with fear that Washington will seek to inflate away its massive debt. Indeed the audience at a Beijing university talk by Tim Geithner laughed out loud when the US Treasury secretary said China’s huge investment in US bonds was safe.
Willem Buiter’s Maverecon: Time for the ECB to get serious about the overvalued euro
The euro has become a currency on steroids. Its relentless nominal and real appreciation since the end of 2000 was briefly interrupted in the second half of 2008, but resumed with a vengeance during 2009. The strength of the currency is hurting the exporting and import-competing sectors of the eurozone. Unemployment and excess capacity continue to rise.
John Authers: Goldman’s success is a double-edged sword
Goldman has a public relations problem on its hands. Rolling Stone magazine’s description of it as a “vampire squid” has stuck. But what does the state of the financial sector mean for investors? This is more complicated. While a few “winners” from the crisis have done well, other banks still appear deeply troubled.
Mort Zuckerman: The free market is not up to the job of creating work
Zuckerman, editor in chief of US News & World Report and chairman and co-founder of Boston Properties, writes: Today there is no evidence of job creation. Quite the opposite: unemployment is rising and millions of jobs have disappeared. In place of thrift we have become a nation of debtors, staggering beneath mortgages that exceed the value of our homes, and credit lines that exceed our ability to repay. But the “Great Recession” has also changed the nature of unemployment, making it harder for those out of work to find a job. Only by investing in infrastructure and innovation can we mend the system.
Lex on tax and the City
Outrage at bank bonuses has isolated the City of London’s most loyal supporters. When Lord Turner, chairman of the Financial Services Authority, in August called for a Tobin tax on a swollen and often socially useless industry, the City’s political patrons termed the plan “crackers”. The mood has since shifted. The risk is that, with the government under pressure to outflank the Conservatives in its pre-Budget report, competitive populism transforms bank taxes into a political football.
Editorial comment: Time for Britain to deliver first class mail
For the Communication Workers Union to pursue a national Royal Mail strike is like turkeys not only voting for Christmas but coming up with the idea of the traditional Thanksgiving dinner as well. The disruption from the strike that is due to begin on Thursday will cause long-term harm to the already struggling organisation on which the jobs and pensions of many thousands of CWU members depend. Yet that does not mean Royal Mail executives should seek to avert the strike at any cost. This is a battle they must fight — and win.
Money Supply: Party poopers
As you would expect from somebody prominent in the Florentine arts scene, speeches by Lorenzo Bini Smaghi, the Italian on the European Central Bank’s executive board, are usually elegant. In a lecture [on Friday], he took as his starting point the memorable comment by Chuck Prince, former head of Citigroup, in 2007 that “as long as the music is playing, we’ve got to get up and dance”. He then went on to explore the question of why in much of the economy, regulation favours insiders by creating barriers to entry, but in the financial sector it was the other way around and rewards were greater for those in the non-regulated sector.
