Comment, analysis and other offerings from Wednesday’s FT,
Martin Wolf: How mistaken ideas helped to bring the economy down
How did the world economy fall into such a deep hole? It is recovering, but painfully, and after a deep recession, despite unprecedented monetary and fiscal easing. Moreover, how likely is it that a balanced world economy will emerge from this force-feeding? The very fact that such drastic action has been necessary is terrifying.
John Kay: ‘Too big to fail’ is too dumb an idea to keep
There are people who believe that, in future, better regulation, co-ordinated both domestically and internationally, will prevent such failures. The interests of consumers and the needs of the financial economy will be protected by such co-ordinated intervention, and there will never again be major calls on the public purse. There are also people who believe that pigs might fly. Mervyn King, governor of the Bank of England has made enemies by pointing out that they will not.
Editorial Comment: Competition rules
Not all bankers are getting away with it. Neelie Kroes, the European competition commissioner, has forced ING to split itself up and to accept stringent price restrictions on its core operations. The Dutch bancassurer is paying a heavy price for its €10bn of state aid.
Lex on US house prices
Enjoy it while it lasts. US house prices rose by a seasonally adjusted 1 per cent in August, their third month-on-month gain. Add those up and the S&P/Case-Shiller index of prices in 20 metropolitan areas is down a mere 29 per cent from the peak, rather than a third as in April. The annual fall, at 11.3 per cent, is the smallest since January 2008. But US consumers, eyeing dismal job prospects, turned decidedly more gloomy in October, according to confidence data from the Conference Board. The question is how long the government-built floor under house prices can hold.
Insight: John Plender — Rethinking capital structures
Remember balance sheet efficiency? This was one of the countless virtues, much trumpeted in business schools, that private equity was supposed to bring to the quoted corporate sector, writes FT columnist John Plender. It turned out to be largely claptrap, as the debris from numerous leveraged buy-outs bears witness. The academics were doing a splendid job in softening up business on private equity’s behalf, but performing a singular disservice to the wider community in peddling their intellectually toxic wares.
Willem Buiter’s Maverecon: The proposed European Systemic Risk Board is overweight central bankers
I recognise the need for EU level regulation and supervision of macro-prudential risk and support EU-level Colleges or Agencies to supervise systemically important cross-border banks, other financial institutions, markets and instruments. Unfortunately, the design of the proposed European Systemic Risk Board (ESRB) is a shambles.
Money Supply: The Fed and asset prices
Is ultra-loose monetary policy fuelling new asset price bubbles? The Fed view is that there is little evidence of this in the US. But it is keeping an eye out all the same.
Letters to the Editor
- Osborne is more interested in short-term tactics
- Speculators do drive prices, and it’s the developing countries that suffer
- UK needs clear regulatory framework on carbon reduction