Comment, analysis and other offerings from Monday’s FT,
Wolfgang Münchau: We must not be too late with starting the Big Exit
Central bankers all over the world are asking themselves the same question: when is the time to start the Big Exit? It surely cannot be now, or can it? I suspect the right answer is: perhaps not now, but earlier than you think, writes FT columnist Münchau.
Nouriel Roubini: Mother of all carry trades faces an inevitable bust
While the US and global economy have begun a modest recovery, asset prices have gone through the roof since March in a major and synchronised rally, writes economist Roubini. While asset prices were falling sharply in 2008, when the dollar was rallying, they have recovered sharply since March while the dollar is tanking. Risky asset prices have risen too much, too soon and too fast compared with macroeconomic fundamentals.
Clive Crook: Congress misses the point of reform
More than a year after the US financial emergency went critical and threatened the global economy with its worst reverse since the 1930s, the underlying causes have yet to be addressed, writes the FT’s Clive Crook. When it comes to improving financial regulation, the crux of the matter, there has been a lot of talk – usually about the wrong things – and next to no action.
Analysis: Merkel’s bold gamble
Faced with the contradictory problems of rapidly emptying state coffers and an economy still reeling from this year’s recession, German chancellor Angela Merkel has opted to fight the crisis with an injection of funds on an unprecedented scale. The new “black-yellow” coalition between her Christian Democrats and the FDP plans to cut income and corporate taxes by €24bn a year up to 2013 – a boost equivalent to about 1 per cent of gross domestic product.
Lex on skin in the game
Those demanding that US banks keep “skin in the game” when securitising loans should think about what type of flesh they want. Draft legislation last week proposed that issuers retain unhedged at least 10 per cent of the credit risk of a securitisation. That is higher than previously suggested (and more than required in Europe), though regulators can reduce the retained slice to 5 per cent. For now, the point is academic. Lack of investor interest in anything but top-rated securities means issuers often retain all subordinated tranches, perhaps 12 to 15 per cent of a deal.
John Authers: OK, I called the rally wrong – and here’s why
Where did I go wrong? I often ask myself this question, but this is the first time I have asked it on the back page of the Weekend FT. It needs to be asked, however, because – as various readers have kindly pointed out – I failed to see this rally coming. To be fair to myself, I foresaw the chance of a big rally this year. Part of the physics of markets is that huge sell-offs are followed by big rebounds. But this rally, which has begun to tire in the past two weeks, is now arguably the biggest such rebound in the past hundred years. I plainly did not get readers ready for anything so dramatic.