Comment, analysis and other offerings from Monday’s FT,
Gordon Brown: How we can restore trust in financial institutions
There has always been an implicit economic and social contract between our financial institutions and the society they serve, writes UK prime minister Gordon Brown. Over centuries the guarantee of responsible stewardship of people’s money has been the foundation of the most precious asset a financial institution can ever have — trust. Two years into the financial crisis, it is clear that the old contract has to be rethought and now made explicit for new times.
Analysis: The real reward
The question is whether Brazil’s recovery, which owes much to the boom in commodity prices, is sustainable. Many analysts worry that the flood of liquidity that is buoying Brazilian assets — the currency has gained about 36 per cent against the dollar this year and stocks are up 135 per cent in dollar terms — could just as easily retreat if the global crisis enters a second stage. Rising government spending on welfare and the public sector payroll, both hard to reverse, could also amount to a fiscal time bomb.
Lex on Tobin or not Tobin
Constant repetition of an idea does not make it right. Lord Turner, the UK’s chief financial regulator, caused a storm in August when he backed a “Tobin tax”, or levy on financial transactions. Several European countries are pushing the idea. UK prime minister Gordon Brown’s weekend volte-face at the G20 finance ministers’ meeting in favour of a global levy might seem to give the idea some momentum. Indeed, it appeared in part an attempt to retake the leadership on international financial issues that Mr Brown briefly held during the global banking rescue a year ago. But while France agreed, the US and Canada were right to slap down the idea.
The Long View: Why the dollar carry trade faces hidden dangers
Most investors agree that it is out there. What is less clear is how big it is, or how worried investors should be about it. The “it” in question is the dollar carry trade. This is an investment strategy that has recently been extremely profitable and as a result has become increasingly popular.
Willem Buiter: Gold – a six thousand year-old bubble
Gold is unlike any other commodity. It is costly to extract from the earth and to refine to a reasonable degree of purity. It is costly to store. It has no remaining uses as a producer good – equivalent or superior alternatives exist for all its industrial uses. It may have some value as a consumer good – somewhat surprisingly people like to attach it to their earlobes or nostrils and to hang it around their necks. I have always considered it a rather vulgar metal, made for the Saturday Night Fever crowd, all shiny and in-your-face, as opposed to the much classier silver, but de gustibus… .
Money Supply: US unemployment and the Fed
“Low rates of resource utilisation.” That was one of the three factors the Fed identified [last] week as underpinning what is now an explicitly conditional forecast that it does not expect to raise rates for at least six months. With unemployment now at 10.2 per cent and possibly set to peak close to 10.5 per cent, “resource utilisation” is unlikely to be the trigger for an early rate increase!
News analysis: Bondholders remain wary of inflationary pressures
“Nurse! Take dictation!” The UK economy is still officially very sick but the Bank of England might soon be getting out its writing paper. This week the Bank — the country’s nurse-in-chief — warned about an impending jump in inflation that some economists think could push the headline rate more than a percentage point above its 2 per cent target — beyond which it has to write to the Treasury with an explanation.