Comment, analysis and other offerings from Wednesday’s FT,
Martin Wolf: Victory in the cold war was a start as well as an ending
“A crisis is a strange way to celebrate an anniversary.” This is the wry judgment of Erik Berglöf, chief economist of the European Bank for Reconstruction and Development.* Yet a crisis is what we see in countries that began the march from communism two decades ago. So, has capitalism failed, as communism did, asks Wolf. In a word, “no”.
Westminster: The election and Britain’s AAA rating
There has been another flurry of speculation in Westminster over the risks to the UK’s AAA rating. Britain is only being spared from a downgrade because the sovereign credit rating agencies expect the Tories to be elected, at least according to Fraser Nelson and others. It’s an interesting argument – so interesting that I thought it was worth asking the credit ratings agencies directly. Here is my Q&A with Brian Coulton, Head of EMEA Sovereign Ratings at Fitch.
Analysis: Keeping the lights on
As Berliners cleared up the left-overs of Monday’s celebrations marking the 20th anniversary of the fall of the Berlin Wall, elsewhere in the capital Angela Merkel, the recently re-elected chancellor, returned to the serious task of putting Europe’s biggest economy back on a sound footing. “What lies before us is no easy path,” she said on Tuesday. But Ms Merkel remains determined that Germany should use its “classic strengths” in industrial fields such as machinery to spark recovery.
Economist’ Forum: A better way to regulate financial markets – Asset based reserve requirements
There is a better way to regulate financial markets through asset based reserve requirements which would extend margin requirements to a wide array of assets held by financial institutions. ABRRs are easy to implement, use the tried and tested approach of reserve requirements, are compatible with existing regulation (including capital standards), and would fill a hole regarding adequacy of financial policy instruments.
Jeffrey Sachs: Obama has lost his way on jobs
The past week brought news of US double-digit unemployment and the Federal Reserve’s decision to maintain near-zero interest rates, writes director of the Earth Institute at Columbia University, Jeffrey Sachs. Both pieces of news expose the inadequacy of US economic policymaking. The Obama administration’s stimulus policies are not well-targeted. The Republican alternatives are even worse. Both sides are missing the key fact: the US economy needs structural change that requires a new set of economic tools.
Money Supply: Dodd’s reform plan
Chris Dodd’s financial regulatory reform plan goes too far in my view in stripping away powers from the Fed. It makes sense to take away the Fed’s ability to bail out individual companies under 13.3 once there is a special resolution entity in place to manage financial failures. But taking away the Fed’s banking supervision role risks robbing it of an information flow vital to deal with financial stability threats. And giving systemic risk powers to a new agency is a recipie for confusion or worse.
Lex on the world energy outlook
It was barely 10 years ago that a well-reasoned cover story in The Economist told us we were “drowning in oil” and that its price could drop by more than half to $5 a barrel. As everybody now knows, prices rose tenfold before peaking last summer. There are just so many moving parts to the energy market that making forecasts is a mug’s game. If exhaustive detail is a measure of credibility, though, few sources equal the International Energy Agency’s World Energy Outlook, published on Wednesday.
John Kay: Powerful interests are trying to control the market
You can become wealthy by creating wealth or by appropriating wealth created by other people, writes the FT’s John Kay. When the appropriation of the wealth of others is illegal it is called theft or fraud. When it is legal, economists call it rent-seeking.