Comment, analysis and other offerings from Monday’s FT,
Wolfgang Munchau: Van Rompuy is the right man for the job
It is so easy to get exasperated with the European Union — its lack of ambition, its multiple co-ordination failures, its notorious ability to disappoint, writes Munchau. And was not last week’s nomination of Herman Van Rompuy and Baroness Ashton to the two big jobs created by the Lisbon treaty further proof of the EU’s tendency to settle for the lowest common denominator? Have we wasted a unique chance of global leadership by not appointing Tony Blair or some other star, or at least somebody whose name we know how to spell?
Could sovereign debt be the new subprime?
A few weeks ago, Claudio Borio, head of research at the Bank for International Settlements, warned in a solemn note to Group of 20 leaders that modern financial policymakers are “driving while just looking in the rear-view mirror”: western finance officials have focused so much on past risks that they fail to spot new dangers, writes Tett. Worse still, as policymakers rush to implement reforms in response to one financial calamity, they are apt to create distortions that pave the way for the next disaster. Just such an unintended consequence could now be festering in the banking sector, as its balance sheets are increasingly stuffed with government bonds.
Karl Inderfurth and Raja Mohan: Put space at the heart of US-India relations
President Obama will receive Prime Minister Manmohan Singh on Tuesday for the first official state visit of his administration, a visit befitting India’s emergence as a major global actor. It also signals America’s commitment to a strong partnership, write Inderfurth, professor at George Washington University and a former assistant secretary of state for south Asia affairs, 1997-2001 and Mohan, Henry Kissinger chair in foreign policy at the Library of Congress and a contributing editor of The Indian Express, New Delhi.
Lex on output gaps
A popular belief these days is that the recession has opened “output gaps” in many countries. Output gaps measure the difference between actual output and potential output and have an attractive simplicity for policymakers. If capacity persists across an economy, interest rates can be kept low with little fear of rising production and labour costs.
Maverecon: Auditing the central bank: a jolly good thing!
What is so important about H.R. 1207: the Federal Reserve Transparency Act of 2009 aka the ‘Audit the Fed’ bill?, asks Willem Buiter. This bill “To amend title 31, United States Code, to reform the manner in which the Board of Governors of the Federal Reserve System is audited by the Comptroller General of the United States and the manner in which such audits are reported, and for other purposes.” may not sound terribly exciting, but in addition to making the Fed accountable for its quasi-fiscal activities, it could well set an important precedent for the enhanced accountability of operationally independent central banks everywhere.