Comment, analysis and other offerings from Tuesday’s FT,
Jonathan Bell: China at risk of a home-grown financial crisis
The pathology of the western financial crisis is all too familiar: misallocation of capital fuelled by cheap credit and lax regulation, a proliferation of investment vehicles with limited credit assessment, and systemic biases predicated on ever-rising real estate prices, says Bell, senior investment manager at Pictet Asset Management. We should worry, then, that Chinese banks may be facilitating a home-grown version, especially as they plan to raise $30bn-$50bn in capital over the coming year.
Analysis: US housing market hit by ‘walkaways’
The high level of foreclosures in the US – the handing over of homes to banks that lent people money to buy them – has been a huge burden on the economy, has kept house prices on a downward spiral and has resulted in misery and anxiety for millions of people. In some areas so many homes have been abandoned that the entire community has fallen apart as schools close, public services are cut and homes are ransacked for fittings or taken over by criminals. That has also sent property values plunging for those people still in their homes and paying mortgages.
Gideon Rachman: Greece threatens more than the euro
As Greece’s financial crisis rumbles onwards, it has become commonplace to argue that the roots of the problem stretch all the way back to the design of Europe’s single currency, writes the FT’s Rachman. Actually, it is worse than that. The Greek crisis is about the very basis on which European unity has been built for the last 60 years. It threatens not just the euro but the entire edifice of the European Union.
Lex on Japan’s debt
Where’s the next Greece? One country being increasingly mentioned is Japan. But why then, investors may be curious to ask, is a country with an ageing population, stagnant economy and masses of debt still able to borrow at 1.5 per cent for 10 years, when yields on Greek debt are now north of 7 per cent?
Editorial comment: Beijing tightens technology noose
For a nominally communist country, China displays a remarkable understanding of capitalism. Its savvy, which has brought it to the cusp of overtaking Japan as the world’s second-largest economy, is not limited to how markets work. China’s policy towards technology companies shows it knows how to tilt markets to its advantage – to the disadvantage of others.
Letter to the Editor: Little mention of how to finance fiscal retrenchment
Quantitative easing will not do the trick if the Bank of England’s net purchase of debt from the private sector largely ends up as increased bank reserves. That is why the money supply in circulation (this excludes bank reserves) has registered sluggish, sometimes negative, growth through our deep recession. And that is why recovery has been equally sluggish despite a soaring public debt.
The Short View: US yield curve
We ignore the yield curve at our peril, says John Authers. That is one of the lessons from the financial implosion that started in 2007, but how do we apply it now? The yield curve is the popular name for the spread between the yields on 10-year and two-year Treasury bonds. Usually, investors require a bigger yield to compensate them for the greater risks that come with lending money over a longer term.