Comment, analysis and other offerings from Friday’s FT,
The acute fiscal challenges across all industrial economies are no surprise. Our economies are emerging from the worst economic crisis since the second world war, and without the swift and appropriate action of central banks and a very significant contribution from fiscal policies, we would have experienced a major depression. But now is the time to restore fiscal sustainability, writes the president of the European Central Bank.
Gillian Tett: Time for true debate on Fannie and Freddie
When the results of bank stress tests are released on Friday in Europe, there will be a flurry of hand-wringing about the capital hole – and who is going to plug it, or bear losses, writes the FT’s Tett. But on the other side of the Atlantic, there is another black hole which badly needs to be discussed – this time in America’s huge government-sponsored enterprises, such as the housing giants Fannie Mae and Freddie Mac
Montek Singh: Message from Delhi: don’t cut too soon
The stimulus versus austerity debate has become much more heated since last month’s summit of the Group of 20 industrialised and developing nations. Political polarisation in industrialised countries has fuelled a resurgence of fiscal conservatism, writes Singh, deputy chair of the Indian government’s planning commission. In India we follow this extremely closely and with concern. Our anxiety about an austerity drive in industrialised countries is clear.
David Miliband: To grow, Britain must solve its jobs deficit
By committing to the largest fiscal retrenchment in living memory, Britain’s coalition government has gone for broke. The prime minister says it will “change our way of life”. That’s the problem, says Miliband, member of Parliament for South Shields and candidate for leadership of the Labour Party. Framing the debate as a choice between the public and private sectors is certainly good politics, but it is bad economics.
Lawrence Mitchell: America needs regulators that fight to win
The Securities and Exchange Commission blew a perfect opportunity to redefine its role with its decision last week to accept a $550m settlement with Goldman Sachs, writes Mitchell, a professor of business law at George Washington University Law School. The settlement looks tough. But in truth, the SEC caved. It let Goldman, which decided that fighting the commission was not in its self-interest, effectively pay off the government with what amounted, in the long run, to pocket change.
Editorial Comment: Ben Bernanke’s uncertain world
It is not only the US economic outlook that is subject to “unusual uncertainty”, as Ben Bernanke, Federal Reserve chairman, put it in his ritual testimony to Congress this week, says the FT. It should be of concern to Mr Bernanke that the same phrase aptly describes markets’ expectations of what the Fed and other policy makers will do next.
Lex on US Treasuries
Japan’s bank deposits get an unfair press. A one-year Japanese bank account will deliver you a yield of 1.03 per cent after inflation; that is much better value than a two-year US Treasury bond, which, after the latest rush to buy bonds, is offering a real yield of minus 0.48 per cent, Lex writes. This is a nasty situation. The risk that the US falls into a Japanese-style liquidity trap of permanently low rates appears very real.
John Gapper’s blog: Hedge funds keep on bringing in the money
So much for the death of hedge funds, writes the FT columnist. Asset management, having been through a couple of tough years, is back to doing fairly well for itself – and that includes hedge funds – according to the Boston Consulting Group.