Comment, analysis and other offerings from Friday’s FT,
There are risks to cutting the UK’s fiscal deficit too slowly. However there are also risks in cutting it too fast, the FT columnist writes. Similarly, while there are risks in not having a credible plan, there are also huge risks in having an inflexible one. The UK needs an adaptable plan for fiscal cuts, one that takes account of the huge uncertainties that result from the fragility of the private sector. Consider what we do not know — how big an impact another slowdown would have on potential output; and how the private sector will respond to the fiscal tightening.
Mario Draghi: Next steps on the road to financial stability
Lehman was the first global systemically important institution that was allowed to fail during the crisis. It was also the last. The public will not, and should not, accept more such bail-outs, writes Draghi, governor of the Bank of Italy and chairman of the Financial Stability Board. Addressing the problem of “too big to fail” is therefore the next central step in financial reform after the Basel III capital rules.
Gillian Tett: For currency lessons read yen for renminbi
A few days ago, I stumbled across an influential tome written two decades earlier by Taggart Murphy, a journalist-cum-banker, called The Weight of the Yen. It is wryly relevant today – though not in the way Murphy might have thought, the FT’s Tett says. In detailing American frustration with a weak yen in the 1980s, it’s really a guide to current moves to get China to revalue its currency — which are focusing less than they should be on the other side of the issue, China’s dangerously slow financial liberalisation.
Jonathan Guthrie: Tieless guys should get knotted pronto
It is a momentous day when a column with the magisterial heft of Friday Notebook launches a campaign concerning an issue as critically important to national wellbeing as gentlemen’s neckwear, the FT columnist writes. But the tie is under threat. Businessmen are turning up to meetings with their collars flapping like wounded pheasants. It is time for this sartorial anarchy to stop.
Lex on Tech M&A
Has dotcom lunacy returned to techland? This month Hewlett-Packard won a bidding war with Dell by forking out 10 times revenues for 3Par and then paid over 90 times prospective earnings for security software company Arcsight, Lex observes. Sometimes, however, headline valuations miss the point — and paying up to defend one’s patch can make sense.
News analysis: Investors turn to century bonds
Taking the “long view” has just acquired a new meaning. Amid record low interest rates and fears about a double-dip recession, many yield-hungry investors had already turned to long-dated bonds to generate returns. Now, a far-sighted few have taken the opportunity to lock in an income stream for 100 years, the FT’s Aline van Duyne and Richard Milne report.
Short View: Emerging markets junk junk status
It was only just more than a decade ago that Indonesia ousted its dictator Suharto and became the only country to default amid the east Asian financial crisis, the FT’s James Mackintosh writes. It might as well be ancient history for all the bond market cares. Indonesia’s 10-year dollar bond yields just 4.14 per cent, lower than Spain’s 10-year borrowing rate –a worrying sign that investors are ignoring fundamentals.