Comment, analysis and other offerings from Monday’s FT,
Clive Crook: Congress could let recovery crumble
The US economy showed new vitality in March, according to employment figures released last week. The unemployment rate fell to 8.8 per cent, reflecting a broadly based increase in private sector jobs. It was good news, and Wall Street was pleased. But do not celebrate the beginning of a self-sustaining expansion just yet, warns the FT’s Clive Crook. Businesses have reached the point where further increases in output require them to take on workers. The question is whether demand and output will keep strengthening or subside.
Wolfgang Münchau: Politics will bedevil resolving the euro crisis
Last week’s widening in sovereign bond spreads and the results of stress tests on Irish banks have reminded us that the eurozone has made hardly any progress in actual crisis resolution – in spite of its pretentious grand bargain, writes the FT’s Münchau. Over the next few weeks, I will try to map out various scenarios of how the crisis might evolve. It is probably the toughest challenge the European Union has confronted in its history. The eventual outcome will depend on a complex interaction of politics, finance and economics
Barney Frank: Greenspan is wrong – we can reform finance
Since the passage of the Wall Street Reform and Consumer Protection Act, known as Dodd-Frank, many commentators have suggested ways in which it might be improved, writes Frank, member of the US House of Representatives from Massachusetts’ fourth congressional district. But until last week no one had seriously suggested that we should have done nothing in response to the financial crisis. Yet, writing in these pages, Alan Greenspan suggests that we should not even have tried. By and large, he says, things went well over the long period of deregulation and light-touch oversight, and he argues that the global financial system is now so “unredeemably opaque” that policymakers and legislators cannot hope to address its complexity.
Lex on what after QE2?
Don’t look now, but QE2 worked. The aggressive second round of quantitative easing unleashed last autumn by the Federal Reserve clearly had the advertised effects. Last week’s US payroll data underline this. Last August, when Ben Bernanke of the Fed signalled more bond purchases in a speech at Jackson Hole, the unemployment rate was stuck at 9.6 per cent. Payroll expansion had dipped alarmingly. Now, unemployment has ticked down to 8.8 per cent, while on a six-month rolling average payrolls are expanding at their fastest since the summer of 2007. This matters to the Fed, whose mandate includes full employment.
Editorial comment: Bretton Woods II
The dollar can breathe safely for the moment, notes the FT. A G20 seminar on international monetary reform and reserve currencies passed last week in Nanjing, China, without agreement on serious reform. That was hardly surprising. President Nicolas Sarkozy declared war on the dollar’s reserve currency status last year in the run-up to France’s 2011 presidency of the G20, but was forced into retreat as early as January, admitting that the dollar would remain the world’s number one currency for some time to come. The stasis is, however, unfortunate.
Gavyn Davies’s blog: Renewed optimism about the global upswing
Global equities and other risk assets ended last week near to their high water marks for the year, says the blogging economist. Once again, markets have reacted favourably to the most important indicators for global activity, all of which have been published in the past week. There have been some signs that higher oil prices have dampened consumer spending in the US, and the global industrial sector has given further evidence of reaching its peak growth rate. But so far any slowdown has been very minor, and not enough to persuade markets that this is anything more than a temporary correction.