Comment, analysis and other offerings from Monday’s FT,
Clive Crook: America’s deepening default chasm
A United States sovereign default is a stunning prospect, you might think. Washington views it with equanimity, the FT columnist writes. The May 16 deadline on the statutory debt ceiling, despite having been talked about for months, exerted no detectable pressure on the budget negotiations. Congress glided through it as though it did not exist. The current view is that a deal will in fact be done at the last minute before August 2 – the new “real” deadline. But one wonders.
Wolfgang Münchau: Cosmetic surgery will not save the eurozone
The eurozone has essentially three options, the FT columnist argues: follow the ECB, and roll over existing debt for as long as it takes; change the rules of the EFSF and accept Brady bonds; or force a full debt restructuring, and accept the consequences. It is going to be one, two or three. A nose job will not do.
Gavyn Davies’ blog: US inflation expectations are now critical for markets
Although the US equity market has now fallen slightly for three successive weeks, there has been no real sign yet of any major crack in market sentiment. This is noteworthy, since there is no longer any doubt that the growth rate of the global manufacturing sector has slowed markedly during the current quarter, Davies writes. Part of this is due to the Japanese earthquake, but the rest is probably due to the more permanent impact of higher oil prices on consumer demand.
Richard Lambert: Sir Ralph’s lessons on short-termism
Sir Ralph Robins is an unsung hero of British industry, writes Lambert, chancellor of the University of Warwick, and a former editor of the FT. As chief executive and then chairman of Rolls-Royce, he invested heavily in aero engine technology through the 1990s, in the face of real hostility from the City. The development of big engines for civil aircraft takes many years to pay off, and institutional shareholders were clamouring for quicker results. Such myopia has become a growing problem for British industry.
Lucy Kellaway: Despite the offer, I won’t fill in for DSK
Now that Dominique Strauss-Kahn is off the speaker circuit, all sorts of peculiar people are being asked to take his place on various podiums around the world, says the FT columnist. Last Tuesday, I received such an invitation. It came from a man who runs a course in diversity and inclusion at Sciences Po. This has to be the oddest e-mail I’ve ever received. DSK is not the obvious person to talk about diversity.
Analysis: Corporate finance — rivers of riches
Feike Sijbesma has a dilemma. But – in common with many chief executives today – it is a pleasant one. DSM, the Dutch life sciences group he runs, has at least €2bn ($2.8bn) of cash on its balance sheet. “We are sitting on cash – and cash we need to spend,” he says. “The market isn’t pressuring us but we need to act in a certain time frame, yes. We want to do acquisitions.” It is a remarkable scene being played out in boardrooms around the world. Less than three years on from the dark days of the financial crisis, companies are sitting on a bulging war chest of several thousand billion dollars of cash, the FT’s Richard Milne and Anousha Sakoui report.
Lex on when the gold bubble pops
Predicting the top of the gold bubble is foolhardy. It is safer to predict that the bubble’s popping will be especially nasty, Lex says. Why? Because the virtuous cycle of lowering barriers to entry for gold investing through innovations such as the GLD ETF would work in reverse. The fund’s physical bullion would be dumped on to a market made up of a smaller group of investors, those willing and able to hold physical gold.
FT beyondbrics: The EBRD — a new camel corps?
Egypt in 2011, with its young population heading towards 100m, looks a very different place from 1989 Poland or Hungary, the FT’s Stefan Wagstyl writes. So can the European Bank for Reconstruction and Development successfully play the same role in helping turn the countries of the Arab spring into thriving market democracies as it did in central and eastern Europe?
FT Tilt: BP-Rosneft – unfinished business
BP’s planned arctic exploration and share swap agreement with Russian oil giant Rosneft collapsed last week after months of legal wrangling failed to produce the desired strategic alliance. And Rosneft has already begun talks with other partners about Arctic exploration. The deal looks all but dead in the water. Not so fast, FT Tilt’s Alastair Marsh reports.