Comment, analysis and other offerings from Wednesday’s FT,
Martin Sandbu: Washington’s battle is a diversion
The US, home to Hollywood and the inventor of televised politics, could be counted on to produce a cliffhanger of a show around the debt-ceiling debate, writes the FT’s economics leader writer. The prospect of default and down-to-the-wire deficit negotiations riveted the nation like a TV drama – and was, like most TV dramas, an escapist distraction from things that matter more. Amid nail-biting over where the cuts will fall and fretting over what might happen in financial markets if the US loses its triple A rating, the latest economic growth figures were published. If America’s leaders had not been too busy to look, they would have found much more to worry about there.
Lex: Gold
Gold’s relentless ascent may continue – a wonderful investment opportunity stemming from the spreading loss of faith in fiat money, says Lex. Or the fourfold price rise in seven years may be the result of fearful and naive buyers putting their faith in a barbarous relic. Investor manias are profitable for those who cash in their gains in good time. The problem is always to pinpoint the top.
Lawrence Summers: Relief at an agreement will give way to alarm
At last Washington has reached a deal that raises the debt limit and averts a default that would have been a national embarrassment and an economic and geopolitical catastrophe, writes the Harvard University president emeritus and former Treasury Secretary. The forces shaping the deal and the deal itself are multifaceted and so also is the right reaction to it. Mine has a number of elements. The first is relief. There will be no first default in US history; no economy-damaging short-run austerity; no attack on the nation’s core social protection programmes or universal healthcare; and no repeat of the past month’s shabby spectacle for at least 15 months.
Editorial: The debt ceiling
The agreement that broke the impasse over the US debt ceiling came with hours to spare before the Treasury’s deadline, says the FT. From today, had no agreement been reached, the US government would have had to stop meeting some of its obligations. This months-long pantomime may call to mind Winston Churchill’s remark that Americans can always be counted on to do the right thing, after all other possibilities have been exhausted. That judgment would be too kind.
FT Tilt View from the Ground: Argentina – Opportunity or renewed crisis?
Over the past several months commentaries have repeatedly drawn comparisons between the current Greek situation and Argentina’s default, writes Josh Rosner of Graham Fisher & Co. Some so-called “experts” have even urged the Greek government to follow Argentina’s model, defaulting on their obligations to creditors, breaking their peg to an external currency and then restructuring in a manner that relieves them of their burdens. These comparisons are both misinformed and dangerous.
Markets Insight: Switchback ride puts premium on resilient stocks
It has been said that the only purpose of economic forecasts is to make astrology look respectable, writes Derek Scott, economic advisor to Vestra Wealth LLP. This may be a bit harsh, but the precision and significance attributed to the latest UK gross domestic product data is absurd. The future path of Britain’s economy is no more than an informed guess but even if confirmed, slower-than-anticipated growth and an above-target budget deficit are unlikely to be the main drivers for gilts or equities.
Inside Asia: China’s banks bring new meaning to stress tests
One of the most remarkable stories of business reform and revival over the past decade has been the turnround in the Chinese banking sector, writes FT Beijing bureau chief Jamil Anderlini. Following a successful government bail-out programme, Chinese banks are now the biggest (by market capitalisation) and most profitable (in absolute terms) in the world and boast some of the strongest balance sheets of any financial institutions anywhere. But for ordinary folk in China, the most basic services available at banks in other countries are unheard of and going to the bank is still one of the most stressful experiences of their daily lives.