Comment, analysis and other offerings from Tuesday’s FT,
1) Member states of the eurozone agree on the need for a new treaty creating a common treasury in due course, begins the Soros Fund Management chairman and philanthropist. They appeal to European Central Bank to co-operate with the European financial stability facility in dealing with the financial crisis in the interim – the ECB to provide liquidity; the EFSF to accept the solvency risks.
Barry Eichengreen, Raghuram Rajan and Eswar Prasad: Central banks need a bigger and bolder mandate
In the wake of the global financial crisis, there is an emerging consensus that the framework underpinning central banking, known as inflation targeting, is too narrow, write the professors at the University of California at Berkeley, University of Chicago and Cornell University, respectively. The crisis is a stark reminder that a monetary policy framework focused on price stability will also affect financial stability through its impact on asset prices, commodity prices, credit, leverage, capital flows, and exchange rates. So, it is time to update central banks’ mandates and operations. Specifically, they should be updated to make financial stability an explicit objective of central banks, along with price stability.
Ray Dalio: Risk on the rise as political leaders give in to mob rule
We are in the midst of a deleveraging, we are nearly out of ammunition and we are at each other’s throats, writes the founder of Bridgewater Associates. Being in a deleveraging and nearly out of ammunition is a very difficult position to be in. But, being at each other’s throats is our biggest problem. Frustrations increase, the established ways of doing things come under attack and frustrations over the ineffectiveness of government creates the perceived need for someone to gain control of the mess. Plato spoke of this dynamic. It was the reason Hitler was elected in 1933.
Analysis: Search for fund options extends beyond Europe
European policymakers are examining several options for bringing in more international financing to help contain the eurozone sovereign debt crisis, write Alan Beattie and Hugh Carnegy. Some – but not all – of which involve the International Monetary Fund. IMF involvement may reassure donors about the use of the money at the cost of constraining flexibility, since the fund lends to member governments rather than intervening in secondary debt markets.
Lex on Oracle/RightNow
RightNow Technologies’ regulatory filings say the company sells a “comprehensive customer experience solution for consumer-centric organisations to enable interactions across web, social and contact centre touch points”. Give bosses of technology companies a choice between reading page after page of this to figure out what RightNow does, and simply buying the company blind at a staggering valuation, and they will probably pick the latter, says Lex.
Tristan Garel-Jones: How the euro will outlast Tory sceptics at the crease
Last night’s vote says a great deal about the Conservative party – and it is not as bad as it looks, writes the minister for Europe under prime ministers Margaret Thatcher and John Major. It would be wrong of the Conservatives to claim to be the patriotic party. Nevertheless, patriotism – in the good old-fashioned sense of the word – is part of the Tory DNA. This makes it quite hard to accept that the history of our country in the 20th century has been a gradual, and I think dignified, move away from the Rule Britannia mindset.
Editorial: US flat tax sirens
A template for tax reform was offered 25 years ago by Ronald Reagan who pulled off America’s last serious tax reform, says the FT. By eliminating exemptions, Mr Reagan was able to push through a bipartisan deal to lower rates across the board and broaden the base. Any reform should aim to meet those goals – fairness, efficiency and clarity. Nor would it need to be regressive.