Comment, analysis and more from Wednesday’s FT,
Martin Wolf: Sinking into the ‘great stagnation’
The future is not what it used to be. Nor is the present, writes the FT’s Martin Wolf. This is the theme of The Great Stagnation by Tyler Cowen of George Mason University. This is an influential, albeit depressing, little book, first published on the internet.* Its theme is in its subtitle: “How America ate all the low-hanging fruit of modern history, got sick and will (eventually) feel better.” The book is a model of popular writing: lucid, brief and provocative. But is the argument also true? If so, what might it imply?
Nouriel Roubini: A plea to policymakers: We can’t risk another year of delay
For the last three years the world’s biggest economies - the US, eurozone and China - have been living up to the infuriating euphemism so beloved of policymakers: ”kicking the can down the road”, writes Roubini. They have been avoiding the tough decisions that are required to address their fundamental economic, financial and fiscal problems. It will become clear in 2012 that this game of “kicking the can down the road” is a zero-sum game.
Global Insight: No crisis too big for EU navel-gazing
Among senior officials in Brussels, there is a growing concern that the December summit not only failed to deal with the most pressing problems facing the single currency but also made them worse by focusing on the wrong subject. Instead of restoring confidence, these officials worry, summit leaders created even more political uncertainty by giving birth to an unwieldy new European treaty that will lead to months of protracted negotiations over a pact that will be presented to national parliaments at a time when anti-Brussels sentiment is at its highest in a generation. It is a recipe for political upheaval, reinvigorated populism and colossal distraction.
John Plender: Banks hard to value as status changes
One striking juxtaposition in equity returns this year is that utilities in the S&P 500 were the top performing sector in the year to date, with a positive return of more than 9 per cent, while financials were the worst, returning a minus figure of more than 21 per cent, writes the FT’s Plender. In the UK utilities showed only a marginally positive return over the year, but the relative picture was broadly the same. Nothing more clearly illustrates how the banks’ transition from growth fuelled by leverage to more heavily regulated utility status entails a very nasty valuation adjustment. For longstanding bank investors, the pledge this week by George Osborne, the British chancellor, to implement most of the proposals of Sir John Vickers’ Independent Commission on Banking rubs salt in the wound.
Editorial comment on Mariano Rajoy
The speech by Spain’s new prime minister on Monday contained more rhetoric than concrete proposals, says the FT. But the rhetoric was of the right kind and gives hope that the correct priorities will guide the new government from day one. The accession to power of Mr Rajoy’s centre-right Partido Popular was greeted by the best news from capital markets in a while: Madrid’s sovereign yields thundered back to earth in a bill auction on Tuesday. The interest cost of six-month paper more than halved to 2.4 per cent from 5.2 last month; the three month yield fell even further from 5.1 to 1.7.
Lex on Deutsche Telekom
The line has gone dead on the proposed $39bn sale of Deutsche Telekom’s T-Mobile arm in the US to AT&T, says Lex. The deal collapsed in the face of regulatory problems. That leaves the vendor with a large though not unexpected headache. The problem is what to do with an unwanted baby: T-Mobile USA may be the US’s fourth-largest mobile network, but it is sub-scale, lacking spectrum, network capacity and pricing power.
Inside Asia: Japanese industry may be hit by new fighter
In choosing the F-35 Lightning II as its new mainstay fighter, Japan has plumped for a weapons platform which lead manufacturer Lockheed Martin wolfishly boasts is of “unmatched lethality”, writes the FT’s Mure Dickie. But rather than allowing some hostile intruder into its territorial airspace, the first fatality to be inflicted by Japan’s purchase could end up being the nation’s ability to build its own fighters.