Comment, analysis, and other offerings from Monday’s FT,
For me, it was a disturbing yet fitting end to the 2012 World Economic Forum, writes Roach, non-executive chairman of Morgan Stanley Asia. I was a panellist at Friday’s Open Forum, a session held since 2003 in an effort to take the debate from the glitterati to real people. In attendance were members of the local community, students and several representatives of the so-called Occupy community. Chaos erupted immediately.
Hernando de Soto: Knowledge lies at the heart of western capitalism
The reason credit and capital have contracted for the past five years in the US and Europe is that the knowledge required to identify and join parts profitably has been unwittingly destroyed, says de Soto, author of ‘The Mystery of Capital’. The connections between mortgage loans and liquid securities, between non-performing financial derivatives and the organisations that hold them; the non-standardised, scattered records that obscure who holds risks; and the off-balance-sheet accounting that obscures many companies’ health: these all make it harder to trust and hence combine.
Wolfgang Münchau: Fiscal treaty could trigger a debt explosion
I recently had a conversation in which everybody seemed to agree that the new European fiscal pact was quite mad, the FT columnist writes. The conversation was overheard by a former policymaker, who turned to us and said that he agreed in principle – but he then added that if the treaty encouraged the European Central Bank to become more flexible, it might still be worthwhile. Later I spoke to a central banker, who also agreed that the treaty was irrelevant, but he was nevertheless in favour of it because it served as a signal to the financial markets. When I spoke to my contacts in the financial markets, I was told that the treaty was quite mad.
Such is the state of Washington budget speak that even the most cautious fiscal recalibration can be made to sound draconian, the FT columnist says. Far better to deal in absolute measures. On that count, President Barack Obama is only barely shifting the needle. By 2017, once his cuts are in full flow, US defence spending will be $567bn against what would have been $622bn. That is still almost six times what China spends today and more than the next 10 countries combined.
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Analysis: The horde of hoarders
Call it the $1,700bn problem, the FT’s John Authers writes. Companies in the US are flush with cash and are paying out a smaller proportion of their earnings as dividends than ever before. Much the same can be said for western Europe. Governments and households on both sides of the Atlantic are meanwhile strapped for cash. This cannot persist much longer.
Lex on Portugal
Fire-fighting is a maddening business. While eurozone leaders focus on the region’s biggest blaze – Greece – smouldering difficulties in Portugal are flaring up again, Lex says. But there have also been bright spots. Portugal’s export performance was good for much of last year. And the new government has proved stable and effective, pushing through badly-needed reforms, to praise from its lenders. This then could be an opportunity for eurozone leaders to get ahead of events.
Lucy Kellaway: The best I can do for today’s youth is quit
Wasting time on the dismal Davos website last week I found a nasty statistic, the FT columnist says. In the next 10 years there will be 1.2bn young people looking for work and only 300m jobs to go around. Next to this stark stat was an invitation to write an essay solving the problem. Briefly I got excited and started sharpening my pencil, as I’m pretty sure I have the perfect answer to the question of youth unemployment.