Monthly Archives: March 2010

James Mackintosh

UPDATE: It has just got even worse. Samantha Cameron is pregnant, with atrocious timing. A “bump” in the polls to come, no doubt. But even less chance of a proper debate about the election.

Forget trying to spot policies, stop worrying about who has lied the most, or whether your favourite council-funded childcare/education/dance therapy service is about to be scrapped to pay for the financial collapse. Britain’s election is all about leaders’ wives.

All three have been paraded in front of the TV cameras, with the past weekend finally seeing Miriam Gonzalez Durantez, the Spanish wife of Nick Clegg, joining the race to see who can best wow the nation. The media lapped it up, with interminable debates about what the role of wives should be in the election, alongside long profiles.

The Mail on Sunday went one further, digging up a “fashion” shoot with Samantha Cameron, wife of the Conservative leader, which the Telegraph this morning chose to put on the front page. What did we learn? Someone thinks the pictures might make people vote Tory. The editors of the two papers rather fancy her. And, wierdly, she appears to be wearing a 1970s sheepskin car coat back-to-front in one of the pictures. But nothing more significant.

From the FT’s comment section:
Clive Crook: US financial reform ignores wider terrain
Wolfgang Munchau: Gaps in the eurozone ‘football league’
Eamonn Butler: We should not be saved from our stupidity
Martin Taylor: A pseudo solution to the euro’s failings
Editorial: Time to send the IMF to Athens
Editorial: Fat fees, few banks
Editorial: Spanish practices
Global Insight: Gillian Tett, Practising the last rites for dying banks
Lex: The agenda-setting column on business and finance

From the FT’s comment section:
Philip Stephens: Obama should table a Middle East peace plan
Samuel Brittan: Headroom for economic recovery
Richard Youngs: Europe should rethink its aid to Palestine
Tyler Moselle: Tackling insurgents is not enough for America
Otmar Issing: Higher German wages are not the solution
Geoff Muligan: Britain must attend to its mutual interest
Editorial: A French policy
Editorial: Sectarian threat hangs over Iraq
Editorial: Swaps con amore
Global Insight: Quentin Peel, Merkel keeps focus on euro stability
Market Insight: Gillian Tett, Alabama and Milan make bankers nervous
Notebook: Jonathan Guthrie, Taking a Leaf out of Nissan’s book
Lex: The agenda-setting column on business and finance

James Mackintosh

China is constantly harangued by the west – and Martin Wolf – for its contribution to the global crisis. On the now-standard line of argument, it saved too much; the savings had to be recycled into western, particularly US, government bonds; and so it helped depress global interest rates, helping to inflate the bubble. Alan Greenspan believes China’s excess savings were enough to explain the entire global housing bubble.

The solution put forward sounds simple: raise consumption, cut savings (particularly by improving social and health services), and allow the currency to appreciate, which will help with both. Barack Obama is now under pressure to label China a currency manipulator, with 130 US congressmen calling for action.

But could the analysis be flawed? A fabulous article in the Economist earlier this month (about imbalances in gender ratios) mentioned that Chinese households save more if they have sons than daughters. Here’s the research, NBER paper 15,093:

as the country experiences a rising sex ratio imbalance, the increased competition in the marriage market has induced the Chinese, especially parents with a son, to postpone consumption in favor of wealth accumulation. The pressure on savings spills over to other households through higher costs of house purchases. Both cross-regional and household-level evidence supports this hypothesis. This factor can potentially account for about half of the actual increase in the household savings rate during 1990-2007.

The research is rather depressing: many Chinese (as well as Indian and other) regions are aborting vast numbers of girls, then finding they have to save more to attract the scarce women to their sons.

It takes a combination of having a son and facing a scarcity of women for families with a son to raise their savings rates.

The effect is most pronounced in rural areas, where the authors estimate half the increase in the savings ratio since 1990 is down to the gender imbalance, while in urban areas it accounts for just over a quarter of the increase. Across the whole of China the savings rate increased from 16.2% in 1990 to 30.2% in 2007, with 14 percentage points, or almost half the increase, due to gender imbalances.

At least part of the now-standard prescription for increased Chinese consumption – a better social safety-net – may, therefore, not achieve its aims. Here’s the IMF’s analysis, from its October 2009 Regional Economic Outlook:

Following the reform of state-owned enterprises (SOEs) in the 1990s, the industry-based social safety net disappeared, limiting the support available to many individuals for their health care, their pensions, and education for their children. Consequently, households had to increase savings significantly to cover their retirement and the risks associated with sickness (Barnett and Brooks, 2009). Household income has also lagged broader economic growth, particularly reflecting (at times) modest wage growth and low investment income, the latter held down by financial repression. Recent government initiatives, however, have sought to strengthen safety nets (reducing the precautionary motives for savings) and boost household disposable income. In particular, the government is expanding health care provision and insurance coverage, increasing pensions, targeted consumption subsidies, and improved funding for rural livelihoods.

Of course, household saving is not the whole story: corporate savings rates are also a big contributor to Chinese saving rates. But as this chart (from the same IMF research) shows, households do make up about half the savings. Perhaps more promotion of women’s (or girl’s) rights in China would make headway in solving global imbalances?

James Mackintosh

While hedge funds are the focus of attacks on “speculators” from Greek, French, German, Spanish and Portuguese politicians for allegedly trashing the euro and Greek bonds, the funds don’t seem to have made money from it.

According to Hedge Fund Research, which tracks the industry, so-called “macro” hedge funds – those trading interest rates, currencies and government debt around the world – have lost money this year, suggesting they were betting the wrong way on Greece, lost big money elsewhere or had ignored the Greek trade altogether (although there are exceptions – at least one was coining it at the start of the crisis, while others deliberately closed their trades because they expected a political fracas).

But Bloomberg reports on a lovely irony: at least one of those betting against Greek bonds using the dreaded CDS was an American mutual fund. Fully regulated, respectable, and run by one of America’s oldest fund managers. The mission of Eaton Vance, according to founder Charles Eaton:

Professional investment management entails an obligation of responsibility of the highest order. It is a very serious matter to accept the obligation to be responsible for the investment of anybody’s money.

The eurocrats currently planning to ban the use of “naked” CDS to make such bets – a bad move with worse motivation – must be choking into their cappuccinos. They’ll be even more annoyed when they realise that a ban in Europe will have no impact at all if the US continues its opposition to such a move and allows CDS to be used not just to protect existing bond holdings, as Europe wants, but also to speculate.

From the FT’s comment section:
John Kay: Think before you tear up an unwritten contract 
Martin Wolf: China and Germany unite to impose global deflation
Jeremy Rifkin: Towards the empathic civilisation
Takatoshi Ito: China’s property bubble is worse than it looks
Editorial: Obama must be robust with Israel
Editorial: Reform is in sight
Editorial: Fighting bribery  
Global Insight: David Gardner, Cameron needs red meat for his Eurosceptics
Market Insight: Michael Dicks, Is Italy the real joker in the eurozone pack? 
Notebook: Sue Cameron, Nailing the big lie on pensions
Lex: The agenda-setting column on business and finance

By Tony Tassell, the FT’s financial news editor

It seems the Obama charisma is waning with even his most ardent supporters. One of the more unlikely chapters of the presidential campaign was the rise of the Obama girl.

Amid the wave of hype and hope that drove the Illinois senator to the White House, a risqué video appeared on YouTube fearing a shapely but previously obscure model called Amber Lee Ettinger lip-synching a song called “I’ve got a crush on Obama”, declaring her love for watching the man on C-Span.

From the FT’s comment section:
Philip Stephens: Cameron should be offering hope, not pain
Lorenzo Bini Smaghi: It is better to have explicit rules for bailouts
Gideon Rachman: Rising China is a real contender
Michael Skapinker: Time to fund creative and sporting talent
Leo Hindery and Donald Riegle: America needs to invest in jobs – and fast
Jacob Wallenberg and Leif Johansson: Europe must sharpen competition policy
Editorial: Europe will not save its way to growth
Editorial: Red shirts rally
Editorial: Accounting failure
Global insight: Joshua Chaffin, Nutrition labels give Brussels an awkward case of indigestion
Market insight: Gillian Tett, Global harmony a distant prospect despite Lehman outrage
Notebook: Brian Groom, Industry fails to warm to politicians
Lex: The agenda-setting column on business and finance

James Mackintosh

The Dutch never cease to amaze me. Geert Wilders is a strange enough contradiction to start with (he wants to ban Islamic immigration because it undermines Dutch culture, but unlike anti-immigration nationalists elsewhere he is worried that Islam will undermine Dutch tolerance for homosexuality).

But his appearance in this video really opened my eyes: the TV format is stunning. This should be a must-watch for everyone in the US and UK planning boring pre-election debates. They get 1 minute each, timed, then can respond, don’t interrupt (much) and at the end are rated by the audience on their debating ability. Making them stand head-to-head makes for fabulous television, and serious issues get discussed too.

From the FT’s comment section:
Clive Crook: A needed reform descends into farce
Wolfgang Münchau: Shrink the eurozone, or create a fiscal union
George Osborne and Jeffrey Sachs: A frugal policy is the better solution
John Cassidy: Lessons from the collapse of Bear Stearns
Geoffrey Bindman: Universal human rights need universal jurisdiction
Editorial: Sovereign equity
Editorial: The return of Chinese inflation
Editorial: The Democrats’ healthcare choice
Global Insight: Alan Beattie, Skirmishes are not all-out trade war
Lex: The agenda-setting column on business and finance

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Politics, economics, high finance and morality – this blog addresses the issues being considered by the FT’s comment team, and their thoughts.

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Christopher Cook is an FT editorial writer. Before joining the FT in 2008 as a Peter Martin Fellow, he worked for three years for the Conservative party.

Lorien Kite is deputy comment editor, a post he took up in 2009 after four years as a commissioning editor on the analysis page. He joined the FT in 2000.

Ian Holdsworth became assistant features editor in 2009 and was previously chief production journalist for the features pages.


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