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In a world going mad with war, European and US sanctions against Russia stand out as sane and measured. They will not stop Russia’s assault on Ukraine in its tracks, but they will help Kiev to weather the Russian blows. And by answering violence with economics, they can help to rescue the world from the current epidemic of military delusions.
Vladimir Putin is not alone in believing that military force can solve Russia’s political problems vis-à-vis Ukraine. Western powers wrongly believed that killing Muammer Gaddafi would resolve problems with Libya; that backing an insurgency to overthrow Bashar al-Assad would resolve political problems with Syria; and that toppling Saddam Hussein would create a stable, pro-western Iraq. Now Israel believes that a mass bloodletting in Gaza will make that trapped and desperate population compliant to Israeli might.
Despite signs of financial complacency, many investors are yet to formulate a comprehensive game plan to navigate the possibility of a market shakeout. The good news is this is both desirable and feasible, and the costs of doing so are quite low.
While they may differ on the specific magnitudes, the majority of investors would readily admit their portfolios have benefited from the sustained support provided to markets by central bankers. This has done more than bolster prices to levels beyond those strictly warranted by current fundamentals. It has also given the markets the confidence to repeatedly “look through” exogenous shocks, including quite a string of geopolitical tensions. Continue reading »
Richard Lambert, head of the Banking Standards Review, says it will take a long time for new bank leaders to change staff behaviour. He discusses with Sharlene Goff, FT retail banking correspondent, the Lloyds scandal and thinktank ResPublica’s proposal for a bankers’ oath
Until recently, most non-executive directors would have told you that the audit committee is the one they really wish to avoid. The meetings are long, the papers voluminous, and the duties burdensome. So the conclusion of a recent survey by Per Ardua, an executive search company, came as a surprise. Eighty per cent of respondents in the financial sector now say that the risk committee is the one to dodge – even though audit and remuneration committees have so far more often exposed non-executives to public criticism. Continue reading »
Since early March , there has been a debate in Europe as to what Russia’s actions in Ukraine represent. Does its forceful annexation of Crimea and the declaration by Vladimir Putin, Russia’s president, that Moscow has a duty to protect Russian-speaking people everywhere represent a fundamental challenge to the European security order? Or is this a complicated crisis that needs to be resolved through negotiations?
Much of the official rhetoric, with its emphasis on de-escalation, negotiated ceasefires and peaceful resolutions, suggests that most leaders believe this is a crisis that needs to be resolved. While few think it will be easy to come up with a solution, most seem to hope that once one is found, relations with Russia can return to business as usual.
The downing of Malaysian Airlines flight MH17 should put an end to any thought that the situation in Ukraine is a routine crisis that can be resolved through peaceful negotiations. There can be no doubt that the 298 people on board this civilian airliner were killed as a direct result of Russia’s deliberate effort to upend the European security order – an order that rests firmly on the general acceptance of the territorial integrity of states and the rejection of changing the frontiers of European states by force. Continue reading »
China’s recent moves in the East and South China Seas – various military deployments, policy proclamations, provocative naval maneuvers and rhetorical stridency – pose serious challenges for how Sinologists have traditionally perceived China and its foreign policy pursuits.
The conventional wisdom has long been that China is primarily focused on its domestic imperatives, including urgent tasks dealing with corruption, endemic pollution, and restructuring of inefficient state-owned industries. For decades now, it has been widely accepted that a benign international environment is a critical requirement for maintaining a sustained domestic focus. When there have been incidents in the past – such an encounter in 2001, when an American reconnaissance aeroplane was intercepted by an overzealous Chinese fighter pilot – it is often the case that the leadership in Beijing and Washington had to work carefully behind the scenes to untangle the mess created by nationalist and poorly co-ordinated elements in the military or border protection units. Unanticipated accidents and incidents were the worry, not premeditated gambits. Continue reading »
Many people are worried about shadow banking, finance which exists outside of regulated banks, in China. Fitch, the rating agency, has raised alarms about its growing presence in the country and critics cite countless examples of seemingly risky and irresponsible lending in warning that a financial crisis looms.
Whether shadow banking really is a worrying danger or merely evidence of a maturing financial system depends on its magnitude and risk profile. Various estimates indicate that the sector has doubled its share of new credit from about 20 per cent in 2008 to 40 per cent by June 2013, at which point it accounted for roughly a quarter of the outstanding credit stock. Continue reading »
The most strident debate among western intelligence agencies is whether the reported thousands of foreign fighters involved in fighting in Syria and Iraq, which include 3,000 Europeans and Americans, are going to return home and bomb their own countries.
A more important question may be whether the war launched by the Islamic State of Iraq and the Levant, or ISIS, and other militant groups is primarily a Sunni extremist campaign against Shias – in other words, a war internal to the Muslim world. In this case, the key players who need to be restrained are not those fighting, but their sponsors Saudi Arabia and Iran. Saudi Arabia in particular has a wider responsibility in the Islamic world to act as a bridge between the sects rather than fuel Sunni extremism. Continue reading »
The Bundesbank is right to remind us that the unprecedented monetary accommodation in the eurozone has produced undesirable side effects. In particular, the policy has reduced the pressure on politicians to pursue speedy budgetary consolidation and to implement structural reforms. In the summer of 2011, for instance, as soon as the European Central Bank intervened to purchase Italian and Spanish government bonds through the Securities Market Programme and the spread on interest rates decreased, the commitments made earlier by those two governments began to be diluted. The same thing happened two years later, after the announcement of the Outright Monetary Transaction by the ECB contributed to sharply reduced market tensions, but also structural reforms.
It is not clear, however, whether or how central banks should incorporate these effects into their own policy frameworks. In other words, should central banks try to calibrate monetary policy – in particular, by being tighter than would otherwise be the case – with a view to keeping a tight leash on governments and inducing them to play their own part? There may be some good reasons for doing so but on balance it would be a serious mistake. Here are several reasons why. Continue reading »
Since Mark Carney took over from Lord King as governor of the Bank of England a year ago, the members of the Monetary Policy Committee have been unnaturally harmonious. Perhaps it has been a honeymoon period granted the new governor. If so, this has been a rather long honeymoon: the most recent meeting in June was the 12th consecutive time that there has been a unanimous vote by the MPC. Many commentators expect another 9/0 vote at this week’s meeting. By contrast, prior to Mr Carney’s arrival at the BoE, the MPC had a split 6/3 vote in five consecutive months over whether to increase asset purchases. Continue reading »