FT Exchange

Ahmed Rashid China steps in to protect its Pakistan project

| Oct 28 03:00 | Comments |
Mourners gather round the coffins of victims of the attack on a military academy in Quetta, Baluchistan

Mourners gather round the coffins of victims of the attack on a military academy in Quetta, Baluchistan  © Getty Images

China’s diplomats have taken the unprecedented step of intervening in Pakistan’s complex domestic politics to ensure the smooth passage of its $45bn investment in infrastructure projects as part of its One Belt, One Road programme.

In recent weeks the Chinese embassy in Islamabad has twice issued press statements calling on Pakistan’s bickering politicians to resolve their differences over the China-Pakistan Economic Corridor. Read more

Ahmed Rashid The way forward for India and Pakistan over Kashmir

| Oct 18 03:30 | Comments |
An Indian soldier carries ammunition after a gun battle with suspected militants in Indian Kashmir last week

An Indian soldier carries ammunition after a gun battle with suspected militants in Indian Kashmir last week  © Getty Images

The bellicosity between India and Pakistan has subsided for now but the issues that have caused the trouble remain, keeping alive the fear of war between the two nuclear powers.

Both countries are in trouble. While there is mounting criticism of India’s Prime Minister Narendra Modi for his failure to address the unrest in Kashmir, Pakistan is isolated in the region. This was highlighted by the cancellation of the summit of South Asian leaders due to be hosted by Islamabad in November. The meeting had promised to be a rarity in a region that sees little internal trade or economic co-operation. Read more

Diane Coyle How the digital age cuts through notions of material ownership

| Oct 03 14:48 | Comments |

Social convention means we know when we buy a drink we don’t keep the glass, writes Diane Coyle Read more

Mohamed El-Erian Yet more low but stable global economic growth is unsustainable

| Sep 30 19:25 | Comments |

An enduring malaise increases the influence of anger politics, writes Mohamed El-Erian Read more

Lorenzo Bini Smaghi Europe’s banks need consolidation to find stability

| Sep 27 05:30 | Comments |

  © Getty Images

European central bankers and supervisors have recently called for greater consolidation of the banking system, in particular in the eurozone, and for accelerating the capital market union project proposed by the European Commission.

These are welcome recommendations. The excessive fragmentation of the European banking system, especially in some countries, is hurting its profitability. It is no surprise that the stock price of banks located in countries with less concentrated markets, such as Italy and Germany, have performed worse since the start of the year, than those that benefit from substantial market power. Mergers, within borders and across borders, raise market power and facilitate the adaptation of banks’ business models, enhancing revenues based on fees rather than interest margins. Furthermore, the development of an integrated European capital market creates an additional financing channel for the real economy, reducing its dependence on bank credit. Read more

Richard Haass It is dangerous to invest too much hope in the Syrian ceasefire

| Sep 13 10:37 | Comments |

Even if Assad is prepared to abide by the truce, rebel groups may not be, writes Richard Haass Read more

Ahmed Rashid Uzbekistan has a chance to shake off Karimov’s legacy

| Sep 12 12:27 | Comments |

The next president must work to build an effective common market, writes Ahmed Rashid Read more

Ahmed Rashid A shaky holding operation in Afghanistan

| Sep 02 03:00 | Comments |
Afghan security personnel patrol near the American University in Kabul after the August attack

Afghan security personnel patrol near the American University in Kabul after the August attack  © Getty Images

Afghanistan is in the grip of chaos caused not only by the advance of the Taliban and its foreign terrorist allies during their summer offensive but also by a leadership crisis in Kabul that has permeated down to the regular and irregular armed forces deployed by the government, widened the country’s ethnic and political divide and helped worsen the economic meltdown.

The season has seen a dire security situation — yet the US seems reluctant to admit how bad it has become. At least two provincial capitals — Lashkargah, the capital of Helmand province in the south, and Kunduz, the capital of a province with the same name in the north — are besieged by the Taliban,who have shut down all roads into the two cities. Read more

Mohamed El-Erian Jackson Hole was a missed opportunity for a policy pivot

| Aug 30 14:46 | Comments |
Jackson Hole

Jackson Hole  © Getty Images

Two contextual realities formed the backdrop to this year’s Jackson Hole symposium of central bankers, academics and media. Read more

Diane Coyle How the data revolution is shifting the risks for insurers

| Aug 24 05:30 | Comments |

The risks are not balanced in the secondhand car market  © Getty Images

Markets do not work well when there are what in the lingo of economics we refer to as “asymmetries of information”, or in other words when one party to an exchange knows more than the other about some unobservable attributes of the item or service in question.

In a famous 1970 paper, “The Market for ‘Lemons’”, the titular lemons being secondhand cars of dodgy quality, the Nobel economist George Akerlof captured the essence of the problem. There is a good reason in economic theory why secondhand car salesmen do not always have a reputation for plain dealing: they know the quality of the vehicle they are offering for sale whereas the inexpert buyer cannot tell. Buyers will offer a price incorporating their view of the risk that a vehicle is a lemon. In some cases, this can be less than the price the seller of a high-quality car will be willing to accept. Sellers will withdraw the good cars from the market, leaving only lemons. The adverse selection can mean that in extreme cases the market collapses.

Some markets — including that for secondhand cars — limit the problem with devices such as reputation-building by big dealerships, or warranties. But sometimes the government needs to step in to ensure a market characterised by asymmetric information and adverse selection can function at all. Read more

Adam Posen Negative interest rates are not the drama they seem

| Aug 23 15:01 | Comments |

Division among central bankers reflects errors that have distorted debate, writes Adam Posen Read more

Stephen King How weak productivity can neuter monetary policy

| Aug 19 11:16 | Comments |

What was seen as a cyclical problem has morphed into a supply-side constraint, writes Stephen King Read more

Ahmed Rashid Jihadi group rebranding is an opportunity for Syria

| Aug 11 04:00 | Comments |
Fighters from Jabhat Fatah al-Sham in Aleppo where Syrian rebels have broken the siege by Assad regime forces

Fighters from Jabhat Fatah al-Sham in Aleppo where Syrian rebels have broken the siege by Assad regime forces  © Getty Images

In an extraordinary turnround, the second largest Islamist extremist group fighting the Syrian regime appears to have changed its name — and maybe its tune. Jabhat al-Nusra, which represented al-Qaeda in Syria, has been given permission from the parent organisation’s chief Ayman al-Zawahiri to cut the links between the two and try to enter the mainstream of resistance to President Bashar al-Assad. It has changed its name to Jabhat Fatah al-Sham, or the Conquest Front of Syria.

Last month, the Syrian group’s leader, Abu Mohammed al-Jolani, appeared in a video for the first time, saying the split was intended to remove any ‘’pretext’’ for the US and Russia to continuing bombing Islamist rebels.

Some western experts have seen the move as nothing more than a bid for power by the jihadist movement against Isis, although others have instead predicted a coming merger between Isis and al-Qaeda. Still others say it is a ploy to deceive western and Russian policymakers. The US director of national intelligence, James Clapper, described the split as ‘’a PR move … [it] would like to create the image being more moderate”. The US State Department has barely commented on the development. Read more

DeAnne Julius Brexit: Two-track trade talks are best for UK

| Aug 09 05:30 | Comments |

Boris Johnson, foreign secretary  © Getty Images

There is general confusion over who is in charge of Britain’s trade negotiations with the EU. The trio of ministers potentially involved are Boris Johnson, the foreign secretary, Liam Fox, international trade secretary and David Davis, Brexit secretary. As the Financial Times recently asked: “What are Mr Johnson, Mr Davis and Dr Fox all supposed to do?” Clarity is needed over both the roles of ministers and the sequencing of tasks if the eventual outcome is to be the best negotiated deal for Britain. Read more

Mohamed El-Erian An ‘A’ for the Bank of England on policy design and communication

| Aug 05 11:59 | Comments |
Mark Carney, governor of the Bank of England gives a press conference on Thursday

Mark Carney, governor of the Bank of England gives a press conference on Thursday  © Getty Images

The policy package announced on Thursday by the Bank of England is yet another illustration of how — for decades now — the UK has punched above its weight when it comes to influencing global economic policies. Its approach is one that other policymakers in the advanced world would be well advised to monitor closely. But for the measures to have lasting benefits, they will need to be supported, and quickly, by a comprehensive government policy response.

As discussed earlier this week in my Financial Times post, the challenge facing the BoE is not an easy one given the short-term structural economic uncertainties associated with the country leaving the EU. Being forced to use measures that are ill-suited to overcome the immediate headwinds to investment, growth and financial stability, the central bank is looking to buy time for the economy, thereby building a bridge to a more holistic policy response by other (better-placed) government entities to promote higher and more inclusive growth, both now and in the future; and it is doing so while eager to minimise the collateral damage associated with using imperfect tools. Read more

Lorenzo Bini Smaghi Stress tests highlight flaws in EU’s banking union

| Aug 05 05:30 | Comments |
The headquarters of Monte Dei Paschi di Siena

The headquarters of Monte Dei Paschi di Siena  © Getty Images

When the eurozone crisis started, in spring 2010, the question was often asked why the problems affecting Greece, a country representing less than 2 per cent of the area’s gross domestic product, could have such huge negative repercussions on the financial markets. The answer was a combination of contagion effects and the institutional shortcomings of the eurozone.

Investors’ main concern was that the debt restructuring in an advanced economy, the first for many decades, would directly affect the value of the other countries’ debt. Given the prevailing uncertainty, markets experienced a sell-off of government bonds and an outflow from eurozone investments. The contagion was stopped when a combination of public sector and monetary policy backstops was put in place, in the form of the European Stability Mechanism and the European Central Bank’s “Whatever it takes” strategy, respectively.

The publication last week of the stress tests organised by the European Banking Authority and the recapitalisation plan for the Monte dei Paschi di Siena seem to have triggered a very similar contagion effect in the financial markets, affecting all banks in the EU. Without a clear backstop and a mechanism to avoid contagion, the European banking union appears to be incomplete. Read more

Mohamed El-Erian The BoE and the challenge of its Brexit response

| Aug 03 05:30 | Comments |
Mark Carney, governor of the Bank of England

Mark Carney, governor of the Bank of England  © Getty Images

Along with the US Federal Reserve, the Bank of England had been — pre-Brexit referendum — among the relatively more successful central banks in dealing with the policy trade-offs inherited from the world’s romance with finance as a failed engine of high and sustainable growth. And while absolute success has also evaded it, the BoE has managed to avoid the feeling of ineffectiveness that now undermines the Bank of Japan’s policy responses, and the growing political vulnerability of the European Central Bank and the Federal Reserve. Read more

Adam Posen Shinzo Abe’s stimulus is a lesson for the world

| Aug 02 18:15 | Comments |

Eurozone nations should use expansionary fiscal policy for structural reform, writes Adam Posen Read more

Ahmed Rashid Turkey’s tarnished model is the worst example to set

| Aug 02 03:30 | Comments |

Turkey's President Recep Tayyip Erdogan attends the funeral of one of the victims of the failed coup  © Getty Images

When Turkey makes a move the Muslim world invariably follows. So now its Islamist government is heading down the path of mass repression and clamping down on all aspects of liberal society, we can expected to see Muslim rulers around the world resort to the same kind of treatment of their people. And with 60,000 people under arrest or removed from their jobs, Turkey is setting the worst kind of example. Read more

Diane Coyle Brexit risks unravelling UK’s role in the web of trade

| Jul 29 00:00 | Comments |

In the late 1970s and into the 1980s, if British FT readers had played a game of word association, the phrase “balance of payments” would have triggered the immediate response “crisis”. Famously, Denis Healey, then chancellor, asked the International Monetary Fund for an emergency loan in late 1976 because of a balance of payments crisis. Read more

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