Stephen King of HSBC writes in ‘The Guardian’ that some of the drivers of growth have reached their maturity and the prayer ought not to be for a strong recovery but for the ability to live within one’s means. This has been the burden of my song in recent times – in presentations, articles, blog posts, etc. since July/August 2012 last year when I came across these two blog posts in ‘The Economist’.
The Standing Committee of the Politburo (Political Affairs Bureau in English) dealing with the economy met unscheduled in April. Journalists excitedly tried to divine the underlying message. It is hard to figure out if their concern was growth or financial system stability. They talked about both. Mind you, what we read is in English. The true intonations and the subtexts might be clearer in the original Mandarin version. So, that they met at all to discuss the economy is the most important thing. If things were going along rather well, why would they have had an unscheduled meeting? Here is the Xinhua news release.
Recently, in a blog post, I had labelled the the combine – regulators, banks and the rest of the financial industry – as one giant criminal enterprise. Little did I realise that Jeffrey Sachs had aired similar thoughts in a conference organised by the Global Interdependence Centre at the Federal Reserve Bank of Philadelphia. No transcripts or presentations are available.
Some one has recorded his extempore remarks and it is available here. Sachs pulls no punches. The real stuff is there from minute 12. This is the NY Post article that set me searching for Sachs’ speech. Sachs has been consistent. I unearthed a ‘Project Syndicate’ article that he had written in April 2011 on the global corporate crime wave.
Good FT article on how riskier lending practices are back and this particular paragraph is a revelation:
Moody’s, the ratings agency, has been raising the alarm. On its calculations, the loan-to-value ratio of commercial mortgages has hit a “tipping point” of 100 per cent. It took 10 years to reach that point after the widespread adoption of CMBS in the 1990s, Moody’s says; it has taken just two years since the resumption of CMBS buying after the crisis to get back there.