Todays Financial Times has an interesting comment piece from Bill Clinton’s former Treasury Secretary, Lawrence Summers.  Here is a small extract.

 ….no country can be expected to generate huge primary surpluses for long periods  for the benefit of foreign creditors. Meeting debt burdens at rates currently  charged by the official sector for credit – let alone the private sector – would  involve burdens on Greece, Ireland and Portugal comparable to the reparations’ burdens Keynes warned about in The Economic Consequences of the Peace ….  The twin realities that Greece, Italy and Ireland need debt relief and that the  creditors have only limited capacity to take immediate losses, mean that all  approaches require increased efforts from the European centre.

Given the comparison used by Summers, it’s ironic that it is the Germans that are in the vanguard of attempts to avoid sensible burden-sharing among the wealthier Eurozone nations.  Current ECB policy is trying to impose a “Carthaginian Peace” on the Eurozone, which will have severe consequences for all, not just the bailed-out countries.

As an aside, I wonder does German Chancellor Angela Merkel (a highly-qualified physicist) agree with Summers’ controversial remarks in a 2005 speech where he suggested that the under-representation of women in science and engineering could be due to a “different availability of aptitude at the high end,” and less to patterns of discrimination and socialization?  His remarks are believed to have contributed to his resigning his position as president of Harvard University the following year.

Conrad Black does a job on Rupert Murdoch in yesterday’s Financial Times – worth reading.  Link here.

The punchline is that “There must be a reckoning with decades of establishment cowardice towards  someone whose nature has been well known throughout that time. The fault is the  British establishment’s and it must not be seduced and intimidated, so  profoundly and durably, again.”

According to the FT, Black is  “the former chairman of the Telegraph Newspapers and of many  other newspapers. He was convicted on four counts of fraud and obstruction of  justice in 2007. He served 29 months in prison until the Supreme Court vacated  the convictions. An appeal court restored two counts. He will return to prison  for 7½ months. He continues to assert his innocence.”

Seems to me that Black would never get a job writing for Murdoch’s newspapers.  He writes too well.

John Kay (in the Financial Times) writes about banks that are  “too big to fail”, and as usual is worth quoting :

Their activities underwritten by implicit and explicit government guarantee, it is increasingly business as usual for conglomerate banks. The politicians they lobby sound increasingly like their mouthpieces, espousing the revisionist view that the crisis was caused by bad regulation. It was not: the crisis was caused by greedy and inept bank executives who failed to control activities they did not understand. While regulators may be at fault in not having acted sufficiently vigorously, the claim that they caused the crisis is as ludicrous as the claim that crime is caused by the indolence of the police.

John Kay in Wednesday’s Financial Times has gone surprisingly soft on those villainous bankers.

“Better, as so often, to follow an aphorism of Warren Buffett’s: invest only in businesses that an idiot can run, because sooner or later an idiot will. Our banks were not run by idiots. They were run by able men who were out of their depth. If their aspirations were beyond their capacity it is because they were probably beyond anyone’s capacity….. we would be wiser to look for a simpler world, more resilient to human error and the inevitable misjudgments. Great and enduringly successful organisations are not stages on which geniuses can strut. They are structures that make the most of the ordinary talents of ordinary people.”

I think John Kay is too kind to bankers.  It was not complexity but greed  Read the rest of this entry »