A few weeks before the fall of Lehman Brothers precipitated the most cataclysmic destruction of wealth since the Great Depression, the European Central Bank famously raised its base rate, believing that the economy was overheating and inflation was a problem. It then took the ponderous ECB, with its fixation on price stability, months to grasp that it what it should actually be doing under the prevailing circumstances was to cut interest rates to the bone to prevent the EU economy from going into free fall.
Bringing to you the top finance and business news stories of the week. This week, the Libya crisis, the global supply chain, and Chinese Walls.
I am hugely indebted to Jim Fink’s Investing Daily newsletter for picking up on an absolutely daft confrontation between Warren Buffett’s Berkshire Hathaway and SEC accounting branch chief Gus Rodriguez. The nub of the matter concerns an obscure Financial Accounting Standards Board (FASB) ruling, namely Accounting Standards Codification (ASC) Section 320-10-35-33.
No one can look on as Japanese nuclear engineers struggle to prevent further radioactive leakage from the damaged reactor cores of the Fukushima nuclear plants without recognising that some serious questions have been raised over the future of nuclear power. Yet for some countries nuclear provides either the dominant base load generation capacity or such a significant portion of it that moving away from nuclear generation risks paralysing their electricity output, with huge potential costs to industry.
The chief executive’s statement that accompanies a listed company's annual results is often so laced with corporate spin and disingenuousness that it's as good as useless. The document is increasingly being used to puff (embellish) the past year's performance, to present a distinctly rose-tinted vision of the future, and of course to shy away from telling investors anything about the true risks and challenges the business and its sector face.
Enmeshed as he is in present and pending court cases, the Italian Prime Minister Silvio Berlusconi probably doesn’t have that much time to reflect on whether or not his jolly relationship with Colonel Gaddafi – now admittedly soured beyond salvation - was ever altogether wise. What is certain is that the very substantial bet that Italy placed on Libya is in the process of coming spectacularly unglued at a point in time where the Italian economy really does not need further shocks.
One of the biggest financial scandals of recent weeks involves the alleged "rigging" of Libor rates by a group of the world's largest banks. The story first surfaced on March 15, when Brooke Masters, a journalist at the Financial Times, spotted the following on page 318 of UBS's 2010.
Much of the major pensions-related reforms within this Budget was trailed early, notably the introduction of a flat state pension and the recommendations made by the Hutton report. Still, it is a significant budget in terms of its ramifications for pensions in the UK and there was one notable detail, namely the aim to index the state pension to longevity going forward in some way.
In one of the most high powered mini events it has ever orchestrated, the IMF recently brought together four top economists, including Nobel Laureate Joseph Stiglitz, for a two day “group think” session (my term, not theirs). The format was a conference in Washington, entitled “Macro and Growth Policies in the Wake of the Crisis”.
John Mauldin’s blog "Thoughts from the Frontline" is one of the best financial and economic commentaries around, not least because Mauldin is an avid and skilled collector and presenter of good analysis culled from wherever he can find it, with credit always duly bestowed. His latest book Endgame: The End of the Debt SuperCycle and How It Changes Everything, written with Jonathan Tepper, is an absolute must read.