Financial Times Watch (17 January 2023)

 Regulator/Central Bank Watch

Today's watch begins with the regulators, and is a follow up from yesterdays complaint from insurance companies that new capital requirement rules coming from the UK gov would risk future investment. Which is code for: “If you don’t let us make loads of money, we won't invest it into the economy”.

Well today, to give us a different view it is the turn of the Bank of England (BoE), surprisingly, testifying before a commons select committee of MPs. BoE governor Andrew bailey and Sam Woods, Prudential Regulation Authority, both note that the new rules around insurance companies “...increase the risk that a pension provider would run out of capital…”. They further noted that this was a choice the government made to. While also noting that there was many items in the regulations that still needed to be reviewed that could still create financial instability.

All in all, it is good to see the BoE standing up to protect workers future pensions from an industry that is more concerned with its bottom line, but there are some issues. They are that this Tory government will not shut down loopholes for the insurance companies and the fact that the regulators themselves are still pro-capital. Indeed since the 1970s Central Banks (CBs) have become more independent in performing their main task, sustaining economic stability for capital. A power neoliberal governments gave the CBs to allow the latter to act without interference from democratic institutions. Bailey’s comments that the BoE will not regulate companies by the “back door” or accept call in powers from the UK government to challenge their decision is proof of that.

Recession Watch

And today we just have time for one more Watch, this time from the Wold Economic Forum (WEF) in Davos. On page 8, the FT reports that many executives there are worried about the next 10 years. Many think that if business don’t re-invent themselves; they will fail, despite the recent up-tick in the global economy.

This story is interesting because it reveals a trend I have seen in recent months since CBs stopped the flow of cheap capital by increasing interest rates. This move in particular is important because it has stopped capital from making easy money just by borrowing and throwing it at anything that had a hint of profit to it. Yet as we have seen in recent months, the withdrawal of cheap money has revealed the weak position of many companies. On top of that we are also witnessing the de-coupling of the US economy from China, Russia and possibly even the EU (see the US War Watch for more).

Still, don’t feel too bad for capital; there will plenty of opportunities for them to keep making money. One such area is the convergence of financial capital with the tech sector which will give capital the computing power to exploit the new emerging economy. A new world where, as BlackRock predicts in it 2023 outlook, capital will need to be quicker as it looks for the harder to find opportunities around the world.

Alright that's all for me for today, see you soon!