All about Authers

John Authers is a funny man. Two weeks ago, he compared Timothy Geithner to Baldrick in the Blackadder series, and his financial recovery plan to one of Baldrick’s “cunning plans”.

Mr. Authers is a rare breed in financial journalism. He often chuckles at the hurly-burly of the credit crunch, rather than tangle himself in its web of tension. He uses five words where others use fifteen. And he writes in English, not finance-speak.

{{ quote I think we are going to need a moment when the markets unequivocally hit bottom }}

But all this would not have mattered had Mr. Authers not possessed his insight. His analysis is as sharp as it is crisp, and strips bare any puzzling day of trading to its essentials. It is a skill that has been honed over two decades at the Financial Times, as a reporter on the American markets, and then as US markets editor and chief of the paper’s bureau in Mexico City.

He is now the FT’s investment editor, having been with the firm since 1990.

Together with Mike James of Assumptions, I interviewed him just before his lecture two weeks ago at the Warwick Economics Summit. A little out of breath, he nonetheless remained his quirky self.

_Q: The markets were not impressed by the US Treasury’s Financial Recovery Plan. What do they expect of policymakers?_

Authers: I think they expected much more detail, partly because they had been led to expect more detail – the details of exactly how they were going to clean up this banking crisis. [Investors] need some degree of clarity, and they had been led to expect much more clarity. Instead, what they got was… “a plan to make a plan”, like Baldrick’s cunning plan. Several people read the speech and looked for attachments with the details and discovered they weren’t there. So there was a very serious problem of poor expectations management by the Obama team. Beyond that, there is a broader sense that this was rare and a narrow political opening when there was political cover to some drastic and unpleasant things like nationalise banks. My sense is that… there is a growing body of opinion that that is what it will mean to draw a line under the crisis.

_Q: So nationalisation is necessary, you mean?_

Authers: Nationalisation may well be necessary to calm the markets down. At the level of should it be necessary, or whether I am confident it will be necessary, I am not going to tell you that. I think to create the conditions of calm from which we can then actually start going forward… The mere fact is that the volatility of the markets inhibits that prospect. I think we are going to need a moment when the markets unequivocally hit bottom, and I suspect that it’s going to involve the nationalisation of banks.

_Q: The Bank of England recently said it was to embark on quantitative easing. But what effect might and will this have on lending?_

Authers: Well, it’s all fairly straightforward economics in terms of how it works… If the Bank is buying up long-term bonds, if they continue to push down the yields available anywhere in the economy, they are effectively daring people to do something more interesting with their money… you begin to trigger interest in doing other things. The thing that worries me, is not [whether] the banks are solvent but are they more than solvent, do they have the ability to take any risk?… There’s a reasonable hope that quantitative easing will do something to deal with that problem.

[But] there’s a reasonable fear that quantitative easing will form part of a very big increase in inflation. I think the fears of a return to inflation are bigger in this country than anywhere else, thanks to the devaluation of the pound. [And] inflation expectations were rather more strongly embedded here than anywhere else, going into the crisis.

These are things to be worried about but there is a reasonable theoretical basis for thinking this is going to get people lending again.