On the web: US introspection, development aid, and challenging economic orthodoxy…

– This week’s Economist sees Lexington bemoan those advancing the discourse of American exceptionalism, suggesting that “[t]he last thing the country needs is to be distracted from its practical problems by the quest for an elusive greatness”. Elsewhere, The Spectator’s Coffee House blog remembers Jimmy Carter’s fabled 1979 speech in which he spoke of a US “crisis of confidence”.

Delivering the annual lecture at The Ditchley Foundation last week, Strobe Talbott suggested that the “promise” of the Obama Presidency – both in the domestic and the international arenas – is now “at risk”. “[W]hatever fate is in store for the current president of the United States”, Talbott argued,

“one thing is for sure.  His success in tackling the major issues of our time will depend on his establishing a degree of common purpose with his partners in national governance at the other end of Pennsylvania Avenue and with his partners in global governance around the world.”

– Elsewhere, over at The Cable, Josh Rogin reports on the slow progress of reviews into US development policy – the Presidential Study Directive on Global Development and the Quadrennial Diplomacy and Development Review.  The Economist, meanwhile, highlights Brazil’s growing identity as a significant aid donor.

– Finally, the head of the UK Financial Services Authority, Adair Turner, cautions against the default acceptance of prevailing economic ideology, suggesting that policymakers would do well to draw on a diversity of economic opinion. Joseph Stiglitz, meanwhile, explores the Keynesian prescription for the global economy.

Time to Stop Betting the House

Today, I launch a new paper on risk and resilience in the UK housing market. The report calls for a fundamental shift in the way in which the UK mortgage market is regulated and the how it operates.

The paper is published by the Long Finance Foundation, which is a counter to the short-termism that has brought many first world economies to the brink of penury.

The initiative began with a conundrum – “when would we know our financial system is working?” – and aims to “improve society’s understanding and use of finance over the long-term”. Intent on igniting a global debate on longer-term finance and related issues.

The paper – Time to Stop Betting the House – is being launched at a Long Finance conference on Enduring Value with Brian Eno, Stewart Brand, Faisal Islam, and Avinash Persaud. It argues that:

  • The FSA has failed to understand the scale of challenges facing the British mortgage market, which represents one of the greatest sources of financial risk facing the public.
  • Its regulatory reforms, far from offering the ‘one-off shift’ that Adair Turner has promised, are timorous and unfit for purpose.
  • They leave over-leveraged borrowers highly vulnerable to future economic volatility – with the potential for a second housing crisis to come sooner rather than later.

The paper then sets out two very different visions for a more resilient mortgage market; Edited Choice reduces complexity in the market whilst increasing choice, Melt the Glue creates resilience from the ground up, decreasing the government’s direct involvement during a transitional period where diversity is also reintroduced into the market.

The aim of the report is to catalyse debate on how the financial services industry should be structured in the future – and challenge the thinking of the next government.

You can download the full report here.