ICON IN THE MAKING

04 NEWS MONDAY 14 SEPTEMBER 2015
CITYAM.COM
STICK OR TWIST JANET? Economists are split over whether
the US Federal Reserve will raise interest rates this week or not
THE CITY VIEW
Corbyn puts Labour’s
moral authority at risk
IT’S SATURDAY afternoon in a central London pub, and a
newly victorious Jeremy Corbyn can be found leading supporters
in a rousing rendition of The Red Flag. At the same
time, just under 5,000 miles away, Venezuela’s opposition
leader Leopoldo Lopez is beginning a 13 year prison sentence
after a court of questionable legitimacy found him guilty of
“subliminally inciting violence.” The EU and the UN have raised
serious concerns over the lack of judicial independence in the
trial, and Human Rights Watch described the outcome as “a
complete travesty of justice.” It’s another depressing episode in
the recent history of a country whose economy and society have
all but collapsed. But back to Mr Corbyn. The Leader of Her
Majesty’s Most Loyal Opposition has been a long-standing supporter
of the Venezuelan regime, first as a staunch defender of
Hugo Chavez and more recently
of his hand-picked successor,
Nicolas Maduro. In
what is surely the hallmark
of stable democracies everywhere,
the President hosts
his own weekly radio and television
show through which
he can update the people “on
the achievements of the Bolivarian revolution.” Mr Corbyn
popped up as a guest in April 2014, throughout which the President
referred to the MP as a “dear comrade.” As Venezuela’s opposition
leader languishes in jail and its citizens queue for hours
to get their hands on everything from flour to toilet paper in
state-run shops, it is worth remembering the high regard in
which elements of the British left hold this socialist paradise. In
2012, Mr Corbyn travelled to Venezuela to witness the re-election
of Hugo Chavez. With him were old friend Diane Abbott and the
media’s number one Corbyn cheerleader, Owen Jones. The latter
insisted on referring to Chavez as evidence of a “progressive alternative
to neoliberalism.” It is now necessary to question the
level of support given to a regime whose behaviour is
condemned by charities, the EU and the UN. After Chavez’s
death in 2013, Mr Corbyn lamented how the revolutionary had
been “unfairly criticised.” He signed off the piece with “RIP
Hugo.” Unless Corbyn & Co change their tune it won’t just be
Labour’s credibility that dies, but their moral authority, too.
Follow us on Twitter @cityam
Labour’s new
leader claimed
Chavez had been
unfairly criticised
THE US Federal Reserve, led by Janet Yellen, will decide on Thursday whether or not to lift interest rates in America. A September
hike had been widely anticipated earlier in the year, but yesterday’s debt warning adds to concerns over stock market volatility
and growth which have seen many analysts push back their forecasts.
Alarm bells ringing over
global debt timebomb
CHRIS PAPADOPOULLOS
GLOBAL debt levels have hit dangerous
heights, a top financial group has
warned, leaving many countries vulnerable
to a US rate hike which could
come as early as this week.
Recent swings in global stock markets
are reflective of deep underlying
problems in the global economy, the
Bank of International Settlements
(BIS) said yesterday.
“We are not seeing isolated tremors,
but the release of pressure that has
gradually accumulated over the years
along major fault lines,” said Claudio
Borio, the BIS chief economist.
Most at risk this Thursday, when
Jane Yellen chairs a meeting of US
rate-setters, will be emerging markets,
where many businesses have borrowed
money in dollars.
Total dollar-debt outside the US has
climbed to $9.6 trillion (£6.2 trillion),
according to BIS statistics.
A rise in interest rates by the Federal
Reserve could create a perfect storm
for emerging market economies,
many of which are suffering due to a
fall in global commodity prices, hitting
their major exports.
They would face a double-whammy
of falling income and higher debt
costs as the US plans to raise rates.
“China’s economic slowdown and
the US dollar’s appreciation have confronted
[emerging markets] with a
double challenge: growth prospects
have weakened, especially for commodity
exporters, and the burden of
dollar-denominated debt has risen in
local currency terms,” the BIS said in
its quarterly report.
“Dollar borrowing... [spills] over into
the rest of the economy in the form of
easier credit conditions,” said BIS economic
adviser Hyun Song Shin.
“When the dollar borrowing is reversed,
these easier domestic financial
conditions will be reversed.”
Some downplayed the BIS alarmism.
“We don’t expect another taper
tantrum, but more of a slow burn for
emerging markets,” Shweta Singh of
Lombard Street Research told City A.M.
The taper tantrum occured in 2013
when the US scaled down a stimulus
programme, leading to widespread
sell-offs across emerging markets.
When the taper tantrum occurred it
took markets largely by surprise. But
a September rate hike has been expected
all year, with chances of a liftoff
this month only cut in recent
weeks.
Singh said Brazil was the most exposed
economy. India and Mexico
were best placed but neither is expected
to perform outstandingly.
The BIS attributes the current economic
predicament to the actions of
rate setters who kept rates low.
FINANCIAL TIMES THE TIMES THE DAILY TELEGRAPH THE WALL STREET JOURNAL
BERLIN TARGETS EU-WIDE
TRANSACTIONS TAX
German Finance Minister Wolfgang
Schauble will push for a planned
European tax on stock and bond
trading to apply in all EU countries in
spite of firm UK opposition to the
scheme and warnings from banks it
would hurt their business. While only 11
nations – including Germany and
France – are planning to participate in
the financial transactions tax, Schauble
said on Saturday that this should be
seen only as a first stage.
DOW JONES STRIKES CHORD
WITH SYMPHONY
Symphony, the messaging tool backed
by some of Wall Street’s biggest banks,
WHAT THE
OTHER
PAPERS SAY
THIS
MORNING
has struck a deal with Dow Jones to
offer news content in its service, a move
that raises the stakes in its battle with
Bloomberg, the market leader. The deal
is likely to be unveiled this week.
SCANDALS COST BANKERS
£900M IN BONUS PAYMENTS
Bankers caught up in scandals that
have engulfed Britain’s biggest lenders
have handed back almost £900m of
unpaid bonuses over the past four
years, in a sign that the City’s tough new
remuneration regime is working.
TOP INVESTORS POINT
FINGER AT PAY OFFENDERS
Some of Britain’s biggest companies,
including AstraZeneca and Carnival,
have been named and shamed by
institutional investors for being serial
offenders in boardroom pay. The firms
were among 12 in the FTSE 350 that
sparked shareholder revolts two years
in succession, according to the NAPF.
DEFENCE COMPANIES FACE
SCRUTINY OVER PROFITS
A new watchdog is poised to crack
down on defence procurement and
stop the practice of “padding”
government supply contracts. The
Single Source Regulations Office set up
last year, is launching a fundamental
review of rules on how much profit
companies can make
CHALLENGER BANKS URGE
FOR TOUGHER PROBE
Challenger banks have urged the
competition watchdog to have a “major
rethink” about high street giants Lloyds
and RBS as part of their probe into the
current account and small business
banking markets.
SHIRE WEIGHING OPTIONS
TO SWEETEN BAXALTA BID
Shire is weighing options for sweetening
its multi-billion-dollar, all-stock offer for
US biotechnology firm Baxalta by
putting cash into shareholders’ hands
sooner, said people familiar with the
matter.
FACEBOOK LOOKS TO BRING
VIRTUAL REALITY TO PHONES
Facebook is working on a stand-alone
video app that would support 360-
degree or “spherical” videos, people
familiar with the matter said. The
format, typically compiled from
multiple cameras, allows users to
change their viewing perspective by
tilting their phones.