Jury out on Greenspan's case

THE US FEDERAL Reserve chairman Alan Greenspan has presided over the biggest monetary stimulus ever delivered to a major economy. No central banker had ever matched his boldness in so speedily slashing interest rates to 1% or in keeping them there for so long.

The result of his massive largesse has been to allow companies to repair their balance sheets, banks to avoid the consequences of their foolish lending and consumers to refinance their mortgages, so that they can continue to spend ferociously, and thereby keep the American economy in much better shape than it deserved.

The kind of slump that might so easily have followed the bursting of the dotcom bubble has been avoided, for which we should all be grateful. However, the side effects have been ballooning budget and trade deficits and a collapse in the value of the dollar - all of which seem to be storing up trouble for the future. This is why the jury remains divided on whether Greenspan's medicine offers a temporary or a permanent respite.

At some point, though, there has to be a reckoning - and this is why Greenspan's comments and testimony yesterday and today, which appeared to hint at an upward movement in interest rates, have had such an effect on Wall Street.

He did once say to a senator that if the latter had understood what he meant then he clearly had not been opaque enough, and that is warning enough against drawing too firm a conclusion from his nuances, nods and winks. But it does appear, and this is certainly Wall Street's interpretation, that he is softening people up to expect a rise in rates sooner rather than later.

If so this, is a major decision. The wonder of the US economy, given the fiscal and monetary stimulus thrown at it, is not that there has been no recovery at all, but that what has come through has been so weak. It is this which has left the sceptics so unconvinced it is truly on the mend, or that all the adjustments and cleaning-out of past excesses that need to be made have been made.

The issue now is whether it is in a position to stand a rise in interest rates or whether this will put excessive strain on overstretched spenders and stop it in its tracks.

Goldman sucks

GOLDMAN Sachs employees may not care for the comparison but, rather like Millwall football supporters they seem almost to cultivate the 'nobody likes us, we don't care' view of life. It's not just the money that gets up everyone's nose - it's the arrogance that goes with it.

Their employees' typical reaction that all the criticism and resentment is born of envy misses an important point. It is increasingly laced with disgust.

If ever a firm needed to look to its public image, it is this one. For weeks newspaper readers have been following with a mixture of incredulity and distaste the prosecution of a Goldman Sachs secretary who has now been found guilty of taking £4.4m from her bosses' bank accounts, and who got away with it for ages because they did not notice the money had gone missing.

Imagine what impact this has on a nation where average earnings are around £24,000 a year, where civil servants have recently been going on strike because they say they cannot support their families on the £10,000 a year they take home, and where the Citizens Advice Bureaux are handling a million new cases a year of people engulfed by their debts.

It should surprise no one if more of the public are likely to agree with the secretary's sentiment that 'they made it so easy they deserved it' than would censure her for the crime.

They may not agree with the stealing but there is universal delight that the Goldman partners have been humiliated by having their behaviour exposed in court.

Goldman might try to take refuge in the fact that all investment banks are in the same boat, but it is not true. Morgan Stanley, Lehman Brothers and Merrill Lynch have their critics and their enemies but they also have a greater public discretion in the way they behave.

Nor is it true that it is the disparity of wealth which is the issue because there have always been huge differences in this country. Indeed, Labour Peer Lord Diamond's inquiry 30 years ago found that fewer than 5% of the population owned 30% of the nation's wealth.

But it is also in the British tradition that the privilege of being seriously wealthy also brought with it a wider sense of responsibility and discretion. The case against Goldman is that too often this is replaced by a new vulgarity and selfishness.

Finance for kids

RATHER than waste time and energy on debt summits and further inquiries into the danger that excessive borrowing might pose, shadow Chancellor Oliver Letwin and his Tory colleagues could usefully put their weight behind PFEG, a charity for the promotion of financial education currently headed by Ron Sandler which is pioneering ways in which financial literacy can be taught in schools.

PFEG has already completed, at the behest of the Department of Education, a three-year pilot project in 40 schools where the elements of personal finance were taught to children, and their attention engaged in novel but relevant ways through projects such as finding the cheapest mobile phone tariff. Through that exercise they learned how to compare competing offers and how to shop around.

Elsewhere, in a follow-up exercise currently under way in a few more schools, efforts are being made to include personal finance as part of the GCSE maths course - perhaps leading one day to exam questions of how to work out the true rate of interest on credit cards.

In all the work so far, the reaction of children has been positive. The concern of teachers is that they were perhaps as financially illiterate as their students and wondered if they had the skills to teach the course - though they seemed to manage all right in the sex and drugs aspects of general studies - and the biggest worry of all was how time might be found in an already-crowded curriculum.

We should not underestimate the challenge of getting finance on to the school curriculum. But neither should we pretend that there is any better long-term solution to personal overborrowing than long-term investment in giving children the opportunity to learn at least the basics of financial literacy.

Corus line

NOT ALL Russian businessmen are as roly-poly friendly as Chelsea's Roman Abramovich - or anxious at any rate to give that impression. Indeed, it is probably more realistic to say that the characteristics of single-mindedness, competitiveness and aggression which are such a help in scaling the heights of Western business have been needed with a significant added slice of ruthlessness to get to the top in the Russian version of capitalism.

One can understand, therefore, why the board of Corus, the Anglo-Dutch steelmaker, has been rather put out by the sudden arrival of the hitherto little-known Russian oligarch Alisher Usmanov as a 14% shareholder, and even more discomfited by the proposal that his representative might join them round the boardroom table.

They need to be careful about being too dismissive of him, however, for he has shown a willingness to commit far more of his own money to the Corus cause than any of them.

That said, the whole approach so far has been overly robust and the natural instinct of the board to resist being bounced is perhaps the right one. But if Corus is going to see off Usmanov's advances it needs the support of institutional shareholders ready, willing and able to vote at its shareholder meeting tomorrow.

Given the archaic state of share voting mechanisms in this country, that support cannot be taken for granted. Institutions may be ready and willing. But it is always debatable whether they are able - whether they can get their systems in place in time actually to cast their votes.

It would, however, be a pretty scathing indictment of their stewardship were Usmanov to win the day through the inability of those opposed to him properly to organise the votes against.

Taiwan stir

TONY Blair's statement yesterday on the decision to hold a referendum on the European constitution caused a stir at the meeting of the Taiwan British Business Council.

Europeans see Taiwan as a gateway to doing business in mainland China. The Taiwanese see Britain as a path into the EU as well as being one of Britain's major trading partners. To them, the issue of the constitution was about Britain's commitment to Europe.

Most seemed to think the combination of a favourable investment climate and the English language would outweigh the disadvantages of an ambivalent attitude towards the EU. But their concern is a reminder to our politicians that there is an overseas as well as a domestic audience for their pronouncements.

Manoeuvrings on Europe to secure short-term political advantage at home risk doing long-term damage to Britain's reputation abroad.