Pink picks

Comment, analysis and other offerings from Wednesday’s FT,

Martin Wolf: The grasshoppers and the ants – elucidating the fable
Fables seek to illuminate reality, says the FT’s Martin Wolf, who wishes to address two questions: who benefits from the trade flows between import-surplus grasshoppers and export-surplus ants? Can the two co-exist fruitfully?

Charles Kupchan: Britain is no longer America’s bridge to Europe
David Cameron’s government, although pulled to the centre by coalition with the Liberal Democrats, seems bent on pursuing a traditional Conservative foreign policy: cosy up to the US while giving Europe short shrift. But according to professor Charles Kupchan, senior fellow at the Council on Foreign Relations, the effort to reclaim the US-UK “special relationship” as the foundation of British statecraft promises to leave Britain in a geopolitical no-man’s land and marginalise its international influence.

Henry Kaufman: Prepare for change on Wall Street
America’s most important set of financial reforms in decades is coming to fruition. To be sure, lawmakers are still working out the details. But the broad outlines of the new US regulatory regime are coming into sharper focus every day. These new laws will affect financial markets and institutions in several important ways. But, as yet, neither investors nor managers seem fully to appreciate the change that is bearing down on them, according to the author of The Road To Financial Reformation

Analysis: Stock markets, or that sinking feeling
While there have been times in equity markets where some stocks have moved wildly, the afternoon that has become known as the “flash crash” was the first time that the entire US equity market was convulsed by such turmoil, write FT reporters Aline van Duyn, Michael Mackenzie and Jeremy Grant. The ongoing autopsy of the US flash crash has implications way beyond Wall Street. Markets across the globe – particularly those that trade privately instead of through exchanges – are under intense scrutiny.

John Kay: The issue of capital gains need not be so taxing
How should capital gains be taxed, asks FT columnist John Kay. Some gains are essentially indistinguishable from income – the predictable rise to maturity of a bond issued at a deep discount – but other types of gain are altogether different in character. Suppose the price of wheat rises because of a crop failure on the other side of the world. It would be unreasonable to add the increase in the value of a farmer’s property to the cash he earns from selling his products. To do so would be to tax him both on the receipt and on the expectation of it.

Mick Davis: Punitive tax puts Australian investment at risk
The proposed Australian mining tax has damaged the country’s reputation as a stable regime for foreign investment, and investments in Australian resources are at risk of being delayed or cancelled, Xstrata chief executive Mick Davis writes in a letter to the FT. The consequences will be borne by mining communities, prospective employees, superannuation funds, customers, service providers and suppliers, impacting on Australia’s prosperity, particularly in resource-rich remote or rural locations.