Comment, analysis and other offerings from Wednesday’s FT,
Martin Wolf: Where are we and where do we need to go?
A year ago, the world economy fell into a deep recession. Now, happily, we see financial stabilisation and economic recovery. But we must not declare victory. The world could still make two mistakes: first, we might withdraw stimulus too soon; second, we might lose the opportunity for reform.
Insight: Stephen Roach — Crisis breeds short memories
Hope always seems to spring eternal in liquidity-driven financial markets, notes Roach, chairman of Morgan Stanley Asia and author of just-published The Next Asia. That is very much the case today in the aftermath of the biggest liquidity injection in modern history. Unfortunately, along with that hope comes an acute sense of short-term memory loss — notably, a failure to grasp the toughest lessons of the Great Crisis and Recession of 2008-09.
Luke Johnson: Generation game redefines business
The clash of generations under way at the top of so many organisations is not just the usual strife between ambitious youngsters and older incumbents waging a rearguard action to maintain their grip on power. Rather, this conflict reminds Johnson of the battles between young and old in the 1960s over the Vietnam war, and the gulf of misunderstanding between them.
John Kay: Markets after the age of efficiency
Warren Buffett said most of what you need to know about efficient markets: “Observing correctly that the market was frequently efficient, they [academics, investment professionals and corporate managers] went on to conclude incorrectly that it was always efficient. The difference between the propositions is night and day.” The difference between these propositions is also the difference between a $50bn fortune and the returns of the average investor.
Lex on Karma Conservatism
‘Boy George’? The label no longer quite sticks. Tuesday’s set-piece speech on the economy saw George Osborne set out his claim to the toughest job in British politics. The shadow chancellor could hardly deliver the entirety of the 2010 budget — six months ahead of time — but he managed to provide just enough detail to reassure the bond markets, while not revealing so much that he materially lessens the likelihood of a Conservative victory.
Dragonbeat blog: China’s NPLs — Another financial time bomb?
Is China’s credit binge a financial time-bomb waiting to blow the country’s much-vaunted economic miracle to smithereens?, asks Dragonbeat’s Arthur Kroeber. Beijing has long bet that the problem of bad loans can be solved by postponing the day of reckoning while rapid economic growth reduces the size of the problem. But the unprecedented expansion in bank credit this year, coupled with last month’s decision to roll over for another decade the bonds used to finance the first non-performing loan workout of 1999, make it a good time to submit this policy to a stress-test.
The Short View: John Authers — The reflation story
The market has its story straight. The world is reflating, led by commodity exporters; equities are still in a “sweet spot” of low rates; and the concern for the future is inflation, not deflation. But inflation does not yet show up in economic data, while core inflation is falling in the US and elsewhere. Implicit 10-year inflation expectations in the bond market are lower than earlier this year. How to explain this? Either the “sweet spot” of low rates and strong emerging market demand will persist, the interpretation du jour , or markets are premature to put such weight on the reflation story.
The future of investing: Ask the expert, Q&A
The credit crunch has undermined faith in our investment system and thrown up huge questions for savers, governments and the financial industry. As part of the FT’s latest major series, Leigh Skene of Lombard Street Research answers readers’ questions on the future of investment.