Comment, analysis and other offerings from Wednesday’s FT,
Martin Wolf: Private behaviour will shape our path to fiscal stability
If we are to understand where we are, we must understand where we have been, writes FT columnist Martin Wolf. This is particularly true if we are to escape from the huge fiscal deficits being run by many governments. These deficits are not the result of government stupidity; they are mainly a consequence of - and response to - private behaviour. We must not ignore this connection.
John Kay: Chaotic evolution defines the market economy
Markets are not a well-oiled machine: they are a constantly changing, adaptive biological system, writes the FT’s John Kay. Pluralism is their motive force, their essence chaotic, their development inherently uncertain. If we could predict the evolution of markets, we would not need markets in the first place. Next week, I will review the other part of the market story — barriers to rent-seeking.
Robert Pozen: Give credit to create jobs - but only where it’s due
The US unemployment rate is now close to 10 per cent and likely to stay that high all through 2010, writes Pozen, chairman of MFS Investment Management and senior lecturer at Harvard Busines School. Even if the economy begins to recover, job growth tends to be a lagging indicator. This is why the Obama administration is considering a tax credit for employers adding new jobs next year.
Analysis: China’s burning ambition
China began discreetly buying Kazakh oilfields 10 years ago and now has more energy projects on the go in the central Asian nation than any other country. While the west’s biggest oil groups agonise over the risks of undertaking expensive infrastructure developments in obscure locations, Beijing has boldly built a 3,000km pipeline to lock Kazakhstan’s oilfields into its orbit. It is moves such as these that have prompted fears of a clash between the west and China over oil.
Money Supply: The Fed and its ‘extended period’ language
Will they / won’t they? All eyes will be on the Fed statement issued around 2pm EST Wednesday to see if there is any change to the “extended period” language the US central bank uses to guide market expectations of the future path of interest rates.
Lex on Berkshire Hathaway
That is some train set. Warren Buffett is set to acquire a 32,000 route mile rail network by buying the portion of Burlington Northern Santa Fe that his company Berkshire Hathaway does not already own. The $44bn cash-and-shares deal, including $10bn of debt and his 22.6 per cent existing stake, is one almighty bet on the US economic recovery as well as the forces — including rising fuel prices and environmental angst — pushing long-haul freight on to the rails.
Insight: Ed Morse - WTI is losing its glitter
Less surprising than the change in the benchmark for Saudi oil sales into the US, whereby Saudi Arabia has dropped the West Texas Intermediate contract, was that it took so long to happen. Neither Riyadh nor its US customers have been happy with using WTI crude as their yardstick, even though it is the most liquid financial instrument available for oil, writes Morse, managing director and head of research at LCM Commodities in New York and deputy assistant secretary of State for International Energy between 1979 and 1981.
View of the Day: Simona Paravani - Get the Latin feeling
Investors looking at emerging markets should favour Latin America over Asia in the near-term - in spite of Brazil’s imposition of a tax on foreign stock purchases, says Simona Paravani, global investment strategist at HSBC Global Asset Management.
The Short View: Uncertainty reigns
Most investors are less certain, writes the FT’s Aline van Duyn. Indeed, for many, the questions are multiplying. Is the global economic stimulus-fuelled growth sustainable? Will central banks be able to shift monetary policy without causing a market panic? The clearest indication of the mounting concerns is the steady rise in the Chicago Board Options Exchange’s Vix index. It measures the cost of insuring against volatility in the S&P 500 index. After hitting a low of about 20, it is back above 30. This signals distress.
