Comment, analysis and other offerings from Thursday’s FT,
Alan Greenspan: Fear undermines America’s recovery
Although rising moderately this year, US fixed capital investment has fallen far short of the level that history suggests should have occurred given the recent dramatic surge in corporate profitability, says the former Fed chairman. Combined with a collapse of long-term illiquid investments by households, they have frustrated economic recovery. These shortfalls, the result of widespread private-sector anxiety over America’s future, have defused much, if not most, of the impact of the administration’s fiscal stimulus. Moreover, the activism embodied in such programmes has itself stoked the degree of anxiety.
John Gapper: Kerviel is a symptom of a banking malaise
This week’s judgment that Jérôme Kerviel, the rogue trader, should repay the €4.9bn ($6.8bn) he lost to Société Générale is among history’s most ludicrous white-collar crime rulings, which is saying something, notes the FT columnist.
Trading Room: Crash course on flash trading perils needed
As US investors recently discovered, the high-frequency trading phenomenon has a dark side, writes the FT’s Jeremy Grant. On May 6 the Dow Jones index plunged an eye-watering 1,000 points, only to recover 20 minutes later in what pundits in the US dubbed “the flash crash”. Last week, market regulators published a report pointing the finger of blame at a specific algorithm that triggered the market plunge.
News analysis: The rise and rise of correlation
Like fish swimming in shoals, shares in the world’s largest companies have see-sawn in lockstep as investors have bought heavily only to head for the exits later, write the FT’s Anousha Sakoui and FT Alphaville’s Izabella Kaminska. This indiscriminate buying and selling, also called “risk-on, risk-off” trading, has characterised the sharp swings in equity markets during the summer sell-off and later rally that has this week sent Wall Street to near five-month highs.
Economists’ forum: TIGER update – global economic recovery is teetering
The October 2010 TIGER update paints a sobering picture of a global economy that has lost momentum and is teetering between a slowdown and at best a tepid recovery, write Eswar Prasad, a Cornell University professor, and Karim Foda, senior research assistant at Brookings. Advanced economies are stuck in a funk and even the dynamic emerging markets have lost some of their swagger.
Market insight: Tadashi Nakamae – Japan is facing an uphill struggle to weaken yen
Even if the yen was overvalued in 1995 there is little doubt that the yen is currently undervalued, writes the president of Nakamae International Economic Research and a former chief economist of Daiwa Securities. Japan’s currency is now at a similar level to its peak in 1995, when it hit Y79 against the dollar.
David Pilling: How being big helps and hinders China
After a great deal of time spent travelling in China, reading about China and thinking deep thoughts about China, I have come to the conclusion that the most profound thing one can say about it is this: China is exceedingly big. This may seem like an awfully trite observation and, frankly, a terrible waste of the FT’s money, notes the FT’s Pilling. But China’s sheer size helps to explain much about the country, from its impact on global commodity markets to the fact that one of the world’s poorest countries is now routinely mentioned in the same breath as the (still) mighty US.
Analysis: Energy – A sea change needed
BP’s new head has vowed to strengthen a safety culture blamed for causing the Gulf of Mexico oil spill; the group’s survival depends on him getting it right, write FT reporters.