Comment, analysis and offerings from Wednesday’s FT,
Martin Wolf: Arab freedom is worth a short shock 
What might the Arab uprising mean for the world?, asks the FT columnist. No one knows the answer to this question. But this should not prevent one from guessing at the range of uncertainty. As an economist, I find one aspect of these events peculiarly heartening: they demonstrate that the forecasting ability of experts on politics is at least as limited as that of economists. All such events are inherently unforecastable.
John Kay: Don’t blame luck when your models misfire
Techniques such as value at risk modelling – the principal methodology used by banks and pressed on them by their regulators – may be of help in monitoring the day-to-day volatility of returns. But they are useless for understanding extreme events, which is, unfortunately, the main purpose for which they are employed, the FT columnist writes. Yet the use of risk models of this type is one of many areas of finance in which nothing much has changed.
Komal Sri-Kumar: Inflation risks will weigh on Indian equities
On November 4 2010, a few hours after the US Federal Reserve announced its second wave of quantitative easing, the Mumbai Sensex rose to 20,863, its highest level since January 2008, writes Sri-Kumar, chief global strategist at Trust Company of the West. Now the market has become one of the world’s worst performing in recent months. Oil prices and central bank tightening indicate that the market is unlikely to recover in the next few months, and now is a poor entry point for investors.
Frederic Neumann: Only higher taxes can curb Asian inflation
Asia is growing fast, but risks drowning in inflation, writes Neumann, co-head of Asian Economic Research at HSBC. Monetary policy, in its usual form, no longer works. Raising interest rates simply draws in more capital, leaving financial conditions highly stimulative. The answer, therefore, must be fiscal. India, China and others in the region need to raise taxes and cut spending, reducing demand and price pressures. A pinch from the taxman is just what Asia needs.
The Short View: First of the month advantage
If you had the chance to work for only 12 days a year, would you?, asks the FT’s capital markets editor Richard Milne. In an investment environment characterised by stress and volatility, it sounds like a surreal question. But it is, in essence, what equity investors are being offered at the start of every month.
Lex: Galliano – bigger brands at stake
“I am a brand, therefore I am.” The hubris of celebrity may have persuaded John Galliano that he was immune to any backlash against his alleged anti-Semitic remarks in a Paris café, says Lex. Bernard Arnault, the luxury goods tycoon who paid his salary, has set him straight: there are bigger brands at stake. Mr Arnault owns Christian Dior, the fabled couture house, which said on Tuesday it was firing its bad-boy designer. Mr Arnault had much to protect in doing so. Shares in Dior have returned 45 per cent over the past year, ahead of key rivals Bulgari and Tiffany. Of its €20.3bn sales in 2010, less than 4 per cent were from couture, for which Mr Galliano was responsible. The financial cost of firing the creative director will be bearable for both Mr Arnault and Dior.
MoneySupply: The evolution of the regional Feds
After a five month recruitment process, the San Francisco Fed has appointed a president from within, its research director John Williams, notes the FT’s Robin Harding. The appointment of another highly-respected economist (#329 on the RePEc list) as a regional Fed president is the latest in a trend after Narayana Kocherlakota (#262) in Minneapolis, James Bullard (#738) in St Louis, Charles Evans (#205) in Chicago and Eric Rosengren (#663) in Boston. It reflects the evolution of the regional Feds: as the banking industry consolidates and payments systems centralise they are becoming less banks and more economic research centres.
Expert view: How high can oil go before it derails growth?
The sharp spike in oil prices sparked by turmoil in Libya, and the accompanying sell-off in global equities, has abated. But crude, at well over $100 a barrel, remains volatile. Should investors be fearful of the risks to the global economy? The FT asks three experts – a commodities specialist, an economist and an equities strategist.
FT Westminster: Would Cameron have done the deal in the desert?
David Cameron’s opposition to the release of the Lockerbie bomber is plain. But he has a more nuanced position on Tony Blair’s deal to bring Gaddafi in from the cold, writes the FT’s Alex Barker. Cameron is privately rather relieved he was spared having to take the decision. From his public statements, it seems he backs the principle behind the pact. But in hindsight he thinks Blair gave a bit too much away.