The Economist on Financial Innovation.
FINANCIAL INNOVATION HAS a dreadful image these days. Paul Volcker, a former chairman of America’s Federal Reserve, who emerged from the 2007-08 financial crisis with his reputation intact, once said that none of the financial inventions of the past 25 years matches up to the ATM. Paul Krugman, a Nobel prize-winning economist-cum-polemicist, has written that it is hard to think of any big recent financial breakthroughs that have aided society. Joseph Stiglitz, another Nobel laureate, argued in a 2010 online debate hosted by The Economist that most innovation in the run-up to the crisis “was not directed at enhancing the ability of the financial sector to perform its social functions”.
Most of these critics have market-based innovation in their sights. There is an enormous amount of innovation going on in other areas, such as retail payments, that has the potential to change the way people carry and spend money. But the debate—and hence this special report—focuses mainly on wholesale products and techniques, both because they are less obviously useful than retail innovations and because they were more heavily implicated in the financial crisis: think of those evil credit-default swaps (CDSs), collateralised-debt obligations (CDOs) and so on. Full article here.
Guest post by Azizonomics.
George Osborne claims that deficit reduction will produce a recovery.
From the Guardian:
The main test of a budget at this time is what it does for the recovery and growth of the British economy. George Osborne has repeatedly made clear that he wants to be judged by this test. He believes that deficit reduction is a growth policy which will be vindicated by its results. Growth has been postponed but, he insists, it is about to happen. So is he right?
It doesn’t look like it: Charts below.
The Trader has covered the HFT subject rather extensively over the past year. The market structure is broken, that shouldn’t be a surprise to investors. But, the latest development, where the exchange blows itself up is not the right forward in order to get the “normal” market back into play. On the latest embarrassing Bats story. From Bloomberg.
The decision by Bats Global Markets Inc (BATS)., the third-largest U.S. equity exchange operator, to cancel its initial public offering emboldened brokerage and fund executives who say the way stocks trade in America doesn’t work.
Bats, founded by a high-frequency trader in 2005 and nurtured by the world’s top securities firms, withdrew the IPO yesterday after errors on its own computers kept the stock from trading and forced a halt in Apple Inc. (AAPL) Pulling the IPO capped a day of embarrassments for the Lenexa, Kansas-based company, which rose to prominence with the electronic trading industry.