30
GLOBAL FINANCE
``There is, clearly, an element of truth in this proposition. In
the United States, for example, a technologically driven decline is
evident in the average lead times on the purchase of new capital
equipment that has kept capacity utilization at moderate levels and
virtually eliminated most of the goods shortages and bottlenecks
that were prevalent in earlier periods of sustained strong economic
growth.
``But . . . as the first cut at the question ``Is there a new
economy?'' the answer in a more profound sense is no. As in the
past, our advanced economy is primarily driven by how human
psychology molds the value system that drives a competitive
market economy.''
Alan Greenspan
2
Greenspan went on to argue that developed economies are always
changing and evolving, in general towards a more efficient system we
have been upgrading and modernizing constantly since the start of the
Industrial Revolution. He agrees with the New Economists and others
that most of the growth in output has been created by the application
of new ideas, and suggests that our tendency to make things smaller
(transistors, microprocessors) may be linked to the increased costs of
processing more and more physical resources.
Like all scientists, economists tend to talk about probabilities,
not certainties. Greenspan and others think that it is probable that
there is no ``New Economy'' in any lasting sense. An excellent
period of growth does not necessarily mean that fluctuations in confi-
dence, inflation, employment, investment, and so on have permanently
ended.
BEST PRACTICE? CHANGES IN THE FOREX
BUSINESS
The world's biggest financial market is foreign exchange, where an
estimated $1.5trn changes hands every day. The wholesale end of the
market, dominated by banks, has always been cut-throat. Currency
brokers and traders operate on tiny margins to execute customer
orders for foreign currency as little as 0.002% of the value of the
transaction.
