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18 мая, 18:42

Bubble bath: The end of Canada’s housing boom?

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Print section UK Only Article:  standard article Fly Title:  Bubble bath Location:  OTTAWA Main image:  20170520_amp501.jpg STEPHEN POLOZ, the governor of the Bank of Canada, has been warning Canadians about piling up debt to buy overpriced houses since he took office four years ago. At first he used bankerly language, pointing to the risk of a “disorderly unwinding of household-sector imbalances”. Lately, with household debt at record levels and house prices in Toronto and Vancouver continuing to rise, he has started to speak clearly. “It’s time to remind folks that prices of houses can go down as well as up,” he said on April 12th. Various levels of government have been trying to restrain house prices (which Mr Poloz has encouraged to rise by keeping interest rates low). The federal government has tightened conditions for the mortgage-insurance policies it sells to lenders, which cover more than half of mortgages by value. Last year the government of British Columbia, Vancouver’s province, slapped a tax of 15% on foreign buyers. Ontario, whose capital is ...

18 мая, 17:46

Ministers as managers: Nationalisation’s high short-term price and higher long-term cost

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Print section Print Rubric:  A high short-term price and higher long-term cost Print Headline:  Ministers as managers Print Fly Title:  Nationalising industries UK Only Article:  UK article only Issue:  Why Israel needs a Palestinian state Fly Title:  Ministers as managers Main image:  Privatised Pat and his black and white fat cat Privatised Pat and his black and white fat cat LABOUR’S manifesto is as long as it is ambitious. Over 123 pages of sometimes dense prose, the party promises to “upgrade” the economy and “transform our energy systems”. This would involve the nationalisation of the water system, the energy-supply network, Royal Mail and the railways. Britain’s infrastructure is indeed due for an upgrade. But Labour’s plans would be costly—both in the short and long term. The first challenge would be to move privately held firms back into public ownership. ...

16 мая, 17:54

Labour’s manifesto (re)launch: Nationalisation’s high short-term price and higher long-term cost

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Main image:  IN ITS manifesto published this morning the Labour Party is proposing sweeping changes to Britain’s infrastructure. Backed by a £250bn ($320bn) “national transformation fund”, the manifesto promises to “transform our energy systems [and upgrade] our economy”. This involves the nationalisation of the water system, the energy-supply network, Royal Mail and the railways. Britain’s infrastructure is indeed due an upgrade. But Labour’s plans would be extremely costly—both in the short and long term.The first challenge would be to move privately held firms back into public ownership. The government might need to fork out around £65bn for the water industry, £60bn for National Grid (which runs electricity- and gas-transmission networks) and £6bn or so for Royal Mail. In reality, were Labour to win the election on June 8th the share price of those firms would probably fall as investors took fright. That would make everything cheaper. Nonetheless it is quite possible that half of the £250bn fund would be spent before Labour had been able to meet its other pledges, such as building a “Crossrail” train line for the north of England. Nationalising the railways, by contrast, might not be especially costly. Network Rail, which manages the track, is already in public hands. The train companies have ...

11 мая, 12:18

The Trump trilemma: The contradiction at the heart of Trumponomics

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Print section Print Rubric:  Donald Trump promises expensive tax cuts, an investment boom and a smaller trade deficit. He can’t have all three Print Headline:  You can’t always get what you want Print Fly Title:  The Trump trilemma UK Only Article:  standard article Issue:  The policy designed to make America great again Fly Title:  The Trump trilemma Location:  WASHINGTON, DC Main image:  20170513_fbp501.jpg THE currents of trade, President Donald Trump accepts, will ebb and flow: “Sometimes they can be up and sometimes we can be up,” he said in an interview with The Economist on May 4th. A long-term trade deficit, though—such as that between America and Mexico, which ran to $56bn in 2016—is bad. Bad because it shows that a poor trade deal has been made (see article); bad because money is being ...

08 мая, 19:42

If Macron fails, Germany fails: Angela Merkel should seize this chance to remake Europe

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Main image:  GERMAN celebrations of Emmanuel Macron’s victory had barely begun last night when the first arguments about it broke out. The French president-elect’s longstanding calls for a “new deal” between his country and Germany were the impetus. In return for French structural reforms and fiscal restraint Mr Macron wants Berlin to support the closer integration of the euro zone, including joint investment projects, Eurobonds (common debt) and a finance minister, budget and parliament for the 19-state currency area. All of which drives a trench through the Berlin political landscape.On the one side are most in the centre-right CDU/CSU, the liberal FDP and especially in the finance ministry under Wolfgang Schäuble, the CDU finance minister. This camp opposes all of Mr Macron’s most ambitious proposals. It is backed by the majority of public opinion and the Bild Zeitung, Germany’s most-read newspaper. And it tends to the belief that the country already pays disproportionately into the European project, that its current success was built on tough reforms in the last decade and that struggling Latin economies like France need to go through the same painful but necessary process. This outlook has deep cultural roots in Germany’s aversion to loose money; the word for “debt” in German is the same as the word ...

04 мая, 17:55

When the music stopped: How the 2007-08 crisis unfolded

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Print section Print Headline:  When the music stopped Print Fly Title:  A brief history of the crisis UK Only Article:  standard article Issue:  A decade after the financial crisis, how are the world’s banks doing? Fly Title:  When the music stopped Main image:  20170506_SRD002_0.jpg EXACTLY TEN YEARS ago, on May 6th 2007, ABN AMRO rejected a $24.5bn bid by three European rivals for LaSalle, a Chicago bank which the Dutch lender had owned since 1979. The previous month Britain’s Royal Bank of Scotland (RBS), Spain’s Santander and Belgium’s Fortis had offered €72.2bn (then $98bn), almost all in cash, for the whole of ABN AMRO. By October that year RBS and its partners had won their prize, minus LaSalle, in what is still banking’s biggest takeover. When ABN AMRO was carved up, RBS briefly enjoyed the glory of being the world’s largest bank by assets. A giddy party was in full swing. “As long as the music is playing,” Chuck Prince, ...

04 мая, 17:55

Subprime, anyone?: Worries mount about car finance in America and Britain

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Print section Print Rubric:  Worries mount that it is too easy to borrow to buy a car Print Headline:  Subprime, anyone? Print Fly Title:  Car finance in America and Britain UK Only Article:  standard article Issue:  The data economy demands a new approach to antitrust Fly Title:  Subprime, anyone? Location:  LONDON AND NEW YORK THOUSANDS of second-hand cars, ranging from dented clunkers to Bentleys, glisten under the evening floodlights at Major World, a car dealership in Queens, a borough of New York. “Business has been good,” says a crisply-dressed salesman, scurrying between prospective customers. Almost everyone who wants to buy a car at Major World can get approved for a loan, he explains, regardless of their credit score, or lack of one: when banks turn buyers down, the dealership offers them its own in-house financing. In both America and Britain new-car sales ...

04 мая, 17:55

Buttonwood: Investors are both bullish and skittish about share prices

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Print section Print Rubric:  Investors are simultaneously bullish and skittish about valuations Print Headline:  Cape Fear Print Fly Title:  Buttonwood UK Only Article:  standard article Issue:  The data economy demands a new approach to antitrust Fly Title:  Buttonwood TEN years ago this month investors were pretty confident. True, there were signs that problems in the American housing market would mean trouble for mortgage lenders. But most people agreed with Ben Bernanke, the Federal Reserve chairman, that “the impact on the broader economy…seems likely to be contained.” The IMF had just reported that “overall risks to the outlook seem less threatening than six months ago.” That was reflected in market valuations. In May 2007 the cyclically-adjusted price-earnings ratio (CAPE), a measure that averages profits over ten years, was 27.6 for American equities (see chart). That ratio turned out to be the peak for the cycle. As the ...

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04 мая, 17:55

Doing good and doing well: A growing share of aid is spent by private firms, not charities

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Print section Print Rubric:  A growing share of aid is spent not by charities, but by private firms Print Headline:  Doing good, doing well Print Fly Title:  Aid and the private sector UK Only Article:  standard article Issue:  The data economy demands a new approach to antitrust Fly Title:  Doing good and doing well Main image:  20170506_IRP001_0.jpg “THE gold rush is on!” That is how a cable from the American ambassador to Haiti described the descent of foreign firms upon Port-au-Prince in early 2010. An earthquake had flattened the city and killed hundreds of thousands. But a deluge of aid presented an opportunity. The message, released by WikiLeaks, noted that AshBritt, a Florida-based disaster-recovery firm, was trying to sell a scheme to restore government buildings, and that other firms were also pitching proposals in a “veritable free-for-all”. During the ...

03 мая, 13:40

Speeding up: Euro-area GDP growth outpaces America’s

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Print section Print Rubric:  GDP in the euro zone rose at a faster rate than America’s in the first quarter Print Headline:  Speeding up Print Fly Title:  The euro-area economy UK Only Article:  standard article Issue:  The data economy demands a new approach to antitrust Fly Title:  Speeding up Main image:  20170506_FNP501.jpg THE appeal of GDP is that it offers, or seems to, a summary statistic of how well an economy is doing. On that basis, the euro-area economy is in fine fettle; indeed, it is improving at a faster rate than America’s. Figures released on May 3rd show that GDP in the currency zone rose by 0.5% in the first quarter of 2017, an annualised rate of around 2%. That is quite a bit faster than the annualised 0.7% rate reported for America’s GDP. These figures probably overstate the gap between the two economies. In recent years, first-quarter ...

03 мая, 10:43

The Economist explains: Why the war on poverty is about to get harder

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Main image:  IN THE past few decades something amazing has happened. The share and the number of extremely poor people in the world (on the current definition, people who consume less than $1.90 a day at purchasing-power parity) has plunged. This is hugely welcome. People who live on less than $1.90 a day are very poor indeed—poor, in fact, even by the standards of the world’s poorest countries. So it is regrettable that the steep decline in poverty is unlikely to continue. Extreme poverty will probably not fall as quickly in the next few years as it has done for the past few decades. Why?The World Bank, which tracks poverty, estimates that 1.9bn people were extremely poor in 1981. In that year, the poor accounted for 42% of the world’s population. In 2013, by contrast, only 767m people were poor. Because the world’s population has grown so much in the interim, the share of poor people in the population has fallen even faster, to just below 11%. The single biggest reason for this delightful trend is China. In 1981, almost unbelievably, 88% of Chinese (and 96% of rural Chinese) seem to have lived below the poverty line. In 2013 only 2% of Chinese were extremely poor. That cannot continue. China will soon eradicate extreme poverty, if it has not done so already. So will countries like Indonesia and ...

27 апреля, 17:46

The battle of three centuries: The history of central banks

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Print section Print Rubric:  Today’s criticisms of central banks echo debates from times past Print Headline:  Battle of three centuries Print Fly Title:  The history of central banks UK Only Article:  standard article Issue:  How to have a better death Fly Title:  The battle of three centuries Main image:  20170429_BBD001_0.jpg TWENTY years ago next month, the British government gave the Bank of England the freedom to set interest rates. That decision was part of a trend that made central bankers the most powerful financial actors on the planet, not only setting rates but also buying trillions of dollars’ worth of assets, targeting exchange rates and managing the economic cycle. Although central banks have great independence now, the tide could turn again. Central bankers across the world have been criticised for overstepping their brief, having opined about ...