Archive for June, 2015

UK Only Article: 
standard article

Issue: 

The right to die

Fly Title: 

Latin America’s economies

Rubric: 

As memories of galloping growth fade, it is time for tough thinking about the future

Location: 

LIMA

Main image: 

20150627_amp004.jpg

IN JUNE 2006 Luiz Inácio Lula da Silva, then Brazil’s president, went to Itaboraí, a sleepy farming town nestled where the flatlands beside Guanabara Bay meet the coastal mountain range. He announced the building of Comperj—the Rio de Janeiro petrochemical complex, a pharaonic undertaking of two oil refineries and a clutch of petrochemical plants. With forecasts of 220,000 new jobs in a town of 150,000 people, Itaboraí geared up for a boom.
Today it is almost a ghost town. Its straggling main street adjoins an unopened shopping mall and is punctuated by a score of blocks of flats and office towers, one with a heliport on the roof, all finished in the past few months and all plastered with “for …<div class="og_rss_groups"></div>

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WORRIES about the global economy are not just confined to sluggish growth, deteriorating demographics or the overhang of consumer and government debt. World trade, which used to grow faster than GDP, seems to have turned sluggish. In each of the last three years, growth has been less than 3% in real terms. The World Trade Organisation is hoping for 3.3% this year but it regularly has to cut its forecasts; there have been reports of export declines in recent weeks from Taiwan, Egypt, Indonesia, Jordan, and China, to name but a few.&nbsp;Some of this year's decline is down to a stronger US currency, of course, which reduces the dollar value of exports. But it is hard to believe that is the only thing going on. A new book from Vox EU covers the subject in great detail. In one chapter, Douglas Irwin looks at the historical record; Angus Maddison's data suggests trade was growing at more than 3% a year in the first great era of globalisation from 1870 to 1913, slowed to less than 1% a year from 1913 to 1950 thanks to two world wars and the Great Depression, and then took off in the "wonder years" from 1950-1973 at more than 7% a year. Figures from the WTO suggest the peak decade was the 1960s. Trade growth slowed after that, until the 1990s when China burst on to the scene. But the current century has seen another slowdown, which worsened once the financial crisis hit.You won't …<div class="og_rss_groups"></div>

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UK Only Article:&nbsp;
standard article

Issue:&nbsp;

My big fat Greek divorce

Fly Title:&nbsp;

AIG

Rubric:&nbsp;

A judge rules a government takeover was illicit but caused no harm

Location:&nbsp;

NEW YORK

THE endless and costly litigation regarding the nationalisation at the height of the financial crisis of AIG, the world’s biggest insurer at the time, has always had a Dickensian air. The case, which was initiated in 2011 by Hank Greenberg, AIG’s disgruntled former boss, involves more than 1,600 exhibits, a transcript of 8,812 pages and 442 docket entries. On June 15th the element of farce was heightened when a court ruled in Mr Greenberg’s favour in every respect except the one that matters.
The punitive terms of AIG’s bail-out involved “plain violations of the Federal Reserve Act”, Judge Thomas Wheeler of the Court of Federal Claims decided. Yet, “If the government had done nothing, the shareholders would have been left with 100 per cent of nothing.” In other words, Mr Greenberg is right to question the legality of the …<div class="og_rss_groups"></div>

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DURING the financial crisis, policymakers sprang into action to stimulate the economy. As a result, the recession, though bad, was far less severe than the Depression. Unfortunately, however, that quick response nearly exhausted governments’ economic arsenals. Seven years later they remain depleted.&nbsp;Should recession strike again, as inevitably it will, rich countries in particular will be ill-equipped to fend it off.To measure governments' "wriggle room",&nbsp;The Economist&nbsp;has devised a composite measure of debt, deficits and interest rates—the weapons policymakers typically wield to dispel threatening conditions. Though crude, the analysis yields a clear and troubling conclusion.&nbsp;A few economies could mount a robust defence against a new shock, but most are sitting ducks.&nbsp;At the beginning of 2007 the average central-bank policy rate in the countries in our ranking was just under 4%—low by historical standards, for instance, while the average for rich countries now is 0.3%.&nbsp;The mountain of public debt accumulated since 2007 adds a further constraint. Debt as a share of GDP is, on average, 50% higher than it was before the crisis.On average, the rich world’s wriggle room has fallen by about a third since 2007. Hopefully the next big shock will take its time …<div class="og_rss_groups"></div>

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UK Only Article:&nbsp;
standard article

Issue:&nbsp;

Watch out

Fly Title:&nbsp;

Free exchange

Rubric:&nbsp;

Rich-world governments will not have much wriggle room when the next crisis strikes

DURING the financial crisis, when the global economy faced its gravest threat since the 1930s, policymakers sprang into action. To stimulate the economy, central banks slashed interest rates and politicians spent lavishly. As a result, the recession, though bad, was far less severe than the Depression.
Unfortunately, however, that quick response nearly exhausted governments’ economic arsenals. Seven years later they remain depleted. Central banks’ benchmark interest rates hover above zero; government debt and deficits have ballooned. Should recession strike again, as inevitably it will, rich countries in particular will be ill-equipped to fend it off.

Just how much wriggle room do they have? For comparison, The Economist has devised a composite measure of debt, deficits and interest rates—the weapons policymakers typically wield to dispel threatening conditions. Though crude, the analysis yields …<div class="og_rss_groups"></div>

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UK Only Article:&nbsp;
standard article

Issue:&nbsp;

Watch out

Fly Title:&nbsp;

The world economy

Rubric:&nbsp;

It is only a matter of time before the next recession strikes. The rich world is not ready

Main image:&nbsp;

20150613_LDP001_0.jpg

THE struggle has been long and arduous. But gazing across the battered economies of the rich world it is time to declare that the fight against financial chaos and deflation is won. In 2015, the IMF says, for the first time since 2007 every advanced economy will expand. Rich-world growth should exceed 2% for the first time since 2010 and America’s central bank is likely to raise its rock-bottom interest rates.
However, the global economy still faces all manner of hazards, from the Greek debt saga to China’s shaky markets. Few economies have ever gone as long as a decade without tipping into recession—America’s started growing in 2009. Sod’s law decrees that, sooner or later, policymakers will face another downturn. The danger is that, having used up their arsenal, governments and …<div class="og_rss_groups"></div>

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UK Only Article:&nbsp;
standard article

Issue:&nbsp;

Watch out

Fly Title:&nbsp;

America’s economy

Rubric:&nbsp;

America’s disappointing economy is more robust than it first appears. But higher interest rates are on the horizon, and could bring unexpected risks

Main image:&nbsp;

20150613_FBD001_0.jpg

ONE of the ways in which America’s economy leads the world has been, of late, an unrivalled capacity for sending mixed messages. The past six months provide a case in point. The year opened with things looking pretty good: strong growth in late 2014 had led the IMF to project that GDP would rise by 3.1% in 2015; the Congressional Budget Office, America’s fiscal watchdog, expected a 3.4% expansion. In March and April, though, bad news built up, and in May official numbers confirmed that tumbling investment and exports meant that over the first quarter GDP had actually been falling at an annualised rate of 0.7%.
Then the good news came back. In early June data from the Bureau of Labour Statistics (BLS) showed hourly pay rising at …<div class="og_rss_groups"></div>

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