Showing posts with label Economic. Show all posts
Showing posts with label Economic. Show all posts

16 November 2017

Russia's Economy Is Growing With Borrowed Money

Leonid Bershidsky
Source Link

Without any new ideas from a technocratic government constrained by President Vladimir Putin's apparent indifference, the Russian economy is once again relying on consumers, who are borrowing more to buy real estate and imported products. The growth is real, but it's also meager. And it will be hard to sustain without bigger changes. On Monday, Rosstat, Russia's official statistics agency, announced that the country's gross domestic product increased 1.8 percent year-over-year in the quarter than ended in September. That's lower than Bloomberg's consensus forecast of 1.9 percent and slower than the 2.5 percent increase in the previous three months. The oil price jumped 20 percent during the quarter, but the economic statistics won't pick up the related growth until the fourth quarter. So far this year, the Russian consumer deserves most of the credit for the growing economy. After suffering through three tough years -- during which time oil tanked and the ruble devalued sharply -- they are buying things again. Unfortunately, most of the things Russians are buying aren't made in Russia. 

7 October 2017

Where is technology taking the economy?

By W. Brian Arthur

We are creating an intelligence that is external to humans and housed in the virtual economy. This is bringing us into a new economic era—a distributive one—where different rules apply.

A year ago in Oslo Airport I checked in to an SAS flight. One airline kiosk issued a boarding pass, another punched out a luggage tag, then a computer screen showed me how to attach it and another where I should set the luggage on a conveyor. I encountered no single human being. The incident wasn’t important but it left me feeling oddly that I was out of human care, that something in our world had shifted.

4 October 2017

2019 Could Be a Very Bad Year for Ukraine

Nikolas K. Gvosdev

Yes, 2019 matters ...

For several years, Russia has been warning—consistently and clearly—that it tends to stop using Ukraine as a transit country for sending its energy to Western markets. If this happens, a major hole will open in the Ukrainian economy which Europe and the United States do not appear to be prepared to fill.

29 September 2017

The World That Awaits The Next German Leader

Now that the 2017 German elections have wrapped up, the process of forming a government and determining exactly who will lead the country is underway. Negotiations to determine the members of the governing coalition could take weeks or even months, but to some extent, it doesn't matter who is named chancellor in the end. The challenges that the next leader of Europe's largest economy must tackle will broadly be the same, whether Angela Merkel returns to the chancellery or not. The country's next government will have to satisfy the same set of national imperatives while dealing with the same outside pressures that shape its options in setting a national strategy. To understand the strategy, it's first necessary to explore these imperatives and surroundings.

5 September 2017

Shrinking, but Still Big: America's Slice of the Global Economic Pie


The American slice of the global GDP pie is shrinking. In 1960; U.S. GDP represented 40% of the global total. By 2014, that share had shrunk to 22%. The decline is relative — America's economy is much larger now than half a century ago, but other countries have grown much faster. Most notably China, the economy of which trebled over the same period, from close to 5% back then to around 15% now. And, as shown by this recent Voronoi diagram (1), first published in July 2015, the American slice is still by far the biggest one. 

Of course, there are several ways to measure GDP. One could argue that China's share should be bigger by now, or that it has already overtaken the U.S. It certainly has for industrial output — the middle of the three shades contained within each slide. The U.S. is overwhelmingly a service-based economy (darker shade), with a relatively small contribution by the agricultural sector (lighter shade). 

27 August 2017

Undue reverence for company founders harms Indian firms

THE chairman of Microsoft, John Thompson, occasionally reminds one of its directors, a fellow by the name of Bill Gates, that his vote in board meetings is no more or less important than that of other members. Contrast that with Infosys, an Indian technology firm, whose own retired founder succeeded in getting its boss to quit on August 18th, after a months-long whispering campaign (see article). The board was dismayed, but the outcome was all too predictable, given India’s penchant for treating corporate founders as latter-day maharajahs.

Indian companies come in all shapes and sizes, from clannish outfits whose tycoon bosses routinely stiff minority investors, to giants like Infosys whose corporate governance (usually) matches Western norms. What unites them is that they accord undue deference to “promoters”, as India dubs a firm’s founding shareholders. The exalted status bestowed on promoters is a pervasive feature of the Indian corporate landscape. Of the 500 largest listed Indian firms, according to IiAS, an advisory firm, 344 are controlled in practice not by boards answerable to all shareholders, but directly by promoters.

13 July 2017

Why the dollar is still king

V. Anantha Nageswaran

If one looked at economic risk factors such as economic growth rate, the safety and stability of the banking system, America’s fiscal deficit and government debt, the US does far better than the eurozone nations. Photo: Reuters

In the last one month, things have begun to turn in the sovereign bond market. The Federal Reserve (Fed) raised the federal funds rate (FF rate) in June to a maximum of 1.25%. Not only that, the minutes of the meeting of the Federal Reserve open market committee (FOMC) have confirmed that the Fed stands ready to start shrinking its balance sheet in the next few months.

Some commentators have called the policy stance of the Fed wrong (see, for example, Martin Sandbu of the Financial Times). They feel that the move to raise the policy rate in baby steps risks an end to the economic expansion that is eight years old. They are making the same mistake that they made before 2008. Even if the inflation rate were below 2.0%, and stayed that way, the FF rate in real terms is negative. Or, even if the inflation rate were to edge down to 1.5%, the real FF rate would be barely positive. Hence, the monetary policy is still very accommodative especially since the unemployment rate is below 5.0%, supply of leveraged loans is at a record high, stock indices are at record high valuations and stock market volatility at record lows.

23 June 2017

Ideas and ivory towers

Written by Dinesh Singh 

The Indian readymade garments industry has been a vital enabler of our export trade. Each year it exports to the West, ready-to-wear apparel worth several billion dollars. Trade analysts, in the recent past, have been quite gung-ho about this sector’s prospects. Where do countries like India, China and others in the region derive the strength that adds so much value to their economies? It is not as if nimble fingers and skilled tailoring hands do not exist in developed nations. The answer lies is in the availability of cheap labour. Unfortunately, this advantage is likely to disappear in the near future. Just as worrying is the obliviousness of this looming danger on the part of our policy and decision-makers.

We simply need to delve into the realm of robotics and artificial intelligence to gauge the situation. A former professor of robotics at the Georgia Institute of Technology has helped create a robotic tailor that can stitch a perfect circle: If you can stitch a perfect circle, then you can perform almost any complicated sewing task that, in the past, could only have been undertaken by skilled and experienced hands. The only seemingly viable option for the garments industry in the Asian region is to seek to import such machines. There goes a part of our plan to keep unemployment figures down.

22 June 2017

Charting the Indian banking sector’s future

Renny Thomas

The Indian banking sector is at a critical juncture in its evolution. It is now clear that the slump in credit growth and increase in stressed assets has affected the profitability of all banks, and threatens the very survival of some of them.

State-owned banks account for more than three-fourths of the stressed asset load, which is now far higher than their net worth. Provision levels are inadequate, as the banks hold only 28% of gross non-performing assets and restructured assets, as provisions. There is a $110 billion gap between the stressed assets in the system and the provisions made. Shifts in consumer preferences, combined with changes in technology and regulations, have created a perfect storm. The way out will depend to a large extent on the speed and direction of stakeholder reactions.

The core challenge is that many of the public sector banks (PSBs) are undifferentiated, sub-scale, and with limited capabilities to be full universal banks. About 80% of them own only 25% of the assets. They also operate in virtually every market segment with very limited sector or vertical-focused specialization. In fact, they focus on the same customer segments, offer similar products, and very often compete only on price. Some of this is because PSBs face challenges that impede them from competing effectively. They have to shoulder a disproportionate share of social and nation-building obligations. Policies on compensation and human resources reduce management autonomy, and inhibit their ability to attract and manage talent.

16 June 2017

Corridor of economic uncertainty

by Christophe Jaffrelot 

China presents the BRI, also known as the One Belt One Road initiative (OBOR), as a connectivity project — hence, the reference to the old Silk Road and a new maritime silk road. Illustration by C R Sasikumar

Last week, the Pentagon’s annual report to the Congress forecast that China will build a military base in Pakistan in order to have in the subcontinent facilities akin to what Beijing is developing in Djibouti. These plans are well in tune with the proposals presented last month during the Belt and Road Forum (BARF) in Beijing in the presence of 29 heads of state. India skipped it because a section of the Belt and Road Initiative (BRI), the China Pakistan Economic Corridor (CPEC), infringes New Delhi’s sovereignty as it passes through Kashmir. But the CPEC probably affects Pakistan’s sovereignty even more, since this project is more than a corridor; it is an expansionist plan, as the military base singled out by the Pentagon also suggests.

6 June 2017

How to rob a bank, according to economics

By:Corinne PurtillDan Kopf

Bank robberies are great case studies for the economics of crime. They’re premeditated affairs in which a perpetrator has evaluated (consciously or not) the rationality of proceeding. The gains are quantifiable. They also come with a built-in dilemma: every minute a robber stays in the bank increases both the haul and the chance of getting caught.

If you are an economist curious about bank robberies, there is no better laboratory than Italy. From 2000-2006, the last period for which comprehensive public data are available, Italy averaged nearly as many bank robberies each year than the rest of Europe combined. The Italian Banking Association also retains detailed records of every heist, including the duration, amount seized, and if and when an arrest was made.

Economists Giovanni Mastrobuoni and David A. Rivers studied nearly 5,000 bank robberies in Italy between 2005 and 2007. The average heist lasted 4 minutes, 16 seconds and yielded €16,000 (about $19,800 at the exchange rate of the time). Though each additional minute in the bank, on average, leads to about €1,400 more in earnings, the majority of robberies last three minutes or less because the risk of getting caught increases with time.

19 February 2017

Imagining India’s first 100 Million City

Saurabh Chandra

Countries need moonshots. Without a goal in the future that excites a lot of young people (and we have a LOT of young people in India), things can get pretty restive and eventually messy. A feeling of a fixed pie focuses people into grabbing more of its share. Moonshots that can tremendously grow the pie focus people into thinking — how do I become a part of that. An obvious moonshot in front of humanity is a colony on Mars. For India, an obvious moonshot is available here on earth itself — world’s first 100 Million city.

The original moonshot was a leap of technology and it created a whole lot of technology spinoffs that created utilitarian justification for the Apollo programme. Making a 100 Million city is also a technological challenge but the benefits are humongous in the outcome itself and we don’t have to justify it in terms of spin-offs to the bean counters. Cities produce wealth and higher density of living is environmentally more sustainable (since we can optimise per person consumption).

The challenge is also not mere technological. It is sociological, political and even administrative. And that is what is great about this idea — it is a grand challenge in multiple dimensions and solving it will pull up our capabilities in all those terms. Compared to making 100 cities, creating exceptions and special laws for 1 is much more feasible. It also plays to India’s strengths and weaknesses where we have been far better at concentrating our best talent on a few problems and running them on mission mode.

13 January 2017

Choose the best tax saving instrument for you

Babar Zaidi

So many options, so little time. If you have still not completed your tax planning for 2016-17, don’t panic. 

ET Wealth’s annual ranking of tax saving instruments cuts through the clutter and tells you which is the most suitable option for you. 

ET Wealth Ratings 

6 January 2017

The end of capitalism has begun

Paul Mason

Without us noticing, we are entering the postcapitalist era. At the heart of further change to come is information technology, new ways of working and the sharing economy. The old ways will take a long while to disappear, but it’s time to be utopian 

The red flags and marching songs of Syriza during the Greek crisis, plus the expectation that the banks would be nationalised, revived briefly a 20th-century dream: the forced destruction of the market from above. For much of the 20th century this was how the left conceived the first stage of an economy beyond capitalism. The force would be applied by the working class, either at the ballot box or on the barricades. The lever would be the state. The opportunity would come through frequent episodes of economic collapse.

Instead over the past 25 years it has been the left’s project that has collapsed. The market destroyed the plan; individualism replaced collectivism and solidarity; the hugely expanded workforce of the world looks like a “proletariat”, but no longer thinks or behaves as it once did.

24 December 2016

Raghuram Rajan Takes On Critics, Again, And Shows Chart By Chart Why They're Wrong

Rimin Dutt

Governments should protect the independence of central banks and look beyond uninformed criticism, he says 

Outgoing Reserve Bank of India Governor Raghuram Rajan took on critics again Tuesday and defended the key policies undertaken by the central bank during his tenure, going into extraordinary detail explaining the context of many of the bank's decisions.

Specifically, he addressed concerns about interest rates, which many of his critics say have been too high, hurting credit growth and spending, and the RBI-mandated clean-up of bad loans and balance sheets at banks, which some critics allege has compounded the credit growth slowdown.

"The RBI, of course, stands by its policies," Rajan said addressing the 10th Statistics Day conference at the RBI headquarters. "Nevertheless, this debate is very important because it could shape policy directions in India over the medium term."

Economic Conditions Snapshot, December 2016: McKinsey Global Survey results

In the face of political transitions and concerns over trade, executives expect improvements at home and a stable global economy—with some regional divergences. 

As executives look ahead to a new year, they see political transitions as a leading risk to global and domestic growth—and among the more pressing threats to their businesses—in McKinsey’s latest survey on economic conditions.1In parallel, slowing trade also has risen as a threat to global growth, especially for respondents in China and developed Asia.2Despite these uncertainties, executives are more positive than negative about economic prospects at home and, as they have all year long, expect global economic conditions to hold steady. Across regions, though, outlooks can vary. Respondents in China and the United States report increasingly positive expectations for their economies and believe growth rates will improve in coming months, while opinions on the eurozone are mixed. Nearly everyone sees more global volatility on the way. 
Political transitions at the fore 

2 December 2016

2017 Index Of Economic Freedom: Trade And Prosperity At Risk – Analysis

By Bryan Riley and Ambassador Terry Miller*

The latest rankings of trade freedom around the world, developed by The Heritage Foundation in the forthcoming 2017 Index of Economic Freedom,[1] once again demonstrate that citizens of countries that embrace trade freedom are better off than those in countries that do not. The data continue to show a strong correlation between trade freedom and a variety of positive indicators, including economic prosperity, low poverty rates, and clean environments.

Worldwide, the average trade freedom score improved just barely over the past year, from 75.6 to 75.9 out of a maximum score of 100. The improvement was due to a small decline in average tariff rates among the countries measured.
Why Trade Freedom Matters

A comparison of economic performance and trade scores in the 2017 Index of Economic Freedomdemonstrates the importance of trade freedom to prosperity and well-being. Countries with the most trade freedom have higher per capita incomes, lower incidences of hunger in their populations, and cleaner environments.

29 November 2016

Five Stages Of Climate Grief – OpEd

NOVEMBER 28, 2016

Ever since the elections, our media, schools, workplaces and houses of worship have presented stories showcasing the stages of grief: denial, anger, bargaining, depression and acceptance.

Liberal-progressive snowflakes are wallowing in denial, anger and depression. They cannot work, attend class or take exams. They need safe “healing” spaces, Play-Doh, comfort critters and counseling. Too many throw tirades equating Donald Trump with Adolph Hitler, while too few are actually moving to Canada, New Zeeland or Jupiter, after solemnly promising they would.

Nouveau grief is also characterized by the elimination of bargaining and acceptance – and their replacement by two new stages: intolerance for other views and defiance or even riots. Sadly, it appears these new stages have become a dominant, permanent, shameful feature of liberal policies and politics.

The Left has long been intolerant of alternative viewpoints. Refusing to engage or debate, banning or forcibly removing books and posters, threatening and silencing contrarians, disinviting or shouting down conservative speakers, denying tax exempt status to opposing political groups, even criminalizing and prosecuting climate change “deniers” – have all become trademark tactics. Defiance and riots were rare during the Obama years, simply because his government enforced lib-prog ideologies and policies.

Liberals view government as their domain, their reason for being, far too important to be left to “poorly educated” rural and small-town voters, blue-collar workers or other “deplorable” elements. Liberals may not care what we do in our bedrooms, but they intend to control everything outside those four walls.

Trump’s Economic Plan: This Isn’t Going To Work – OpEd

NOVEMBER 28, 2016

Will Donald Trump be good for the US economy?

The American people seem to think so. According to a recent survey taken by Gallup “Americans have relatively high expectations (of) the president-elect… Substantial majorities (upward of 60%) believe the Trump administration will improve the economy and create jobs. A slim majority (52%) say he’ll improve the healthcare system.”

Even more impressive, the University of Michigan Consumer Sentiment Index spiked to a 93.8 -high in November, signaling a significant improvement in overall consumer attitudes about the economy.

Analysts attribute this change in outlook to the recent presidential election which showed a marked-uptick in optimism “across all income and age subgroups across the country.”

“The initial reaction of consumers to Trump’s victory was to express greater optimism about their personal finances as well as improved prospects for the national economy,” said Richard Curtin, the survey’s chief economist.

So, people are not just giving Trump the benefit of the doubt, they genuinely think their economic situation is going to get better under the new president.

The results are particularly significant when we realize that the economy not only topped the list of important issues going into the November elections, but that also (according to a survey conducted by Edison Research) “Three in five voters said the country was seriously on the wrong track and about the same number said the economy was either not good or poor. Two-thirds said their personal financial situation was either worse or the same as it was four years ago. About one in three voters said they expected life to be worse for the next generation.”

27 November 2016

League of nationalists

Nov 19th 2016 

AFTER the sans culottes rose up against Louis XVI in 1789 they drew up a declaration of the universal rights of man and of the citizen. Napoleon’s Grande Armée marched not just for the glory of France but for liberty, equality and fraternity. By contrast, the nationalism born with the unification of Germany decades later harked back to Blut und Boden—blood and soil—a romantic and exclusive belief in race and tradition as the wellspring of national belonging. The German legions were fighting for their Volk and against the world.

All societies draw on nationalism of one sort or another to define relations between the state, the citizen and the outside world. Craig Calhoun, an American sociologist, argues that cosmopolitan elites, who sometimes yearn for a post-nationalist order, underestimate “how central nationalist categories are to political and social theory—and to practical reasoning about democracy, political legitimacy and the nature of society itself.” 

It is troubling, then, how many countries are shifting from the universal, civic nationalism towards the blood-and-soil, ethnic sort. As positive patriotism warps into negative nationalism, solidarity is mutating into distrust of minorities, who are present in growing numbers (see chart 1). A benign love of one’s country—the spirit that impels Americans to salute the Stars and Stripes, Nigerians to cheer the Super Eagles and Britons to buy Duchess of Cambridge teacups—is being replaced by an urge to look on the world with mistrust.