Tag: Business and finance

IN 2007 financial dangers, piled up like so much tinder, ignited at last and caused a swathe of destruction across the global economy. The blaze also engulfed governments, which faced intense public pressure to prevent such calamities from recurring. Much has happened on the regulatory front since then. Few believe, however, that the problem of financial instability has been solved. To regulators’ frustration, in a world of global financial flows, efforts to safeguard one country often endanger others.

This bothersome tendency has become harder to ignore as cross-border capital flows have swollen. Annual gross financial flows in rich countries soared from roughly 5% of GDP in 1980 to around 25% of GDP on the eve of the financial crisis. This worldwide torrent of money has its benefits. Investors can more easily diversify their portfolios. Investors in slow-growing rich countries gain access to higher-yielding investments in poorer, capital-starved economies, and those poorer economies gain access to desperately needed capital relatively cheaply.

Yet there are costs as well. Emerging economies with less sophisticated financial markets and…Continue reading

THOSE of us who fly regularly have grown thoroughly accustomed to the usual interactions with flight attendants. Yet because most cabin crew are so courteous and professional, few of us probably have a good sense of how they would like us to behave so that they can go about their jobs as efficiently and pleasantly as possible. Do they, for example, get annoyed when they have to respond to the hellos of each arriving passenger, or do they feel snubbed if someone doesn’t greet them? Does it bother them when absolutely no one is watching as they perform the safety announcements? How about those who stretch in the aisles?

Business Insider interviewed more than 60 flight attendants to compile a list of the behaviours that annoy. There are 21 common complaints, it seems. They can be broken into three categories.

The first might be described as the kind of behaviour that would be an affront to anyone with a modicum of decency. This includes passengers hogging the overhead bins. This is equivalent to putting a…Continue reading

BRAD SETSER, an economist at the Council on Foreign Relations, is the author of a new discussion paper looking at «the return of the East Asian savings glut». A summary of his paper begins in arresting fashion:

The combined savings of China, Japan, Korea, Taiwan, and the two city-states of Hong Kong and Singapore is about 40 percent of their collective GDP, a thirty-five-year high.

Prior to the financial crisis, many economists fretted about the problem of global imbalances. Measurement error aside, global trade balances; surpluses in some countries offset deficits in others. Yet the magnitudes of those surpluses and deficits can be small or large. In the early 1990s, surpluses and deficits were each around 0.5% of global GDP. They expanded rapidly therefore, to about 2% of global GDP on the eve of the crisis. After shrinking dramatically during the crisis and global recession, imbalances have begun to rebound and are now back to about 1.5% of GDP.

Why do such imbalances matter? They can create problems in a few ways. Large surpluses can be a side…Continue reading

THERE have only been six chairmen of the Tata Group since it was founded in 1868. There will soon be a seventh after Cyrus Mistry, the first boss of the conglomerate not connected to the founding family, was ousted after less than four years in charge. Even though he undertook few of the reforms needed to bring vast swathes of the Tata empire to profitability, he will prove a difficult act to follow. That the ousted man has now embarked on an extraordinary rampage against his old employer will scarcely help.

Mr Mistry might reasonably have expected to serve for a couple of decades at the helm of India’s biggest group, with interests from IT to cars, hotels, salt, steel and much else besides. His departure on October 24th was a surprise. For a company with a culture of consensus, the abruptness of his sacking—the board did not even give him the option of stepping down, and the purging of many of the top executives he had hired—is about as brutal as it comes. Ratan Tata, his predecessor, will take over while a new boss is found.

The catalyst for the defenestration was the lack of performance at some of the group’s big companies….Continue reading

CHAMPAGNE corks must have been popping yesterday at London Heathrow, Europe’s busiest airport, as the British government finally gave it the green light to build a third runway. The decision has been a long time coming. The airport, has been operating at 99% of its capacity for a decade.

No new full-scale runways have been built in south-east England since the second world war because of government dithering. More than a dozen commissions, policy documents and white papers investigating how to expand capacity around the capital have come and gone since the first proposal to build a third runway at Heathrow in 1946. Those plans were defeated by NIMBYs, tight budgets and legal challenges. But just like the thick fog that enveloped Heathrow this morning, the path to expansion is still murky.

The first obstacle is political. Although members of the British government’s aviation sub-committee were unanimous in their support for expansion at Heathrow rather than Gatwick, its arch competitor to the south of London, not everyone in the cabinet is convinced. Many west London MPs vociferously oppose expansion, including Boris Johnson, the foreign secretary, who once…Continue reading

FINDING a reliable way of timing the market is something that has eluded the greatest investment minds in history. That is why many people are tempted by the “magazine cover indicator” as a contrarian signal. One of the most famous was Business Week’s “Death of Equities” cover in 1979 (which actually came three years before the great bull market got going).

Two analysts from Citigroup, Greg Marks and Brent Donnelly, write that:

The premise behind the indicator is that when a journalist or editor finally devotes a cover to a market trend, company, country or person, the story or theme has been in vogue for some time and is likely past its peak. Positioning and sentiment should already fully reflect the story on the cover of the publication and the story should be fully priced in. In other words, by the time a journalist writes about the trend, a majority of the move has already happened.

The analysts—the cheeky devils—decided to apply the test to The Economist’s covers. They…Continue reading

In the first of our Economist Radio specials from Washington, Money Talks examines the Wall Street versus Main Street argument playing out in the election. Our Buttonwood columnist dissects how markets might respond to a Trump win. And award-winning  MIT economist, David Autor, dissects the negative consequences of free trade