Tag: Finance and economics
The proxy-voting season kicks off on Wall Street
JING ZHAO’S main occupation is translating Latin classics into Chinese. He runs a small think-tank, the US-Japan-China Comparative Policy Research Institute. He lives off rents from property bought cheaply after the financial crisis. But this quiet, intellectual California resident has a surprising sideline: submitting proposals to be voted on by the shareholders of companies in which he owns small stakes. That makes him part of a movement that is forcing management at some of the world’s biggest firms to consider not just profitability but broad shifts in social attitudes.
The annual meetings of America’s listed companies, usually held between February and June, have come to constitute “proxy season”—so-called because shareholders need not cast their votes in person. This year proposals from Mr Zhao will be on the ballot at four giant firms. He wants Apple to create a human-rights committee, citing its decision last year to bow to Chinese censorship by removing hundreds of…Continue reading
Economists understand little about the causes of growth
OVER the past decade economists have been intensely scrutinised for their intellectual failings in the run-up to the 2007-08 financial crisis. Yet had the recession that followed been more severe—wiping a quarter off the GDP of every advanced economy, say—those countries would still have ended up four times as rich per person, in purchasing-power terms, as developing countries are now, and more than ten times as rich as sub-Saharan ones. Robert Lucas, a Nobel prizewinning economist, once wrote that after you have started to think about the gap between poor and rich countries it is hard to think about anything else. Economists understand even less about economic growth than about business cycles. But the profession has done too little to address this failure or to understand its implications.
Economists have precious few hard facts about growth. They know that sustained growth in GDP per person only started in the 18th century. They know that countries can become rich only by growing steadily over…Continue reading
A trade war between America and China takes shape
TALK of tariffs is in danger of developing into cries of trade war. On April 3rd America published a list of some 1,300 Chinese products it proposes to hit with tariffs of 25%. Just a day later China produced its own list, covering 106 categories. “As the Chinese saying goes, it is only polite to reciprocate,” said the Chinese embassy in Washington, DC.
According to the Peterson Institute for International Economics, a think-tank, America’s list covers Chinese products worth $46bn in 2017 (9% of that year’s total goods exports to America; see graphic). China’s covers American goods worth around $50bn in 2017 (38% of exports). The sums were enough to move markets on April 4th, though the S&P 500 index soon made up lost ground.
Insurance and the gig economy
THE rise of the gig economy means not only workers, but those who insure them, are having to adapt. Take third-party liability insurance—the sort that would pay out if, for instance, a courier hit and injured a pedestrian. An employee driving a company van would be covered by a standard commercial-insurance policy. But “gig” couriers, working when they wish and using their own cars, must often insure themselves. Even if they have personal cover, it will not usually pay out for accidents that happen while they are driving for work.
Among the firms seeking to fill this gap is Zego, which sprang up to serve scooter couriers such as those working for Deliveroo, a food-delivery service. Deliveroo and its rivals require proof of insurance from couriers, but had no easy way to check it was valid. Couriers, meanwhile, were often loth to pay stiff premiums. Harry Franks, formerly of Deliveroo and co-founder in 2016 of Zego, spotted an opportunity and convinced insurers that a different model could be…Continue reading
The choice of a boss for the New York Fed ends in a familiar way
THE president of the Federal Reserve Bank of New York is perhaps the second most important person in America’s financial hierarchy, behind only the chairman of the Federal Reserve. Unlike the presidents of the other regional Reserve Banks, he sits permanently on the committee in Washington, DC that sets interest rates. The New York Fed supervises Wall Street and, during financial crises, often gathers bankers to hash out a fix or to impose one on them. On April 3rd it was announced that John Williams would be next in line to take charge of the institution, replacing William Dudley.
Mr Williams has led the San Francisco Fed since 2011, when his predecessor in that job, Janet Yellen, moved to Washington. He is best known for his academic contributions to monetary policy. In particular, his estimates of the “neutral rate” of interest, at which money is neither tight nor loose, are regularly cited. In recent years he has appeared moderately…Continue reading
Germany’s biggest lender is in the doldrums
JOHN CRYAN has spent almost three years on the thankless task of revitalising Germany’s biggest bank. Deutsche Bank’s shares fetch around €11 ($13.50) each. That is less than half their price when he became joint chief executive in July 2015 (he became sole boss 11 months later) and an eighth of the peak in Deutsche’s pre-crisis pomp (see chart). Paul Achleitner, the chairman of Deutsche’s supervisory board—perhaps sharing investors’ impatience, perhaps to shore up his own position—has reportedly sounded out possible replacements for Mr Cryan.
The two men are also said to…Continue reading
Fake news flourishes when partisan audiences crave it
THE theories lurk in odd corners of the web, occasionally bubbling into broader public consciousness. That President Donald Trump is working with Robert Mueller, for example, and preparing a hammer blow against the true threats to American democracy: Barack Obama, Hillary Clinton and their “deep state” allies. Such fabrications are not new. Yet the capacity of fake news to influence the outcome of political votes seems to have grown, and is provoking a backlash. France, for example, may soon allow judges to censor fake-news stories during election seasons. Malaysia’s government says it may jail those who publish or circulate fake news. Such steps risk enabling governments to limit legitimate speech (on April 3rd India’s government abandoned similar plans after widespread criticism). What is more, they are unlikely to do much to stem the flow of disinformation so long as there remains an audience of readers hungry for fakery.
Outrage over fake news is overwhelmingly targeted at the supply side:…Continue reading
Economics renames itself to appeal to international students
ECONOMISTS do not much like their discipline being dubbed the dismal science. Some American universities are paying more attention to the noun than to the adjective. The reason is not philosophical, but pragmatic. Foreign STEM graduates (the acronym stands for science, technology, engineering and mathematics) can get visa extensions for three years of practical training (ie, work). Those from other disciplines are allowed only a year.
Two more years working in America means more earnings. It also means a better chance of finding an employer willing to sponsor an application for an H-1B visa, the main starting-point for skilled foreign workers who hope to settle permanently. In 2012 the Department of Homeland Security expanded the list of STEM courses. Now any reasonably crunchy economics degree can count as STEM with a tweak to its federal classification code, from economics (45.0601) to econometrics and quantitative economics (45.0603).
Economics departments appear to be catching on….Continue reading
The next Japan is not China but Thailand
TWENTY years ago Thailand was the most torrid of emerging markets. After a spell of overheated growth and wide current-account deficits, it had exhausted its foreign-exchange reserves and lost its currency’s peg to the dollar. In the aftermath, inflation approached 10% and the Bank of Thailand (BoT) struggled to restore confidence in the baht. In a widely cited paper by Romain Rancière of the University of Southern California and two co-authors, Thailand was used as a stark illustration that dynamism and danger, fast growth and occasional crises, went hand in hand.
A few of today’s emerging markets can still set the pulse racing—Turkey, for example, has combined breakneck growth with double-digit inflation and a worrying slide in the lira. But Thailand is not one of them. Private investment expanded by only 1.7% last year. Thailand’s sovereign bonds yield less than America’s. Inflation is once again a worry, not because it is too high, but because it is so stubbornly low. Consumer prices rose by…Continue reading
Spotify makes its stockmarket debut
WHEN Spotify, a music-streaming service, went public on April 3rd, its founder, Daniel Ek, rang no bells on the trading floor of the New York Stock Exchange. Rather than the “pomp and circumstance” of an initial public offering, the Swedish firm, which is widely credited with turning round the fortunes of the music industry, opted for an unusual direct listing. No new shares were issued. Bankers did not sign up new investors, set a target price or stabilise early trading. Existing investors were simply allowed to trade their shares publicly.
Despite the low-key approach, and even as other tech firms’ shares wobbled, there was plenty of interest. That will cheer other firms considering going public. The share price ended its first trading day at $149, comfortably above prices reached in private markets earlier this year. That values the company at $26.5bn, making it the largest firm to list since Snap last year, and the eighth-largest tech listing ever.