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The US Constitution gives considerable latitude to the president to make foreign policy and on Wednesday Barack Obama exercised it in a big way. Describing US policy towards Cuba as outdated and unsuccessful, he initiated a new approach to the island nation that sits just 150km off the coast of Florida.
The two countries will re-establish diplomatic relations, including opening embassies in one another’s capitals. Co-operation will expand on technical issues ranging from counter-terrorism to combating disease. Cuba will soon be removed from the list of countries accused by Washington of supporting terrorism. Many Americans will find it easier to visit Cuba, spend and remit money there and bring cigars and rum back home. Read more
Reports of Apple’s decision to suspend its sales in Russia pending a review of pricing occasioned by “extreme fluctuations in the value of the rouble” reminded me of my trip to Moscow in August 1998 in the midst of the country’s financial crisis then. Checking into the hotel, I noticed something quite unusual — the traditional numerical pricing quotes had been replaced by references to letters and a customer notification. Upon checkout, the hotel management would match the letters with the updated pricing they deemed appropriate at that stage. Only then would customers be told the exact cost of the goods and services consumed during their stay. Read more
If Britain is to keep pace in the global economy, southeast England needs an additional runway. But this vital infrastructure will come at a high price, and the question is where the money is most effectively spent.
The Airports Commission I chair is working on a recommendation on additional capacity for the new government after next May’s election. The consultation papers we published last month suggest a price tag of up to £19bn at Heathrow, for a full-length runway with related infrastructure; and about £9bn at Gatwick. The numbers are huge but the private-sector owners of London’s largest airports believe the investment can be financed and will yield an acceptable return. Read more
Early this morning, reports began to come in of a bomb blast in Peshawar — but there was little unusual about that. The Taliban’s war against Pakistan has often focused on the city, which is the administrative and economic hub closest to the tribal areas where it operates. It is also the base of a large military station.
As the minutes ticked by, reality dawned: an army-run school had been attacked. For more than an hour, as shooting continued inside the building, the official death toll was stuck at three. But it quickly reached 50, 80 and then leapt to 100. As I write now, it is estimated that nearly 130 people have died and over 200 others have been injured. This must be one of the worst single massacres of children in the history of Islamic terrorism.
The Taliban has claimed the attack and described it as an act of revenge against the Pakistani military for targeting its families. In June, after years of delay, the army began to tackle terrorist hubs in the north Waziristan region, the mountainous tribal areas bordering Afghanistan. Read more
In recent weeks, every major terrorist assault around the world has brought with it questions about the possible involvement of the Islamic State of Iraq and the Levant, the group known as Isis. The truth is that, in many countries in the Muslim world, Isis may have sympathisers but it does not yet have well-established roots.
Last week in Chechnya, it seemed that the Russian province’s third war in recent memory had broken out when Chechen militants stormed a building in central Grozny, the capital. The attack paralysed the city and killed some twenty people, including ten police officers. Soon after, Russian media suggested that Isis was responsible, alleging that hundreds of Chechens are already fighting for the group in Syria and Iraq. Read more
Take a walk from the US Air Shuttle in New York’s LaGuardia airport to ground transportation. For months you will have encountered a sign saying “New escalator coming in Spring 2015”. Or take the Charles River at a key point separating Boston and Cambridge which is little more than 100 yards wide. Traffic has been diverted to support the repair of a major bridge crossing the river for more than two years, and yet work is expected to continue into 2016!
The world is said to progress but things that would once have seemed easy now seem hard. The Rhine river is much wider than the Charles yet General George Patton needed just a day to build bridges that permitted squadrons of tanks to get across it. It will take almost half as long to fix the escalator in LaGuardia as it took to build the Empire State building 85 years ago. Read more
You might not like the picture sketched by George Osborne of the UK economy in the years to come: yet more austerity and a massive retreat of the state. No matter. Sensible people from across the political spectrum have dismissed the path for the economy and the public finances described by Britain’s chancellor of the exchequer as a delusion. There is — we are told — close to zero chance of it coming true.
That may be right. But if this view of the future is a delusion, it is not one that the chancellor and the Office for Budget Responsibility, the UK’s independent fiscal watchdog, have fashioned out of thin air. It stems in part from a shortage of attractive medium term options for the fatigued economies of advanced nations that is sadly all too real. Read more
It might be described as an Autumn Statement for wishful thinkers. Admittedly, with a general election fast approaching, perhaps the medium term projections don’t matter too much. There is, however, something decidedly odd about George Osborne’s medium term fiscal and economic outlook.
First of all, the public spending cuts still to come are, on the Office for Budget Responsibility’s numbers, huge. Spending on public services as a share of gross domestic product is set to fall by considerably more over the next five years than it did over the last five years, accounting for the lion’s share of the shift from a budget deficit of 5 per cent of GDP to a surplus of around 1 per cent of GDP.
The UK economy is doing better than most developed economies but not well enough that the chancellor of the exchequer could afford to announce big giveaways for voters in advance of next year’s general election. That was the two-sided reality that confronted George Osborne when he was devising his Autumn Statement. What he ended up with was a long list of announcements that will benefit some parts of the economy at the expense of others – without spending very much money overall.
Was it political? Of course it was. These events always are. The move to ensure that higher earners will benefit from the next increase in the personal tax allowance is one of many changes that is focused squarely on potential Conservative voters. Another would be the curious decision to spend three-quarters of a billion pounds that the chancellor does not have on cutting the tax on buying a house. Read more
As the recent experience in the US and Japan has shown (and the FT’s James Mackintosh” explains), quantitative easing may produce its strongest effects on financial markets before the policy is implemented. In other words, it is the expectation that the central bank will embark on massive asset purchase that matters most, more than the purchase itself. And the more markets are convinced that the policy will be successful, the less the central bank may need to actually intervene.
When it comes to the eurozone, markets continue to have doubts about whether the European Central Bank will ultimately be willing to purchase government bonds. Indeed, such a policy decision seems to raise legal and institutional issues that make it “the instrument of last resort”. The ECB has clarified that the purchase of government bonds in the secondary market is not prohibited by its statutes, and can be used if the purchase of private assets is insufficient to boost the size of the balance sheet back to 2012 levels. Read more