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In the consumer realm, Asia has always been about choices. Which smartphone, which brand of music, which kind of cuisine and increasingly which kind of car are the kinds of decisions at a consumer level that Asians make on a daily basis. There has been and continues to be brand loyalty that is often aligned with nationally favoured producers, but there are numerous examples of popular brands that have a broader cross-border regional appeal (witness Toyota cars traditionally or Samsung Electronics and K-pop music today).
Despite the historical tensions and distrust that lurk just beneath the surface of Asia’s modern prosperity, there has been remarkably little pressure or imperative for political elites or governments to make choices with regard to friendships or favourites in their respective strategic relations. Indeed, what is most striking is how the strong political and security ties between several Asia-Pacific states and the US have coexisted relatively comfortably with very strong (and growing) commercial and economic ties between these same countries and China. Continue reading »
Huge cash buffers, together with cheap and plentiful financing, are fuelling a merger and acquisition boom that has delivered sizeable windfalls for investors. To sustain these gains, however, real economic growth will need to materialise from what, at least so far, remains a phenomenon dominated by financial engineering and mostly short-term objective maximisation.
The numbers are unambiguous. After a hyper-cautious period triggered by the trauma of the 2008 global financial crisis, companies are increasingly putting their record cash holdings to work – so much so that the herd instinct has shifted from prudent accumulation to concern about being seen to be just sitting lazily on cash. Continue reading »
This year’s annual conference of central bankers in Jackson Hole is focused on the right question: how to determine the extent of labour market slack in the US and other advanced economies. This is the most pressing issue for Janet Yellen, Federal Reserve chairwoman, and her colleagues, given the limits of what monetary policy can do about structural unemployment.
There has been a legitimate debate over what lies behind the low US labour force participation rate, which measures the proportion of adults who are either working or looking for work. Some blame demographics, with two large cohorts (ageing baby boomers and women of child-bearing age) both disproportionately likely to leave the workforce. Eight years ago, a group of Federal Reserve staff predicted in an academic paper that labour force participation would fall to about 63 per cent this year for precisely this reason. That turned out to be eerily close to reality, suggesting the US may be at full employment. If so, there is nothing the Fed can do to improve matters; it would cause inflation if it tried. Continue reading »
What is it about political leaders installed by America in third world countries? It seems they never want to leave office. It started in Vietnam in the 1960s, where the CIA ruthlessly removed Vietnamese leaders who at first were useful to the US occupation, but refused to step down when they were not.
President Hamid Karzai of Afghanistan was a darling of Washington after the attacks of September 11 2001. Now he is a hate figure in the US capital, alleged to have allowed rigged elections that have plunged the country into an ethnic crisis that pitches Pashtuns against Tajiks. Continue reading »
Investors have already navigated a global financial crisis, experimental monetary policies and a frustratingly weak western recovery.
Now they face an additional challenge: how to deal with politically motivated sanctions on Russia that are both broadening (targeting whole sectors rather than individuals and particular firms), and morphing (from being imposed by the west on Russia to involving counter sanctions). Continue reading »
What the world saw last Thursday evening was an American president torn between personal preferences and cold reality. The result is a US that is once more moving towards greater military involvement in Iraq – but only reluctantly and incrementally.
Describing himself as someone who ran for office “in part to end our war in Iraq and welcome our troops home”, Barack Obama announced a policy of dropping supplies to save thousands of members of the Iraqi Yazidi religious minority – and authorised but did not order air strikes on advancing insurgents from the Islamic State of Iraq and the Levant (known as Isis). Continue reading »
The latest data release of the Italian second quarter gross domestic product shows that the economy shrank 0.2 per cent, confirming that the country is back in recession. This is worrying in several ways. It brings GDP below the 2000 level, making Italy the worst performer since the start of the European monetary union. The slowdown in exports, the only component of GDP that had grown in the recent past, shows the underlying fragility of the country’s economy and its lack of competitiveness. The negative result, together with the very low level of inflation, makes debt sustainability more difficult to achieve, thus raising new concerns in financial markets.
The most worrying aspect, however, is that the recent number proves once again how wrong economic forecasts have been about the Italian economy. At the end of last year, the consensus of Italian and international institutions projected the 2014 GDP growth at about 0.6 per cent. The Italian government courageously aimed at 0.8 per cent. These forecasts were revised down earlier this year – and lately by the International Monetary Fund – to 0.3 per cent. The last release will probably induce a further correction towards zero. Continue reading »
Faced with a choice between solving a problem and winning an issue, Barack Obama invariably opts for the former. The US president is a pragmatist who sees compromise not as a painful necessity but as a virtue. Unfortunately, he has seldom found any partners for peace on Capitol Hill. House Republicans do not lose their seats when they fail to address a challenge such as the budget or immigration. They lose them when they cast unpopular votes.
In his first term, this conflict between presidential temperament and legislative incentive was frustrating to Mr Obama’s liberal base. As the president continued to give but not receive, they came to regard him as timid and weak. Continue reading »
Disillusionment with Washington has rarely run higher. Congress is unable to act even in areas where there is widespread agreement that new measures are necessary, such as immigration, infrastructure and business tax reform. Barack Obama’s administration is condemned as ineffectual with respect to both domestic and foreign policy.
There was once a flood of extraordinarily talented people eager to accept political appointments and go into government; it has shrunk to a trickle. Crucial positions remain unfilled for months or years. Continue reading »
Barack Obama’s decision to bomb the forces of Isis – in order to blunt the danger of a genocidal mass killing of tens of thousands of Christians and Yazidis seeking shelter in the mountains of northern Iraq without food and water – reflects a much-needed change of policy, but could be too little too late.
Never before in modern Islamic history has a group such as Isis so mercilessly set out to not only undo long-standing frontiers in Iraq and Syria, but also to carry out mass killings of Muslims and non-Muslims (Isis do not consider Shia as Muslims and has been executing them at will). Continue reading »