Monthly Archives: October 2015

Kishore Mahbubani Are the British or Chinese more cunning?

| Oct 29 2015 01:00 | Comments |
State Visit Of The President Of The People's Republic Of China - Day 2

President Xi Jinping travels in style with Queen Elizabeth  © Getty Images

Many Asians are puzzled. How can the British and Chinese governments announce a new “golden era” in their relations? The Chinese have long historical memories. How could they have forgotten that Britain was the first western power to humiliate China in the Opium War of 1842? Or that the British, in an act of vandalism comparable to the destruction of Palmyra by the Islamist group Isis, burnt down the magnificent Summer Palace in Beijing in 1860?

The simple answer to this puzzlement is that the British and Chinese governments are two of the shrewdest geopolitical players in the world today. Both have carefully calculated that each will gain from this “golden era”. In theory, the British will gain more. Contrary to the ancient Chinese custom of receiving tribute from supplicant foreign envoys, it is the Chinese who have arrived in the UK with a lot of goodies. The British government has claimed that President Xi Jinping’s state visit last week saw “up to £30bn” worth of trade and investment deals completed, creating more than 3,900 jobs across the UK. London’s stature as a global financial centre is also being boosted as it becomes a bigger renminbi trader. Read more

Tolu Ogunlesi The fight for land rights in Lagos

| Oct 22 2015 05:30 | Comments |
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Badia, Nigeria  © Getty Images

By the time the dust settled, hundreds of homes were gone, replaced by a tangle of broken planks and crushed metal, and thousands of homeless residents. And the bulldozers responsible for this destruction in a section of Badia East, a slum settlement along a century-old railroad that runs westwards across Lagos, towards the port area of Apapa.

Badia is one of more than 100 slums identified by rights groups in Lagos, Africa’s most populous city. Its people insist they have federal documents that assigned occupancy rights to them almost four decades ago, and that the parties laying claim to the land — a loose coalition sometimes fronted by the state government and at other times by a powerful local chief — have yet to produce any compelling documentation proving their own claims. It is taken for granted that in Nigeria, all the power of the state tends to be arrayed on the side of privilege. Read more

Bruce Bartlett How and why the Fed raises rates is as important as when

| Oct 21 2015 05:30 | Comments |
Federal Reserve Leaves Interest Rates Unchanged

The Federal Reserve building in Washington  © Getty Images

One of the arguments one often hears for why the Federal Reserve should raise interest rates is that savers are being penalised by low rates. Higher rates, it is said, would restore to savers a reasonable rate of return and increase personal income. Unfortunately, this argument is simplistic because how and why interest rates rise is critically important; having the Fed raise them by fiat may do more harm than good.

What determines interest rates is probably the most complex in the field of economics. At any given time there may be multiple reasons why market rates rise or fall and other reasons why real, inflation-adjusted rates are changing. Separating the cause is essential for economic analysis, but in many cases the truth may only become apparent in retrospect. Read more

Ahmed Rashid Air cover is what Afghanistan needs from the west

| Oct 16 2015 03:30 | Comments |
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US troops will stay longer in Afghanistan  © Getty Images

President Barack Obama announced on Thursday that he would prolong the present US force in Afghanistan into 2017, beyond his earlier cut-off date for a total withdrawal of US troops before his term ends next year.

The Afghan Taliban are threatening to overrun half a dozen more provinces and their capital cities — a stark reminder of the country’s continuing fragility that appears finally to have convinced Mr Obama to change his mind. Nato responded by saying the US move “paves the way for a sustained presence” by the alliance and it would take “key decisions” in the coming weeks. Read more

Yukon Huang Xi and Obama: the shifting relationship between two powers

| Oct 15 2015 00:32 | Comments |

 

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China's President Xi Jinping (left) and US President Barack Obama at the White House in September  © Getty Images

President Xi Jinping’s visit to the US in late September was risky, coming at a time when China’s economy was seemingly in trouble. Would he be on the defensive and appear weak since market perceptions of China have turned more negative in recent months? Yet the economic realities are less alarming and Beijing has the potential to put its economy on a more sustainable growth path if it so chooses.

Mr Xi’s visit was a meeting between two powers, each with its own strengths and insecurities. China is now the largest economy in the world in terms of purchasing power parity. Thus it is not surprising Gallup polls showed that in 2014, 52 per cent of the American public believed that China was the world’s leading economic power, and with this perception comes many overhyped fears. When the Chinese were asked the same question, they responded that America was the world’s leading economic power. And the Chinese are right. A country’s economic might is determined not solely by the size of its economy but also by its per capita income level, which determines its capacity to deal with issues such as foreign policy and security. By that measure, China now ranks about 80th globally and is the first developing country to become a great power. This explains its insecurity and reluctance to assume the responsibilities expected of a great power. Read more

Mohamed El-Erian Expect Opec members to keep their feet on the production accelerator

| Oct 13 2015 15:10 | Comments |
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Ali Al-Naimi, Saudi oil minister

Judging from Monday’s market reaction, including an oil price fall of 5 per cent, traders were surprised by data showing that, in contrast to past history, Opec members increased production in the face of lower international oil prices. They shouldn’t be. Because of the market’s new supply dynamics, it is in the individual and collective interest of many Opec nations to pump out as much as they can, and this will be the case for a while. Read more

Bruce Bartlett Is the Fed being goaded into raising rates too soon?

| Oct 09 2015 10:35 | Comments |
Janet Yellen Holds News Conference On Fed Interest Rate Decision

Janet Yellen, Fed chair  © Getty Images

All year, financial markets have been expecting the US Federal Reserve to begin the process of normalising interest rates, raising them from the extraordinarily low levels that they have been held at for an unusually long time. An initial rise in the federal funds rate was expected in September, but derailed by a less-than-stellar jobs report. Now markets are focused on a rise in December. Read more

Ahmed Rashid Kunduz hospital tragedy unlikely to focus west on Afghans’ plight

| Oct 05 2015 15:21 | Comments |
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Afghan government forces during fighting with Taliban militants in Kunduz  © Getty Images

Doctors and nurses of the international medical charity Médecins Sans Frontières abandoned its bombed hospital in the Afghan city of Kunduz on Sunday after 22 people — including 12 of its staff and three children — were killed and 37 seriously wounded by American missiles early on Saturday morning. Read more

Fyodor Lukyanov Why Putin made his big move on Syria

| Oct 05 2015 10:50 | Comments |
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Russia's President Vladimir Putin  © Getty Images

Russia’s operation in Syria marks a new era in its political development. For the first time in more than a quarter of a century the Kremlin has undertaken a large-scale overseas military operation necessitated not for peacekeeping or peace-enforcement reasons but because of strategic considerations. Read more

Ivo Daalder A clear choice for Putin over Syrian campaign

| Oct 01 2015 22:35 | Comments |

An image showing Russian airstrikes in Syria  © AP

In deploying military forces in Syria and quickly starting a bombing campaign, has Vladimir Putin outfoxed Barack Obama? Plenty of commentators seem to think so. They see the Russian president’s surprising move into Syria as clear evidence that Washington’s strategy for the region is failing, giving Mr Putin an opening to reassert Russia’s interest and presence in the Middle East. To them, it is yet another indication of Mr Obama’s foreign policy weakness and Mr Putin’s strength.

There is no doubt that deploying dozens of combat aircraft, tanks and armoured personnel carriers and hundreds if not thousands of troops to Syria is a bold move on Mr Putin’s part.

American attempts to prevent Russia from ferrying the forces into the country failed when Iraq refused Washington’s repeated request to close its airspace to the giant Russian transport planes sending in men and military material.

With a growing military presence in the region, the Russian president used the occasion of his first visit to the UN in a decade to denounce the American strategy against the Islamic State in Iraq and the Levant (Isis) as an utter failure and blame the US for the tide of refugees that is now overrunning Europe. And then Russia started bombing. Read more

Diane Coyle The private sector will never solve the UK’s housing crisis

| Oct 01 2015 10:42 | Comments |
Construction Of Luxury Apartments Along The Thames

New residential blocks go up in south London  © Getty Images

Many people would agree with the proposition that there is a housing crisis in the UK. Buying a home in London has become largely unaffordable. One recent study estimated a first-time buyer in Britain would need to earn £41,000 a year to buy a home — almost twice the country’s median full-time salary — or £77,000 a year in London. Higher house prices ripple out from the capital to the rest of the country. Young people find it increasingly difficult to buy a home yet rents are rising faster than inflation and salaries.

The state of crisis is not surprising. The number of new homes being built in the UK each year is the lowest since the mid-1920s. Making up the supply shortfall is widely estimated to require about a quarter of a million new homes a year for the foreseeable future, twice the current rate of building. Meanwhile, in the face of inelastic supply, demand has been rising for many years because of growth in the number of households, demand from overseas buyers in London and a few other markets and growth in real incomes. Recent government policies have tended to increase demand, too. For example, as their names indicate, both Help to Buy and Rent to Own subsidise buyers.

If supply is inelastic, the increase in real house prices over the medium term should depend on household growth and real income growth. The actual increase has been even greater than these demand-side fundamentals would suggest because, of course, housing is also an asset, the most important one many people own. Its current market price depends not only on the housing services consumed over time but also on the prospective capital gain. Read more