Finance

Finance

Catalonia and the perils of fiscal redistribution

POPULISM is the weapon not just of the downtrodden. As the crisis in Catalonia demonstrates, the rich have economic anxieties of their own. Catalonia has an identity distinct, in important ways, from that of the rest of Spain. But the recent drive for independence has been energised by anger over the flow of fiscal redistribution from rich Catalans to their countrymen: people seen, in parts of the restless north-east, as thankless and lazy as well as alien. Paradoxically, globalisation has inflamed separatism around the world by raising the question Catalans now confront: to whom, exactly, do we owe a sense of social responsibility? Every country or restive region has its own idiosyncratic history. Yet over the long run national borders are surprisingly malleable. Some circumstances offer ...

Asian households binge on debt

ONE of the more persistent beliefs about the global economy is that Asians are more frugal than others. Explanations have drawn on culture (the self-discipline of Confucianism), history (memories of privation) and public policy (flimsy social safety-nets forcing people to save). For Lee Kuan Yew, the founding father of Singapore, and other theorists of “Asian values”, thrift was one of them. Whatever the true reason, data long supported the basic claim that Asian households were indeed careful with their cash. But over the past few years consumers across the region have done their best to prove that prudence was perhaps just a passing phase. Household debt in advanced economies has generally declined as a percentage of GDP since the 2008 global financial crisis, according to the Bank for I...

October 30th marked the 70th birthday of the WTO’s precursor

SUPERLATIVES surrounded the General Agreement on Tariffs and Trade (GATT) when it was signed on October 30th 1947. A press release heralded it as “the most far-reaching negotiation[s] ever undertaken in the history of world trade.” The Economist grumbled it was “one of the longest and most complicated public documents ever issued—and one of the hardest to comprehend.” The Daily Express, a British newspaper, growled: “The big bad bargain is sealed.” The agreement’s complexity matched the tangle of global trade affairs. In the preceding decades a thicket of protectionism had strangled commerce and slowed recovery from the Depression of the 1930s. The GATT’s length matched its scope. It included both tariff cuts and promises to forswear new duties. Covering 23 countries responsible for 70% of...

Increasingly, hunting money-launderers is automated

KEEN, no doubt, to stay alive, drug traffickers tend to be prompter payers than most. For software firms, this is just one of many clues that may hint at the laundering of ill-gotten money. Anti-money-laundering (AML) software, as it is called, monitors financial transactions and produces lists of the people most likely to be transferring the proceeds of crime. Spending on this software is soaring. Celent, a research company, estimates that financial firms have spent roughly $825m on it so far this year, up from $675m last year. Technavio, another research firm, reckons the market is even bigger and will grow at more than 11% annually in coming years. This is partly because authorities are increasingly quick to punish institutions that let down their guard. Deutsche Bank, for example, has ...

Jerome Powell is poised to be named chairman of the Fed

YOU could forgive Janet Yellen, the chair of the Federal Reserve, for feeling peeved. With unemployment at just 4.2%, and inflation at 1.6%, she is close to achieving the Fed’s two goals of curbing joblessness and pinning price rises at 2%. Ms Yellen is a Democrat appointed by Barack Obama in 2014. The tenures of past three Fed chairs were all extended by presidents from the other party. Yet as we went to press, President Donald Trump was expected to nominate Jerome Powell, a Republican on the Fed’s board, to replace Ms Yellen. If picked, Mr Powell—also an Obama appointee—would stand out from recent incumbents. He would be the first Fed chairman since William Miller, who left office in 1979, with no formal economics training; and, according to the Washington Post, the richest since the 194...

In Japan, the move from cash to plastic goes slowly

BIC CAMERA, a Japanese electronics retailer, accepts payments in so many ways that the list nearly obscures the till: credit, debit and pre-paid cards; mobile wallets; ApplePay and Alipay; and, in some stores since April, bitcoin too. Efforts are under way to wean Japan off genkin, or cash. Handling notes and coins is expensive for businesses; many operate on tight margins because a persistent lack of inflation has inhibited price rises. The government reckons more cashless payments could help the economy, too, encouraging people, including a growing number of tourists, to spend more. (And help it collect more tax.) Entrepreneurs think the data that come with cashless methods could promote new business. Yet cash still dominates. Thank a preponderance of ATMs in ubiquitous konbini (convenie...

Japanese cars enjoy an afterlife in Myanmar, but not for much longer

THE Japanese make cars that last but replace them relatively quickly. The average car in Japan is three years younger than in America. This combination of durable manufacturing and dutiful consumption of a prized national product works out well for the rest of the world; many countries import older Japanese cars in bulk. Secondhand vehicles fill vast parking lots in Japan’s port cities, awaiting shipment to New Zealand, the United Arab Emirates and elsewhere. The third-most-popular destination is Myanmar, which imported over 80,000 used Japanese vehicles in the first nine months of this year, according to Japan’s International Auto Trade Association. Drivers believe that Toyotas, Hondas and Nissans can stand up to the country’s pockmarked roads, a faith not yet shown in South Korean and Ch...

Japan Inc gingerly embraces more foreigners

MICHAEL WOODFORD, the first non-Japanese president of Olympus, likened the camera-maker’s board members who sacked him in 2011 to “children in a classroom”. Mr Woodford had confronted Tsuyoshi Kikukawa, the company’s imperious chairman, over a $1.7bn hole in its finances. Mr Kikukawa responded by orchestrating a show of hands in a boardroom coup that sent the Englishman packing. It all fitted a cliché of Japan’s boardrooms as an all-Japanese, all-male club where wizened bosses ruthlessly enforce wa, or harmony. Gradually, the serenity is being disrupted. Nearly 15% of companies in the Nikkei 225 stock index now have at least one non-Japanese on their boards. That is still less than half the share in Britain’s FTSE 100, but it is up from 12% in 2013 and the trajectory seems set. Japan’s big...

A merger between CVS Health and Aetna could be what the doctor ordered

STANLEY and Sidney Goldstein would scarcely recognise their creation. In 1963 the brothers opened a humble storefront in Lowell, Massachusetts, selling health and beauty products. Determined to put customers first, they named their enterprise Consumer Value Stores. Today the Goldsteins’ startup, soon afterwards sold to a bigger firm, is nothing short of a health-care Goliath. Revenues at CVS Health reached $177bn last year, riches which come from 9,700 retail pharmacies and from its operations in mail-order drugs and sales of more expensive speciality medicines. The firm commands nearly a quarter of the American market for prescription drug sales (see chart). It is also the biggest pharmacy-benefit manager (PBM) in America, a type of middleman that negotiates bulk discounts on drugs with l...

IKEA undertakes some home improvements

ON A Sunday afternoon, just beyond London’s M25 ring road, shoppers participate in the ritual that is a trip to IKEA. Fuelled by a lunch of Swedish meatballs, they negotiate their way around the 400,000-square-foot maze of a store, past children playing hide and seek and couples arguing over the merits of a PAX over a HEMNES wardrobe. Hours later, they emerge, wearily pushing trolleys loaded with flat-pack furniture and far more tea lights than they had intended to buy. The joy of assembly still awaits them. This experience has changed remarkably little since the late 1950s, when IKEA, which is still privately owned, set up its first store in southern Sweden and found that people would travel long distances for low-cost, self-assembled goods. IKEA has become the world’s largest seller of f...

Many Japanese-made cars enjoy an afterlife in Myanmar, but not for much longer

THE Japanese make cars that last but replace them relatively quickly. The average car in Japan is three years younger than in America. This combination of durable manufacturing and dutiful consumption of a prized national product works out well for the rest of the world; many countries import older Japanese cars in bulk. Secondhand vehicles fill vast parking lots in Japan’s port cities, awaiting shipment to New Zealand, the United Arab Emirates and elsewhere. The third-most-popular destination is Myanmar, which imported over 80,000 used Japanese vehicles in the first nine months of this year, according to Japan’s International Auto Trade Association. Drivers believe that Toyotas, Hondas and Nissans can stand up to the country’s pockmarked roads, a faith not yet shown in South Korean and Ch...

The bitcoin bubble

PUT the word Bitcoin into Google and you get (in Britain, at least) four adverts at the top of the list: “Trade Bitcoin with no fees”, “Fastest Way to Buy Bitcoin”, “Where to Buy Bitcoins” and “Looking to Invest in Bitcoins.”. Travelling to work on the tube this week, your blogger saw an ad offering readers the chance to “Trade Cryptos with Confidence”. A lunchtime BBC news report visited a conference where the excitement about Bitcoins (and blockchain) was palpable). All this indicates that Bitcoin has reached a new phase. The stockmarket has been trading at high valuations, based on the long-term average of profits, for some time. But there is nothing like the same excitement about shares as the was in the dotcom bubble of 1999-...