The new travel order rules face a court challenge

ON THE evening of June 29th, five months after issuing his first executive order halting travel from several Muslim countries and suspending America’s refugee programme, Donald Trump’s restrictive border policy finally went into effect. The legality of Mr Trump’s revised order (issued on March 6th) will be on the Supreme Court’s docket in the autumn, but on June 26th, the justices let it go forward in the meantime—with significant caveats. Entry to America may be barred “with respect to foreign nationals who lack any bona fide relationship with a person or entity in the United States”, the court said. But the travel ban cannot apply to people with family connections in America. Until the Supreme Court has a chance to fully consider the matter, “foreign nationals who have a credible claim of a bona fide relationship with a person or entity in the United States” are to be exempted from Mr Trump’s executive order.

Just before the...Continue reading

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Russia convicts Boris Nemtsov’s killers, but the organisers are still unknown

IN LATE 2014, Boris Nemtsov, a Russian opposition leader, wondered aloud about the consequences of allowing the head of the Chechen republic, Ramzan Kadyrov, to amass his own armed forces. “The contract between Kadyrov and Putin—money in exchange for loyalty—is ending. Where will Mr Kadyrov’s 20,000 men go?” he wrote. “When will they come to Moscow?” Just a few months later, Nemtsov was gunned down while walking with his girlfriend across a bridge in the shadow of the Kremlin. The killing rattled the Russian political world and horrified the liberal opposition that looked up to Nemtsov, a charismatic former deputy prime minister who had once seemed destined for the presidency. 

On June 29th, after three days of jury deliberations, a Russian court convicted five Chechen men in connection with the assassination. Yet for Nemtsov’s supporters, the verdict brought little solace. Those convicted may have carried out the killing, but the Russian state has proved...Continue reading

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Time to Choose Sides in Global Markets

The first half of 2017 has ended with big moves in global bond yields and exchange rates, sparked by a belated realization that central banks are increasingly edging toward reining in extraordinary policy measures. The stage is set for a scrappier second half.

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Iraq claims a slightly premature victory over Islamic State

IRAQ’S prime minister, Haider al-Abadi, has claimed victory over Islamic State (IS), after his army captured the ruins of Mosul’s 12th-century al-Nouri mosque, where IS’s leader declared his “caliphate”. It has been an arduous campaign. Previous battles for the city have been short-lived. In 1918 and 2003 British and American forces marched into the city almost unopposed. But IS’s defence of Iraq’s second city against an overwhelmingly more powerful coalition has lasted for over eight months. Obstacles and trenches have cut up the approach roads into and all over the city. Even now two small pockets in the city remain, including several main streets in the heart of the Old City adjoining the Tigris River. Tens of thousands of people are estimated to remain under IS control.

The longer the fighting has continued, the more it appears to have intensified. With no escape routes, IS fighters scorched the earth as they retreated. With the same zeal they applied to...Continue reading

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Economy Is Losing a Big Booster

The oil-price rebound gave capital spending a boost but weakening prices means it will likely be short-lived.

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India's Tax Reform Is Far From Straightforward

A new goods and sales tax is an improvement on the current situation, but still too complex

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China to Markets: Relax, Global Growth is Fine

While global bond and stock markets are under pressure, the latest data from China contained some encouraging news.

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Why Washington, DC’s programme for homeless families isn't working

THE tiny flat in northeast Washington, DC was damp and verminous but, after six months living in a hostel for the homeless, Sarah and her 10-year-old daughter loved it. Even with its defects, the flat was more than Sarah could afford; the rent is $900, which is roughly what she earns, as a part-time lollipop lady, helping schoolchildren across the road. Washington DC’s government covered half the cost—but, under the terms of its “rapid rehousing” programme, only for three years and now the family’s time is almost up. Sarah has been served with an eviction notice and worries she will soon have to move back to a hostel or a shelter. 

Her story is a common one, according to a recent report published by Washington Legal Clinic for the Homeless. Washington has the highest rate of homelessness among America’s big cities. Among families it is particularly high. Between 2013 and 2017, according to an annual one-day count, the number of homeless families in the district rose by 23%, to almost 1,200. This year’s tally showed...Continue reading

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Why farmers are anxious about NAFTA

“I HAVE always told you that I will either renegotiate or terminate NAFTA,” said President Donald Trump at a recent rally in Cedar Rapids, Iowa. He had been about to pull out of the North American Free-Trade Agreement with Canada and Mexico, he explained. But then he got a nice call from Justin Trudeau, Canada’s prime minister, and another from the president (“good guy”) of Mexico asking him to negotiate: “and I am always willing to negotiate.” Even so, Mr Trump insisted, NAFTA has been very unfair to the United States, so he will renegotiate successfully—or pull out. The audience applauded, but rather hesitantly.

Of America’s top ten farm states by cash receipts from production, six are in the Midwest, and Iowa ranks second, after only California. Farmers have benefited from NAFTA more than other industries, which is why they are now fighting hard against messing about with the treaty. In 1993 America exported corn, soyabeans and other farm products worth $8.9bn to...Continue reading

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Are conservatives right about Medicaid?

MANY conservatives worry that once an entitlement programme exists, it is all but impossible to pare back. They will be disheartened by the postponement, on June 27th, of a Senate vote on the Republicans’ health-care bill. The party’s moderates cannot tolerate the proposed cuts to Medicaid, the federal and state health-insurance programme for the poor. Under the bill, which will now be amended or rewritten, Medicaid’s budget would have been 26% lower in 2026 than currently forecast. “Medicaid cuts hurt [the] most vulnerable Americans,” noted Senator Susan Collins of Maine, announcing her opposition. Conservative justifications for cuts—that Medicaid has grown too big, and is ineffective—must compete with the fact that one in five of Ms Collins’s constituents use the programme. But are the right’s complaints about Medicaid justified?

When Medicaid began in 1965, it served two groups: those who also received cash welfare from the government, and whomever states deemed to be “medically needy”. That mostly meant elderly residents of nursing homes. But it could be much broader. New York included almost half its population. Because the federal government picked up over half the tab, in 1976 Congress tried to control costs by limiting coverage to the poor and nearly-poor.

In the 1980s, however, Washington oversaw a gradual broadening of...Continue reading

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Luxury travel for your pet

More than 2m live animals are transported by air every year in America. Those going through John F. Kennedy Airport in New York have the best of it, thanks to the Ark, which claims to be America’s first 24-hour privately-owned airport terminal for animals. So far it has hosted dogs, horses, cats, baby goats, parrots and a giant rat. Penguins and other water fowl have a bed-sized water basin and a frozen floor. Italian opera, usually Luciano Pavarotti, is piped into the Ark’s equine centre. The handlers say the music has a calming effect on the horses as they await departure for racing, dressage, show-jumping and polo events. Meanwhile humans trudge through security and then board planes with narrower seats and less legroom than they had in the 1970s—doggone it.

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Assessing the first months of the new nine-member Supreme Court

WHEN the justices took their chairs last October, Hillary Clinton was a shoo-in for the presidency and Antonin Scalia’s seat seemed destined for a jurist who would anchor a liberal Supreme Court majority for the first time in almost five decades. Nine months later, as the justices wrapped up a largely uncontentious term, Neil Gorsuch, Donald Trump’s pick for Mr Scalia’s seat, seems poised to cement the court’s conservative tilt for the foreseeable future. “Conservatives have to be clinking their champagne glasses,” says Elizabeth Wydra, president of the Constitutional Accountability Centre.

Justice Gorsuch joined the court in mid-April, taking part in only 13 of the 60-odd cases handed down by the end of June. That is enough to confirm that he mimics his predecessor’s jurisprudence. Indeed, he seems to be even more conservative: his votes are in lockstep with those of the right-most justice, Clarence Thomas. In the eyes of Ian Samuel of Harvard Law School, who...Continue reading

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The American revolution revisited

IN MARCH 2016, at a dismaying moment in the election campaign (there were a few), the Republican Speaker of the House of Representatives, Paul Ryan, urged a gathering of congressional interns to recall the “beautiful” experiment that created America. This, Mr Ryan told the youngsters, is the only nation founded not on an identity but on an idea, namely: “that the condition of your birth does not determine the outcome of your life.” Conceding that modern politics might seem consumed with “insults” and “ugliness”, the Speaker insisted that this was not the American way. The Founders determined that their noble idea could be upheld only with reasoned debate, not force. Mr Ryan cited the first of the Federalist Papers, and Alexander Hamilton’s counsel that in politics it is “absurd” to make converts “by fire and sword”.

He was drawing on a rich rhetorical tradition. Browse through school history books, with names like “Liberty or Death!”,...Continue reading

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Crime and despair in Baltimore

BACK in the 1980s and early 1990s, when Dante Barksdale was playing the game in Baltimore—dealing drugs, toting guns, making some money—there was a process to killing people. “You couldn’t shoot someone without asking permission from a certain somebody,” muses the former gangster, on a tour of the abandoned row-houses and broken roads of West Baltimore, the most dangerous streets in America. “It’s become like, “I’m going to kill whoever’s got a fucking problem with it.”

Mr Barksdale, who spent almost a decade in prison for selling drugs, speaks with authority. His uncle, Nathan “Bodie” Barksdale, was a big shot in the more hierarchical Baltimore gangland he recalls. Avon Barksdale, a fictional villain in “The Wire”, a TV crime drama set in Baltimore, was partly inspired by him. The younger Mr Barksdale was himself fleetingly portrayed in it. (“‘The Wire’ was a bunch of bullshit,” he sniffs. “I got shot in the fourth episode and I didn’t...Continue reading

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Capital One Needs to Explain Itself

Capital One’s poor showing in the Federal Reserve’s stress tests raises new questions about the company’s risks.

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Rite Aid Crashes Into the Bargain Bin

Rite Aid’s deal with Walgreens isn’t a dream scenario, but it will strengthen the pharmacy chain’s balance sheet and make it more attractive to future suitors.

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What Angela Merkel’s shift on gay marriage reveals about her style

IT WAS a relaxed event at a Berlin theatre on June 26th. Angela Merkel was taking questions from the readers of Brigitte, a lifestyle magazine. A young man asked her: “When can I get to call my boyfriend my husband?” The chancellor, who had previously described marriage as the union of a man and a woman, gave a typically cryptic answer. She noted the “difficulties” that “some” have with same-sex marriage and described being affected by a meeting with a lesbian couple in her constituency. Then came the crucial phrase. Her Christian Democrat (CDU) party, ventured Mrs Merkel tentatively, should shift “somewhat in the direction of a question of conscience”.

Then things moved fast. The next day her Social Democrat (SPD) coalition partners picked up on the comment, broke with the CDU and called a parliamentary vote on gay marriage with the socialist Left party and the Greens. The day after, the chancellor gave it her blessing. As The Economist went to press the vote was due on June 30th, and was expected to pass with the backing of the three left-of-centre parties and a handful of CDU MPs. If such a result clears the upper house (probable) and survives any challenges in the constitutional court (also probable), Germany will later this year join most of western Europe in letting same-sex couples tie the knot like...Continue reading

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The West backs Balkan autocrats to keep the peace, again

ON JUNE 23RD, in the presence of as many foreign dignitaries as he could muster, Aleksandar Vucic had himself anointed president of Serbia. The former prime minister, elected on April 2nd, had taken the oath of office in May, but decided to stage a big inaugural ceremony to demonstrate his stature. To succeed himself as prime minister Mr Vucic nominated Ana Brnabic, an openly gay woman, earning plaudits from foreign liberals.

In fact it is Mr Vucic who will run the country, and he is no liberal. Yet Western leaders are relieved. Serbia is the most powerful country in the western Balkans, and Mr Vucic, whatever his flaws, can keep it stable. Variations on this deal can be seen across the region. Some are calling such governments “stabilitocracies”.

Mr Vucic’s main opponent in the presidential race was Vuk Jeremic, a former foreign minister. The campaign was filthy. Media sympathetic to Mr Vucic made outlandish allegations: Mr Jeremic was purportedly a secret Muslim supported by Islamic State who had been complicit in a high-profile murder; his wife supposedly headed a drugs cartel. The police abruptly questioned him over alleged financial improprieties. No charges were filed, and Mr Jeremic says the stories were all fiction.

What happened to Mr Jeremic shocked no one. According to Srdja Pavlovic, the Montenegrin academic who coined the term...Continue reading

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Turkey is taking care of refugees, but failing to integrate them

THE refugee camp on the outskirts of Kahramanmaras, in Turkey’s south, glows as brightly as the local officials singing its praises. The air-conditioned container-unit houses, home to 24,000 displaced Syrians and Iraqis, are spotless. Each unit comes with a kitchen, a bedroom, a television and a laundry machine. The camp also boasts a school, a hospital and a supermarket. “We have all that we need,” says Muhammad Darwish, cradling his baby niece, Hiyam, one of over 240,000 refugee children born on Turkish soil since 2011. Turkey’s president, Recep Tayyip Erdogan, surveys the scene from a huge banner near the camp’s entrance, his image next to that of a distraught child. “It is a matter of conscience,” reads the caption.

To the people of the surrounding villages, it is also a matter of controversy. The camp’s residents are all Sunnis. The village locals are Alevis, members of Turkey’s biggest religious minority and distant cousins of the Alawites, the sect that forms the...Continue reading

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France launches its last high-speed rail lines

IT TAKES courage to mess with one of France’s most-loved brands. The public adores its TGV—Train à Grande Vitesse—as a symbol of modernity, and because many families dreamily associate the double-decker trains with long summer holidays. Yet from July 2nd, in time for les vacances, the state-owned railways, SNCF, will do away with the three-letter marque: the TGV service will be renamed “InOui”.

The change comes at a fateful time. On July 1st Emmanuel Macron, the president, will flag off France’s ninth and tenth high-speed routes, serving the country’s west. Rennes will be just an hour and a half from Paris. Yet no more entirely new lines are being built after these. The Rennes track alone consumed many billions of euros in a decade of construction. A report in 2014 by the public auditor found the lines rarely bring cities wider economic benefits.

Now SNCF is recasting itself, says a senior manager, as a...Continue reading

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Eastern Europeans think Western food brands are selling them dross

FOR some it is the cheese and yogurt; for others the fruit juice. But for Tibor Ferko, a young butcher from Usti nad Labem, a city in the northern Czech Republic, it is the chocolate that leaves him slavering at the chops. Mr Ferko gestures with near-Italian flamboyance as he recalls the “creamy” texture of the Milka bars available just across the German border but denied to him by the inferior product at home. A few miles away, in a supermarket off the Srbice highway, Zdenek Kuklik vows never again to visit Czech shops for the Hipp baby food he feeds to the son clinging to his chest. Why? Because on the one occasion they bought locally he instantly spat the stuff out, explains his wife. From now on it will be strictly the superior product from across the border.

Suspicions that multinationals dump second-rate versions of the branded products they sell to westerners have a long pedigree across the ex-communist countries of eastern Europe. A mini-industry of angry consumer shows and...Continue reading

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Georgia, a model of reform, is struggling to stay clean

Whatever floats your tree

GEORGIA has been known for excess and eccentricity since ancient times, when it was called Colchis, the home of Medea and the Golden Fleece in Greek mythology. But even by Georgian standards, the latest hobby of Bidzina Ivanishvili, the country’s richest and most powerful man, is extravagant. The reclusive oligarch, whose hilltop glass-and-steel castle towers over Tbilisi, the capital, buys the oldest and tallest trees in the country, digs them out and transports them by road and ship to his residence on the Black Sea.

Most Georgians are amused, and hope he will buy one of theirs. But the image of a 100-year-old, 650-tonne tulip tree sailing over the water is an apt symbol for Mr Ivanishvili’s role in Georgia. The billionaire, who holds no official post but pulls strings from behind the scenes, is changing not only its physical but its political landscape. He has also uprooted the largest figure in Georgian public life, former...Continue reading

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Kazakhstan: the crossroads of the new Silk Road

WHEN an authoritarian ruler builds a gigantic dark globe, he should not be surprised that people call it the “Death Star”. But whereas the Death Star from “Star Wars” was a tool for wiping places off the map, the Kazakh pavilion at Expo 2017, which opened in June in Astana, Kazakhstan’s capital, is supposed to put the Central Asian country of 18m on the map, especially for investors. The Death Star celebrates traditional forms of Kazakh hospitality, such as giving guests a warm coat, or a sheep’s head for supper. A shopping mall named after the old Silk Road offers fancy souvenirs.

Kazakhstan is at a crossroads, both literally and figuratively. Geographically, it is sandwiched between Russia, China and the Middle East, astride once and future trade routes. The president, Nursultan Nazarbayev, is eager to turn this location to Kazakhstan’s advantage, by joining China’s “Belt and Road” programme of new transport links between Asia, Europe and Africa. Over the past two...Continue reading

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The price of admission to Japanese politics is high

At least help us get our money back

SETSU KOBAYASHI is still smarting from his brief foray into Japanese politics last year. A constitutional scholar, he set up a centrist political party called Kokumin Ikari no Koe (“The Angry Voice of the People”). But the people were not as angry as he thought: none of the party’s list of ten candidates won any of the seats allocated by proportional representation in elections for the upper house of parliament. They had each deposited ¥6m ($53,000) to run, which they all forfeited. The whole exercise left Mr Kobayashi ¥60m out of pocket—the price of a nice apartment in Tokyo. “Never again,” he says.

Candidates for first-past-the-post seats in parliament pay half as much (¥3m)—but that is still swingeing by international standards (see chart). This creates a big obstacle for new parties or independents trying to break into politics. Tokyo is about to hold elections for its local assembly; candidates must stump...Continue reading

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Mahathir Mohamad’s return shows the sorry state of Malaysian politics

WHEN Mahathir Mohamad spent a week in hospital last year, at the age of 91, talk naturally turned to his legacy as Malaysia’s longest-serving former prime minister. How naive. Dr Mahathir may have stepped down in 2003 after 22 years in office, but he has hardly been retiring in retirement. His constant sniping helped topple his immediate successor, Abdullah Badawi, who lasted until 2009.

Now the old warhorse is picking a fight with Najib Razak, the prime minister since then and now leader of Dr Mahathir’s former party, the United Malays National Organisation (UMNO), which has run Malaysia for the past 60 years. Dr Mahathir has registered a new political party and persuaded Pakatan Harapan, the fractious coalition that forms Malaysia’s main opposition, to admit it as a member. Now Pakatan is debating whether to make Dr Mahathir the chairman of their coalition—and, perhaps, their candidate for prime minister at elections which must be held within 13 months. Having long said that he...Continue reading

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Inside Pakistan’s sex-toy industry

INSIDE a small, gloomy factory in a provincial city in Pakistan, two young men huddle over a grinding wheel. They believe they are making surgical instruments. But like many of the small, local firms manufacturing steel and leather goods for export, their employer has a new sideline. The nine-inch steel tubes whose tips the men are diligently smoothing are, in fact, dildos. “It’s just another piece of metal for them,” says the firm’s owner, who picks one up to show how his worldlier customers—all of them abroad—can easily grip the gleaming device.

This surreptitious set-up is inevitable. That a country as conservative as Pakistan exports anal beads, gimp masks and padlockable penis cages, among other kinky wares, would shock locals as much as the Westerners whose hands (and other parts) the finished products end up in. Fearing the response of religious hardliners, many of the companies involved do not advertise their wares on their own websites. Instead, they list the saucy stuff through Alibaba, a Chinese e-commerce giant that acts as a middleman for many businesses in the developing world. Some officials demand bribes to allow the exports to flow. Others are simply unaware of the potential for mischief in, for example, a Wartenberg Pinwheel—a spiked disc that can be run across the skin.

The risk has so far proven worthwhile. A local maker...Continue reading

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Voters in Papua New Guinea head to the polls

ACCORDING to legend, tribesmen from the Asaro river valley in the remote eastern highlands of Papua New Guinea (PNG) first began covering their bodies in white clay and donning grotesque, swollen-headed masks to make their enemies think they were spirits. On a brisk June afternoon in Goroka, the capital of Eastern Highlands province, a dozen Asaro Mud Men, as they are colloquially known, moved slowly and deliberately through a crowd of hundreds gathered on a dusty field, bows drawn and spears in hand. Elsewhere members of another local tribe danced in a circle in leaf skirts and ornate feathered headdresses. A band played up-tempo reggae while buses and lorries festooned with fern fronds and draped with campaign posters for Gabriel Igaso, the would-be parliamentarian whose rally this was, drove slowly through the crowd, packed with cheering supporters. Much of the town turned out for the afternoon’s entertainment.

Rallies like this have taken place across PNG since April 20th, when...Continue reading

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Why fertiliser subsidies in Africa have not worked

ASK Anesi Chishiko about fertiliser, and she points to her goats and her trees. Manure and leaves are all that she folds into the earth on her family farm in Zambia. Inorganic fertiliser is too costly: the government offers subsidies, but only “clever people” know how to get them, she explains. Her maize sucks up nutrients more quickly than she can replace them. Each year, she says, the soil gets worse.

Farmers in sub-Saharan Africa use little fertiliser: the region accounts for just 1.5% of the world’s consumption of nitrogen, a crucial nutrient. Governments, who want them to use more, spend nearly $1bn annually on subsidies. That is good business for traders, and good politics for leaders chasing rural votes. But it is not the best way to help small farmers like Ms Chishiko. Fertiliser often reaches them late, or not at all. And the cost saps budgets as surely as overcropping saps the soil.

An earlier generation of subsidies was phased out in the 1990s, at...Continue reading

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Algeria: reviving the land of the living dead

Bouteflika, ready for a fifth term

EVERY 15 seconds out pops a washing machine, a television and an air-conditioner from the modern production lines in Setif, 270km (170 miles) east of Algiers. Some 90% of them are destined for export. Algeria offers cheap labour, proximity to Europe and has been calm for a decade. Production costs are a seventh as high as in France, says a manager at the Algerian company, Cevital, which recently acquired Bradt, a French manufacturer of domestic appliances. A new 100-hectare site is set to open across town early next year.

Historically Setif has been a turbulent city. A massacre of demonstrators there triggered the guerrilla war that forced out the French colonists in 1962. In the 1990s jihadists waged a decade-long revolt, taking refuge in the mountains near the town. Only last month the security forces fired rubber bullets at retired army officers demanding higher pensions.

So the government should welcome fresh...Continue reading

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Why justice in Africa is slow and unfair

IT IS is a little past 11 o’clock in the morning and Courtroom C is silent. The accused, the defence attorney, the state prosecutor and even the judge who is supposed to be trying the case of The State v Innocent Gwekekwe are absent. In fact, almost all of the courts turn out to be empty. A clue to the mystery may lie in the smell of fried chicken wafting along the airy corridors of Harare’s High Court building, which manages to get through less than half of the matters put before it each year, leading to an ever longer backlog of cases.

The wheels of justice may turn slowly in Zimbabwe, but in some other parts of the continent they have almost fallen off. In the Central African Republic (CAR), for instance, UN peacekeepers lament their inability to arrest criminals in the town of Kaga Bandoro because there are no holding cells to hold them, never mind courtrooms or judges to give them a fair trial.

Zimbabwe and the CAR are extreme examples, but...Continue reading

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How war-torn Yemen gets ice cream

CHOLERA spreads, with over 200,000 new cases reported. Malnutrition is rife. Government salaries were last paid a year ago. But the customers keep coming at the local franchise of Baskin-Robbins, an American ice cream brand, in Sana’a, Yemen’s rebel-held capital. Since the war erupted, the company has added a new branch to the five it already has in the capital. “Our best-seller is pralines,” says one of the managers, who last month served more than 16,000 customers.

When Saudi Arabia and the United Arab Emirates first began bombing in March 2015, getting supplies quickly became a problem. The tubs are shipped from America, but bombing knocked out the refrigeration units in Aden, the southern port, and the road north was treacherous. So Baskin-Robbins rerouted their orders through Salala, a port in neighbouring Oman. Each month a freezer truck brings its fresh stock of 20 flavours 1,500km (900 miles) through the desert. The journey is expensive and tiresome but mostly safe, so long...Continue reading

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Alarm grows about over-exuberance in corporate lending

WHEN the financial crisis was at its height in 2008, being a debtor was a dreadful experience. Banks and companies scrambled desperately to get the financing they needed.

But the balance of power in the financial markets can easily shift. In 2005 and 2006, credit had been easy to get on generous terms. Not only were loans cheap and plentiful; they also suffered from fewer restrictions. Until then, corporate loans had many covenants offering safeguards for lenders if the debtor’s financial position were to deteriorate. But 2005-06 saw the emergence of “covenant-lite” loans in which such restrictions were virtually non-existent.

The cycle has turned again. Analysis by Moody’s, a ratings agency, shows that the proportion of the loan market that is “covenant-lite” has risen from 27% in 2015 to more than two-thirds in the first quarter of this year (see chart). Some loans even contain restrictions on the lender, not just the borrower. Private-equity firms demand a veto over...Continue reading

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What Asia learned from its financial crisis 20 years ago

MUSEUM SIAM in Bangkok is dedicated to exploring all things Thai. Until July 2nd, that includes an exhibition on the Asian financial crisis, which began on that date 20 years ago, when the Thai baht lost its peg with the dollar. The exhibition features two seesaws, showing how many baht were required to balance one dollar, both before the crisis (25) and after (over 50 at one point). Visitors can also read the testimony of some of the victims, including a high-flying stockbroker who was reduced to selling sandwiches, and a businesswoman whose boss told her to “take care of the work for me” before hanging himself. (In Hong Kong, Japan and South Korea, 10,400 people killed themselves as a result of the crisis, according to subsequent research.) In Thailand the financial calamity became known as the tom yum kung crisis, after the local hot-and-sour soup, presumably because it was such a bitter and searing experience.

The exhibition’s subtitle, “Lessons (Un)learned”, seems unfair. The victims of the crisis (Thailand, South Korea, Malaysia, Indonesia and Hong Kong) took many lessons to heart. With the exception of Hong Kong, they no longer rely on a hard peg to the dollar to anchor inflation, giving their currencies more room to move. (The sandwich vendor’s chosen logo for his new business...Continue reading

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The complicated failure of two Italian lenders

BANKS sicken slowly but die fast. For years Banca Popolare di Vicenza and Veneto Banca, in the prosperous Veneto, in north-east Italy, had been plagued by mismanagement. Even criminal investigations are under way. For months the Italian government had been wrangling with European authorities over the terms of a bail-out. For weeks it had seemed improbable that private investors would put in money alongside the state, as the European Commission insisted.

On June 23rd the European Central Bank (ECB) declared that the banks were “failing or likely to fail”. Two days later, after a frantic weekend, the Italian government pronounced them dead: their good assets were sold to Intesa Sanpaolo, Italy’s second-biggest lender, for a token €1 ($1.14), and their dud ones put into a “bad bank”. The operation may cost Italian taxpayers €17bn. This is the second call on Italy’s public purse this month. On June 1st the commission approved, in principle, the rescue of long-troubled Monte dei...Continue reading

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Developing countries rebel against the credit-rating agencies

EARLIER this year, a crowd of patriotic Indian students bristled when Arvind Subramanian, the government’s chief economic adviser, showed them a slide with two charts. One showed India’s steady economic growth and flat debt-GDP ratio; the other China’s slowing growth and fast-rising debt. Yet India’s credit rating from S&P Global Ratings (formerly Standard and Poor’s), has been stuck at BBB-. China, on the other hand, was upgraded from A+ to AA- in 2010 even as its debt shot up. The slide was pithily titled “Poor Standards”.

Rating government debt is always controversial. And India v China is often a grudge match. But many emerging-market governments agree with Mr Subramanian, who has contrasted the rating agencies’ treatment of India with that of the rich world in the 2008 crisis, when they “closed the stable doors after the horses bolted”.

In frustration, the BRICS grouping—Brazil, Russia, India, China and South Africa—plans to set up an...Continue reading

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Pakistan’s old economic vulnerabilities persist

THE IMF, claims Pakistan’s government, is surplus to requirements. Ministers in its business-minded ruling party, the Pakistan Muslim League-Nawaz (PML-N), boast of a record that means the country can pay its own bills. “We will not go back to the IMF programme,” declared Ishaq Dar, the finance minister, in May, almost a year after the completion of Pakistan’s most recent, $6.6bn bail-out. In a country that mistrusts Western assistance and where protesters portray the IMF as a bloodthirsty crocodile, such words have a heady appeal. But they ring hollow.

On June 16th the IMF warned of re-emerging “vulnerabilities” in Pakistan’s economy. It praised GDP growth of above 5% a year, but noted missed fiscal targets and a ballooning current-account deficit. The fund’s own projections a year ago for the fiscal year ending this June underestimated this deficit by about half the final total of $9bn. And based on trends in early April it overestimated the fiscal-year-end foreign-exchange reserves by $3bn.

Independent economists point out that, many times before, collapse has come on the heels of an IMF programme’s conclusion. Sakib Sherani, a former government economist, says that to avoid “egg on its face” for cheerleading Pakistan’s economic recovery just months ago, the IMF is slowly changing its story. By the end of 2018, many predict,...Continue reading

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America’s banks pass the Federal Reserve’s tests

OVER the years, the grumbles have got louder. Since 2011 America’s big banks have undergone annual “stress tests” overseen by the Federal Reserve, along with scrutiny of their plans for paying dividends and buying back shares. A product of the post-crisis Dodd-Frank act, the tests are intended to make sure that lenders have enough equity on hand should catastrophe strike again. But banks say they are both opaque and burdensome. And because failure can mean a block on payouts, the tests have bred caution and ire.

The time for caution seems to be over. On June 28th the Fed said it had approved the dividend and buy-back plans of all 34 banks tested this year—plans which propose handing shareholders a pile of cash. All 34 also passed the first stage, results of which were revealed six days earlier and which assume no repurchases and unchanged dividends. Even under a “severely adverse” scenario involving a nasty recession, all would keep key capital ratios above the...Continue reading

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Kenya launches the world’s first mobile-only sovereign bond

Trading floor of the future

MOBILE money is ubiquitous in Kenya. Someone tapping on their phone might be paying school fees, sending money home or donating to a church. Soon they might be trading bonds. On June 30th the Kenyan government was due to launch M-Akiba, the world’s first sovereign bond to be sold exclusively through mobile platforms.

The bond is marketed at small investors, who will not need a bank account to take part. They can register on their phone in a few minutes and invest as little as 3,000 shillings ($29), far less than the 50,000 shillings needed to buy other treasury bonds. “Akiba” means savings in Kiswahili. The government is keen to promote thrift and is offering a juicy 10% annual return on the three-year bond, about three percentage points above deposit rates at commercial banks. Coupon payments are made through mobile money.

A pilot offer in March lured over 100,000 people to register. But only 5,692 of them went on...Continue reading

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America’s programme to help trade’s losers needs fixing

Alas, poor Warrick

BRIAN AUNSPACH thought he had a job for life. After six years at a smelter owned by Alcoa, America’s largest aluminium company, his work was hard but the benefits decent. Warning signs came with crashing aluminium prices in the summer of 2015 and murmurings about unfair Chinese competition. Then reality hit: in January 2016 Alcoa announced the smelter’s closure. Around 600 people lost their jobs.

The events of 2016, from Brexit to Donald Trump’s election, were widely seen as a backlash against globalisation. The Warrick smelter in Indiana, which shut amid “challenging market conditions”, was perceived to be a victim of free trade. And the likes of Mr Aunspach, an American displaced by trade, are the objects of keen attention from wonks as well as politicians.

His is an old problem, with old solutions. Since 1962 America has earmarked funding to help people adjust to trade-related shocks. Trade-Adjustment Assistance (TAA)...Continue reading

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The infant Islamic-bond industry faces a crisis

DANA GAS, an exploration business listed in Abu Dhabi, seems in a spot of bother. Ten years after sealing a landmark production deal with Iraqi Kurdistan, it is struggling to recover $900m it is owed by the autonomous region and the Egyptian government. So it faces a liquidity squeeze. That is not, however, why it says it wants to restructure $700m-worth of Islamic bonds maturing in October 2017. Rather, it says it has received legal advice that the bonds are no longer compliant with sharia—rules based on Islamic scripture.

The bonds were deemed compliant in 2013, but Dana cites evolution in the “interpretation” of Islamic financial instruments. It is seeking to have them declared invalid in a United Arab Emirates court. Its domestic assets are shielded from creditors under UAE law; it has also obtained injunctions in Britain and the British Virgin Islands protecting it from claims until the case is settled. Hearings are not due to start before December, months after the bond’s next payment-due dates.

Islamic law forbids the generation of money from money—interest. Sukuk, or Islamic bonds, thus differ from their conventional peers. They are backed by assets and instead of lending the issuer money, the holder owns a nominal share of what the cash was spent on and receives an agreed ratio of the...Continue reading

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Don't Fight China, the Federal Reserve of Coal

State media reports China is about to restrict coal imports again, throwing a wrench into global markets for the third time in just over a year.

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H&M Gets With the Fashion for Cutting Costs

Finally, some good news from H&M: It is keeping a close eye on costs. But a return to meaningful sales growth would be much better news.

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Premier Foods Review Puts Options on the Table

Shares of Britain’s Premier Foods have languished since a rejected takeover offer from McCormick. Investors may get another shot as the food maker is conducting a strategic review.

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Hong Kong Must Fight to Stay Relevant

Mainland Chinese markets loom large over Hong Kong these days. The city should try harder to stand out as a market of integrity.

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Brazil’s president is charged with bribery

EVER since an audio recording emerged in May of Brazil’s president, Michel Temer, seeming to discuss paying hush money and backhanders, the country’s zealous prosecutors have been expected to pounce. Even so, the decision by Rodrigo Janot, the chief prosecutor, on June 26th to charge Mr Temer with bribe-taking was momentous. It is the first such charge against a sitting president.

Mr Janot bases his accusations on the tape and testimony of Joesley Batista, the billionaire businessman who secretly recorded it. These resulted in a sting operation in which Rodrigo Loures, a former aide to Mr Temer, was filmed receiving 500,000 reais ($159,000) from Mr Batista’s envoy, allegedly for interceding with the antitrust agency on his firm’s behalf. Mr Janot suspects that the cash, plus another 38m reais promised by Mr Batista, was in fact meant for Mr Temer. The president protests his innocence and points out that his relationship with Mr Loures is all that links him to the...Continue reading

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Chip Makers Cashing in on Digital Currencies, for Now

Graphics processors have long been the mainstay of personal computers tricked out for gaming. But the chips are also useful for a task called cryptocurrency mining.

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Mongolians prepare to elect a new president

ADDRESSING more than 3,000 supporters in a packed arena five days before the first round of Mongolia’s presidential election on June 26th, Khaltmaa Battulga, the Democratic Party (DP) nominee, promised the things candidates everywhere tend to promise: modern infrastructure, better jobs and restored national pride. Other pledges were more specific to Mongolia, such as one to secure a fairer shake for nomadic herders. His voice was rough as rawhide, but not because of frenetic speechmaking. It has been rough ever since he sustained throat injuries during a previous career as a judo champion.

His time as a sportsman and a subsequent career as a businessman position the 54-year-old Mr Battulga well for his third calling, politics. Outside the arena, an enthusiastic DP supporter called Byamba says what he likes best about Mr Battulga (pictured above, on the pennant) is his success in business. The other main candidate, Miyegombyn Enkhbold of the Mongolian People’s Party (MPP), is, he says,...Continue reading

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The outrageous death of Otto Warmbier complicates American policy on North Korea

North Korea’s idea of humanitarianism

“HOW safe is it? Extremely safe!” So read the guidance for North Korea on the website of a Chinese travel company when Otto Warmbier, a 21-year-old American student, signed up for a five-day trip in December 2015. Mr Warmbier was arrested the next month at the airport in Pyongyang, as he was leaving, and accused of attempting to steal a propaganda placard. He was tried in March 2016, and sentenced to 15 years’ hard labour. “I have been very impressed by the Korean government’s humanitarian treatment of severe criminals like myself,” he said during a televised confession.

The North Korean authorities denied access to Mr Warmbier after his trial. But on June 13th they released him, in a vegetative state, “on compassionate grounds”, after talks between the North’s ambassador to the UN and America’s point-man on the country. He was flown home to Ohio, where he died six days later. Doctors said he was...Continue reading

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One country in Asia has embraced same-sex marriage. Where’s next?

LET’S hear it for Taiwan. Late last month its highest court ruled that the law allowing marriage only between a man and a woman was invalid. Sexual orientation, it said, is “an immutable characteristic that is resistant to change”—rebutting a widespread view across Asia that homosexuality is a curable disease. Barring same-sex couples from marrying violated the right to be treated equally, the court concluded. It gave parliament two years to change the law. If it fails to do so, gay couples will be able to go ahead and register as married anyway.

For Chi Chia-wei, the case’s most ardent backer, it has been a long fight. He was a teenager when he came out to his family in 1975. When he made a public declaration of his homosexuality in 1986, Taiwan was still under martial law; he was arrested and jailed. Nineteen years after the Netherlands became the first country to legalise same-sex marriage, Taiwan has become the first in Asia. Which will be second?

Certainly not...Continue reading

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Japan’s government is in two minds about smoking

TARO ASO, Japan’s finance minister, is a seasoned champion of the political gaffe. Among his most notorious observations was that health costs could be cut if elderly people would just hurry up and die. Even by that standard, however, the doubts he has expressed about the link between cigarettes and lung cancer have raised eyebrows. Mr Aso’s scepticism might just be wishful thinking: he is, after all, a lifelong smoker. But his ministry also rakes in more than ¥2trn ($18bn) a year from tobacco taxes and owns about a third of Japan Tobacco, the world’s fourth-largest cigarette-maker.

Campaigners have railed for years against the anomaly of a government that simultaneously sells cigarettes and discourages smoking. One likens it to accelerating a car with the brakes on. The debate has come to a head over a proposed ban on smoking inside most buildings other than private residences, to protect people from passive smoking. The health ministry wants it in force before millions...Continue reading

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Blue Apron IPO Tied Up by Big Tech

Blue Apron Holdings is the latest startup to have a tech giant suck the air out of its public market debut. It certainly isn’t the first and likely won’t be the last.

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Why Al Jazeera is under threat

WERE it not for Saudi intolerance, there might never have been Al Jazeera, the Arab world’s most popular news channel. In its formative days the Qatari-funded station struggled to find good staff. Then Saudi Arabia kicked the BBC’s irritatingly truthful Arabic-language channel off a Saudi satellite, causing it to shut down. Suddenly dozens of journalists were looking for work. Al Jazeera hired them. When it went on the air in 1996 it was run by people steeped in the BBC’s standards.

Al Jazeera is now at the centre of a feud pitting Saudi Arabia against Qatar, its super-rich neighbour. Several Arab countries, including Egypt and the United Arab Emirates (UAE), have joined the Saudis in isolating the tiny monarchy over its alleged support for terrorism and its ties to Iran. But what really irks them is how Qatar has used Al Jazeera to wield outsize influence in the region. They see it as a propaganda tool, promoting an agenda often at odds with their own.

The...Continue reading

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Podcast: The Italian bailout job

Italy has been forced to bail out two banks at a cost of as much €17bn euros ($19 bn). Is that the end of the bleeding in Italy's financial sector? Also, as the iPhone turns ten, we look at how Apple is evolving. And Catherine Mann, Chief Economist at the OECD, tells us how to government can help workers made jobless by globalisation. Hosted by Simon Long.

How to protect offshore oil platforms from roaming icebergs

Is Mexico’s government spying on its critics?

MEXICANS do not trust their government. Just 29% have some confidence in the institution, according to Latinobarómetro, a polling firm. A report in the New York Times on June 19th, widely broadcast by the Mexican media, must have reduced that number. It said that software sold to the government to spy on suspected criminals had turned up on the mobile phones of journalists and human-rights campaigners who criticise the government perfectly legally.

Investigations by the Times, Citizen Lab (a research centre in Toronto) and three NGOs named 15 people, most of them critics of the government of President Enrique Peña Nieto, whose phones were found to have the spyware. They include Carmen Aristegui, a journalist who helped uncover a controversial purchase of a house by Mr Peña’s wife from a government contractor. Another target was employees of Centro Prodh, a human-rights group that represents the families of 43 students who...Continue reading

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Donald Trump closes the door to Cuba—a bit

IT WAS typical Trumpian pageantry. On a bunting-trimmed stage at the Manuel Artime theatre in Miami’s Little Havana neighbourhood, the president of the United States declared on June 16th that he was “cancelling” the “completely one-sided deal with Cuba” made by his predecessor, Barack Obama. There is much less to this than Donald Trump’s pugnacious rhetoric suggests. But the new policy will still hurt Cuba’s fledgling private sector, discourage economic reform and damage Uncle Sam’s prestige in Latin America.

The deal struck in 2014 by Mr Obama and Cuba’s president, Raúl Castro, restored diplomatic relations after an interruption of 54 years, softened the United States’ trade embargo, eased travel between the countries and removed Cuba from the list of state sponsors of terrorism. Much of that will not change. Mr Trump’s main innovation is to make tourism harder, supposedly to deny income to Cuba’s armed forces. Commercial flights and cruises, though, will...Continue reading

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Who governs Peru?

TO LOSE a minister to congressional censure is a normal hazard of democratic life. For a government to lose four in its first year, including the ministers of finance and the interior, on spurious grounds smacks of a parliamentary conspiracy. That is the drama that may soon face Pedro Pablo Kuczynski, Peru’s president.

A year ago Mr Kuczynski, a former investment banker, narrowly won a run-off election because slightly more Peruvians abhorred his opponent, Keiko Fujimori, than supported her. In an election for congress two months before, his political group had won just 18 of the 130 seats while Ms Fujimori’s Popular Force won 73 (partly because less populated regions are over-represented).

Popular Force, helped by opportunistic allies, has made its majority felt with spoiling operations. In December congress censured Jaime Saavedra, the capable education minister, who was promptly hired to run the World Bank’s global education division. Last month the transport minister...Continue reading

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Nestlé's $21 Billion Buyback Not as Sweet as Can Be

Investors increasingly seem to expect the same sugar rush from Nestlé that they have got this year from Unilever. But that comparison shouldn’t be pushed too far.

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Toshiba Can't Get Best Deal If It Doesn't Talk to Western Digital

Toshiba needs to sell its memory-chip business in an expeditious way. Amping up a legal fight with its longtime joint venture partner seems an odd way to get things done.

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Central Banks Give Sleepy Markets a Wake-Up Call

The U-turn in bonds is a sign that investors haven’t been paying attention to what central banks have been saying.

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Can the fund management industry deliver a better deal for investors?

IMAGINE an industry where the average profit margins were 36%, where the regulator found little evidence of price competition and where the average person didn't get the benefit of the lower charges available to the wealthiest customers. You would probably expect the regulator to throw a book the size of Thomas Piketty's Capital at it. The industry's executives ought to be as nervous as a very small nun at a penguin shoot.

But that hasn't happened with the report of the Financial Conduct Authority (Britain's regulator) into the fund management industry. What the FCA proposes in terms of greater transparency of fees and better governance standards is fair enough. But one wonders how much difference it will make. The industry has reacted to the findings with equanimity.

Perhaps the most damning of the report's findings is point 1.9

We find weak price competition in a number of areas of the asset management...Continue reading

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Takata Bankruptcy Doesn't End Auto Industry's Pain

One of the world’s largest air-bag makers, Takata Corp., has finally filed for bankruptcy after a drawn-out scandal involving faulty products that caused multiple deaths. The question now is how much wind this will take out of its big-auto-maker customers.

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The Supreme Court sides with the church in a playground dispute

AFTER the April 19th oral argument in Trinity Lutheran Church of Columbia v Comer, a fight over religion and rubber, it seemed the church was in good shape. On June 26th, that hunch was confirmed. By a 7-2 vote, the Supreme Court told Missouri it had violated the First Amendment’s free-exercise clause by excluding Trinity Lutheran Church from a grant programme providing new rubberised surfaces for pre-school playgrounds. In a crisp opinion for the majority, Chief Justice John Roberts called the “exclusion of Trinity Lutheran from a public benefit for which it is otherwise qualified, solely because it is a church” a policy that is “odious to our constitution...and cannot stand”.

The chief justice noted that when children “fall on the playground or tumble from the equipment”, pea gravel underfoot “can be unforgiving”. Missouri may not be subjecting children to “chains or torture on account of religion” and “a few extra scraped knees” is about the extent of the physical harm that leaving churches out of...Continue reading

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Google's EU Fine a Small Price to Pay for Scale

For Big Tech like Google, the benefits of scale come with a price.

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Micron Will Keep Defying the Skeptics

It’s telling that just when Micron is back to making serious money, the first question is: how long can that last? A strong memory market has boosted sales and earnings for the chipmaker, and the shares are still worth buying.

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Consumer Credit Gone Wild, Bank of England Slaps It Down

The Bank of England tightened the screws on bank lending to consumers, a key driver of the post-Brexit economy.

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Why Central Banks Need to Worry About Falling Oil Prices

The effect of declining oil prices on inflation raises some awkward questions for markets and policy makers.

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SoftBank Should Hurry to Rid Itself of Sprint

Japanese tech giant SoftBank has higher priorities than its 83% stake in struggling U.S. telecom operator Sprint.

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To Predict U.S. Stocks and Inflation, Keep an Eye on Chinese Electricity

After a bubbly first quarter, Chinese growth is moderating again. A not too hot, not too cold China is good for U.S. stocks.

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The Supreme Court’s curious compromise on the travel ban

Syria’s Armenians are fleeing to their ancestral homeland

WHEN war broke out in Syria in 2011, some of the wealthier families from the country’s Christian Armenian minority decamped to Yerevan, the Armenian capital, where they rented luxury flats on the city’s Northern Avenue. It felt, some would later say, as though they were on holiday. The government allotted them space in a local school, where Syrian teachers who had fled as refugees continued to instruct their children using the Syrian curriculum. It took some time for it to dawn on them that they might never go home.

Syria’s six-year-old civil war has forced more than 5m of its citizens to seek refuge outside their country. In 2015-16 hundreds of thousands trekked through the Balkans, seeking safety in Europe. But hardly any of Syria’s Armenian minority took this route. Instead, many went to Armenia. With its own population shrunken by emigration (falling from 3.6m in 1991 to 3m today), Armenia was happy to welcome as many Syrian Armenians—most of them educated, middle...Continue reading

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Shale Produces Oil, Why Not Cash?

Producers of oil and natural gas from places like the Permian Basin have been burning more cash than they produce for the history of the business and an expected turnaround this year is starting to look less impressive.

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Easy Money Gone, Loeb Has a Tough Road at Nestlé

A soaring share price and changes in the works before the activist’s arrival mean smaller gains and more time to get them at Swiss food company.

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Why Italy's Bank Rescue Looks a Backward Step for Europe

A sweetheart deal to wind down two small banks raises wider questions about state support for lenders.

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Why Failure Would Be a Virtue in Banking

Support measures and regulations to protect the financial system that have been put in place since the financial crisis are propping up banks that in normal times would shrink, close down or get bought. Some of these need re-examining.

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Time the Music Stopped for Evergrande's Debt Dance

The world’s most-indebted property developer, China Evergrande, is testing investors’ patience with another huge bond issue.

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Ties Between Chinese Banks and Deal Makers Run Deep

Whether or not the ties between banks and companies like HNA amount to systemic risk, it’s clear the relationships are complex

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A new front in the legal fight over Donald Trump’s travel ban

AMERICA awaits word from one more court in Trump v International Refugee Assistance Project and Trump v State of Hawaii—cases challenging the president’s entry ban from six Muslim-majority countries. The travel restrictions were blocked by federal judges in mid-March, and the Fourth and Ninth Circuit Courts of Appeals refused to lift those stays in May and June, respectively. Days before their summer recess is set to begin, the nine justices of the Supreme Court are poised to weigh in on Mr Trump’s executive order. They will decide any day whether to hear the cases in the autumn (or, less likely, over the summer) and whether to let the ban take effect in the meantime.

As the justices reckon with the limits of presidential power, a sleeper ruling on June 19th—also involving government animus toward Muslims—throws an unexpected wrench in the works. The case, Ziglar v Abbasi, is a relic from the George W. Bush administration. It addresses the ugly aftermath of the attacks on September 11th, 2001 in...Continue reading

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BlackBerry's Valuation Got Disconnected

BlackBerry’s share price surged in the months since it was awarded millions in an arbitration dispute with Qualcomm. Disappointing quarterly results wiped out a chunk of those gains.

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For Consumers, Less Debt but Lots of Bills

As a group, U.S. households’ debt-to-income and debt-to-asset ratios in the first quarter fell to their lowest levels since the early 2000s. But financial obligations beyond debt payments, such as rents and auto leases, are taking a bigger bite out of pay.

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Weibo Gets in Beijing's Way

Investors need to consider the political risk faced by China’s version of Twitter.

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Brexit One Year Later: Markets Might Get It Wrong Again

The Brexit vote sank the pound but bouyed the FTSE 100. That relationship might be changing.

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China's Debt Crackdown Could Get Out of Hand

High flying Anbang and HNA are the latest victims of a broad crackdown on risk in China. The well-worn thesis that China would have a boring year ahead of its leadership summit has proven false.

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A New Risk for Goldman, Morgan Stanley in Stress Tests

This year’s bank stress tests turned up an unpleasant surprise for Goldman Sachs and Morgan Stanley. The banks scored low on a metric introduced for the first time this year, the supplementary leverage ratio, meant to measure banks’ total leverage.

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Deep cuts to Medicaid remain the centerpiece of the Republicans’ proposals

WHEN the House of Representatives passed the American Health Care Act in early May, it was widely thought that the Senate would rewrite it. The House’s bill, among its many reforms, would unwind Obamacare’s expansion of Medicaid, health insurance for the poor. That expansion has given health insurance to 12m Americans. Surely moderate Senate Republicans could not tolerate a reversal? 

Yet the Senate bill, the Better Care Reconciliation Act (BCRA), revealed on June 22nd after a secretive drafting process (see leader), merely delays the start of the Medicaid cuts by an additional two years, to 2021. In fact, the cuts to the programme would end up being deeper than under the House plan.

By contrast, Senate Republicans have significantly altered the House’s approach to the individual market, which serves those who buy health insurance for themselves. The House...Continue reading

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'Immaterial' Revision or Not, Hain Still has Problems

An internal investigation at Hain Celestial Group found past errors in its accounting were immaterial. Investors care more about the company’s future, which still looks troubled

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A Risky Bet By Investors---That the Health-Care Bill Fails

The Better Care Reconciliation Act of 2017 is here, and investors aren’t remotely concerned.

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A split over refugees has left the Dutch with no government

LIKE most things Dutch, the asylum-seekers’ centre in Rijswijk, a suburb of The Hague, is clean, rectilinear and well-organised. The housing units’ aluminium exteriors are as shiny and elegant as a VanMoof bicycle. Pupils from Syria and Afghanistan march cheerfully down the pavement, escorted by blonde teachers. The centre has room for up to 500 residents, but the actual number is lower. Since March 2016, when an agreement between the European Union and Turkey closed off the migration route across the Aegean, the stream of asylum-seekers arriving in the Netherlands has slowed to a trickle. Some of the reception centres set up at the height of the migrant crisis have never been used.

With the number of refugees shrinking, one would think asylum might drop off the political agenda. Instead, it is the issue that will not die. In mid-June a clash over migration policy torpedoed coalition negotiations that have dragged on since an election in March. At the time, that election...Continue reading

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In Naples, the hit-men are children

Cleaning up after the kids

LESS than a hundred yards away, Via San Biagio dei Librai in the centre of Naples bustles with activity. Tourists buy souvenirs and munch pizza, oblivious to the meaning of the coded graffiti on the street’s peeling walls. But in a side alley, all is solemn hush. Beyond a door, in a courtyard, stands a tall metal cabinet displaying a ceramic bust of a young man, surrounded by fresh white roses. If not for his hipster beard and haircut, it could be the shrine of a long-dead saint.

The building that surrounds the courtyard is the redoubt of one of the many warring clans of Italy’s oldest yet least-cohesive mafia, the Camorra. The young man to whom the shrine is dedicated is Emanuele Sibillo, the archetype of a new breed of Neapolitan gangster. He was murdered in 2015 at the age of 19 in a nearby street that forms part of the territory of a rival crew.

Naples has seldom been free of turf wars. But recent months have seen...Continue reading

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Romania’s Social Democrats yank their own prime minister

Grindeanu, hard to get rid of

IN ORDINARY politics, it is opposition parties who attempt to bring governments down. But politics in Romania is rarely ordinary. For the past week the country’s governing Social Democratic Party (PSD) has been trying to unseat its own prime minister and his cabinet. The prime minister, Sorin Grindeanu, refused to go. On June 21st the PSD succeeded at last, winning a no-confidence vote and kicking Mr Grindeanu out of power, less than six months after it had installed him. One of Mr Grindeanu’s few allies, Victor Ponta, a former prime minister, called the vote an “atomic war between the Social Democrats and the Social Democrats”.

The PSD claimed it was removing Mr Grindeanu over his failure to pass most of the party’s legislative programme, which includes crowd-pleasing measures like tax cuts, salary increases for public servants and a €10bn ($11.2bn) sovereign-wealth fund to promote infrastructure investment. In fact it...Continue reading

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Emmanuel Macron’s government is off to a floppy start

IT SHOULD have been a triumphant moment. Together with its allies, La République en Marche! (LRM), the movement of President Emmanuel Macron, won 350 of the 577 seats in the National Assembly in the election on June 18th. Even on its own, LRM won 308 seats, a clear majority. That is a remarkable outcome for a political outfit launched only last year. Even a couple of months ago few, other than the supremely confident Mr Macron, dared suggest it was possible.

Yet he had little chance to savour the moment or prepare for the legislative session that begins on June 27th. His government faced days of awkward scrutiny as four ministers quit. On June 19th Richard Ferrand, an LRM minister close to Mr Macron who has been caught up in a financial scandal, stepped down. (He will become the party’s leader in parliament.) Over the following days three ministers from MoDem, a centrist ally, also resigned. Investigators are looking into whether they misused European parliamentary...Continue reading

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Germany’s Russian gas pipeline smells funny to America

LIKE vinyl records and popped collars, rows between the United States and Europe over Russian energy are making a comeback. In the early 1980s Ronald Reagan’s attempts to thwart a Soviet pipeline that would bring Siberian gas to Europe irritated the West Germans and drove the French to proclaim the end of the transatlantic alliance. The cast of characters has shifted a little today, but many of the arguments are the same. In Nord Stream 2 (NS2), a proposed Russian gas pipeline, Germany sees a respectable project that will cut energy costs and lock in secure supplies. American politicians (and the ex-communist countries of eastern Europe) detect a Kremlin plot to deepen Europe’s addiction to cheap Russian gas. They decry German spinelessness.

NS2, which its backers hope will come online at the end of 2019, would supply gas directly from Russia’s Baltic coast to the German port of Greifswald, doubling the capacity of Nord Stream 1, an existing line. Its defenders, including a...Continue reading

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Uber: Too Big to Flail

The investors who have sunk many billions into Uber can take at least some comfort in the reality that scale still matters—by a lot.

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Why falling oil isn't hurting markets

INVESTORS could easily get confused about the impact of oil prices rises on the economy and markets. The story seemed to be clear: high prices bad, low prices good. The two great oil shocks in the 1970s unambiguously bad for western economies - ushering in stagflation and transferring spending power to the oil-producing countries. In turn, low oil prices in the late 1990s coincided with the dotcom boom.

But when oil fell in the second half of 2015, that was seen as a bearish sign for the global economy and markets. This time round, oil is falling again, with both Brent crude and West Texas intermediate dropping more than 20%. But the decline has barely made a dent in the upward march of the S&P 500 index.

The key to the differing market reaction is why the oil price is falling. Back in 2015, the fear was falling demand, in particular investors worried that the Chinese economy was slowing. If that assumption had been right, demand for a lot more than oil would have suffered. The equity...Continue reading

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Goodbye for Now to China's Biggest Deal Makers

China’s crackdown on lending to its biggest deal makers means the “China bid,” which has kept global deal making humming, will take an even longer breather than previously thought.

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Investors snap up Argentina’s 100-year bonds

ONE hundred years ago, Argentina was not the country it is today. Thanks to a belle époque of lavish foreign investment, rapid inward migration and bountiful agricultural exports, its GDP per person in 1917 was comparable to that of Germany and France. Although the first world war brutally interrupted international trade and investment, the country profited from filling the bellies of soldiers on the front with tinned corned beef.

No one knows how Argentina may change over the next 100 years. But many investors seem willing to bet on one forecast: that its government will in 2117 repay $2.75bn-worth of dollar-denominated, 100-year bonds, sold to enthusiastic investors on June 19th.

Since Argentina has defaulted six times in the past 100 years, that belief seems brave. But instead of looking backwards, investors are looking from side to side, at the miserable yields on offer elsewhere. Argentina’s “century” bonds yield almost 8%. That...Continue reading

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Klarna, a Swedish fintech unicorn, gets a full banking licence

BANKS moan incessantly about over- regulation. Yet their banking licences come with perks: in most places only licensed institutions can accept deposits and offer current accounts; within the EU, “passporting” means a bank licensed in one country may operate across the single market. So some European financial-technology (“fintech”) upstarts have started to seek banking licences. On June 19th, Klarna, a Swedish payments firm valued at $2.25bn, became the latest—and the largest so far—to get one.

European fintech firms have various reasons for seeking approval as a bank. Bunq, a Dutch firm and one of the first to get a licence, started out in payments, like Klarna, but expanded to deposit accounts. Some, like N26 in Germany or Atom Bank in Britain, sought to be full-service, online retail banks from the outset. Others, such as ClearBank, a new British clearing and settlement bank, want to offer services to other firms.

Of those focused on the retail market, Klarna...Continue reading

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The Federal Reserve risks truncating a recovery with room to run

WHEN it comes to inflation, the Federal Reserve sometimes resembles a child freshly emerged from an age-inappropriate horror film. To its members, runaway price increases seem to lurk in every oddly shaped shadow. On June 14th America’s central bank raised its benchmark interest rate for the third time in six months, even as inflation lingered below its 2% target, as it has for most of the past five years. Some critics reckon the Fed’s 2% inflation target is too constraining. Indeed, in recent comments on a letter from prominent economists calling for a higher target, Janet Yellen, the chairman, signalled openness to the idea. But the Fed’s problem is less its target than an unforgiving pessimism about American productivity. If its bleak view is wrong, the Fed itself is partly to blame for slow growth.

Economists generally treat productivity growth as a “real” factor, outside central-bank control. Thus, it is thought to depend on things such as technological progress, workers’ skill levels and the flexibility of the economy. But productivity growth is cyclical: it varies depending on whether an economy is booming or busting. Central banks might therefore have more influence over it than they are prepared to admit.

Economies have a growth speed limit, determined by changes in population and productivity. When unemployment is high, the economy...Continue reading

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Investors in aircraft should get set for turbulence

AIR shows are where the aerospace business shows off. At this year’s Paris show, the world’s largest, which opened at Le Bourget airport on June 19th, the military types are most ostentatious. Aeronautical party tricks include helicopters that ascend into the sky tail-first and stealth fighters that fly backwards.

But no one is keener to strut their stuff than Airbus and Boeing, the world’s two biggest makers of airliners. At the 2015 show the pair sold 752 planes worth around $107bn. But the party atmosphere at that event—with copious food and wine laid on for customers and journalists alike—has given way this year to a more sober mood, weaker sales and a bring-your-own-lunch policy. This should give pause to investors in one of the world’s fastest-growing asset classes: aircraft.

Airbus and Boeing still booked plenty of orders. But for the first time, most came from lessors, which lease them to operators, rather than from the airlines that use them....Continue reading

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