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Thursday, 2 March 2017

An ultranationalist kindergarten in Japan

Soaking up the jingoism like sponges

EVERY morning the children of Tsukamoto kindergarten stomp their tiny feet in time to military anthems, bow to pictures of the emperor and vow courageously to offer themselves to defend the state. At school functions, the three-, four- and five-year-olds exhort watching parents to protect Japan from foreign threats.

The great-grandparents of Tsukamoto’s pupils were once taught similar fare, but state schools toned down the nationalism in the aftermath of the second world war. Until recently few Japanese realised that any private schools were still peddling such jingoism. They were even more surprised to learn that the government seems to have been encouraging them.

Last year Moritomo Gakuen, the firm that runs the kindergarten, bought a plot of public land in the city of Osaka at a knock-down price—perhaps 14% of its value. It began building a primary school to propagate the same ultranationalist ideas. It invoked the name of Shinzo Abe, the prime minister, when soliciting donations. His wife, Akie, gave a speech at the kindergarten and was named honorary head teacher. Tomomi...Continue reading

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Linguistic slights spur ethnic division in Sri Lanka

FROM its gleaming new headquarters, Jaffna’s police force serves around 100,000 people. The vast majority of the local population are Tamils or Tamil-speaking Muslims; fewer than 50 locals are members of Sri Lanka’s biggest ethnic group, the Sinhalese. But the vast majority of the city’s 532 police officers are Sinhalese; only 43 are Tamil, and very few of the rest speak the Tamil language well.

This is not just an affront to Tamils, whose complaints about discrimination lay at the root of a 26-year civil war that ended in 2009. It is also a practical problem. Sripathmananda Bramendra came to the new headquarters one day in December to obtain the paperwork needed to replace a lost licence-plate. He waited for hours to talk to a Tamil-speaking officer. But the only one around was first busy with a superior, and then had to rush off to translate at a public protest. Everyone still queuing was told to return the next day.

Roughly three-quarters of Sri Lankans are Sinhalese; Tamils and Tamil-speaking Muslims make up the remaining quarter. But the population is relatively segregated, with most Tamils concentrated in the north and east. Unlike...Continue reading

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Donald Trump holds Afghanistan’s future in his hands

IT MAY be America’s longest war, but during his election campaign Donald Trump barely mentioned Afghanistan. When he did, it was somewhat baffling: at one point, he said that America could not pull all its troops out because neighbouring Pakistan had nuclear weapons. As the insurgents of the Taliban prepare for a spring offensive against the American-backed government, there is still no indication of what the new administration’s approach will be.

For once, Mr Trump’s refrain that Barack Obama left a terrible mess for him to deal with has merit. Mr Obama’s policy on Afghanistan seemed driven more by politics at home than by conditions on the ground. He ordered a timely “surge” in American forces when warned by General Stanley McChrystal in 2009 of imminent “mission failure”. But he then squandered hard-won gains by reducing troop levels faster than his generals advised, hoping to be able to declare victory and leave in time for congressional elections in 2014. When NATO prematurely called time on combat operations at the end of that year, Afghan forces, far from ready to take full responsibility for the country’s...Continue reading

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Rodrigo Duterte’s bloody war on drugs is impeding the sensible bits of his agenda

POLITICAL norms may be crumbling all around the world, but citing Adolf Hitler as an inspiration remains a no-no almost everywhere. That did not stop Rodrigo Duterte, the outspoken president of the Philippines, who declared in September that he wanted to do to Filipino drug addicts what Hitler had done to Jews.

So far, Mr Duterte’s drug war has seen more than 7,000 drug suspects killed by police, vigilantes and rivals (the three categories overlap). Most Filipinos are enthusiastic, albeit nervous for their safety; many foreigners are appalled. Love it or hate it, the campaign has totally overshadowed Mr Duterte’s eight months in office. Yet Filipinos elected Mr Duterte not just for his “Duterte Harry” approach to crime, but because of a much broader pledge to upend the status quo by elbowing aside entrenched elites, reducing yawning inequality and repairing crumbling infrastructure. In addition to its terrible cost in lives, Mr Duterte’s anti-drugs crusade risks becoming a distraction from the many more constructive items on his agenda.

The most important measure Mr Duterte’s administration has so far presented to Congress, where...Continue reading

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Donald Trump’s military budget plan is less impressive than he claims

THE budget plan Donald Trump will send to Congress, proposing to boost defence spending by $54bn next year, is less transformative than the president appears to believe. As John McCain, the chairman of the Senate armed services committee, swiftly pointed out, the 10% increase is about $19bn more than forecast by the outgoing Obama administration (out of a total annual spend of close to $600bn). It would not provide anything like enough money for the 350-ship navy, additional fighter planes and extra troops for both the army and the marines that Mr Trump has called for. And it would certainly not pay for the new nuclear arms race that the president has also suggested he favours.

Mr Trump wants to slash spending on soft power. Cuts to the State Department’s budget and foreign-aid programmes would reduce America’s influence in the world and undermine the civil side of stabilisation missions—for example, the rebuilding of Mosul after Islamic State has been kicked out—against the advice of some of his own cabinet. The defence secretary, James Mattis, while giving testimony to Congress in 2013 when he was running Central Command, warned: “If you...Continue reading

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When homeowners are given vetoes over development, they prevent it

Zonal defence in action

CURTIS HOWARD, an ex-serviceman and former truck driver, received a startling piece of post at his San Fernando Valley apartment recently. “EVICTION NOTICE” it read in red capital letters. “You are ordered to vacate the premises described in the writ no latter than 3/07, 2017.” Mr Howard had been homeless for several years before landing at Crest Apartments, a new affordable-housing project in Van Nuys, where he pays $60 a month. His stomach sank at the prospect of moving back to the streets. When he scrutinised the notice more closely, he realised it was fake. The paper was actually a campaign mail-out for Measure S, a proposal that will appear on ballots in Los Angeles on March 7th along with choices for the city’s mayor.

Also known as the “Neighbourhood Integrity Initiative”, the measure would pause construction on projects that require exemptions from existing rules on zoning and height for two years. It would also prohibit spot zoning, where changes are applied to small parcels of land. Proponents of the initiative oppose a mixed-use complex in West Los Angeles that would replace a car...Continue reading

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An ancient prejudice returns

2017 contd.

MORE than 150 tombstones were toppled or damaged at Chesed Shel Emeth (“The truest act of kindness”), a Jewish cemetery in University City, Missouri. At the Mount Carmel Jewish cemetery in Philadelphia, between 75 and 100 were smashed. According to David Posner of the Jewish Community Centre (JCC) Association, 31 threats were made against 23 JCCs and eight schools in 15 states and a Canadian province on a single day in February. This was the fifth wave of such threats since the start of the year. “The threats were hoaxes, but the calls were not,” says Mr Posner. All 31 schools and centres had to be evacuated.

In his speech to Congress on February 28th, Donald Trump condemned the attacks. Mike Pence visited University City a few days earlier to inspect the damage for himself. Yet plenty of people blame the president for what is happening. When campaigning, Mr Trump condoned thuggery and was slow to disown support from white supremacists. The Southern Poverty Law Centre, a watchdog, counted 867 racist incidents, some of them amounting to crimes, in the first ten days of Mr Trump’s presidency, dubbing this...Continue reading

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Too much federal regulation has piled up in America

IF REPUBLICANS in Congress unite behind Donald Trump’s agenda, it will not be because they have changed their views on economics. Whatever Mr Trump’s plans for border taxes and fiscal stimulus, most Republicans still profess to support free trade and loathe government borrowing. Instead, unity is possible because two other goals bind the president and his party together. The first, tax cuts, is a usual priority for the party. But the second, deregulation, only recently rose to the same status. The call to cut red tape is now an emotive rallying cry for Republicans—more so, in the hearts of many congressmen, than slashing deficits. Deregulation will, they argue, unleash a “confident America” in which businesses thrive and wages soar, leaving economists, with their excuses for the “new normal” of low growth, red-faced. Are they right?

The straightforward motivation for Republicans’ deregulatory agenda is their disdain for President Barack Obama’s legacy, much of which was installed through regulatory fiat. The Affordable Care Act, better known as Obamacare, required bureaucrats to write thousands of pages of new rules; the Dodd-Frank...Continue reading

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The White House proposes eye watering budget cuts

Bean counter in chief

DURING his campaign for the White House, Donald Trump touted a “penny plan” for government spending. This meant cutting the part of the budget that funds day-to-day operations—ie, excluding Social Security, health care, debt interest or defence—by 1% a year. Critics said such cuts were unachievable. Department budgets are already beneath their historical average as a share of the economy. They would have to shrink by nearly a third over a decade, after accounting for inflation, to satisfy the penny plan.

That has not deterred Mr Trump. On February 27th the White House announced its headline budget numbers, ahead of a more detailed plan due soon to appear soon. In his first year in office, Mr Trump is proposing to cut so-called “non-defence discretionary” spending not by 1%, but by more than 10%, relative to current law. The $54bn (0.3% of GDP) this would free up would flow to the defence budget (see article).

Cue incredulity. The part...Continue reading

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Why do most Americans seem sure that the president is keeping his promises

DONALD TRUMP’S presidency contains a puzzle. Opinions of the new president are remarkably clear-cut. Nine in ten of those who voted for him last November say they approve of his performance. Interviewed face-to-face, Trump supporters hail him for that rarest of political feats—doing in power just what he said he would do when campaigning. He has staged daily shows of action and resolve; scolding silver-haired CEOs to bring back jobs; signing executive orders to review and eventually repeal what he calls “job-killing” regulations, flanked by farmers or coal miners in hard hats. The heart of his first formal address to a joint session of Congress on February 28th was the line: “Above all else, we will keep our promises to the American people.”

Mr Trump’s opponents also seem sure that he is keeping his promises, albeit to their horror. More than nine in ten of Hillary Clinton voters say they disapprove of his presidency. Many predict his swift impeachment and demand “resistance” to all he does, an overwrought choice of word, implying that Democrats who work with him are treacherous collaborators. The resignation of Michael Flynn for lying...Continue reading

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The Biotech Stock Safety Net

Dirt cheap borrowing costs for big pharma gives risky biotechs a boost.

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Who will lose when globalisation retreats?

THE new nationalists are on the march in Europe and America. They argue that globalisation has benefited the elites and penalised the ordinary workers and that governments should put America/Britain/France first. That means favouring domestic producers and restricting global flows of people, goods and (this gets mentioned less often) capital. The latest proposal came from the Trump White House last night—a threat to ignore World Trade Organisation rules and impose tariffs on countries with “unfair” trade practices.

A previous column suggested that the world may have entered a third phase of the post-1945 economy, after the Bretton Woods phase (fixed exchange rates and recovery) from 1945-early 1970s and the globalisation phase from 1982-2007. Each phase ended in a crisis (stagflation in the 1970s, a credit crunch after 2008). The next era could see globalisation in retreat for the first time since 1945.

That...Continue reading

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The Trump administration’s trade strategy is dangerously outdated

The trade guns of Navarro

ON THE campaign trail, Donald Trump’s trade policy was an alarming mixture of coruscating complaints and fierce threats of protectionist retaliation. But the world has been in the dark about how much of this rhetoric his administration might turn into reality. A flicker of light came on March 1st as the administration’s trade-strategy document was presented to Congress. Washington wonks see the hand of Peter Navarro, Mr Trump’s trade adviser and author of a book (and film) called “Death by China”. Robert Lighthizer, the nominee for the United States Trade Representative (USTR), has not yet been confirmed.

Little is new in the document’s promises of “ new and better trade deals” or of strict enforcement of American trade laws. But a preference for bilateral trade deals over multilateral ones is a change of tack. And the tone is certainly confrontational: “It is time for a more aggressive approach.” The document also gives an indication of how a Trump administration might take a trade fight to China: by using sections 201 and 301 of the Trade Act of 1974.

The first weapon,...Continue reading

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China and currency manipulation

SINCE his election as president, Donald Trump has not softened his criticism of China over its alleged meddling to control the value of its currency, the yuan. On the contrary, he has called China “the grand champion” of currency manipulators. The kindest interpretation of this is that Mr Trump is out of date, as his own government could tell him.

America’s Treasury makes a six-monthly assessment of the foreign-exchange policies of its big trading partners. The criteria it uses to identify currency manipulators are regarded by many economists as inadequate. They do not include, for example, the domestic purchasing power of a currency. Nevertheless, even by those flawed criteria, China is far from the champion. Indeed it seems to have quit the tournament altogether.

The Treasury uses three measures: whether the country runs a sizeable surplus in trade with America; whether its current-account surplus exceeds 3% of GDP; and whether it spends more than 2% a year to buy foreign assets to suppress the value of its currency. Over the past year, no country has checked all three boxes. China, in the latest report, only met...Continue reading

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A planned merger of LSE and Deutsche Börse unravels

IT HAD been billed as a bridge between Europe’s two main financial hubs. It has become, however, a symbol of their growing competition—and of the uncertainty into which Brexit has plunged the EU’s markets. A planned merger between Deutsche Börse (DB) and the London Stock Exchange (LSE), both listed companies, seems on the verge of collapse. This week the LSE rejected the latest demand of the European Commission (EC) to sell parts of its business to allay competition concerns.

The €29bn ($30bn) merger was first announced a year ago and is the companies’ third attempt to join forces since 2000. It brings together the operators of the British, German and Italian stock exchanges, as well as some of the largest clearing-houses in Europe. Before it would approve the deal, the EC launched an investigation into its impact on competition. Last September it identified a number of concerns, including about the derivatives market once the clearing-houses merged. In early February the LSE sought to ease that concern by confirming the sale of its Paris-based clearing unit, LCH.

Not good enough, the EC countered a few weeks later: the sale...Continue reading

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India’s twin balance-sheet problem

IF INDIA is indeed the world’s fastest-growing big economy, as its government once again claimed this week, no one told its bankers and business leaders. In a nation of 1.3bn steadily growing at around 7% a year, the mood in corner offices ought to be jubilant. Instead, firms are busy cutting back investment as if mired in recession. Bank lending to industry, growth in which once reached 30% a year, is shrinking for the first time in over two decades (see chart). If this is world-beating growth, what might a slowdown look like?

India’s macroeconomy chugs along (though the quality of government statistics remains questionable), but its corporate sector is ailing. The sudden and chaotic “demonetisation” of 86% of bank notes in November hardly helped. But the origins of India’s troubles go much deeper. After India dodged the worst of the financial crisis a decade ago, a flurry of investment was made on over-optimistic...Continue reading

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An impossible mind: the late Kenneth Arrow

SOME great economists are Aristotelians, discerning the logic of markets from tangible examples around them. Others are Platonists, using their powers of reasoning to grasp ideal economic forms, of which actually existing markets are but flickering shadows. Kenneth Arrow, who died on February 21st aged 95, was both. His ideas gave economics some of its most compelling abstractions and most fruitful applications.

The abstractions won him the Nobel prize at the age of 51. (He remains the youngest winner and the most cited by others in their prize lectures.) He established the conditions under which prices might successfully co-ordinate production and exchange, eliminating shortages and surpluses. Adam Smith provided the best metaphor for this underappreciated feat: the “invisible hand”, guiding resources to their best uses. Ken Arrow and his co-author, Gérard Debreu, provided the best algebra.

To economists versed in mathematics, a well co-ordinated economy is like a system of simultaneous equations, which all hold true at the same time. The solution to these equations is a set of prices that equates demand and supply for scarce commodities...Continue reading

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Competition for private-equity deals heats up

TIME was, the private-equity industry felt spoiled for choice. The difficulty was choosing deals, not finding them. Yet according to numbers from Dealogic, a data provider, that have been crunched by Bain & Company, a consultancy, private-equity houses are now losing out in mergers and acquisitions (M&A) to non-financial companies. In 2016 private equity’s global share of all deals dipped to 4.2%, the lowest level since the depths of the post-crisis recession in 2009. This was down from 5.4% as recently as 2014 and an all-time high of 7.9% in 2006. The same trend is evident in Europe and in America, private equity’s two biggest markets (see chart).

Yet the pressure on private-equity firms to deploy their capital has never been greater. The industry has raised well over $500bn from investors in each of the past four years, the longest such streak ever. The amount of uninvested cash they are sitting on (“dry powder”) reached a record $1.47trn at the end of 2016. Of that, $534bn was specifically earmarked for buy-outs. Investors, who pay fees as a percentage of the capital they have committed, even when it is still uninvested,...Continue reading

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Second-degree moral hazard

MORAL hazard is a problem that crops up often in economics. People behave differently if they do not face the full costs or risks of their actions: deposit insurance makes customers less careful about picking their bank, for example.

Moral hazard can also be second-hand. Take medicine. A patient with private insurance may be happy to sit through extra tests, and a doctor may be happy to order them. Doctors might be more reluctant to order tests if they know that the patient would bear the full cost.

A newly published paper* sets out to test this secondary problem by examining a common-enough situation—taking a taxi ride in a strange city. The authors, a trio of academics at the University of Innsbruck, sent researchers on 400 taxi rides, covering 11 different routes, in Athens, Greece. In all cases, the researchers indicated they were not familiar with the city. But in half the cases, the researchers indicated that their employers would be reimbursing them for the journey. The researchers in the latter group were 17% more likely to be overcharged for their trip and paid a fare that was, on average, 7% higher.

The most common form of...Continue reading

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Interest rates and investment returns

IF THERE is one aspect of the current era sure to obsess the financial historians of tomorrow, it is the unprecedentedly low level of interest rates. Never before have deposit rates or bond yields been so depressed in nominal terms, with some governments even able to borrow at negative rates. It is taking a long time for investors to adjust their assumptions accordingly.

Real interest rates (ie, allowing for inflation) are also low. As measured by inflation-linked bonds, they are around -1% in big rich economies. In their latest annual report for Credit Suisse on global investment returns, Elroy Dimson of Cambridge University and Paul Marsh and Mike Staunton of the London Business School look at the relationship between real interest rates and future investment returns. Very low real rates have in the past been associated with poor future equity returns (see chart).

That may come as a nasty shock for state and local-government pension funds in America. They have to assume a future rate of return on their investments when calculating how much they need to contribute to their plans each year. Most opt for 7-8%, a level that has...Continue reading

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Is Italy’s populist Five Star Movement ready to govern?

IT IS the best and worst of times for the Five Star Movement (M5S), the populist group that is Italy’s main opposition. On the bright side, Matteo Renzi, the former prime minister, resigned on February 19th as leader of the Democratic Party (PD), the dominant party in government and the M5S’s chief rival. Mr Renzi will probably regain control of the PD, but his move highlighted a split between his supporters and critics, some of whom defected on February 28th to a new radical-left parliamentary group. Small wonder the M5S and PD are nearly even in the polls.

But if the M5S’s popularity is clear, its competence is not. The party’s most senior governing officials are two mayors elected last June, Virginia Raggi in Rome (pictured at right), Italy’s biggest city, and Chiara Appendino in Turin (pictured at left), its fourth-biggest. Their performances since could scarcely be more dissimilar.

On February 7th Ms Raggi learned that prosecutors had formally placed her under investigation for a second time. The mayor, who denies wrongdoing, risks indictment for falsifying a document and abuse of her office. Her counterpart in Turin, according...Continue reading

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A secure messaging app has become Russia’s juiciest news source

OVER the past year, a group of political bloggers purporting to have access to inside information have offered insight into the workings of the Russian state. They can be found on the messaging app Telegram, which has a “channels” feature that allows readers to subscribe to a feed but not to respond. The bloggers, often anonymous, serve up news spliced with cutting commentary and the whisperings of the Russian elite. The most popular, with some 26,000 subscribers, is Nezygar, or “Not Zygar”—a reference to Mikhail Zygar, a former editor-in-chief of the independent television network Dozhd (“Rain”). (Some think Nezygar is a Kremlin project.) Messages arrive on users’ smartphones alongside conversations with friends, creating a sensation akin to having a Kremlin insider on speed dial.

The channels’ popularity says less about the quality of their information than it does about the lack of other sources. “If Russia had lots of worthwhile political analysts, lively political journalism and strong independent media, there would be no ‘Nezygar’ phenomenon,” writes Oleg Kashin, a columnist. “But when there’s dirty, rusty water...Continue reading

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Germans are debating getting their own nuclear weapon

Germans’ traditional view on nukes: no thanks

IT BEGAN in November, soon after the election of Donald Trump as America’s president. The publisher of the Frankfurter Allgemeine Zeitung, a conservative newspaper, opined in an editorial that it was time to contemplate “the altogether unthinkable for a German brain, the question of a nuclear deterrence capability, which could make up for doubts about American guarantees”. Roderich Kiesewetter, a foreign-policy expert in the Christian Democratic Union, the party of Chancellor Angela Merkel, chimed in that there should be no “thought taboos”. He and other politicians then went silent, apparently after a signal that the chancellor did not need this distraction in an election year. But in Germany’s think-tanks the debate kept raging.

Since 1945 West Germany and then the reunited country have relied on the American nuclear shield to deter aggression from Russia. A prominent thesis, outlined in 1984 by Josef Joffe, a journalist, holds that European integration was only possible because this external American power had “pacified” the age-old...Continue reading

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Why Europeans are less eager consumers of online ranting than Americans

HEINZ-CHRISTIAN STRACHE, the leader of Austria’s nationalist Freedom Party, fancies himself a rapper. For the past decade he has been recording amateurish music videos of rap songs like Österreich Zuerst (“Austria First”), which features the lyrics “For anyone who doesn’t want to integrate/ I have a destination/ go back home, have a good flight!” (It sounds no better in German.) No mainstream TV channel would show such videos, but when Mr Strache posts them on Facebook, the media report on them.

Europe’s populists were early adopters of social media. In the Netherlands, Geert Wilders pioneered the use of outrageous tweets that infuriate his opponents and fire up his followers. (Unlike Donald Trump’s, they are sparse and calculated, not nocturnal and impulsive.) In France, Marine Le Pen’s National Front co-ordinates hashtags, memes and animated videos across social-media platforms. In Germany, the demonstrations of the anti-Muslim PEGIDA movement began with the creation of a Facebook group. The far-right Alternative for Germany has more likes on Facebook than any other German party—over twice as...Continue reading

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Britain may find it hard to escape the European Court of Justice

THE European Court of Justice (ECJ), a stately place populated by robed judges, eager clerks and artworks depicting clunky legal metaphors, seems an unlikely place for a coup. But it is here, “tucked away in the fairyland Duchy of Luxembourg”, wrote Eric Stein, an American academic, that the court “fashioned a constitutional framework for a federal-type structure in Europe”. This line has resonated with the many critics that the court, the supreme judicial authority in the European Union, has attracted. British Eurosceptics in particular have seen in the ECJ a political project shrouded in legal obscurantism that poses a deep threat to the ancient sovereignty of their courts and MPs.

Now that Britain has voted to leave the EU, liberation from the shackles of Luxembourg ranks second only to control of immigration in the Brexiteers’ hierarchy of needs. That explains why Theresa May, the prime minister who will shape the terms of Britain’s departure, has vowed to take the country out of the ECJ’s jurisdiction. “We will not have truly left the European Union,” she said recently, “if we are not in control of our own laws.”

In...Continue reading

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Eurozone Inflation's Hidden Resilience

The common wisdom is that eurozone core inflation is weak. Another take is that it has proved resilient.

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Podcast: Money talks

There are a number of growing threats to Europe with Brexit and maybe another Greek disaster looming. But Eurogroup president Jeroen Dijsselbloem tells Sacha Nauta the EU is actually on the mend. Also: Why Oscar mix-ups symbolise how independent films such as Moonlight are overshadowed by the big studios. Simon Long hosts.

King Salman travels to Asia

EVEN by the standards of state visits, this one is especially lavish. On March 1st the king of Saudi Arabia, Salman bin Abdel Aziz Al Saud, flew into Indonesia with a staggering retinue of 1,500. Twenty-five royal princes and ten government ministers are among those travelling with the 81-year-old ruler on the second leg of his Asian tour. Following three days in Malaysia, he will spend four days in Jakarta, the capital, before kicking back on Bali’s beaches for five days.

Preparations for the visit, the first in 47 years by a Saudi monarch to Indonesia, the world’s most populous Muslim country, have been months in the making. Airport crews in Jakarta and Bali have taken delivery of 459 tonnes of equipment, including two Mercedes-Benz S600 limousines, flown in aboard four Boeing 747s, two Boeing B777s and two Hercules C-130s. The national parliament has installed a throne-like chair with impressively thick brown leather upholstery for the king to recline upon before he addresses lawmakers. Parliament’s deputy speaker explained to local media that the monarch requires a chair that “relaxes” his body.

As well as Indonesia and...Continue reading

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Nigeria’s president has been ill for six weeks. What now?

SITTING on the pavement outside the Lagos state government secretariat, Empero flicks through newspapers, looking for jobs. “We are smiling and we are dying,” says the 36-year-old, a town planner by trade. Nigerians are known for their dramatic turn of phrase. But recent events may justify such rhetoric. The economy shrank by 1.5% in 2016. Inflation has more than doubled to 18.7% in 12 months. Meanwhile, the president, Muhammadu Buhari, has been out of the country since January 19th, being treated for an undisclosed illness. The 74-year-old former military dictator could hardly have chosen a worse time to be incapacitated. But much of the blame for Nigeria’s current economic troubles can be laid at his door.

Mr Buhari was elected in March 2015 promising to defeat Boko Haram, the jihadist group terrorising the country’s north-east, and to tackle endemic corruption. He had on his side a wave of hope; he was the first Nigerian opposition leader to oust an incumbent peacefully at the ballot box, despite his authoritarian past.

On national security he has made progress: Boko Haram, now splintered into two factions, no longer controls...Continue reading

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Why Platinum Can't Beat Sapphire

Big banks have advantages over American Express in the credit-card rewards race.

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Brazen even by North Korean standards

Aviation meets suffocation

THE murder of Kim Jong Nam, half-brother of Kim Jong Un, the North Korean dictator, had already seemed outlandish enough. According to the Malaysian authorities, two women in their 20s had stolen up behind him at Kuala Lumpur International Airport on February 13th, smeared some kind of poison on his face and then slipped away into the throng of travellers. Within 20 minutes Mr Kim was dead.

The results of an autopsy, announced ten days later, were more extraordinary still: they showed the poison to be VX, the deadliest nerve agent ever synthesised. That firmly pointed the finger at North Korea’s repressive regime, which is thought to have a vast stockpile of chemical weapons, VX among them. The nerve agent is classified as a weapon of mass destruction and banned under the Chemical Weapons Convention—which North Korea, along with only three other countries, has not signed. Just one litre of the stuff could kill 1m people, such is its potency. Inhaling VX vapour disrupts the nervous system within seconds, causing convulsions and suffocation.

North Korea is not known for its...Continue reading

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How Chinese Companies Finance Their Ambitions Abroad

With Beijing cracking down on capital outflows, SkyBridge Capital buyer HNA Group has found a new way to raise cash offshore.

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Wednesday, 1 March 2017

Trump Faces the Tyranny of High Expectations

Every day stocks go up, investors are pricing in greater success for president’s agenda.

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Palo Alto Networks Frightens Again

Sales woes and rising competition are crimping the growth of one-time cybersecurity star Palo Alto Networks.

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How Google Does TV

Google’s bet on web TV with YouTube involves a much smaller wager than AT&T’s with DirecTV.

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A Surprising Clue About Oil Prices Today

Surging U.S. crude oil exports don’t mean that OPEC is winning, but a shift in customers would.

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Trumponomics Causes Global Corporate Bonds to Collide

An unusual shift is under way in U.S. and European corporate bond markets—politics on both sides of the Atlantic are the reason.

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How quickly will the Federal Reserve tighten?

EVER since the Presidential election, markets have focused on the potential for fiscal policy—tax cuts and spending increases—to boost the American economy. But over the last few days, there has been a reminder that monetary policy, which has dominated investors’ thoughts for much of the period 2008, still has the potential to have a big impact. The possibility of a rate rise from the Federal Reserve this month overshadowed President Donald Trump’s speech to Congress.

William Dudley of the New York Fed said that the case for tightening had become a “lot more compelling in recent months” and that “the risks for the outlook are now starting to tilt to the upside”. John Williams of the San Francisco Fed said that a March hike was now getting serious consideration. Bloomberg reckons the markets are pricing in a 60% chance of a rate hike on March 15th; Brown Brothers Harriman reckons the probability is 74%. The acid test...Continue reading

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Export Adrenaline Boosts China Factories---but Hangover Could Be Hard

China’s latest manufacturing data adds to the evidence that recovering global trade is helping offset the housing-market slowdown, but Mr. Trump could spoil the party.

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Yingde: China Takeover Drama Brings Breath of Fresh Air

Minority shareholders at China’s largest industrial gas maker have emerged as winners from the boardroom tussle.

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The Supreme Court seems unhappy with a social-media ban for sex offenders

THE RAPE and murder of 7-year-old Megan Kanka in 1994 inspired a host of federal and state laws tracking sexual predators and publicising information on their crimes and whereabouts. Many states also passed laws keeping such criminals away from schools, playgrounds and parks. In 2008, in an attempt to expand this zone of protection into the virtual world, North Carolina barred registered sex offenders from “access[ing]” social networking sites where minors are “know[n]” to have accounts.

It seems the Tar Heel state may have overreached. The law did not receive a welcome greeting at the Supreme Court on February 27th when the justices heard Packingham v North Carolina, a case asking whether kicking sex offenders off wide swaths of the internet jibes with the First Amendment’s free-speech guarantee. In 2002, Lester Packingham, then 21, was convicted of “taking indecent liberties” with a 13-year-old girl. Eight years later, Mr Packingham defied what he saw as the “ridiculous” social-media ban by writing a Facebook post celebrating the dismissal of a traffic ticket. Authorities soon came across his post and prosecuted him.

Mr Packingham’s...Continue reading

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Donald Trump sounds more presidential, yet stays a populist

EVEN in the midst of great solemnity, while giving the most presidential-sounding speech of his career, Donald Trump could not quite shake his fascination with ratings. The moment came during an address to a joint session of Congress on February 28th. Mr Trump had just praised the heroism of a Navy SEAL, Senior Chief William “Ryan” Owens, killed in Yemen on a counter-terrorism mission in the first days of the Trump administration. Now television screens across America filled with close-ups of the commando’s wife, as she wept in her VIP guest’s seat high above the House chamber. Impressed by the length of the standing ovation accorded Mrs Owens, the president departed from his prepared script: “And Ryan is looking down right now, you know that, and he’s very happy because I think he just broke a record,” he beamed at the young widow.

As so often with Mr Trump, the moment revealed a divided America. His tribute to the Navy SEAL was called beautiful and sincere by Trump-admirers. It was deemed crassly cynical by his critics, who saw it as an attempt to cow reporters and political opponents asking sharp questions about a dangerous mission in Yemen that went badly...Continue reading

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Shake Shack Isn't Delicious Enough at This Price

Shake Shack sells tasty burgers, but its rich valuation still isn’t appetizing for investors.

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An innovative cure for broken water pumps in Africa

IN THE mid-2000s Playpumps International, a charity, hit on a photogenic way of providing clean water to rural African villages: a pump powered by children playing on a merry-go-round. International donors and celebrities pledged more than $16m. But the system was more expensive than alternatives and needed so much “playing” it was effectively dependent on child labour. It became a byword for wasteful Western aid, but it is far from the only example.

At any time around a third of the water infrastructure in rural sub-Saharan Africa, from simple hand pumps to pricey solar-powered systems, is broken. Even after spending billions of dollars most international donors still cannot ensure the pumps they pay for are maintained (just 5% of rural sub-Saharan Africa has access to piped water). Many of the village committees responsible for collecting the fees that should cover repairs are dogged by nepotism and corruption. More often, though, villagers simply struggle to gather money, find a mechanic and source spare parts, says Johanna Koehler of Oxford University. Kerr Lien, a village in central Gambia, reverted to using a manual well for nine years...Continue reading

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Israel’s justice minister imposes four new Supreme Court justices

WITH the parliamentary opposition in Israel hopelessly splintered, demoralised and without an agreed leader, it has fallen mainly to Israel’s fiercely independent Supreme Court and its combative media to hold the government of Binyamin Netanyahu to account. No wonder both institutions have been in its crosshairs for years. With four justices reaching the mandatory retirement age of 70 this year, it has had a rare opportunity to influence the court’s make-up.

On February 22nd the justice minister, Ayelet Shaked (pictured), took full advantage of this opportunity. A former aide of Mr Netanyahu and now one of the leaders of the right-wing Jewish Home party, she has been spearheading the campaign for a more conservative Supreme Court. The Judicial Appointments Committee, which she chairs, approved the four new Supreme Court justices. Two of them are religious Orthodox Jews (one of whom lives in a West Bank settlement); another has close ties with right-wing politicians; and the fourth, a Christian who fills the court’s Arab seat, is known for usually siding with the state prosecution.

The appointments came after months of deadlock...Continue reading

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For Snap, the Truth Will Be in Advertising

Snap calls itself a camera company, but everything beyond the first line of its IPO filing suggests it is an advertising company. And estimating how much ad revenue it can generate is key to determining its value.

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