The “I’ve paid in all my life” fallacy

SOCIAL security is often described as the “third rail” of American politics—touch it and you die. Britain’s prime minister has just tied herself into a tangle over the way to fund long-term care for the elderly.

The problem is made more difficult because of the way that such benefit schemes were established and marketed to the public—as insurance schemes in which what you receive in benefits relates to what you put in. When pension schemes were set up by Franklin Roosevelt (pictured left) in the 1930s or in Britain, by David Lloyd George (pictured, right) in the Edwardian era, the insurance notion was something people could easily grasp (private schemes already existed) and could be seen as fair. 

This was fine in the early years of such schemes when the number of people contributing was far greater than the number of people taking benefits. But as our societies age, the costs rise and the inadequacy of...Continue reading

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Europe's Economy Keeps Running With the Bulls

A rush of eurozone survey data points to continued growth momentum. Europe is still beating expectations

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Norway’s wolves are being hunted; its reindeer are going mad

“SJALDAN liggjandi ulfr laer um getr,” goes a passage in the Havamal, a medieval Norse poem: “The sleeping wolf seldom gets a ham.” The maxim, like the one about early birds and worms, is an exhortation against laziness, but it also conjures a vision of Norway as a land of untamed nature, where wolves chase boars through snow-bound forests. This may have been true in the 10th century, but today the country’s wild fauna are not doing as well. Wolves are rare, and the government is under pressure to cull them further. Another iconic species faces a different threat: chronic wasting disease (CWD), a sort of mad cow disease that can infect reindeer.

North American elk, deer and moose have been dying from CWD since the 1960s, but when the disease was discovered in Norway in March 2016 it was the first instance in Europe, and the first anywhere in wild reindeer. Like mad cow disease, it is caused when proteins known as prions take the wrong shape. The main...Continue reading

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Why European Companies Could Really Miss London

Most industries need access to raw materials: In finance and markets that raw material is savings.

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Noble Has One Option Left

The battered commodities trader may soon have no choice but to restructure its debts.

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Why Donald Trump Doesn't Scare the Market

The VIX has stayed low not because the market isn’t worried, it is because the market doesn’t know exactly what to worry about.

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Another Gloomy Day for Amgen

Nothing is going right for Amgen these days. It now says its experimental osteoporosis treatment, Evenity, is unlikely to win approval from the Food and Drug Administration this year.

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Ford's New Boss Won't Bring Quick Fixes

Ford’s new boss comes from the future side of the business. That implies more long-term investment, not a quick profit fix for suffering shareholders.

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Huntsman-Clariant: A Chemical Experiment Worth Pursuing

Huntsman and Clariant think they offer the perfect mix: a $14 billion merger of equals without overlapping businesses or rivalries but with hugely valuable cost savings.

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Reform Can't Come Soon Enough for China's Oil Giants

China’s state oil firms have long labored under high labor costs and price controls that depress returns. A new reform plan could change that—but only if China makes some tough choices, and quickly.

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Baidu Falls Behind in Race to be China's Netflix

Baidu could miss out as Chinese tech majors try to build up their online video content.

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Why a U.S. Lending Bounce Isn't Easing Worries

Despite a slight rebound in loan growth, political and economic uncertainty still seem to be holding back lending by U.S. banks.

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Donald Trump’s reset on Islam

FORGOTTEN, it seems, are his tweets calling them “cowards” and his Facebook post likening them to slaveholders. The people of Saudi Arabia, not least the royal family, seems to care only about what Donald Trump is saying now. And while Candidate Trump taunted the Saudis, President Trump has embraced them, making the kingdom his first foreign destination. In Riyadh, the capital, on May 20th-21st, he sought to reassure Muslim leaders and draw a sharp contrast with Barack Obama’s foreign policy.

The centrepiece of the trip was a speech by Mr Trump to dozens of Sunni Muslim leaders, which his staff billed as an answer to Mr Obama’s address in Cairo in 2009. In their own way, both presidents sought to reset America’s relations with the Muslim world. But whereas Mr Obama attempted to mend the damage wrought by the war in Iraq, Mr Trump was burdened by his own Islamophobic rhetoric. “I think Islam hates us,” said Mr Trump last year, after calling for a blanket ban on...Continue reading

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Big Tech's Not-So-Easy Money

Repatriating huge stockpiles of offshore cash looks less likely, given tumult in Washington. But investors in Big Tech shouldn’t need to bank on it.

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Hassan Rouhani wins a second term

IF HE had intended to clip President Hassan Rouhani’s wings, Iran’s reactionary supreme leader, Ayatollah Ali Khamenei, will be disappointed. Far from the knife-edge of an election analysts had anticipated, Mr Rouhani won a resounding 57% of the vote with his rousing reformist rhetoric, and secured a second term without the need for a run-off. His main rival, an authoritarian former judge, Ebrahaim Raisi, who had the backing of the hardliners, trailed badly with 38%.

Traditionally, Mr Khamenei has found second-term presidents, whatever their hue, to be troublesome. Gaining in confidence and anxious to leave a legacy, they have fought to claw back some of the supreme leader’s powers, resulting in acrimonious showdowns. Thanks to his superior constitutional and extra-constitutional powers, Mr Khamenei has always emerged on top. But at 78, he is, perhaps, tiring. Mr Rouhani, ten years his junior, will feel empowered by a popular mandate the unelected supreme leader lacks. He...Continue reading

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New Orleans removes its last big Confederate-era statue

WHATEVER the inhabitants of New Orleans think about the monuments to Confederate bigwigs that dot their city, many felt relief, on the afternoon of May 19th, that the last of the four most prominent statues was at last being taken down. The removal of Robert E. Lee, who for the last 133 years has surveyed downtown New Orleans from a pedestal atop a busy traffic circle on the city’s grandest street, marked the end of an exhausting ordeal that has lasted nearly two years.

The push to take down the four offending relics, led by Mitch Landrieu, the mayor, seemed to come out of nowhere in 2015. It was approved with relatively little controversy by the city council; the statues should have been gone within weeks. But then came the lawsuits, challenging the statues’ removal. As the process dragged on, it became more divisive. The city struggled to find a contractor willing to take the monuments down; one backed out after receiving death threats. When another was found, the city took extraordinary measures to protect his identity, as well...Continue reading

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A polarised Iran could struggle to come together after election day

 

COME elections, Iran’s regime lets its people breathe more easily. In its attempt to whip up a high turnout of voters and prove that it has popular support, the regime ensures that presidential campaigns have a festive flavour. Over the past month the two front-running clerics have hosted DJs and footballers as warm-up acts at their rallies. The usual taboos against criticising the deep state that surrounds the unelected supreme leader, Ayatollah Ali Khamenei, are flouted with abandon. Women, temporarily freed from their fear of harassment by the regime, let their mandatory veils slip so far back they look like neck-scarves. By night the capital, Tehran, has the atmosphere of a street carnival.

Large crowds at campaign rallies and long queues at polling stations, which opened on May 19th, suggest that many of Iran’s 56m voters will cast their ballots. Hassan Rouhani, the incumbent, has roused many of Iran’s disaffected people with his denunciations of the state...Continue reading

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Mutineers have been bought off again in Ivory Coast

Would you say no to him?

AS STRIKES go, this one was resolved remarkably quickly and with an unusually one-sided result. The reason, quite simply, is that these strikers had guns. Just days after some 8,400 mutinous soldiers marched out of their barracks in Ivory Coast, shooting in the air and blockading roads, the government had caved in, paying each of them 5m CFA francs ($8,400) and promising to give them another 2m before the end of June. But not before one person had been killed by stray gunfire.

This was the second mutiny by soldiers in the country this year. In January disgruntled troops, many of them former rebels who had fought in a civil war in 2011, took to the streets claiming they had been underpaid ever since the end of that conflict. The president, Alassane Ouattara, who was helped into power by the rebels in 2011 after his predecessor, Laurent Gbagbo, tried to steal an election, quickly acceded to their demands. The first mutiny ended with an...Continue reading

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How governments in the Middle East snoop on human-rights activists

ONLY a few hours after Azza Soliman, an Egyptian feminist, was arrested in December her colleagues received an e-mail supposedly containing her arrest warrant. It was a sham—slickly designed bait to lure them into handing over their passwords. The messages, sent while Ms Soliman was still being interrogated by police, were probably the work of the state security services. Researchers have documented nearly 100 similar hacking attempts to gain information from some of the country’s most prominent NGOs and journalists.

The subterfuge in Egypt is indicative of a wider trend. Governments across the Middle East are turning to hackers to target bothersome activists and intercept or block their encrypted communications.

A text message sent last year to Ahmed Mansoor, a human-rights advocate in the United Arab Emirates (UAE), shows the extent of the effort. It promised “new secrets” about tortured prisoners, if he clicked on the link. Instead, Mr Mansoor forwarded the message...Continue reading

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The struggle to succeed South Africa’s president heats up

IN THE twilight of his unpopular presidency, Jacob Zuma has to vet his crowds carefully. Almost wherever he speaks, he risks a clamour of boos and jeers, many from members of his own party, the African National Congress (ANC). A rally organised by the country’s main trade union federation, which is formally allied with the ANC, should have been a perfect opportunity for him to drone on about the party’s achievements since ending white-minority rule in 1994. But he never got the chance to speak; union members shouted him down. Two of his closest supporters were also heckled at May Day rallies in different cities on the same day. Unionised workers, who in past elections made up most of the activists going door-to-door to canvas for the ANC, are turning against a tainted president, and against a party that excuses his many scandals.

Mr Zuma’s second and final term of office still has two years to run. Yet the race to succeed him is already on. A lot rests on this transition. It could...Continue reading

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Tunisians wonder whether to let powerful crooks off the hook

Two, four, six, eight, don’t let their loot appreciate!

SHOUTING “no to forgiveness” may sound awfully cruel. But on May 13th thousands of Tunisians marched through Tunis, the capital, waving banners with that slogan. They were protesting an “economic reconciliation” bill that would give amnesty to businessmen and officials accused of graft during the rule of Zine el-Abidine Ben Ali, the former president. The staggering corruption of his regime was one of the sparks of a revolution that forced Mr Ben Ali from office six years ago and ignited the Arab spring.

The new protesters say they are defending the spirit of the revolution. But Tunisia’s leaders say the bill is needed to spur investment in an ailing economy. It would let businessmen and bribe-trousering officials secretly declare their ill-gotten gains and repay them to the state. It is hoped that businessmen who do not fear arrest would start investing. Officials, meanwhile, are stalling...Continue reading

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Better Late Than Never for Oil-Service Providers

Analysts and investors got ahead of themselves when translating a drilling boom to oil-field-services companies’ profits, but the bonanza is merely delayed, with executives are sounding more bullish, especially when it comes to red-hot U.S. shale plays.

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VR Headsets Get Stuck on Shelves

Virtual reality was supposed to be the next big thing, but headsets haven’t exactly been flying off the shelves. The question is, why?

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Why too many Americans are dying young

IN 2015 Anne Case and Angus Deaton, economists from Princeton University, revealed that white, middle-aged Americans with limited education were dying in greater numbers, while people of other ethnic groups and in other countries were living longer.  But it is not only Americans at the tail end of the baby boom who are dying too soon. Young adults in America die at far higher rates than in other developed countries. And, as with older Americans, progress against young mortality in America over the past two decades has been slow. In 1999, the death rate for those aged between 20 and 24 was 91 per 100,000. In 2015, the latest figures show, that had barely declined to 89 per 100,000.   

In 2012, when George Patton from the University of Melbourne and his colleagues reported international mortality data among young people, the annual death rate for men aged between 20 and 24 was 144 per 100,000.  For women of the same age, the death rate was 48 per 100,000. The male-female gap was similarly large in many European countries, but overall death rates for the age group were about half the size.  In Germany, for example, young men died at a rate of 60 per 100,000 and women at a rate of...Continue reading

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Don't Count on the Fed If the Market Tumbles

A healthy economy and high stock valuations mean the central bank won’t be quick to step in to calm volatile markets.

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U.S. vs Europe: The Political Risk Reverses in Markets

U.S. political turmoil, set against relative eurozone calm, is steadily narrowing the gap between U.S. and German bond yields.

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Ukraine bans its top social networks because they are Russian

AFTER the Maidan revolution in 2014, Ukraine declared that it was reorienting itself towards the West and hoped one day to join the European Union. The country has since made some progress in breaking with its Soviet legacy. Yet the government still sometimes takes steps that seem more appropriate for a budding authoritarian regime than for an aspiring European democracy. 

Earlier this week Petro Poroshenko, the president, announced a ban on several Russian-owned internet firms. They included VKontakte (VK) and Odnoklassniki, the two most widely-used social networks in Ukraine; Mail.ru, one of the country’s most popular email services; and Yandex, a major search engine.

The government argues that the measures are a matter of national security, as Russia’s war against Ukraine drags into its third year. “The challenges of hybrid war demand adequate responses,” Mr Poroshenko wrote on his VK page, explaining his decision to close the site as an answer to...Continue reading

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What Delinquent Auto Loans Say About Loose Lending

Auto loans are getting worse, and while the delinquency rate remains low, the increase is surprising given the strong employment picture.

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Do China's Iron-Ore Futures Mean Anything?

In recent weeks, global investors have been fixated on the extreme gyrations in China’s commodity markets, especially iron ore. That attention would be better invested elsewhere—at least for iron futures traded on the ultraspeculative Dalian exchange.

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Applied Materials: Plenty of Flash Left in the Pan

Applied Materials, a maker of semiconductor-manufacturing gear, posted another strong quarterly report, along with a forecast that easily topped Wall Street’s expectations.

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The chaotic western Balkans take a sudden turn for the better

FOR months, Kosovo, Macedonia and Albania have each been embroiled in crises of varying kinds. But over the past few days, the political landscapes in each of these countries have suddenly shifted, and for the better. Kosovar politicians who normally despise one another have struck a deal to campaign together in an election on June 11th. In Albania, a party that had been threatening for months to boycott elections agreed to take part. And Macedonia’s president at last agreed to let an opposing party form a government, ending a five-month-long impasse that had led to brawling in the streets and inside the country’s parliament itself.

The crisis in Kosovo was the most acute. On May 10th the country’s government fell when the Kosovo Democratic Party (PDK) of Hashim Thaci, the president, pulled out of the ruling coalition. The PDK wanted to hold elections before its declining popular support ebbed any further. The immediate cause of the collapse was the failure of parliament...Continue reading

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Brazil Should Jolt Investors Out of Emerging-Market Complacency

The country’s latest political scandal should serve as a warning after a rush into emerging-market bonds the past year.

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Choppy Markets Underscore Why ECB Will Take It Slow

The ECB remains worried about external risks to the outlook. This week is proving they haven’t gone away.

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Prisoners and the job market

DION got his first paying job at 14—which would be admirable, except that he was selling crack cocaine. He spent much of his early adulthood bouncing between prison and the streets of Yonkers, in New York state. Then, a few months out of one four-year spell behind bars, he discovered Greyston bakery. Founded by a Jewish engineer-turned-Buddhist monk, Greyston practices “non-judgment”. To get a job, people need only provide their names and telephone numbers, and turn up on time when a vacancy arises.

Most companies are far more discerning, particularly when it comes to people like Dion. Perhaps half of America’s private-sector employers ask job applicants to declare their criminal records, and two-thirds routinely run checks before taking people on. They see it as necessary due diligence. Unfortunately, checks that individual firms believe to be prudent are collectively bad for the 7m Americans who have spent time in prison and the 70m with a criminal record—numbers...Continue reading

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Curious electioneering in Big Sky Country

Settin’ the woods on fire

ON A recent evening Rob Quist ambled into a bar in Bozeman dressed in a Stetson and black jeans. He cleared his throat and recited a rhyme he had composed. “Montana…She’s slow to grant her favours to come-lately, newer faces./To long-time suitors, she reveals her hidden, secret places./She lives in big-time splendour; she’s the heart of the golden West./And all manner of wondrous creatures live and suckle at her breast.”

The occasion was not a beer-and-poetry night but a congressional campaign rally. On May 25th Mr Quist, a country-and-western singer and fourth-generation Montanan, will compete as a Democrat in a special election for Montana’s sole congressional seat, vacated when Representative Ryan Zinke was appointed secretary of the interior. Republicans have held the seat since 1996. But the polls, few as they are, suggest that Mr Quist is closing the gap with his opponent, businessman Greg Gianforte, a “newer...Continue reading

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Who should run Illinois?

Must grumble

IN THE two and a half years since he was elected governor of Illinois, Bruce Rauner has met the media as little as possible. Recently, though, he has seemed more eager to communicate. In February he started to take questions from listeners once a month on WBEZ, the local public-radio station. On May 9th he appeared on Facebook Live with his wife, and last month he went on an impromptu tour of the state, visiting businesses and restaurants.

Mr Rauner is one of the most vulnerable Republican governors in the country. A poll in March by the Paul Simon Public Policy Institute of Southern Illinois University found that 58% of those surveyed disapproved of the job he is doing. The fiscal mess he inherited is now so acute that, according to chatter on the bond markets, Illinois could go bust like Puerto Rico. The state’s debt stands at $210.4bn; Moody’s, Fitch and Standard & Poor’s all put its credit rating just two notches away from...Continue reading

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President Trump’s travels

DONALD TRUMP departs for his first trip abroad as president on May 19th. He may be happy to leave Washington, but the cloud he is under will travel with him. And while every preparation has been made to ensure nothing will go awry, there is every reason to fear it will. Mr Trump’s boasting to Russian officials about the “great intel” he had on a plot by Islamic State (IS) underlines just how hazardous this excursion is. His shocking indiscretion seems to have sprung largely from a desire to impress his visitors.

There has been comforting talk of a foreign-policy “firewall”, thanks to the influence of the so-called “axis of adults”: the defence secretary, Jim Mattis, the secretary of state, Rex Tillerson and the national security adviser, H. R. McMaster. The result has been a supposedly traditional Republican foreign policy emerging, distant from Mr Trump’s campaign rhetoric.

Mr Trump has declared that NATO is not obsolete after all. East Asian allies have been...Continue reading

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George Soros runs the gauntlet

No friend of autocrats, either

IN “MASQUERADE”, Tivadar Soros’s memoir of Nazi-occupied Budapest, he describes how he procured false IDs for fellow Jews, including his 14-year-old son George. The elder Soros’s approach to the forgeries is enlightening. With wealthy clients, he “asked for whatever the market would bear”. From the desperate he made nothing: “I felt that I was just a little responsible for everyone.” George posed as the godson of an official who conducted inventories of confiscated Jewish estates. “Without risks,” his father says of a time when each day was a life-or-death gamble, “there’s no life.”

An appetite for risk made George Soros a billionaire, but also made him enemies, as has his congenital philanthropy. In recent months these resentments have reached a new, alarming pitch. Two strands of criticism, in America and abroad, seem to have fused, a confluence epitomised by a pair of obscure letters sent by Republican...Continue reading

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Why evangelicals love Donald Trump

MANY titles bestowed on Donald Trump—from president to commander-in-chief—are hard for non-supporters to digest. But the honorific that most puzzles the world, perhaps, is that bestowed by American conservatives who praise the swaggering, thrice-married tycoon as a man of God.

Expect that gulf of perception to grow still wider as Mr Trump embarks on his first presidential trip overseas on May 19th. Sceptics remember Candidate Trump stoking sectarian rage on the campaign trail. They remember a man who proposed a complete ban on Muslim arrivals and scorned Pope Francis as a Mexican “pawn” for questioning his immigration plans. Yet now White House aides call President Trump a leader bent on uniting the great faiths, who will bring a “message of tolerance and of hope to billions” during stops in Saudi Arabia, Israel and Rome.

Sceptics have long suspected that conservative Christians—and above all white evangelical Protestants, who are among his most loyal...Continue reading

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Deadline pressure for Colombia’s peace agreement

THE Tierra Grata encampment in the foothills of the Perijá mountains overlooks vast cattle ranches around the city of Valledupar. If the FARC guerrillas were still waging war on the government of Colombia, it would be the perfect spot from which to dominate this north-eastern area. But the 160 members of the FARC’s 41st and 19th fronts who occupy the hillside camp spent a recent Sunday preparing not for battle but for a football tournament with teams from nearby towns. They are among nearly 7,000 guerrillas in 26 camps across the country who are waiting to disarm and become civilians under a peace deal, ratified last December, that ends the group’s 52-year-long war against the state.

But even as the FARC footballers warmed up, there were signs that not everything was going to plan. The camp is still under construction, which should have finished last year. The FARC’s ammunition and 7,000 firearms should have been deposited in shipping containers secured by the UN by the end of...Continue reading

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A journalist slain

At least four Mexican journalists have been killed this year for their reporting, according to the Committee to Protect Journalists (CPJ). Since 2007 66 have died violently. On May 15th unknown assassins murdered one of the finest, Javier Valdez, in the state of Sinaloa. Mr Valdez was a co-founder of Ríodoce, a weekly publication that covers corruption and the bloody wars between drug-trafficking gangs. The CPJ says he “combined the grit of the most battle-hardened reporter with the elegiac soul of a 19th-century Romantic poet”. The death toll is so high that earlier this month the attorney-general’s office replaced the chief of its division for “crimes against freedom of expression”.

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Ecuador waits for Lenín Moreno

IN A burst of hyperbole and historical confusion, Rafael Correa compared the run-off election in Ecuador last month to “the battle of Stalingrad” in which his left-wing government was “fighting against the global right wing”. Yet the outcome was far from the rout achieved on the Russian steppes: rather, Mr Correa’s candidate, Lenín Moreno, achieved a narrow victory, by 51% to 49% over Guillermo Lasso, a conservative banker. Even so, the result interrupted the recent ebbing of the “pink tide” in South America that has seen several electoral victories for the centre-right.

The prospects for Mr Moreno’s presidency, which begins on May 24th, are unusually uncertain. His first task is to establish his legitimacy in practice. Some in the opposition question his victory. The electoral authority’s computers briefly shut down with Mr Lasso in an early lead. The police raided Cedatos, Ecuador’s most reliable polling firm, confiscating its computers, after it published an exit...Continue reading

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The end of Canada’s housing boom?

STEPHEN POLOZ, the governor of the Bank of Canada, has been warning Canadians about piling up debt to buy overpriced houses since he took office four years ago. At first he used bankerly language, pointing to the risk of a “disorderly unwinding of household-sector imbalances”. Lately, with household debt at record levels and house prices in Toronto and Vancouver continuing to rise, he has started to speak clearly. “It’s time to remind folks that prices of houses can go down as well as up,” he said on April 12th.

Various levels of government have been trying to restrain house prices (which Mr Poloz has encouraged to rise by keeping interest rates low). The federal government has tightened conditions for the mortgage-insurance policies it sells to lenders, which cover more than half of mortgages by value. Last year the government of British Columbia, Vancouver’s province, slapped a tax of 15% on foreign buyers. Ontario, whose capital is Toronto, brought in its own...Continue reading

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From Russia with risk

BE CAREFUL what you wish for. Traders were bored last week and now they have got some excitement. The US equity market suffered its worst trading day in eight months, falling 1.8%, with banks dropping 4%. The Volatility index, or Vix, which recently dipped below 10, jumped above 15. The dollar has lost most of its gains since Donald Trump was elected in November (see chart).

The catalyst for the sell-off seems to be the latest set of...Continue reading

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Two Italian parties are fighting over the Colosseum

THE view from the roof of Rome’s city hall makes others seem inconsequential. Just a turn of the head is sufficient to take in Trajan’s Column, the Forums, the Colosseum, the Palatine Hill and the Circus Maximus—all set against a backdrop of the blue-grey Apennine mountains. This may be the world’s greatest, and most beautiful, open-air museum. But in the past few weeks it has become a battleground too, involving two parties with different visions of how to cope with the burgeoning number of tourists clamouring to see Italy’s cultural riches.

On one side, wielding a mighty sword, is the centre-left Democratic Party (PD) and its former leader, Dario Franceschini, the arts and heritage minister in the coalition government of Paolo Gentiloni. On the other, waving a net and trident, is the mayor of Rome, Virginia Raggi of the populist Five Star Movement (M5S). In January Mr Franceschini set up an Archaeological Park of the Colosseum, which comprises the great arena itself and most of...Continue reading

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Emmanuel Macron appoints a post-partisan government

IN THE first test of his promise to bridge the party divide, Emmanuel Macron has appointed a government marked by political balance, novelty and competence. A day after his inauguration on May 14th, France’s president named as prime minister Edouard Philippe, the centre-right mayor of Le Havre, to counterbalance his own roots on the left. Two days later, he unveiled a post-partisan team of ministers that mixes left and right, old and new.

The appointment of Mr Philippe was a coup of sorts. A year ago, when the 39-year-old Mr Macron launched his political movement, En Marche! (“On the Move!”), he vowed to “unblock” France by ending the confrontational division between left and right. Yet in reality, the bulk of his supporters came from the left or the centre. The Republicans, who want to form a solid block in parliament after legislative elections on June 11th and 18th, proved largely immune to Mr Macron’s charms.

Mr Philippe, however, succumbed. A...Continue reading

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The soldier who allegedly plotted to kill Germany’s ex-president

Putting the past behind them

IN JANUARY a maintenance worker at Vienna Airport found a loaded 7.65 calibre pistol in the pipe of a public toilet. He told the Austrian police, who put the toilet under surveillance. A month later they arrested a man who appeared to be searching for the gun. He turned out to be a lieutenant in the Bundeswehr, the German army, who claimed he had drunkenly found the weapon in some bushes and had hidden it in a panic. But investigations suggested something much darker.

“Franco A”, as he is known, had allegedly been living a double life. He served in the 291 Light Infantry Battalion at a base in eastern France. In his time off, he lived at a refugee centre in Bavaria, masquerading as David Benjamin, a Syrian asylum seeker driven from his home by Islamic State. According to press reports he was an extremist planning false-flag terror attacks, including the assassinations of Germany’s ex-president and its justice minister. The saga...Continue reading

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The markets are quiet. Too quiet?

HAN SOLO, a hero from the Star Wars movies, has a habit of saying, at tense moments, “I have a bad feeling about this.” Many commentators are echoing this sentiment after a recent fall in the Volatility Index, or Vix, below ten. Their fears deepened on May 17th, when the Vix lurched above 15 and American stockmarkets had their worst day in eight months. Incessant turmoil in the White House at last seemed to take its toll.

A low Vix reading is usually seen as a sign of investor complacency. The previous two occasions on which the index fell below ten were in 1993 and early 2007 (see chart). One preceded the bond market sell-off of 1994 and the other occurred just before the first stages of the credit crisis.

The value of the Vix relates to the cost of insuring against asset-price movements via the options market. An option gives the purchaser the right, but not the obligation, to buy (a call) or sell (a put) an asset at a given price before a given date. In return, like...Continue reading

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Insurers get a new global accounting regime

LISTED firms in over 120 countries, including all large economies bar America, issue financial statements according to international financial reporting standards (IFRS) set by the International Accounting Standards Board (IASB). One industry, however, has been in practice free to keep using divergent national standards: insurance. That, too, is about to change. IFRS 17, issued on May 18th and coming into force in 2021, is the first standard for insurers to require consistent accounting across all countries using IASB rules (ie, again excluding America).

It has a wide gulf to bridge. In one example, looking at identical financial results reported under two countries’ standards, revenue differed by a quarter and net income by nearly two-fifths. Some places, such as the EU, require insurers to use updated discount rates to value future cashflows. Others, including America and many parts of Asia, allow the use of historical discount rates and assumptions valid at the time the policy was...Continue reading

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A surge in the value of crypto-currencies provokes alarm

IT IS hard to predict when bubbles will pop, in particular when they are nested within each other. It helps to keep this image in mind when considering one of the biggest surges in asset values of recent years: the market value of all the world’s crypto-currencies has trebled since the beginning of the year, and is now worth more than $60bn (see chart).

Bitcoin is the best known of these currencies, especially after hackers this month instructed victims to pay ransoms in the anonymous digital cash in order to get their computer files decrypted. Not that many bitcoins exist: there are about 16.3m of them, with only 1,800 new ones minted every day. But growing demand has pushed bitcoin’s price to a record recent high of about $1,830, up from $450 a year ago.

Problems abide. Earlier this year some of the biggest exchanges, such as Bitfinex, experienced problems with their correspondent banks and were unable to pay out real-world currencies to account-holders. To get their money...Continue reading

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