OThe US economic boom has consequences for the global balance of power - and for the UK.
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onto International Economics: IB Economics May 16, 3:44 AM
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Scooped by
Graham Watson
onto International Economics: IB Economics May 16, 3:44 AM
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OThe US economic boom has consequences for the global balance of power - and for the UK.
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Rebrand to Snickers in 1990 caused uproar but special edition will have limited run in Morrisons stores
Graham Watson's insight:
Mars are restoring the Marathon name, albeit temporarily, in a limited edition version of Snickers available in Morrisons, in the hope of capitalizing on nostalgia for retro brands.
It will be interesting to see how well they sell, and if they do sell well, whether the move could become more permanent.
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The Federal Reserve has cut its key lending rate by 0.5 percentage points - a larger cut than expected.
Graham Watson's insight:
The big news yesterday was the 0.5% cut in US interest rates, with the Fed taking bold action as price rises slow and there's some evidence of the labour market softening. Additionally, the Bank's forecasts imply that there might be another 0.5% cut by the end of the year. Good news for US borrowers.
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In the climate vulnerable Caribbean region, Dominica is on a path to climate resilience. Equipped with a strong regulatory base for forests, which cover about 60% of the island, the government and the World Bank are working together to conserve nature and spur economic development through ecotourism.
Graham Watson's insight:
This clip looks at how Dominica has recovered in the wake of Hurricane Maria in September 2017. The focus has been on reforesting the island, protecting its biodiversity and developing a sustainable forest economy.
This has required a clear policy to manage what could otherwise have been a common access resource - the economy's forest - using clearly defined and enforced property rights, with help from the World Bank.
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Louisiana catches about 70 million tons of shrimp, but it's not enough to meet America's surging demand. Cheap imports make up 90% of what the US consumes, and most of it is farmed in countries like India using controversial tactics. Dock prices in Louisiana have fallen to compete. It's left US shrimpers with a perfect storm of rock-bottom prices and sky-high fuel. Up and down the supply chain, companies worry this may be the last generation of Louisiana shrimpers.
Graham Watson's insight:
This Business Insider clip looks at how international trade, with imports from India and Ecuador imperilling Louisiana's shrimp farmers. Farmers face higher costs and their shrimp are getting rock bottom prices.
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As rich westerners fuel demand for the ancient fragrance, a lucrative race for the resin is killing the trees but leaving little of the trade’s profit for those gathering it
Graham Watson's insight:
A salutary tale bringing together scarcity and choice, changing tastes, and developmental issues.
It seems as though increased demand for Ethiopian frankincense has seen rising demand for the resin and bark of frankincense trees and there are fears that they could be harvested to extinction. Worse still, much of it is harvested illegally, with the higher price of frankincense incentivising thieves to plunder the resource. And you should appreciate that if it were to become a common access resource, this has a number of implications for the future of frankincense.
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Shein and Temu have been able to ship packages under $800 to the US without facing tariffs.
Graham Watson's insight:
The US-China trade war continues, this time the US authorities are turning their attention to small packages arriving in the country from Shein and Temu.
Both companies export largely low-value cheap goods, including clothes and shoes from China, and there are 'concerns' about product quality, health and safety issues and so on. In essence, this is almost always a front for 'nationalist' interests. As a result, the US authorities are thinking about scrapping the 2016 exemption from tariffs on packages worth less than $800 and imposing protectionist barriers but it's difficult to see who gains from this.
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Consumer prices in the US rose 2.5% over the 12 months to August, the slowest pace since February 2021.
Graham Watson's insight:
Good economic news from the US, where inflation has fallen from 2.9% in the previous month to 2.5% last month, its lowest level since February 2021. Grocery prices and fuel prices are falling, with the latter down 10% on the previous year.
This raises the possibility that the Federal Reserve are going to cut interest rates next week, with markets thinking that a 0.25% cut is likely although some think that interest rates might be cut even further.
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The European Court of Justice upheld a 2016 decision that said Apple received unlawful aid from Ireland.
Graham Watson's insight:
Busy - and profitable - day for the EU Commission and the European Court of Justice with the court upholding the earlier decision that Apple had received illegal aid from the Irish government and should instead be paying 13 billion euros in tax. The Irish government argued that the benefits of Apple locating there outweighed the cost of the taxes foregone.
Could this be a watershed in the history of the tech sector within the EU?
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Employers added 142,000 jobs in August, figures show, which was less than expected.
Graham Watson's insight:
The US economy is currently betwixt and between - with the latest labour market figures showing weaker than expected job growth, although unemployment fell by 0.1% to 4.2%.
There are concerns that the Federal Reserve's conduct of monetary policy has been overly tight and that this is starting to impede the growth of the economy.
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Former president offers blank cheque to coal and oil, and cosies up to billionaires such as Elon Musk and Peter Thiel
Graham Watson's insight:
Joseph Stiglitz argues that the election of Donald Trump would be disastrous for the US economy, making it weaker and increase income inequality.
He argues that the prospect of higher tariffs, the threat to the Federal Reserve's independence, his prospective fiscal policy and and the repeal of the Inflation Reduction Act would all be harmful. That said, Stiglitz is a well-known Democrat.
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New governments usually come into power offering hope and a break with the past. This one is squandering the opportunity for a fresh start, says David Blanchflower
Graham Watson's insight:
David Blanchflower writes in the Guardian arguing that the new Labour government in blindly following the policies of its Conservative predecessors and in danger of repeating austerity rather than tackle problems such a poverty reduction. There's not much policy but it gives an insight into how the left of the party might feel about the current policy direction.
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Plans underline European carmakers’ problems in switching from petrol and diesel vehicles to electric models
Graham Watson's insight:
This companion piece to Larry Elliott's earlier article about the German economy as a whole, highlights the fact that many European and American electric car manufacturers are struggling to compete with cheaper Chinese imports, and considering factory closures, even though there are EU tariffs on imported Chinese vehicles.
In the case of Volkswagen this would be historic. They've never shut a German plant before, and this has implications for the supply chain, and will have a negative multiplier effect on the surrounding area.
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Editorial: Europe’s tougher new entry rules must not get in the way of a closer relationship with neighbouring countries
Graham Watson's insight:
Are we on the point of another reset of UK-EU relations, with the Guardian noting that changes to border regulations and the introduction of a prior authorisation travel system might refocus minds. There's also talk of looser travel restrictions for the under-30s, so are closer relations on the way? |
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Editorial: Raising the retirement age is never popular, particularly for a country that is getting old before it gets rich
Graham Watson's insight:
One of the biggest impediments to China's future prosperity is its demographics. An ageing population, and an increased number of dependants means that in this regard it is far worse off than India. This Guardian editorial looks at the long-term implications of this and how it might - perhaps - be tackled by increasing the retirement age, for example.
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Editorial: Former European Central Bank chief Mario Draghi is right to call for Marshall plan-type investment in the continent’s future
Graham Watson's insight:
Today's editorial argues that Mario Draghi's plan for increased investment in the EU is correct and that without it the EU will suffer, both economically, in the short-run and long-run, and politically, in that it will continue to lose appeal and fuel the rise of far-right populism across Europe.
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It will influence mortgages, credit card and saving rates for millions of people in the US - and even around the world.
Graham Watson's insight:
With the Federal Reserve looking like it's going to cut interest rates - and some think they might cut them by 0.5%, although I'd be surprised - this BBC article looks at why the US interest rate is of such significance.
For economies who've pegged their currency to the dollar, there's an immediate impact, as such rate cuts are fed through to their economies too. There's also an obvious wealth effect on US asset prices.
But, for developing countries, this might feed through into marginally lower costs of borrowing and debt finance, so this is a good thing for them too.
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For decades, US corporations have been enticed to funnel profits through the country – will this court decision disrupt our cosy little setup, asks writer and historian Jack Sheehan
Graham Watson's insight:
An interesting article about the Irish government's 13 billion euro windfall, as Apple are forced to pay tax to them. It gives a bit of insight into recent Irish economic history and, I think, a clever reading of the narrative that surrounds public spending.
"Economic downturns in Ireland are inevitably framed as morality plays in which the wicked (ordinary people) are punished for their greed (wanting functional public services). The message is clear: nice things cannot happen here." The same is true in the UK.
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The move is widely expected – but will still be studied closely as dark clouds loom on the US horizon
Graham Watson's insight:
The state of the US economy will play a significant role in the forthcoming election, but it seems as though the storm clouds are gathering. That said, the Federal Reserve look likely to cut interest rates, although it's unclear how far, or how fast they are likely to fall.
And much of what applies to the US also holds true in many other developed economies, notably the UK and the EU.
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European Central Bank lowers forecast for GDP growth, as it cuts interest rates for the second time this year
Graham Watson's insight:
The ECB have warned that Eurozone growth is going to be lower than forecast, as it lowered interest rates by 0.25% to 3.5% in response to Eurozone inflation falling to 2.2% in August, from 2.6% in July. Given that the inflationary target is 2%, it might seem as though inflation is likely to fall back to target soon enough, but the consensus is that it is going to rise later in the year, as the result of increased wage pressures.
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The source of new renewable energy is also a battleground over China’s cheap exports of panels that has split US firms
Graham Watson's insight:
This article looks at the market for solar panels, arguing that despite the rapid fall in the price of solar panels, which should be seen as a good thing, this needn't be the case.
In the first place, Chinese firms have flooded the market with solar panels, leading to accusations of dumping, but additionally, some of those solar panels are being produced in a way that generates a sizeable carbon footprint. So not only are there trade reasons for being more sceptical about the current state of the solar market but there are also environmental reasons too.
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Report by Mario Draghi calls for additional investment to regain growth and prevent social unrest
Graham Watson's insight:
There are worries about both the current level of growth in the Eurozone and its longer-term viability, both of which are addressed in a report by former Italian PM, Mario Draghi, who calls for a boost in spending to aid the digital and green transitions.
The longer-term fear is that low productivity in the zone, and being out-competed by China is going to affect social cohesion and pose problems for the EU in the longer-term.
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Amid polycrisis and immense global challenges, the World Bank's IDA and its partners are working with determination and consistency to transform lives, rebuild economies and enhance crisis preparedness.
Graham Watson's insight:
This World Bank clip looks at the role of the International Development Agency in helping developing economies overcome a plethora of challenges and foster development.
It highlights the role of international financial organisations in tackling poverty, providing humanitarian aid and boosting infrastructure development, all of which are essential to promote sustainable development.
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The car maker's decision comes as industry faces slowing demand in some major markets for electric vehicles.
Graham Watson's insight:
Just a little note to highlight that the path to the universal uptake of EVs isn't going to be straightforward, with Volvo rowing back on a commitment to only sell EVs by 2030. They argue that since they made the commitment in 2021, market conditions have changed, not least in the EU.
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BBC Verify looks at jobs, inflation, stocks and other indicators to compare the Trump and Biden economies.
Graham Watson's insight:
Who would have thought that President Trump's claim that he'd overseen "greatest economy in the history of our country" would prove to be hokum?
Looking at most macroeconomic indicators, it's easy to debunk this claim, although in terms of real incomes, Trump has a slight point. However, given his fixation with the stock market, it's amusing to see that it is higher now than when he left office.
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Germany was once an economic model to emulate but its reliance on industries past their sell-by date is costing it dear
Graham Watson's insight:
Larry Elliott looks at the ongoing problems facing the German economy arguing that whereas it was a role model in the latter part of the 20th century, it's inherent weaknesses have been revealed in the 21st century.
He argues that the Germans have been complacent, and invested too little in all forms of infrastructure, as well as human capital. He sees the economy as over-reliant upon sunset industries, and although they've done remarkably well to integrate the former East Germany, current rates of growth are low. |
The headline to this article looks to be remarkable: can an economy be doing "too well". However, the reason for it might be that for all the talk of a successful green transition and job creation in the US, the economy is only operating beyond the full employment level of national income because of borrowing, and the inflationary effects of this mean that the standard of living of the average US worker hasn't really been improved at all.