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Friday, October 30, 2020
The State of The Investment Market and Scam prevention Methods Seoul's economy in Korea has been growing even during the global financial crisis in 1998 and has maintained its stability since then. It is dominated by chaebols or more commonly known as family-owned conglomerates. However, Global Asset Managements' world-renowned economists...
The $600 weekly unemployment benefit the federal government funded this year was a remarkably effective expansion of the safety net. It helped pay many workers more than their lost wages. It enabled families to spend more than during normal times. It even allowed households to put away savings as the economy was teetering.Then the money stopped at the end of July. And it’s clear, looking back, what happened next: Workers quickly burned through the reserves that the aid had given them. Of the savings many households were able to build up over the course of four months of unusually generous government help, much of it was gone by the end of August.
WASHINGTON — President Trump clashed with his own party on Thursday over a stimulus package to stabilize the economy, calling for a big-spending plan of the kind envisioned by Democrats even as the top Republican leader declared that such a measure had little support within the party.Mr. Trump declared he “would go higher” than the latest $1.8 trillion framework the White House has put forward in negotiations with Speaker Nancy Pelosi of California, faulting his own Treasury secretary for failing to offer enough money in the talks. A short time later, Senator Mitch McConnell, Republican of Kentucky and the majority leader, all but ruled out such a deal, saying senators in his party would never support a package of that magnitude.“He’s talking about a much larger amount than I can sell to my members,” Mr. McConnell told reporters in Kentucky, a refrain he reiterated in multiple appearances across the state. Instead, he plans next week to try to advance a scaled-down $500 billion package, which is likely to fail without Democratic support.The stark division between the top two Republicans in Washington was the latest indication of the dim pre-election prospects for enactment of a broad pandemic recovery package that economists
GOVERNMENTS IN MANY poor countries have faced a sickening choice this year, between spending to support their populations through the covid-19 crisis and paying creditors. On October 14th finance ministers of the G20 group of countries offered a temporary salve for 73 of the world’s neediest countries, by saying they would extend their Debt Service Suspension Initiative (DSSI) to halt debt-service payments until July 2021. That should free up funds to fight the pandemic (see chart). But a lasting solution will take more dramatic action. Public debt in poor countries rose from 29% of GDP in 2012 to 43% in 2019, according to the IMF, and is expected to jump to 49% this year. Collapsing tax revenues and swollen deficits make it harder to pay the bills and give foreign investors the jitters. According to data from the World Bank and the three largest credit-rating agencies, at least 33 of the DSSI-eligible countries were either close to or in debt distress—ie, struggling to meet their repayment obligations. The 73 countries eligible for the DSSI were due to spend over $31bn servicing debt between May and December. About half of this was owed by the 33 countries under most fiscal
THE IMF’S latest forecasts, released on October 13th, spell out just how long the economic harm from covid-19 will last. America’s gdp will return to its 2019 level only in 2022; Italy’s, in 2025. The fund reckons that in many places output will stay well below its pre-pandemic trend, as labour and capital are only slowly reallocated from shrinking industries towards thriving ones. Last October the fund expected India’s economy to grow by more than 40% by 2024; now it expects half that. Editor’s note: Some of our covid-19 coverage is free for readers of The Economist Today, our daily newsletter. For more stories and our pandemic tracker, see our hub This article appeared in the Finance & economics section of the print edition under the headline "The IMF’s new forecasts"
AROUND FIVE years ago emerging-market investors were greatly excited by the prospects for Iran’s stockmarket. The lifting of sanctions in exchange for limits on its nuclear programme was in sight. Exports of oil, Iran’s main source of foreign currency, would increase, boosting the economy. And there was the hope that Iran might soon be included in equity indices tracked by global investors. A surge of buying by foreigners would surely follow. Things turned out rather differently. Sanctions were lifted in 2016, only to be reimposed by America in 2018. Oil exports have dwindled. Iran did have a stockmarket boom, but it came much later than anyone had expected and foreigners played almost no part in it. And it was more bubble than boom. In a few short months this year, share prices rocketed (see chart). The bubble has since popped. Share prices have fallen by around a quarter since early August and by a lot more in hard-currency terms. One rationale for the frantic stock-buying was Iranians’ desire to hedge against the lost purchasing power of the rial; sanctions make holding dollars offshore rather tricky. It is tempting to conclude that bad things happen when savings have nowhere else
IN THE 1980S comedy, “Trading Places”, Jamie Lee Curtis plays a prostitute who has been saving for her future; she has $42,000 “in T-bills, earning interest”. If she followed the same strategy today, she would be disappointed with the return. The one-year Treasury bill yields 0.13%, so her annual interest income would be just $55. If she reinvested the income, it would take more than 530 years for her money to double. Savers around the world face the same problem. Bank accounts, money-market mutual funds and other short-term instruments used to offer a decent return. Not any more (see chart). Rates are lower in nominal terms than they were 30 years ago because of a long-term decline in inflation, but they are also lower in real terms. The pandemic has made the dilemma acute. This year American, British and German nominal ten-year bond yields have all touched their lowest levels in history. Savers are likely to respond to this situation in one of three ways. They can save less, and spend more of their incomes. Another approach is to set aside more money, to make up for lower returns. A third option would be to put more savings into
NO SOPHISTICATED ANALYSIS is needed to show that China is in better economic shape than most other countries these days. Just look at its bustling shopping malls, its jammed roads in rush hour and its mobbed tourist sites during holidays. But if the crowd scenes suffice to affirm that China is doing well, a little more work is needed to address the question: exactly how well? As is often the case with Chinese data, the answer is controversial. The national statistics bureau will report third-quarter GDP on October 19th. Analysts expect growth of about 5% compared with a year earlier, a strong recovery from the depths of the coronavirus slowdown, and all the more stunning when much of the world is mired in recession. Yet some believe the official growth data have been too rosy this year, not least because China’s pandemic lockdown in the first quarter was among the world’s most restrictive. Thankfully, the mysteries are not unfathomable. Research published in recent weeks sheds some light on what is really going on. Doubts about China’s data are not new: it is probably fair to say that few serious economists trust its exact growth figures. Instead, there are two
MOST BANKERS have been working frantically for the past six months. Traders handled record-high volumes in choppy markets. Their colleagues issued mountains of equity and debt as companies sought to withstand the economic downturn by amassing capital. Commercial bankers offered forbearance to struggling borrowers, and were forced to write down the value of loans as the likelihood of being repaid fell. As a result, investment-banking revenues soared in the first half of the year, and most commercial banks suffered losses as they set aside provisions for bad loans. That made for slender profits at Bank of America, Citigroup and JPMorgan Chase, the big hybrid banks. Goldman Sachs and Morgan Stanley, which are more skewed towards investment banking, posted stellar profits. Wells Fargo, a mostly commercial lender, lost money. The third-quarter earnings reported by five of these banks on October 13th and 14th tell a different story (the sixth, Morgan Stanley, was due to report on the 15th, as The Economist went to press). Investment bankers were still busy—trading revenues were up by around 20% compared with the third quarter of 2019, and Goldman’s profits doubled on the year. But the pace of activity was leisurely compared with the second
The crowd was growing impatient as Crystal Holmes fumbled with the keys to the store.Dozens of people were swarming the street around Western Beauty Supply, the Chicago shop where Ms. Holmes works. She had persuaded some of them to let her open the store so they could rob it without breaking the windows.“She’s taking too long,” someone yelled. “Let’s go in and get it.”Western Beauty Supply sells products like wigs, hair extensions and combs mostly to Black women. Most of the employees, like Ms. Holmes, are also Black, but the owner is a Korean-American man, Yong Sup Na.When a few young men appeared outside the store earlier that evening in May, Mr. Na went out to speak with them. He offered some of them cash, and they walked away. At that point, Mr. Na told Ms. Holmes that he felt confident his business was safe. “They are not going to break into the store,” he told her.A few minutes later, though, a larger group showed up. A woman snatched Mr. Na’s keys, but Ms. Holmes persuaded her to give them back. Then she ordered Mr. Na, her boss, to leave. “You don’t know what could happen,” she told him.Even as
WASHINGTON — The World Trade Organization on Tuesday gave the European Union permission to impose tariffs on $4 billion worth of American products annually in retaliation for illegal subsidies given to the U.S. plane maker Boeing, a move that could result in levies on American airplanes, agricultural products and other goods.The decision, which stems from a 16-year fight before the global trade body, follows a parallel case that the United States brought against Europe over subsidies to its largest plane maker, Airbus. Last year, the Trump administration imposed tariffs on European planes, wine, cheese and other products after the W.T.O. gave the United States permission to retaliate on up to $7.5 billion of European exports annually.It remains to be seen whether the new tariffs will ultimately persuade the United States and Europe to come to a negotiated settlement that would lift the levies, or merely inflame relations and result in higher costs on businesses and consumers on both sides of the Atlantic. The European Union has repeatedly appealed to the United States to remove its tariffs, but American officials say Europe has not taken the necessary actions to stop its Airbus subsidies.The tariffs will not go into effect immediately. The
IN 1991 ALVIN ROTH, who in 2012 would share the Nobel prize in economics, was asked to speculate about how the discipline might change over the century to come. “In the long term,” he wrote, “the real test of our success will be not merely how well we understand the general principles which govern economic interactions, but how well we can bring this knowledge to bear on practical questions of microeconomic engineering.” Mr Roth did his bit to move the field in that direction: among other things, he helped design market mechanisms to match sick patients with kidney donors. The Swedish Riksbank, which awards what is officially known as the Prize in Economic Sciences in Memory of Alfred Nobel, seems to agree. On October 12th it gave this year’s prize to Paul Milgrom and Robert Wilson, both of Stanford University, for their work on auction theory and design. Their work epitomises economics as engineering. Auctions are an ancient mechanism for selling valuable commodities, from fine art to a fisherman’s catch to government bonds. Historically, a few forms of auction have been dominant. In an English auction, ascending bids are made until a sole winner remains; in the Dutch variety, a