Category Archives: In Depth

Why I hope Liz Truss is lying

Liz Truss, the favourite in the race to succeed Boris Johnson as prime minister, has laid the blame for inflation at the door of the Bank of England, saying it must do more to fight price rises.

Truss also said she would change the Bank of England’s mandate if she becomes prime minister, to ensure that the central bank fights inflation more efficiently, but gave no details about what that change would entail.

With consumer price inflation hitting a 40-year high of 9.4% in June, you may think she has a point. The Bank of England is behind the curve, but when it comes to changing the central bank’s mandate, I really hope Liz Truss is lying. If she is not, then we should all be very afraid.

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Three reasons why market capitulation may be over

The return of inflation has taken a lot of people by surprise, although it should not have done. Worryingly, even central banks have acted quite surprised by the abrupt rise in prices, when they should have expected it.

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Beware value traps when hunting for stock market bargains

European stock markets recouped all the ground lost since the February 24 Russian invasion of Ukraine, but investor optimism may be misplaced.

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Housing wealth soars while productivity lags

A century ago, the roaring ’20s were a time of hedonistic excess. After the horror of World War I, people wanted to rebuild, but also to forget. Wealth increased, and so did prices.

While we like to think we are smarter, or at least more knowledgeable than 100 years ago, there are worrying similarities between the two periods. If anything, the excesses this time around are much greater.

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Come on, Europe: wir schaffen das

There are moments in politics and policy that change the course of history; when they can be summarised in three words, they are the best.

Mario Draghi’s statement back in 2012 that the European Central Bank will do “whatever it takes” to save the euro was such a moment: from then on, the speculators’ attack on weaker eurozone members’ sovereign debt stopped.

Another such moment came three years later, when in 2015 German chancellor Angela Merkel allowed one million refugees to enter Germany. “Wir schaffen das” (we can manage this), she said.

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Fitness for the older generation is a missed investment opportunity

With developed world populations ageing fast, you would think that entrepreneurs would be jumping at the opportunity to find new ways to cash in the silver dollar (pound, or euro, yen, etc).

The Covid-19 pandemic offers a big opportunity to do that – the key is for governments to act to facilitate it.

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ECB pays lip service to worries about inflating a housing bubble

The European Central Bank (ECB) raised its inflation target last week, at the same time going to great lengths to try to persuade people that it did not.

In the process, the central bank also stated that it will find a way to deal with an issue that is increasingly pressing: that of runaway house price inflation.

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A climate change accounting trick could save the planet

As more politicians become aware of the need to do something about climate change before we’re all swallowed by the oceans we came from, discussions are focusing on how to measure what countries are doing about it and what steps to take to contain it.

An accounting trick that could save the planet should perhaps be given more attention: adjusting each country’s gross domestic product data by the effect that particular country has on climate change.

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How to make renting attractive in the UK

Central banks have been busy saving the West from its own excesses since the great financial crisis of 2007, but in the process, they have made housing unaffordable for young people, particularly in the UK.

House prices have surged in many UK cities, with record low interest rates and money printing making homes more affordable for “investors” and less so for those who actually need them as places to live in, as opposed to assets to speculate on.

Despite record low mortgages and various subsidies, homeownership is increasingly unaffordable for a rising number of people.

The consequence is deepening inequality, which makes the UK look more like a feudal, rather than modern, society.

One of the ways to tackle the so-called “housing crisis” would be to make renting an option perhaps as good, if not better, than buying a property.

Here are four ways in which the UK government could go about making renting a truly affordable option for young people in the UK – and a few of the reasons why it will never do it.

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Emerging markets face three major headwinds

Emerging market assets have enjoyed robust performance despite the Covid-19 pandemic, with investors attracted by their higher yields and faster economic growth prospects in these countries.

But three headwinds could cut short their growth spurt: rising interest rates, environmental, social and governance (ESG) issues and the retreat of globalisation.

These headwinds are converging at a very delicate time for global markets, and at least two of them could persist for a long time.

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