Month: March 2022


Under the unprecedented sanctions, how is the Russian economy doing?

IN response Russia's aggression in Ukraine, Westerners start economic war. The United States has banned the sale of a wide range of goods to Russia; Big companies withdraw by the dozen; And several countries together have frozen 60% of the central bank's international reserves. The idea was to send Russia's economy into a free fall, punishing President Vladimir Putin for his aggression. The ruble fell more than a third against the dollar in the week following the attack, and shares of many Russian companies fell.

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Is Western strategy still going to be planned? The chaos in the Russian market seems to have subsided. The ruble has jumped since its inception in early March, and has now reached its pre-war level. The main benchmark of Russian stocks sank by one-third, but has since stabilized. The government and most companies are keeping up with their payments in foreign currency bonds. A race has ended with banks withdrawing about 3trn rubles (31bn), with the Russians returning most of the cash to their accounts.

The policy has helped stabilize a battery market. Some are orthodox. The central bank has raised interest rates from 9.5% to 20%, encouraging people to keep interest-bearing Russian assets. Other principles are less common. The government has ordered exporters to convert 80% of their foreign exchange earnings into rubles. Trading on the Moscow Stock Exchange has become, to use the central bank's accent, "negotiable". Short-selling is prohibited, and non-residents will not be able to offload the stock until April 1st.

The real economy, though, is in some ways a financial mirror image: it's healthier than it seems at first glance. A weekly measure of consumer prices shows that they have risen more than 5% since the beginning of March alone. Many foreign companies have pulled out, reducing supply of goods, while a weaker currency and sanctions have made imports more expensive. However, the price of everything is not increasing. Vodka, primarily domestically produced, costs a little more than before the war. The price of petrol is almost the same. And although this is early days, there is still very little evidence of a major blow to economic activity.

Produced by and by an estimate based on Internet-search data OECDThink-tank of a rich country, Russia GDP The week of March 26th was about 5% higher than the previous year Collected by other "real-time" data Economist, Such as electricity consumption and rail loading of goods, are up. A cost tracker, produced by Sberbank, Russia's largest lender, has grown slightly over the years. Part of that reflects the fact that people stockpile products before prices rise: the cost to household is particularly strong. However, the cost of services has dropped slightly and is much healthier in most epidemics.

Russia looks set to enter recession this year. But it could turn out badly in the end, as most economists have predicted. GDP Fall of 10-15% - depending on three factors. The first is that ordinary Russians began to worry about the economy as soon as the war broke out and cut spending - as happened in 2014, when Russia invaded Crimea. The second is whether imports from the West will eventually shut down production due to restrictions on companies' access. Russia's aviation sector is particularly vulnerable, as is the car industry. Yet many large businesses that began during the Soviet era are accustomed to operating without imports. If any economy can come close to dealing with isolation from the world, it will be Russia.

The third and most important factor relates to Russia's fossil-fuel exports. Despite many sanctions, Russia still sells about $ 10 billion worth of oil a month to foreign buyers, equivalent to a quarter of its pre-war exports; Revenue from the sale of natural gas and other petroleum products is still flowing, too. It provides a valuable source of foreign exchange through which it can buy some consumer goods and parts from neutral or friendly countries. If this does not change, the Russian economy may reject the worst forecast. 3

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This article was published in the print edition of the section entitled "Wounded Bears"


Weekly initial claims tick up but stay close to the lowest level …

Initial claims for regular state unemployment insurance rose slightly, adding 14,000 for the week ended March 26, bringing it to 202,000, just below the previous decade's multi-decade low (see first chart). Claims continue to bounce, but have dropped to seven in the last ten weeks Despite the increase, claims remained below the January-February 2020 average of 212,000 before the lockdown. By long-term historical comparison, the initial claims are very low.

The four-week average fell last week, posting the seventh drop in the last eight weeks, coming in at 208,500, the first dip below the 212,000 threshold since Jan. 8. Weekly preliminary demand data suggests that the labor market remains very tight. However, Russia's aggression in Ukraine is disrupting the world economy and the start of the Fed's austerity cycle could lead to instability in economic activity in the coming months.

The number of ongoing claims for the state unemployment program totaled 1.718 million for the week ended March 12, down 81,430 from the previous week (see second chart). State claims have dropped to seven in the last nine weeks and are below their pre-epidemic level of 2.111 million since October 2021 (see second chart).

For the week ended March 12, the total number of continued claims in all federal programs was only 57,474, a drop of 545. For January and February 2020, the federal continued claims average was 34,174. Although current numbers are above the pre-epidemic average, they reflect only a fraction of the 16.6 million peaks and essentially the termination of the Emergency Unemployment Assistance Program and the Emergency Emergency UC program.

The latest results from the combined federal and state programs put the total number of people claiming benefits in all unemployment programs for the week ended March 12 at 1.776 million, down 81,975 from the previous week. The latest results are below 2 million in the fifth week in a row.

Despite some volatility, initial demand has been on a downward trend in recent weeks and is at extremely low levels by historical comparisons. The overall low level of demand combined with the high number of open jobs indicates that the labor market has remained very tight. With persistent labor shortages, material shortages, and logistical problems, production recovery across the economy as a whole can slow down and maintain upward pressure on prices. In addition, Russia's aggression in Ukraine has had a dramatic effect on geopolitical and global economic turmoil in capital and commodity markets, triggering new waves of trade disruptions. In addition, the start of a new Fed tightening cycle will likely weigh on economic activity. The outlook remains highly uncertain.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 for over 25 years researching economic and financial markets on Wall Street. Bob was previously head of Brown Brothers Harriman's Global Equity Strategy, where he developed an equity investment strategy that combines top-down macro analysis with bottom-up fundamentals.

Prior to BBH, Bob was a senior equity strategist at State Street Global Markets, a senior economic strategist at Prudential Equity Group, and a senior economist at Citicorp Investment Services and a financial markets analyst. Bob holds an MA in Economics from Fordham University and a BS in Business from Lehigh University.

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Why Arab tenants fight for Russia


Yemen The biggest humanitarian crisis that no one discusses. As I mentioned: "People are not driving with the" We Stand with Yemen "bumper sticker, and schools do not need children to make this war understandable. They are not part of the larger agenda and no one can benefit from their suffering at this time. "

Saudi Arabia and Qatar seem to feel the same way. Qatari Foreign Minister Sheikh Mohammed bin Abdulrahman Al-Thani said, "We have seen the humanitarian crisis in Ukraine, and everyone is talking about it now. Many countries in the region have suffered over the years and nothing has happened." Bin Abdul Rahman Al-Thani. . "We have never seen a global response to these tragedies."

He went on to note the plight of forgotten people in Syria, Palestine, Afghanistan and Libya. Countless people have been killed in this seemingly endless conflict, in the thousands, and millions have been displaced - forgotten and rejected by the West.


Ukraine's Zelensky has criticized Russia for helping Syrian President Bashar al-Assad secure power in 2015. Russia actually helped fight the Islamic State group and drove them out of Iraq and Syria. Putin has called on the people of the Middle East to back up. "If you see that there are people who want to do what they want - not for money - then we have to give them what they want and Help them get to the conflict zonePutin told Defense Minister Sergei Shoigu at a Security Council meeting in Moscow.

Considering the dire economic situation for countless individuals in countless countries in the Middle East, the prospect of a stable income is a deal that many men cannot deny. Yet, in addition to money, the lack of Western support for these countries has caused resentment towards Ukraine and its Western allies. Many years ago, Putin presented himself as an ally.

Neon repents of the Vietnam War

We are hiring an art and design intern for summer and autumn

Five Thirty Eight is hiring one Art and Design Intern For summer and autumn. Are you someone who likes to tell a compelling story using photography, illustration and design? Are you thinking of a career in visual journalism? The Art and Design Inter will work with senior designers and story editors at FiveThirtieth to make our stories as well-researched and visually appealing as possible. This is an exciting opportunity for anyone interested in editorial design that can make an impact on a small team.

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The White House wants to stop a tax evasion used by the super-rich

M.OST American The government wants to impose higher taxes on the very rich. Every few months or so, democratic lawmakers unveil plans to do so, only to stumble over their legislation. It's not just the rich who can afford the powerful lobbyists. The nature of their fate makes them an elusive target for the tax authorities. A new proposal from the Biden administration could offer a partial solution, if it transcends political and legal hurdles.

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The idea behind President Joe Biden's new budget proposal on March 28 is that Americans worth more than 100 100 million should pay a 20% minimum tax on all their income, which includes, arguably, an appreciation of their investment. If a very rich American earns $ 10 million in his stock portfolio in a year, he will have to pay দায় 2 million in liabilities.

The goal is to close a gap. Wealthy Americans must pay at least 20% capital gains tax when selling assets. But when assets are inherited, the value at the time of transfer creates a new basis for calculating capital gains. This way the super-rich can reduce their tax bills: they owe nothing on unsold assets while they are alive, and their heirs then benefit from a "step-up basis" for capital gains. Economists in the Biden administration calculate that 400 wealthy American families pay an average federal income tax rate of only 8%, much lower than the average rate paid by the majority of the middle class.

An easy way to close this gap is to recognize all capital gains on inheritance. In fact, it was Mr. Biden's choice when it came to legislation last year. But opponents have branded it a "death tax" that would bankrupt family farms. Although the charge was unfair প্রায় almost all farms were below the tax threshold-Democrats dropped the idea.

The Biden administration has called the new proposal a "billionaire minimum income tax." Steve Rosenthal of the Tax Policy Center, a think-tank, called it an innovative rebranding of step-up basis ideas. "It will work like a pre-payment," he said. Taxes due at the time of death will be deducted by those who have paid in advance.

The White House thinks the new tax will bring in $ 360 billion over the next decade, making it impressive for a tariff that hits the richest 0.01% of households. However, it reflects a loss for the state on the basis of decades of gains, like Jeff Bezos and Elon Musk. In order to pay taxes, they may have to sell shares in their firm, potentially rebuilding their ownership structure. The government will handle the push by breaking the payments in installments (first for nine years and then for five years). Once established, the revenue will be thin. "The 60 360 billion estimate makes it more promising in the long run than it really is," said Kyle Pomerleu, a think-tank at the American Enterprise Institute.

There are two immediate barriers. The political question is whether Joe Manchin and Kirsten Cinema, two moderate Democratic senators, support the idea, as Biden did in the White House. They have opposed the previous tax hike for various reasons. Then there is the court. The constitution limits the federal government to income, not resources. The White House will argue that capital gains are a form of income, but its proposal will face legal challenges.

Even if Mr. Biden succeeds in making the tax law, another concern will arise. Tariffs will be complex, especially for assets that do not trade in the public market. Lawyers will create new structures to shelter resources. "We're sharpening their pencils as we talk," said Joel Slimrod, an economist at the University of Michigan. 3

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This article was published in the Finance and Economics section of the print edition under the headline "Our portion before death"


The creative destruction of Carl Icon AIER

HBO has recently been published Icahn: The restless billionaire, A documentary about 85-year-old Wall Street legend Carl Eiken Freshly, the documentary does not portray the icon as negatively as one would expect from an awakened Hollywood production company. Instead, it demonstrates how Icahn's staff investments make money for shareholders and promote corporate prudence.

Without mentioning it, the documentary demonstrates how Ican's career embodied what economists call "creative destruction," a term coined by Joseph Schumpeter to describe the paradox of progress in free-market economics. Economic growth is erratic. New technology displaces old ones, creating jobs and destroying companies and industries. However, society becomes more productive and richer, as citizens reap the rewards of new products, industries and jobs.

Active investors like Icahn encourage creative destruction. They take big positions in companies that they believe are undervalued or mismanaged and push for change for the betterment of the company. If they succeed, the company's share price rises, and the active investor is rewarded. However, when things go awry they run the risk of losing a lot (or all) of their investment.

Corporate rider or activist investor?

The media often denounces active investors as "corporate attackers" or "vulture capitalists". They are criticized for taking big positions in the company, cutting costs (including jobs) and selling their shares when the share price rises.

But what critics miss is that some jobs are not always good for the company. The failure of management to effectively manage a public company is not the fault of the active investor. Often, the documentary shows, corporate decisions benefit the CEO or management rather than the company.

An example is the role of an active investor in Icahn's war with the CEO of the Tappan Company in 1979. Icahn, a young, pioneering employee investor, took a big position at Tappan, a popular American kitchen appliance company. To him, the company was valued at $ 7 per share. He built a large stock position in the company and fought a proxy to get a seat on the board.

Once on the board, he used his seat for positive change. Icon annoyed the CEO at a board meeting over the merger proposal, calling it "the worst deal in economic history." Icahn thought it would benefit the CEO at the expense of the company. The move surprised other board members and the CEO dropped his plan to move forward with the deal. A few months later, Tappan was bought by Electrolux for $ 17 a share, which proves Icahn.

Activist investors risk their money to improve public companies and against corporate mismanagement. When successful, activists raise the value of the company and win over both employees and shareholders. The general public also benefits from healthy, valuable companies that strengthen the economy.

Creative destruction creates value

Creative Destruction is a powerful illustrator of the "suffering" and "profit" caused by innovation in the free market. The life of Guilded Edge industrialist Andrew Carnegie serves as an example. Carnegie's father lost his job due to technological advances in the weaving industry, forcing him to leave Scotland in search of opportunities in America. A generation later, his son Andrew will revolutionize the steel industry and become the richest man in the world. Carnegie's father suffered the pain of destruction, while Carnegie enjoyed the benefits of innovation.

In the end, we are better off because of creative destruction. Innovation comes at the expense of certain jobs and industries, but very few people would choose to live without today's technology.

Without healthy companies for innovation, creative destruction is hampered. Active investors play an important role in overcoming the barriers to innovation. Icahn’s corporate activism initiates corporate growth and eliminates chronic inefficiency from corporate mismanagement. While its activities may cost some jobs in the short term, it benefits the shareholders and the public because companies can freely innovate and produce better products.


Although the documentary succeeds in showing the positive side of working investors like Icahn, it seeks to inspire by talking about his life. A poor Jewish child in Queens, he has worked hard all his life, and now, at the age of 85, he is worth about $ 20 billion. Icahn comes across as a fierce but humble person. The documentary quotes him as saying, "This is something you have to remember, if you are not careful it will not last forever."

Icahn is a Tour-de-Force, relentlessly pursuing creative destruction in its nearly 60-year career in the financial markets. Creative destruction is sometimes painful but ultimately good, and should be celebrated instead of discrediting active investors like Carl Icon.


David Waugh

David Waugh joined AIER in 2020 and currently serves as managing editor. He has previously worked as a partner in S&P Global Market Intelligence.

David is a graduate of Hampden-Sydney College where he received a BA in Economics. While in Hampden-Sydney, he was a Senior Fellow at the Center for the Study of Political Economy and served as a teaching assistant in the Department of Economics. He is a Don Lavoie Fellow at the Mercatus Center at George Mason University.

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Modern is developing a dangerous flu vaccine

Moderna, the company that developed its first vaccine in Operation Warp Speed, plans to give another risky injection. The company is working on another mRNA vaccine to combat the common flu called mRNA-1010. Moderna is currently in the second phase of trials of unwanted vaccines and already has a big red flag. Those who have received the mRNA-1010 vaccine The chances of experiencing side effects are twofold The standard flu vaccine, more than those who have received afloria. Adverse side effects were felt in each age group.

Why would the weakest of our population receive a vaccine that is twice as harmful as the one currently available? Answer: Fear of coercion and profit.

The company also plans to develop a vaccine that combines the unknown chemicals in the covid vaccine with its flu vaccine. Novavax is already in the early stages of a combination vaccine Kovid's story suddenly disappeared from the mainstream media the day Russian troops lined up on the Ukrainian border, but let's not forget that governments still plan to use the virus as a significant component of their toolkit to control the population.

"Their drugs are poison

We are hiring a social video intern for summer and autumn

FiveThirtyEight is looking for an intern to work with our video and social groups in the summer of 2022. We are looking for a current student journalist or recent graduate who is passionate about accuracy, precision, video making and storytelling; Those who specialize in creating and cultivating communities on platforms like TikTok or Instagram; And eager to share with those audiences our uncomfortable, data-driven approach to sports and political journalism.

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Rising food prices have an impact on the poor economy

T.He is Sri Lankan The economy was in dire straits before Russian tanks began entering Ukraine. The Sri Lankan government is overwhelmed by the burden of foreign debt and the impact of the epidemic on its tourism access IMF For help as the year begins. Now the devaluation of the currency and the effects of war on commodity markets are driving up consumer prices. Troops have been deployed to calm the crowd lined up for fuel, and a debt default could be inevitable. As prices rise for everything from oil and gas to corn and wheat, other countries could expect similar consequences.

Food makes up a small part of the household budget in a rich world, but accounts for more than 20% of most consumer spending in the emerging world and about 40% in sub-Saharan Africa. Prices have already risen significantly in the last few years due to production disruptions and extreme weather. Global food prices, in fact, reached an all-time high in February, according to an index A Food and Agriculture Organization. From then on they will rise even higher.

One consequence of this is increased poverty. The Center for Global Development, a think-tank, estimates that Russia's aggression in Ukraine will push 40 million people worldwide into extreme poverty. (By comparison, the World Bank estimates in 2021 that approximately 100 million people will fall into poverty as a result of the Covid-19 epidemic.) High commodity prices will also add to the macroeconomic strain in many places.

Total debt across emerging and developing economies stood at a 50-year high last year, comparatively GDP. These banks are raising the cost of services as central banks around the world start raising interest rates to check inflation. Tough economic conditions are weighing on emerging-market currencies, increasing the cost of foreign exchange borrowing and forcing the government to drain currency reserves to reduce exchange rates. High commodity prices could further complicate the financial picture for emerging economies, as many governments provide generous food and energy subsidies to households.

The case of Sri Lanka is exemplary. Its foreign exchange reserves have shrunk from 8 8 billion in 2019 to about 2 2 billion earlier this year. Although the government has sought help from both India and China, it will almost certainly need help IMFWith which it is expected to begin negotiations in April (and may call for a reduction in subsidies as part of any rescue package).

Egypt has also struggled. It imports about two-thirds of the wheat it uses, the lion's share of which comes from Russia and Ukraine. At the pre-epidemic stage of consumption, Egypt's annual bill for food and energy imports is about 40% of its foreign exchange reserves (see chart). Realizing the problem, foreign investors began withdrawing money from the country, forcing the government to devalue 14% of the currency. March 23 It is officially sought IMFIts help

The World Bank estimates that at least a dozen countries may be unable to repay their loans in the next 12 months due to low hard currency reserves. Some South Asian and North African economies are in crisis; Pakistan and Tunisia are particularly vulnerable. Even emerging markets with healthier financial positions can expect slower growth, higher inflation and the Krumper citizens to face the consequences of the Russian war.

The news is not all bad. Economies that specialize in producing the most disrupted goods due to war may benefit from the rise in prices. The oil-exporting Gulf states will collect a windfall, which will only partially offset the high price of imported food. Some Latin Americans have praised their high expectations for oil and grain exports since the start of the currency war. Brazil appears to be in crisis in 2021, driven by high inflation and revenue shortfalls. The war has given a remedy to a large exporting country. For many in the rest of the world, though, it has been something. 3

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This article is published under the heading "Menu Expenses" in the Finance and Economics section of the print edition.


Weak growth of real personal income excluding relocation

Personal income rose 0.5 percent in February, according to the Bureau of Economic Analysis (see first chart). Over the past two years, personal income data has been sharply distorted by lockdown policies that have led to massive layoffs, and government stimulus programs that have skyrocketed transfer payments. As distortions diminish, personal income returns to the recent trend growth of around 4.5 percent (see first chart).

Excluding personal transfer payments, personal income rose 0.7 percent in February and up 9.0 percent from the last 12-month period. This is 2.2 percent above the 4.1 percent trend line (see first chart).

In real terms (adjusted for price changes), personal income excluding transfers rose 0.1 percent in February, up 2.5 percent for the year but 2.5 percent below the trend line and 2.2 percent below its September 2021 level (see first chart).

The weak growth of real personal income without relocation is a matter of concern for the real consumer spending outlook. Total Personal Consumption Expenditure (PCE) rose 0.2 percent in February after jumping 2.7 percent in January. Among the components, sustainable products fell 2.5 percent while attic-product costs fell 0.1 percent, while services spending rose 0.9 percent month-on-month.

In real terms, PCE fell 0.4 percent as actual sustainable product costs fell 2.5 percent, actual non-sustainable product costs fell 1.9 percent, and actual service costs rose 0.6 percent. Despite the decline, the actual PCE 2.2 percent trend remained 1.8 percent above the growth line (see Chart 2).

Personal savings rose 3.5 percent in February, but the level is below the December 2019 level and equal to the July 2019 level. Personal savings rates also increased in February, reaching 6.3 percent of disposable income after 6.1 percent in January and 8.4 percent in December, but this is below the pre-epidemic rate of 7.3 percent in December 2019 and consistent with December 2013 (see Chart 3).

Price indicators from personal income and expenditure reports are the primary measures to be followed by the Federal Reserve. The total PCE price index rose 0.6 percent in February as prices of durable-goods were flat, prices of durable-goods rose 1.8 percent and prices of services rose 0.3 percent. Excluding food and energy, the PCE price index rose 0.4 percent for the month.

Over the past year, the PCE price index has risen 6.4 percent, compared to 6.0 percent in the previous month. The core PCE index, which excludes food and energy prices, rose 5.4 percent from a year earlier. Both systems have been running well above 2 percent since April 2021.

Overall, ongoing disruptions in labor supply and production, material shortages, and logistical and transportation constraints continue to put upward pressure on prices. The increase in the number of new Kovid cases in late January and early February was likely to boost supply chain and support business efforts to expand production, with geopolitical instability surrounding Russia's aggression in Ukraine having a dramatic impact on capital and commodity markets, a start. New wave of potential barriers to business. For consumers, rapidly rising prices are hurting real incomes and eroding confidence in personal finances, suggesting a threat to real spending. The outlook for the economy has become extremely uncertain and extreme caution has been exercised.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 for over 25 years researching economic and financial markets on Wall Street. Bob was previously head of Brown Brothers Harriman's Global Equity Strategy, where he developed an equity investment strategy that combines top-down macro analysis with bottom-up fundamentals.

Prior to BBH, Bob was a senior equity strategist at State Street Global Markets, a senior economic strategist at Prudential Equity Group, and a senior economist at Citicorp Investment Services and a financial markets analyst. Bob holds an MA in Economics from Fordham University and a BS in Business from Lehigh University.

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