Yet more evidence of who will be winners and losers in the post-recession world. China, which now has $2,273bn in reserves, is taking the lead in initial public offerings (China Minsheng Bank plans $4.68bn; Sands China, $3.8bn) and is witnessing a surge in car sales. The country has also made a “selfless” pledge of $10bn in low-cost loans to Africa; the offer comes without political conditions, but is likely to help expand trade further and secure much-needed future resources for China.
Energy security or the Molotov-Ribbentrop pact? Russia will soon be able to deliver gas directly to Germany, following the approval of a new pipeline by Sweden and Finland. German and Russian signatures on the Nord Stream pipeline are now just a formality. Construction is scheduled to start next year, with gas flowing by the end of 2011. A second parallel pipeline is due for completion a year later. Worried eastern Europeans are being reassured that the pipeline will supplement rather than replace the existing set-up. This as oil looks likely to become costlier.
The Colombo Stock Exchange is planning to demutualise now the conflict is over, and neighbour India has overtaken Russia to become the largest single portfolio of World Bank private sector arm. But at what cost? The Indian government has been accused of impoverishing farmers to help those living in cities. Prime Minister Manmohan Singh admits that more should have been done and promises to focus more on health and education.
The news from the west is not so good. But that geographical divide may be misleading. George Soros believes we are in fact seeing polarisation between international capitalism and state capitalism. These are less catchy labels, however.
So, the news from internationally capitalist countries is not so good. A group of international regulators says that many of the 20 biggest banks are too optimistic about their health, and warns they should not exit government supervision any time soon. The Bank of England’s head of financial stability issues a related warning: he says the relationship between banks and the state represents a “doom loop”, which will keep inflicting crises until action is taken to stop the cycle.
But signs of recovery may be removing the impetus to fix – or believe in – this cycle. Following international disapproval, the UK has back-pedalled on Gordon Brown’s surprise suggestion of a Tobin tax at the G20 meeting. The IMF, which considers the Tobin tax unworkable – is considering instead risk-weighted insurance payments for banks and will present concrete proposals at G20 meetings in April. (And Norway has called for a shared Nordic seat at the G20, and for debate on the body’s representation and legitimacy.)
EU public debt could rise to 100 per cent of GDP by 2014 if there is no action; the figure was 66 per cent in 2007, and the target for aspiring eurozone members is lower still, at 60 per cent. In the UK, there has been a 28 per cent rise in individual insolvencies, year-on-year. And a WalMart executive says “there are families not eating at the end of the month”. It is hardly a surprise, then, that almost a quarter of people across 27 countries consider the free market “totally flawed” (h/t naked cap).
And reading this paragraph could pop a 6,000 year-old bubble, according to Willem Buiter. Gold has no intrinsic value, he says: there are cheaper and better substitutes for all its uses. The value of the precious metal is derived simply from a shared belief in its value, making gold the longest-lasting bubble in human history.