1 Britain’s zero-sum game: Neither inflation nor
deflation (Larry Elliott in The Guardian) Put the “Britain slides into
deflation” headlines on hold for another month. Higher petrol prices meant that
the annual inflation rate in the UK in March was zero, the same as it was in
February.
There is plenty of evidence that upward pressure on
inflation in Britain is non-existent. The trend in inflation is unambiguously
downwards. That’s apparent from the government’s preferred measure of the cost
of living, the consumer prices index, where the annual inflation rate has
fallen from 1.6% to zero since last July.
There is certainly plenty of deinflationary pressure
in the UK. What does this mean? It means that the Bank of England is under
absolutely no pressure to tighten policy. It means that living standards are
rising, because earnings are growing by 2% while prices are not rising at all.
Things could now go in one of two ways. A longer
period of low interest rates and rising real incomes could drive faster growth,
leading to employers offering higher wages to attract and retain staff. Alternatively,
low inflation could make employers even meaner with the pay deals they offer
their workers. If annual average earnings start to fall rather than rise,
deflation would become a reality.
2 Two billion adults still unbanked (BBC) More than
a quarter of people globally still do not have access to banking facilities, a
report shows. The World Bank's Global Findex report said more than half of
adults in the world's poorest areas still have no access to the financial
system.
This is despite a global increase of 11% in the last
three years of adults owning bank accounts. The increase in account ownership
has been driven largely by developing countries and the role of technology. It
also found that the gender gap in financial inclusion is not narrowing. The
largest gap was in South Asia, where 37% of women have an account, compared with
65% of men.
Mobile money accounts - making and receiving
electronic payments via a mobile phone - in Sub-Saharan Africa contributed to
the growth in account ownership, which now stands at 62% of adults globally, up
from 51% three years ago. World Bank Group president Jim Yong Kim said:
"Access to financial services can serve as a bridge out of poverty. We
have set a hugely ambitious goal - universal financial access by 2020."
3 US, China baffled by each other (Thomas L Friedman
in NYT/Straits Times) The concept of "one country, two systems" was
invented to describe the relationship between Hong Kong and mainland China. But
here's the truth: The American and Chinese economies and futures today are now
totally intertwined, so much so that they are the real "one country, two
systems" to watch.
Both countries almost take for granted the ties that
bind them today: the $600 billion in annual bilateral trade; the 275,000
Chinese studying in the US, and the 25,000 Americans studying in China; the
fact that China is America's largest agricultural market and the largest
foreign holder of US debt; and the fact that last year Chinese investment in
the US for the first time exceeded US investment in China.
Americans, though, are asking of Mr Xi: "What's
up with you?" Mr Xi has taken more control over the military, economic and
political levers of power in China than any leader since Mao Zedong. But to
what end - to reform or to stay the same? Foreign textbooks used by
universities are being censored, and blogging and searching on China's main
Internet sites have never been more controlled. Don't even think about using
Google there or reading Western newspapers online.
But, at the same time, Mr Xi has begun a huge push
for "innovation", for transforming China's economy from manufacturing
and assembly to more knowledge-intensive work, so this one-child generation
will be able to afford to take care of two retiring parents in a country with
an inadequate social safety net. Alas, crackdowns don't tend to produce
start-ups.
The combination of cheap energy in America and more
flexible, open innovation - where universities and start-ups share brainpower
with companies to spin off discoveries; where manufacturers use a new
generation of robots and 3D printers that allow more production to go local;
and where new products integrate wirelessly connected sensors with new
materials to become smarter, faster than ever - is making the US "the next
great emerging market".
Mr Xi seems to be betting that China is big enough
and smart enough to curb the Internet and political speech just enough to
prevent dissent but not enough to choke off innovation. This is the biggest bet
in the world today. And if he's wrong (and colour me dubious) we're all going
to feel it.
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