Aurelia Butler

NEW YORK (Reuters) – The U.S. Treasury Department will soon propose a rule that would effectively end anonymous luxury-home purchases, closing a loophole that the agency says allows corrupt oligarchs, terrorists and other criminals to hide ill-gotten gains. The long-awaited rule is expected to require that real estate professionals such as title insurers report the identities of the beneficial owners of companies buying real estate in cash to the Treasury’s Financial Crimes Enforcement Network (FinCEN). FinCEN is slated to propose the rule sometime this month, according to its regulatory agenda, though the timeline could slip, said two people briefed on the developments. Anti-corruption advocates and lawmakers have been pushing for the rule, which will replace the current patchwork reporting system. Criminals have for decades anonymously hidden ill-gotten gains in real estate, Treasury Secretary Janet Yellen said in March, adding that as much as $2.3 billion was laundered through U.S. real estate between 2015 and 2020.”That’s why FinCEN is taking this important step to put something officially on the books that would root out money laundering through the sector once and for all,” said Erica Hanichak, government affairs director of advocacy group the FACT Coalition.Some advocates say FinCEN, which declined to comment on the timing of the proposal, has moved too slowly. Officials first said in 2021 that they planned to implement the rule. FinCEN has been struggling to complete a related rule that would unmask shell company owners. A bipartisan group of lawmakers has pressed FinCEN to tighten up that proposal, according to an April public letter. That debate has slowed down FinCEN’s work on the real estate reporting rule, one of the sources said.The American Land Title Association, which represents title insurers, says it welcomes the new rule but that FinCEN should delay it until the shell company rule is completed. The proposed rule will be open to public and industry feedback. PATCHWORKWhile banks have long been required to understand the source of customer funds and report suspicious transactions, no such rules exist nationwide for the real estate industry. Instead, FinCEN has operated real estate purchase disclosure rules, known as geographic targeting orders (GTOs), in just a handful of cities including New York, Miami and Los Angeles. The new rule is expected to effectively expand GTOs nationwide.FinCEN implemented GTOs in 2016 after the New York Times revealed that nearly half of luxury real estate was bought by anonymous shell companies. But the orders are easy to skirt by simply buying property outside the targeted areas, said Jodi Vittori, an expert on illicit finance at the Carnegie Endowment for International Peace. Transparency advocates pushing for a nationwide rule point to the example of Guo Wengui, an exiled Chinese businessman who, according to prosecutors, used an anonymous shell company to channel illicit profit from a fraud scheme into the $26 million purchase of a 50,000-square-foot New Jersey mansion in December 2021. Had Guo brought property across the Hudson (NYSE:HUD) River in Manhattan, it would have been subject to a GTO and likely flagged immediately to law enforcement. Guo, a onetime business partner of former Donald Trump adviser Steve Bannon, has pleaded not guilty to fraud charges. His lawyers did not respond to a request for comment. A FinCEN spokesperson said GTO reports provide valuable data. Howard Master, a formal federal prosecutor, said law enforcement uses them to generate leads, but mainly to learn more about assets owned by individuals already under investigation. “It’ll identify an asset that is beneficially owned by someone that you might not otherwise have known about,” said Master, now a partner at investigations firm Nardello & Co.A 2020 report by the Government Accountability Office, Congress’ investigative arm, found that nearly 7% of GTO reports identified individuals or entities connected to ongoing FBI cases. But the same report highlighted concerns about the ability of FinCEN, which has complained of chronic underfunding, to police the program. For the new rule to be effective, FinCEN will need more enforcement resources, said David Szakonyi, a political science professor at George Washington University. “FinCEN needs more people and more computers to process the information.” More

WASHINGTON (Reuters) – U.S. Federal Reserve officials are in “uncharted waters” with no clear historical guide as they set monetary policy in an environment with inflation falling but no increase as yet in the unemployment rate, Richmond Fed staff said in a new research note analyzing a central bank rate cycle they deemed “unlike any other.””The current cycle is the first time over the entire postwar period the (Federal Open Market Committee) has made significant progress in lowering inflation without an associated increase in the unemployment rate,” Richmond Fed staffers including senior adviser Pierre-Daniel Sarte wrote in the paper, published Wednesday on the bank’s website.”The current rate episode sees us in uncharted waters,” with the Fed facing the largest-ever gap between inflation and the target federal funds rate when officials started tightening monetary policy in March of 2022, and now seeing the unemployment rate remain stable and low despite the fastest increase in interest rates in at least 40 years, the researchers wrote.Whether that sort of cost-free decline in inflation can continue will be at the center of Fed discussion in coming weeks as policymakers decide whether they have moved interest rates high enough, or whether further rate hikes are needed.New data to be released Thursday morning may do little to move the discussion.Economists polled by Reuters project the consumer price index rose at a 3.3% annual rate in July, a slight increase over June’s 3% reading. But that headline number will be influenced by the fact that some of the largest monthly price increases, registered in mid-2022, are now falling out of the current annual calculation.Underlying price trends are expected to show continued slowing in inflation, with the CPI on a three-month annualized basis and stripped of food and energy costs rising 3.2% as of July compared to 4.1% as of June, wrote Inflation Insights President Omair Sharif.”The summer of disinflation will likely continue” despite the rise in the headline inflation number, he said. The direction for the Fed so far has been a good one, with inflation as measured by the CPI down from a peak of 9.1% in June of last year.The Fed has raised the federal funds rate 5.25 percentage points since March of last year, with policymakers approving rate increases at 11 of the last 12 meetings in a sequence of actions meant to discourage borrowing and spending, and slow both the economy and the pace of price increases. Typically, that would be associated with a jump in unemployment as businesses and consumers scale back. Yet the unemployment rate has remained below 4% — low for the U.S. — since February of 2022, and stood at 3.5% as of last month.Fed policymakers have offered different interpretations of why that’s happening, from “labor hoarding” among firms scarred by how hard it was to hire during the pandemic, to inflation that may have been driven largely by problems in supply chains that have slowly corrected. Others feel the economy remains slow to adjust to higher interest rates, and that the unemployment rate will ultimately rise before the Fed finishes its inflation fight.How Fed officials analyze those sorts of nuances will determine whether they follow through with another rate increase at some point this year — the majority view among policymakers as of their latest projections, issued in June — or decide that the current target interest rate range of between 5.25% and 5.5% is adequate.Their next meeting is Sept. 19-20, with many analysts and investors at this point betting the Fed will not raise rates again.Policymakers have been reluctant to commit. The gap between the last Fed meeting in July and the next one is an unusually long eight weeks, giving them two full months of data to consider.As of June, one closely watched measure of prices, the personal consumption expenditures price index excluding food and energy, was still running more than double the Fed’s 2% target. Only two Fed officials so far have publicly said they feel rates do not need to go higher, with others saying they want the “totality” of the data in hand before making a decision. Given the unique circumstances, the Richmond Fed researchers noted risks on both sides.The current Fed “has been uniquely successful thus far in lowering inflation while leaving the unemployment rate at its lowest levels in roughly half a century,” they wrote, with the potential that policy tightening so far “may bring about further declines in inflation without a dramatic rise in the unemployment rate. This would be a first in the postwar U.S. economic experience.”Still, “with little guidance from past rate cycles, the FOMC will have to remain vigilant to avoid missing its target should the economy prove more resilient than anticipated.” More

Thanks to everyone who replied to our survey of which topics you’d like Free Lunch to cover. The results are now in: “Green industrial policy” and “Surprise me!” prevailed with 29 per cent of the votes each; next came “Inflation and disinflation” with 19 per cent and “Inequality” with 18; and, finally, “Sanctions” with 6. We would love to hear from more of you, so do send any requests/comments/suggestions to [email protected]. I have already had some good out-of-the-box suggestions that I will try to reply to. Keep them coming.Concerning the green transition, do take a look at my colleagues’ long read on the new metals superpowers. For today’s Free Lunch, I’ll have to go for “Surprise me!”. Regular readers may recognise the topic, however. A couple of years ago I wrote about Hans Kundnani’s provocative argument that those feeling a European identity are really expressing an exclusionary “ethno-regionalism”, where “European” means “white”. Kundnani has now developed his original article into a book — Eurowhiteness — which pushes the argument further. In some ways, this has added to its strength. As I wrote back then, I don’t agree with where Kundnani goes, but find many of his points instructive, useful and true. So I recommend both the original article and the book, in which he elaborates on how the motivation for European integration was always in practice intimately linked to that for European dominance. In the words of the book’s most succinct sentence: “For as long as Europeans have thought of themselves as European, they have thought of themselves as being better than the rest of the world.”Kundnani treats readers to more details about how colonialism dovetailed with pan-Europeanism and reminds us of further crucial but conveniently forgotten facts. For example, that the founders of what is now the EU had vast colonial territories at the moment of the Treaty of Rome — indeed the original community included parts of the African continent through French departements in Algeria — yet Morocco’s later interest in applying was dismissed since it was not in geographical Europe. His main thesis is, I think, correct: that the redemptive narrative built around the second world war and the Holocaust has served to distract from the actions and attitudes of Europe and Europeans towards the rest of the world. Kundnani is right that “there was never an attempt to make the memory of colonialism a central European foundational memory . . . even as the Holocaust was becoming ‘the core of European identity’, the EU had become a vehicle for imperial amnesia”.Kundnani comes close to concluding that “European identity” is essentially racist, hence the title of the book, Eurowhiteness, because “Europeanness” excludes non-whites, he argues. This is why he wants us to see Brexit as an opportunity for the UK to better come to terms with its own imperial legacy and multicultural society precisely by becoming less “Eurocentric”.This I don’t buy. In another recent and important book (thoughtfully reviewed by Stephen Bush here), Kenan Malik points out that racial categories have always been constructed in reaction to otherwise hard-to-justify inequalities. Malik’s most striking point is that the very idea of “whiteness” is a product of the Enlightenment. A world view founded on the basic rational equality of all humans was adopted (perhaps for the first time in history) by societies in which huge inequalities nevertheless remained and where power was wielded to maintain them. Creating categories of the more or less human could rationalise this: racism as massive (and mass) cognitive dissonance reduction.Malik’s analysis is particularly important for pro-Europeanism, which self-consciously identifies with Enlightenment values. But it also shows the limits of Kundnani’s “eurowhiteness” idea, especially the attempt to use it to rebut accusations that Brexit itself was motivated by xenophobia or racism. In short, “whiteness” refers not to natural facts but to whomever a dominant group happens to choose to exclude at any particular point. If we are going to use the concepts of “whiteness” and racism at all, therefore, we need to count the aggression against Poles and Romanians in Britain around the Brexit referendum as just that, drawing the category of “whiteness” in a way that put them outside. Even if Kundnani’s hopes proved warranted and post-Brexit Britain became more inclusive of its own imperial legacy (the Windrush scandal and the intense political weaponisation of migrant boats are not good omens), doing so by becoming less Eurocentric would only rearrange the perimeter of “whiteness”, not overcome it. The focus should surely be on the hypocrisy in much pro-Europeanism, a term I wish Kundnani used more. The facts he documents (and a great public service he performs by doing so) show the problem is that pro-Europeanism is not consistent enough. As I wrote in my previous commentary on this, even if European identity is not cosmopolitan, it has universalist elements at its core: the Enlightenment commitment to rationalism, the social market economy and the pooling of sovereignty between previously autonomous units (nation-states). All these can in principle be shared by and with all.Kundnani complains about the “civilisational mission” contained in pro-European thinking, and of course he is right about the crimes committed in the name of such missions. But if the problem is that pro-Europeans hypocritically restrict access to their “way of life” then surely the remedy is for European identity to practise what it preaches and make the universalism real — what Malik calls “radical” Enlightenment. That means embracing a narrative that includes, for sure, colonialism by western Europe (as well as central and eastern Europe’s history as victims of Russian colonialism). It also means a great effort at understanding ways of being European that includes a family history of being victims of European crimes, such as the many European citizens with ancestry from former colonies. But it also means welcoming countries outside geographical Europe that aspire to the same values of rational tolerance, social markets and pooled sovereignty into the European project — indeed to encourage those values elsewhere while practising them more consistently ourselves.If that is not a civilisational project, I don’t know what is. But I also don’t see why it would be a bad thing.More on the curious weakness in average hours workedLast month I pointed to the striking weakness in average hours worked across many advanced economies. I suggested this means there is more slack in labour markets than many central bankers would have us believe. One reader wrote to ask if this might just reflect a greater use of part-time work after the pandemic, whether because more people opt for part-time rather than full-time positions or because labour shortages mean businesses must now hire people who never wanted to work full-time in the first place. If so, the fall in average hours worked would be compatible with a tight labour market.So I took a look, and I think the numbers rule out this possibility. As the charts below show, since the pandemic the share of part-time work in total jobs has fallen both in the US and in the EU and the eurozone:So I stick to my original view: there is more slack in labour markets than many people think.Other readablesThe link between economic integration and political liberalism is down but not out, I argue in my latest FT column.Robin Wigglesworth’s brief history of the bond market is the best you will read on the financial product that transformed the world, over and over again.Sarah O’Connor writes in praise of the “techies” who boost our productivity.Ed Conway complicates the lazy debate on whether fossil fuel extraction helps with energy security by pointing out that Britain exports almost all its North Sea oil.Numbers newsChina’s consumer prices are deflating.

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And trade powerhouse no more? Chinese exports have shrunk 14.5 per cent in dollar terms since last year, and imports by almost as much. More

1. U.S. inflation loomsThe all-important U.S. consumer price index for July is due out on Thursday, giving investors a fresh chance to judge the trajectory of inflation in the world’s largest economy and update their estimates for Federal Reserve policy decisions.Economists predict that the headline measure climbed by 3.3% year-on-year, accelerating from 3.0% in June. However, an atypically soft corresponding figure in July 2022 suggests that markets may not place too much importance on the quickening pace.On a monthly basis, the gauge is seen holding steady at 0.2%. Meanwhile, the core reading, which strips out volatile items like food and energy, is predicted to remain unchanged at an uptick of 4.8% annually and 0.2% month-on-month.Along with loosening a tight labor market, cooling red-hot inflation has been the main objective of Fed policy during its more than year-long campaign of interest rate hikes. After peaking at 9.1% last summer, headline inflation has steadily decelerated closer to the central bank’s 2% target, although the core number has been stubbornly elevated.At its most recent gathering, the Fed chose to raise borrowing costs by a further 25 basis points and noted that its future policy decisions would be “data-dependent.” The inflation print, set to be published at 08:30 ET (12:30 GMT), could be one of the most crucial numbers officials will have to consider.2. Futures point higherU.S. stock futures rose on Thursday, as investors looked ahead to the release of the inflation data and digested a fresh batch of corporate earnings.By 05:21 ET (09:21 GMT), the Dow futures contract added 193 points or 0.55%, S&P 500 futures gained 27 points or 0.59%, and Nasdaq 100 futures jumped by 101 points or 0.67%.Although the consumer price index will likely headline the economic calendar, weekly initial jobless claims and hourly earnings for July may factor into market sentiment during the trading day as well.Elsewhere, company results from Alibaba (NYSE:BABA), Six Flags (NYSE:SIX) and Ralph Lauren (NYSE:RL) are on the docket, as a recent stream of quarterly returns continues to ebb. Traders are also parsing through earnings released after the bell on Wednesday from media giant Disney.3. Disney’s streaming plansShares in Walt Disney (NYSE:DIS) moved higher in premarket U.S. trading on Thursday after the sprawling entertainment group announced changes to its streaming service to help offset sputtering performance in its film and television divisions.Disney said that it would increase the prices of its streaming service and crack down on password sharing, in the latest sign of Chief Executive Officer Bob Iger’s push to make the business profitable by fall 2024.The streaming unit, which includes options like Disney+ and Hulu, narrowed its losses by more than anticipated in its fiscal third quarter following a bump up in subscription prices and marketing cost cuts. But total subscribers fell to 146.1 million, weighed down by its Disney+ Hotstar brand in India, which lost digital rights to Indian Premier League cricket matches.Meanwhile, Iger admitted that the recent box office reception of several movies from Disney’s vaunted studios “has definitely been disappointing.” TV operations, once a merger-fueling juggernaut for Disney, also saw revenue and profits slip due to cord-cutting viewers and weak advertising markets.Iger, who has embarked on a restructuring drive since returning to the helm of the company in November, told investors that “a variety of strategic options” are now being considered for its TV networks. Tellingly, he noted that movies, theme parks, and streaming will underpin future growth at Disney – notably omitting the traditional, or linear, TV division.4. China threatens retaliation to U.S. ban on some investments in country’s tech firmsChina’s commerce ministry said Thursday that it has the right to respond to a new U.S. prohibition on some investments into Chinese tech companies, adding that the move deviates from “principles of fair competition and the market economy.”On Wednesday, U.S. President Joe Biden unveiled the long-awaited ban, citing concerns that Chinese firms specializing in sensitive technologies like artificial intelligence, semiconductors and quantum computing could pose “significant national security risks.”Some future investments in these technologies will be barred, while Americans who own stakes impacted by the order may be asked to disclose their holdings to the government, media reports say.Biden’s executive order, which is expected to come into effect next year, is widely seen as an attempt by Washington to limit growth in technologies that could boost the advancement of Beijing’s military capabilities in areas like weapons development and code-breaking.5. U.S. crude volatile ahead of U.S. inflation dataOil prices oscillated around the flatline on Thursday, as traders awaited crucial U.S. inflation data later in the session.U.S. inventories unexpectedly grew in the week to August 4, data from the Energy Information Administration showed Wednesday, but there was also a much bigger-than-expected draw in gasoline and distillate stockpiles.This helped drive an uptick in crude prices despite continued worries over a sluggish economic recovery in China, the world’s largest oil importer.By 05:22 ET, the U.S. crude futures contract traded 0.08% lower at $84.33 a barrel, while the Brent contract dipped by 0.02% to $87.53. Brent hit a six-month high on Wednesday, while WTI touched its strongest level since November 2022. More

“Our goal is to bring down inflation permanently after a transitional period,” Simsek said.The sustained price pressure, driven by a drop in the lira currency and tax hikes, comes as President Tayyip Erdogan’s new finance minister Simsek and central bank chief orchestrate a policy U-turn, including interest rate hikes, that are expected to slow domestic demand.The monetary tightening – after years of aggressive rate cuts – is meant to cool inflation by mid-2024. But in the meantime the U-turn has hammered the currency and left authorities asking already stretched households for patience. “As you can see from the central bank’s projections, inflation will continue to rise temporarily due to certain factors in the coming months,” Simsek said.”We have implemented some tax regulations to improve budget balances and address the aftermath of the earthquake. These tax adjustments are indeed inflationary, but they will not be repeated. These are one-time adjustments we have made.”The central bank under new governor, Hafize Gaye Erkan, has raised its key rate by 900 basis points to 17.5% since June, though the pace of tightening missed market expectations. Last week it more than doubled its year-end inflation forecast to 58%, meeting expectations.Inflation touched a 24-year peak of 85.5% last October. It subsequently eased due to a relatively stable currency and the so-called base effect but then rose sharply again in July to nearly 48%.Simsek said increasing the predictability of economic policies was one of the main goals in order to attract foreign investment into the country.”As uncertainty decreases and current account deficit narrows in the coming period, there will be an increase in capital inflows to Turkey. I believe we will move towards relative stability in the exchange rate, and this will also have a positive impact on the inflation outlook.” Simsek also said he expected the “productive discussions” Turkey had last month with Gulf countries regarding investments to bear fruit starting this year. More

BEIJING (Reuters) – At Nanchengxiang restaurants in Beijing, customers treat themselves to a breakfast buffet with three types of rice porridge, sour and spicy soup, and milk – all for the price of 3 yuan ($0.40).”Many good, cheap choices popped up during the pandemic,” said 71-year-old Gao Yi, while sharing breakfast with his grandson in one of the chain’s 160 outlets in the Chinese capital.”Not all of them last. But there are new good deals all the time, you just have to go out to find them.”That’s what deflation looks like in China.Poor consumer appetite is fuelling a price war among lower-end restaurant chains in China, which analysts say could harm smaller businesses struggling to keep up with discounts offered by bigger players.As witnessed by Japan in the 1990s, deflation – if prolonged – can weigh on economic growth.”Good deals are needed to get consumers through the door so there is a lot of pressure on these businesses to find margins,” said Ben Cavender, managing director at China Market Research Group in Shanghai.Unlike in Western countries, Chinese people were left largely to fend for themselves financially during the pandemic, with government support directed mainly toward the manufacturing sector. Once the restrictions were lifted, there was no immediate consumer splurge as some economists had predicted.With wages and pensions hardly budging and the job market highly uncertain, spending appetites are limited, and in a barely growing economy, confidence is low.”Discount strategies, offering consumers a more value-for-money choice, match the current economic situation,” said Zhu Danpeng, a food and beverage analyst and deputy head of the Guangdong Provincial Food Safety Promotion Alliance.The central Nanchengxiang outlet was packed on Thursday, as it has been every morning since the 3 yuan deal was launched in May, according to staff. The company did not respond to Reuters’ questions about their profit margins and business strategy.Xishaoye, a Beijing-based burger franchise, has also advertised lower prices, with staff saying some items will be as cheap as 10 yuan. Yum China, the operator of KFC in the country, is luring customers with a burger, snack and drink menu for 19.9 yuan.”Traffic is back, but spending per person has dropped,” Joey Wat, Yum’s chief executive officer, told Reuters.”In our minds the pandemic seems like it happened a long a time ago. It actually hasn’t. People need time to adjust.”Restaurant worker Dong went to a wet market in central Beijing around lunchtime on Thursday, but did not buy anything.”I have a housing mortgage and a kid. I have no choice but to be more prudent,” said Dong, 33, who only gave his last name for privacy reasons.($1 = 7.2115 Chinese yuan) More