Aurelia Butler

Investing.com — China Evergrande is formally in default, but the yuan and Chinese assets react with a shrug. Weekly jobless claims are due, while central banks around the world continue to tighten monetary policy increasingly aggressively. Stocks are set to open lower as Amazon (NASDAQ:AMZN) gets another antitrust fine and GameStop (NYSE:GME) disappoints its retail investor army. The pound slumps to a 2021 low as Covid-19 restrictions are reintroduced. Here’s what you need to know in financial markets on Thursday, 8th December. 1. Yuan steady, Chinese markets rise as Evergrande defaultsThe yuan remained steady and Chinese equity and debt markets rose, despite the first formal declaration of default on real estate developers China Evergrande and Kaisa.Fitch said Evergrande was in ‘restricted default’ after missing payments on two dollar bonds and a loan guarantee that had not been widely known about until last week. That will trigger cross-default clauses on over $19 billion of Evergrande debt, and a major restructuring of those liabilities.The developer’s dollar liabilities are less than 7% of its total debt pile. The People’s Bank of China acted to pre-empt volatility in the local markets last week by cutting the reserve ratio for banks, freeing up nearly $190 billion in liquidity. Markets were also lifted by declines in Chinese consumer and producer inflation in November, although both were smaller than expected.2. Jobless claims dueThe U.S.’s labor market is in the spotlight again with weekly jobless claims data due at 8:30 AM ET (1330 GMT), which follow hot on the heels of another red-hot report on job openings and labor turnover. Analysts expect a modest drop in initial claims to 215,000 from 222,000 last week.The monthly JOLTS survey had shown vacancies in the U.S. surging back above 11 million, reviving fears of labor shortages that could crimp output and raise prices. The phenomenon is not restricted to the U.S.: a survey published by KPMG in the U.K. on Thursday showed vacancies rose again in November while starting salaries rose at their fastest since records began.Globally, central banks continue to react to tightening labor markets and other inflationary pressures by raising interest rates: Brazil hiked its key rate by 150 basis points and Poland by 50 basis points on Wednesday and both warned of more to come. Ukraine followed suit earlier Thursday and Peru is expected to at its central bank meeting later. Russia and Hungary are also expected to hike on Friday.3. Stocks set to open lower; Amazon fined by EU; Game Stop disappointsU.S. stocks are set to open lower on a bit of profit-taking after the Omicron relief rally ran out of gas on Wednesday.By 6:20 AM ET, Dow Jones futures were down 123 points, or 0.3%, while S&P 500 futures were down 0.4% and Nasdaq 100 futures were also down 0.4%.  All three had posted gains on Wednesday, albeit smaller ones as the emerging data on the Omicron variant of Covid-19 continued to warrant a degree of caution.Stocks likely to be in focus later include GameStop, which fell over 5% in premarket trading after publishing a wider net loss for its fiscal year and failing to provide much clarity over the digital transformation that Chewy (NYSE:CHWY) CEO Ryan Cohen was supposed to usher in.Also in focus will be Amazon (NASDAQ:AMZN) after it received a 1.13 billion euro ($1.3 billion) antitrust fine from Italy. Oracle (NYSE:ORCL), Costco (NASDAQ:COST), Lululemon and Broadcom (NASDAQ:AVGO) all report earnings after the close.4. Pound hits 2021 low as Covid-19 restrictions reintroducedPrime Minister Boris Johnson announced a tightening of government guidance to stop the quickening spread of Covid-19 in the U.K., pushing the pound to its lowest in a year against the dollar.The new regulations are largely advisory, recommending that people work from home wherever possible. The government had already reintroduced a mask mandate for indoor retail spaces last week.However, the hospitality industry will be largely exempt, and office Christmas parties will be allowed to proceed. Tighter rules in this area were politically impossible due to an ongoing scandal over revelations that Johnson’s own staff held an illegal Christmas party in 10 Downing Street last year while the rest of the country was in strict lockdown, submerged under a wave of Covid deaths.5. Oil falls on demand jitters; Carbon prices end record surgeCrude oil prices fell as doubts returned about the strength of demand going into a holiday period likely to be punctuated by ad hoc restrictions across much of the northern hemisphere.By 6:30 AM ET, U.S. crude futures were down 0.5% at $71.97 a barrel, while Brent crude was down 0.7% at $75.31 a barrel.In Europe, carbon emissions prices eased from record highs amid forecasts of warmer temperatures. Prices had opened at a new record of 90.26 euros (102.14) a ton but fell around 5% by late morning in Germany. However, the longer term problems of a shortage of Russian gas continues to hang over the market as the ongoing stand-off over troops on the Ukrainian border complicates the political backdrop for the start of flows through the Nord Stream 2 pipeline. More

Hello from Brussels, where the details of the anti-coercion instrument we wrote about on Monday have been published and are being intensely debated. One view is that, interpreted broadly enough, it would essentially give the European Commission’s trade directorate control over EU foreign and security policy. Call us captured by our sources, but frankly you could do worse. Today’s main piece is on the 20th anniversary of China joining the World Trade Organization, a birthday that will evoke mixed feelings in Beijing and Geneva and the distinct lack of a party atmosphere in Washington. Charted waters looks at a new index of shipping costs, which its founders hope will set the benchmark for the measurement of container freight rates. US needs to be in it to win itRich countries have a pretty standard narrative about China’s membership of the World Trade Organization, which goes like this. It joined in December 2001 following a decade of enthusiasm about the irresistible march of globalisation. The assumption was that the arc of Chinese development was long but that it bent towards capitalism. China’s status under WTO rules as a “non-market economy” was even given a pre-determined expiry date.That turned out to be wrong. Reformers such as Zhu Rongji, Chinese premier from 1998 to 2003, were supplanted by aggressive economic nationalists. True, Beijing actually has a fairly good record of complying with the letter of WTO dispute settlement rulings, having for example dismantled state support to its wind turbine industry. It has joined the multi-party interim appeal arrangement, the workaround institution that various countries set up after the US put the WTO appellate body into the deep freeze. But the gaps in the WTO rule book, which was designed for market economies, have become all too obvious. The subsidies disciplines leave a lot of the huge range of Chinese trade-distorting government interventions uncovered. Attempts to bring more of the companies and agencies of state under them have been foiled by the unhelpful definition of a “public body” set down by the WTO’s dispute settlement system.With regard to negotiations, China has refused to give up its special and differential developing country status. It sat on its hands as the multilateral Doha round sickened throughout the 2000s before popping up at the fateful WTO ministerial in 2008 to earn some credit by administering the final blow. This narrative isn’t wrong, as far as it goes — and the recent review of China’s trade policy at the WTO shows a lot of rich countries share the critical analysis. But it ignores the errors of the US, in particular, in sidelining the WTO and China within it. You don’t have to agree with all of this invaluable paper by Henry Gao at the Singapore Management University, a relatively sympathetic analysis of China’s experiences in the WTO, to recognise Washington’s own role in bypassing and undermining the institution. The US has systematically barked up a whole forest of wrong trees ever since China joined, wasting political capital, alienating allies and creating expectations on Capitol Hill it couldn’t possibly meet.Now that the Doha round is toast, it’s easy to forget just how much time and energy it sucked up after the US and the EU foolishly insisted on launching it — at exactly the same ministerial meeting in 2001 as admitted China. After Washington promised its farmers unrealistic new export market access in the round, the talks hit resistance from developing countries. In reaction, the US redoubled its efforts to pursue a strategy of “competitive liberalisation” — a rash of preferential trade deals — which undermined the WTO.The US has also been utterly obsessed with defending certain methodologies of antidumping duty (you can bone up on the “zeroing” saga here) from the depredations of the WTO’s dispute settlement process, an institution it has now done its best to undermine. There are plenty of reasons to be cross with WTO dispute settlement, but the US has allowed its animus to be driven too much by a small number of sectors (usually steel) and their antidumping lawyers (people such as Robert Lighthizer).By contrast, it took until 2017 for the US to join together with the EU and Japan to come up with new definitions of trade-distorting subsidy which might cover more of China’s state capitalist model. That project has been stop-start ever since, had to be relaunched last month, and has failed to broaden beyond the three governments involved. Fair enough, it’s fantasy to imagine they will pitch up at the WTO clutching their bits of paper with new subsidy rules scrawled on and all the other members will paste them into the WTO rule book without demur. But you can’t beat something with nothing, and if you want fundamentally to shift the debate over subsidies, you need to focus on that much more than on antidumping methodology.One solution to get the US and China round the same table is laid out here by the venerable Jim Bacchus (a founder member and former chair of the WTO appellate body, though he doesn’t like to mention it). Bacchus’s way forward is a grand bargain where China accepts broader subsidy rules and addresses issues such as forced technology transfer in return for the US cutting agricultural subsidies and reforming its trade defence instruments.To be honest, we’re not super-confident that there’s going to be a lot of reconciliation. The US isn’t engaging meaningfully with WTO reform discussions, whatever warm fuzzy vibes US trade representative Katherine Tai may be sending out. Les absents ont toujours tort, as they say in Brussels, or “you gotta be in it to win it” in the Washington version. China, however annoying it may be, is at least turning up and participating.If we all teleported back to 2001, the other big economies would no doubt write many more explicit rules into China’s accession agreement, and they’d be right to do so. But we are where we are. Not until the US signals that it’s a better guardian of the WTO system than China will Washington earn the credibility to make up for lost time.Charted watersThe spike in shipping costs has led to a wave of attention in benchmarks measuring the price of transporting a container of goods across the world’s oceans. With this in mind, shipping data outfit Xeneta and Compass Financial Technologies, a financial index provider for alternative asset classes, have today launched the Xeneta Shipping Index by Compass. The aim of the index, which will cover eight of the world’s leading trade routes, is to be the most accurate and transparent daily container freight index available and to comply with EU rules on benchmarks for short-term shipping freight rates. Here’s a peek at what the data show for the east Asia to US west coast and North Europe to South America east coast voyages. Claire JonesTrade linksThe UK has threatened the US with higher retaliatory tariffs if it doesn’t lift the Trump-era duties on steel and aluminium.The FT editorial board opines that Germany under Olaf Scholz will have to move beyond Angela Merkel’s doctrine of “change through trade” when dealing with China.More on Scholz: the new German chancellor is prepared to halt construction of the Nordstream II gas pipeline as part of a package of sanctions if Russia invades Ukraine. The US might be trying to bring home chip supply chains, but it seems its own manufacturers have other ideas and would prefer to invest in Asia instead. Another US chipmaker, Entegris, plans to more than double its investment (Nikkei, $) in Taiwan to $500m. Alan Beattie and Francesca Regalado More

(Reuters) – As a journalist covering retirement, I have written dozens of stories over the years about the ins and outs of Medicare enrollment. But when the time came recently for yours truly to sign up I discovered there was still plenty left to learn. And let me just say this: the whole thing was quite a project.As a freelancer with no employer-provided health insurance, I have been fortunate to have coverage through my wife’s employer. But I became Medicare-eligible two years ago, and I have been looking forward to making the switch, because Medicare consistently receives high marks from enrollees for its breadth of coverage and reasonable cost. I decided that 2022 would be my year.The enrollment process generally went smoothly, but it served as a disquieting reminder of the complexity of most of our retirement systems, which call for a level of knowledge and navigational skill beyond what is reasonable to expect from the average person. First, I needed to deal with the fact that I was not signing up at the normal time. Medicare requires that you sign up during a seven-month Initial Enrollment Period (IEP) that includes the three months before your 65th birthday, the month of your birthday, and the three months that follow it. Missing that window triggers late-enrollment penalties levied in the form of costly premium penalties that continue for life. The key exception to that rule: you may delay enrollment in Medicare as long as you are covered by a current employer, and a spouse can also remain on your employer coverage past age 65.  My two-year delay could cost me 20% more for Part B (outpatient services) throughout retirement, and that could really add up. There also are less onerous late penalties for Part D (prescription drugs) plans.Aiming to avoid those penalties, job one was documenting that I had been covered from age 65. I needed to complete and submit Medicare form CMS-L564, which attests that I had insurance past my IEP, and my wife’s employer needed to add information as well. That went fairly smoothly, although the form I mailed in never arrived at the Social Security Administration, which processes initial applications. A staffer helpfully explained that I should fax a copy of the form. (Fax!?)ORIGINAL OR ADVANTAGE?I complied, and before long, I had enrolled penalty-free. I had my Medicare number in hand, and I was ready to shop. The first big decision: would I enroll in Original Medicare, or Medicare Advantage?The Original Medicare program is fee-for-service. You can visit any doctor, hospital or other healthcare provider that participates in the program anywhere in the country; the government pays the provider directly for each healthcare service you receive. You pay your Part B premium, and most people add a Part D plan and Medigap supplemental insurance.Advantage is the managed care alternative to original Medicare. These plans combine Part A and B services, and often Part D prescription drugs with no premium beyond the monthly Part B premium.My choice was Original Medicare. This is the gold standard of health insurance – the breadth of healthcare provider choice is unparalleled. And, coupled with a Medigap supplemental policy and Part D prescription drug plan, my coverage would be rock-solid.OUT-OF-POCKET RISKThe most complex question I faced was how to best insure against the risk of high out-of-pocket costs. I had already avoided the biggest risk by passing on Medicare Advantage. These plans leave you exposed to high out-of-pocket costs in years when you use a lot of healthcare services. This year, the average plan had a ceiling of $5,091 for in-network Part A and Part B services, and $9,208 for in-network and out-of-network services combined, according to the Kaiser Family Foundation.Original Medicare has no built-in out-of-pocket cap, but Medigap would protect me against high out-of-pocket risk. I considered my plan options carefully.Medigap coverage levels vary by policy type. The policies come in an alphabet soup of lettered-plan choices that may seem complex at first glance. The key difference is the percentage of coinsurance and deductibles picked up by different plan types. I decided to focus on G plans, which provide strong coverage of out-of-pocket costs for Part A hospital coinsurance and deductibles, outpatient coinsurance and skilled nursing facilities.In Illinois, where I live, a 65-year-old Medicare enrollee can buy a G plan for a premium ranging from $1,600 to $3,200 per year – not an inexpensive option at all. But I chose a different route: a high-deductible G plan. Here, I would get the same out-of-pocket protection of a regular G plan, but I would pay the first $2,490 as a deductible before the insurer began to pay. In return, my premium would be much lower – just $600 per year.In years when I use up the deductible my exposure will be higher than it is with the regular G plan. But in years when I do not use up the deductible, I will come out ahead.And I will have better out-of-pocket protection than I would have had in Advantage – for a starting premium of $600 per year. For my money, this is a sweet spot in Medicare: join the fee-for-service program, but couple it with a high-deductible Medigap plan.STARTING EARLYMy other key takeaway is this: begin your enrollment process at least two months before your intended date for the start of coverage. The staffers at the Social Security Administration who I spoke with were very helpful, but the agency has been beleaguered by budget and staff cuts over the past decade, and dealt with operational challenges during the pandemic.There were paperwork hassles and missteps that ate up some time, and reaching the agency by phone was difficult. Four weeks elapsed from the start of my enrollment process to receiving my Medicare number – and then I needed a few more days to enroll in Medigap and Part D. You want to avoid any gaps in your health insurance coverage, so get an early start. More

Click here to listen to the latest news in less than three minutes. Top Stories Today is an audio news digest that gets you up to speed on the day’s headlines.Theranos founder Elizabeth Holmes yesterday finished testifying after seven days of questions about her decision-making at the failed blood testing start-up, as one of Silicon Valley’s most closely watched fraud trials neared its conclusion.Holmes took questions about the company’s revenue projections and media strategy as prosecutors wrapped up their cross-examination. Holmes, who faces 11 counts of wire fraud and conspiracy to commit wire fraud — each carrying up to 20 years in prison, betrayed little emotion and appeared defiant battling suggestions that she misled investors about the capabilities of Theranos’s devices. She has pleaded not guilty.Some of the most sensational testimony came on Tuesday when prosecutors questioned Holmes about revenue forecasts Theranos had produced for an investor, which differed from the company’s own internal projections.Holmes’ testimony included allegations of abuse against her former boyfriend and business partner Ramesh “Sunny” Balwani. Lawyers for Balwani have denied the accusations.At its peak, Theranos was a widely heralded start-up whose aim was to lower the cost and discomfort of routine blood testing. Investors valued the company at $9bn. But in 2015, a Wall Street Journal article questioning Theranos’s technology sent it into a tailspin, and it shut down three years later. Closing arguments in the case, which got under way in September, are scheduled for December 16 and could last as long as two days. Thanks for reading FirstFT Americas. Here’s the rest of today’s news — GordonFive more stories in the news1. Big Four post strongest performance since Enron Accounting firms Deloitte, EY and PwC and KPMG have recorded their strongest collective result since the Enron scandal led to the collapse of Arthur Andersen in 2002, racking up $167.3bn in annual turnover as corporate clients rushed to transform during the coronavirus pandemic. 2. Joe Biden makes diplomatic concession to Russia The US president made a significant diplomatic concession by signalling that he wanted to convene meetings between Nato allies and Russia to discuss Vladimir Putin’s grievances with the transatlantic security pact. Biden said he hoped to announce the high-level talks by Friday.3. Evergrande rated ‘restricted default’ Fitch has become the first rating agency to declare that China Evergrande’s overseas bonds are in default after the world’s most indebted developer failed to make a crucial interest payment this week. Fitch also stated that Kaisa, another heavily indebted developer, was in restricted default. 4. DoJ notifies Deutsche Bank of criminal settlement violation Deutsche Bank has been notified by the US Department of Justice that it may be in violation of a criminal settlement after it failed to alert authorities about an internal complaint at its asset management division, according to people familiar with the matter.5. Instagram chief calls for rules to protect children on social media Adam Mosseri, Instagram’s chief executive, has called for an external regulator to set rules on how social media companies protect children. The comments came during a congressional hearing into the effects of the platform on younger users.Coronavirus digestA third BioNTech/Pfizer Covid-19 shot offers protection against the Omicron variant, but just two doses show reduced effectiveness, preliminary research suggests. Pfizer said yesterday it expects to have a vaccine that specifically targets the new variant available by March.The UK’s health secretary has warned that the rapidly spreading Omicron variant of coronavirus could infect 1m people. The pound dropped yesterday to its lowest level against the dollar in more than a year as the prospect of new restrictions clouded the economic outlook.Employees at US rideshare company Lyft have been told they do not need to return to offices until 2023 at the earliest.Brazil’s central bank has lifted interest rates to the highest point in more than four years as it battles double-digit inflation. The Selic benchmark was raised 1.5 percentage points to 9.25 per cent. The FT’s inflation tracker analyses rising prices around the globe.The day aheadJoe Biden’s ‘Summit for Democracy’ begins The two-day virtual meeting hosted by the White House will feature the heads of 111 governments and emphasise liberal values. But the guest list has attracted controversy. Senate vote to raise US debt ceiling The Senate is expected to inch a step closer towards raising the debt limit with a simple majority. A deal struck by Congressional leaders earlier this week would allow Democrats to act unilaterally to raise the borrowing limit, without the risk of a Republican filibuster.Nubank IPO Shares in South America’s most valuable start-up, which is backed by Warren Buffett, begin trading in New York after it raised $2.6bn in an initial public offering. Starbucks union vote result Baristas at three Starbucks stores in Buffalo, New York, find out whether their workplaces will become the coffee company’s first unionised outlets in the US. Earnings Broadcom, one of the world’s biggest semiconductor makers, reports fourth-quarter earnings. Investors will be looking for an update on supply shortages that have led to delays of everything from cars to electronics and toys. Former Treasury secretary Larry Summers will be in conversation with Martin Wolf in the keynote interview on the third and final day of the FT’s Global Boardroom digital conference. Register here.What else we’re readingDisney’s chief is planning to do things his way Bob Chapek borrowed billions, sidelined insiders and irked the talent. But it’s all part of the plan, say Christopher Grimes in Los Angeles and Anna Nicolaou in New York in a report for FT Magazine.

Joe Biden must build on his dialogue with Xi Jinping In the aftermath of the recent video conference between US president Joe Biden and President Xi Jinping of China, Washington faces a dilemma, writes former World Bank president Robert Zoellick: how to engage Beijing when Biden’s leading officials have declared that engagement has failed? How’s the economy really doing? That depends on your perspective, writes Gillian Tett. Economists and policymakers need to upgrade their systems for tracking the economy now, which includes blending quantitative and qualitative perspectives.Using ‘synthetic data’ to uncover Syrian war crimes Researchers are increasingly turning to “synthetic data” instead of real images to train artificial intelligence programs to recognise weapons used in the conflict and captured on social media. But can the technique adequately represent reality?Oil and gas majors compete for talent Europe’s oil majors have set out strategies to cut greenhouse gas emissions to net zero by 2050. But achieving those targets requires recruitment and retraining on a scale never seen before. Can they convince potential recruits to get on board?“You need to have a credible and meaningful strategy and show how people can make a difference” — Ronan Cassidy, Shell’s chief human resources and corporate officerWellbeing and fitnessOur colleagues on the How To Spend It magazine have selected six new ways to optimise your health this winter.

 The view from the spa at Deplar Farm © Eleven Experience More

When coronavirus hit us, it seemed like the pandemic could trigger a politics of “we are all in this together” — that is what motivates the rhetoric of “building back better”. But such politics always came with the challenge that the economic forces unleashed by the pandemic risked having the contrary effect, of intensifying the inequalities that had grown in the preceding four decades. That at least, was what many observers feared, including me. So what is happening to inequality? This week the latest issue of the World Inequality Report was published — a huge repository of information, drawing on the latest findings from the World Inequality Database (WID).It notes the evidence that lockdowns affected low-paid workers worse than high earners and that while the rich could increase their savings, the poor often had to run down savings or indebt themselves. But it highlights that it is still early days. In part, this is because the data on income distributions take time to arrive. But it is also because governments of rich countries incurred enormous deficits to cushion the blow — and the overall outcome on inequality depends on how that new debt is handled in the future. Historical evidence shows that premature fiscal austerity worsens inequality. There is much — much — more in the report about the current state of inequality, even if the impact of Covid-19 is elusive. Among the rich pickings, here are three findings that strike me as particularly interesting. First, global inequality (between countries) was pretty constant in 2020 compared to the year before — but that stalled a trend of falling inequality since the early 2000s. Second, global inequality of individual wealth took a jump last year, when the share of global wealth owned by the world’s billionaires increased by half (from 2.2 to 3.3 per cent) and that of the top 0.01 per cent wealthiest individuals increased by about a percentage point (from 10.3 to 11.1 per cent). At the same time, the wealth of the broader top 1 per cent group remained stable, both in the US and Europe, so the winners of greater wealth inequality were extremely concentrated at the very top.Third, Europe is the most egalitarian continent, whether measured by income inequality, wealth inequality, or inequality of individual carbon emissions, the WID’s data on which are fascinating and important. (They show that middle-income people in rich countries emit less than the top 10 per cent in some poorer regions.)What makes Europe more egalitarian than the US? Many think it is because European governments tax and redistribute more than Washington and the US states. But in a freshly published paper (with a good Twitter thread summary for those with no time to read), Thomas Blanchet, Lucas Chancel and Amory Gethin show that this is wrong. It is not redistribution that makes Europe the most egalitarian continent in the world, but “predistribution” — ie, its more equal distribution of rewards in the market itself, before governments transfer any money from higher to lower earners.I have made this point about the Nordics in the past. It surprises people to realise that these economies do not owe their famed equality to redistribution — of which they do about the same as other west European countries — but because market earnings are more equal to begin with. I made this point by comparing income distributions before and after taxes and transfers.It turns out that this holds more broadly for Europe, in comparison with the US. This is not immediately obvious by simply looking at pre- and post-tax incomes. Instead, Blanchet, Chancel and Gethin used a more sophisticated methodology called distributional national accounts. As the name suggests, it uses national income accounting concepts to allocate everything produced in the economy in a year — including that which does not feature on anyone’s payslip, such as undistributed profits in corporations — to some beneficiary. (It makes sense to attribute undistributed profits to shareholders, for example.) Do this, and two things become clear. The pre-tax income distribution in the US is much more skewed than in European countries. That is perhaps not so surprising but the differences are starker than we may have thought. But the US tax system is in fact more progressive than Europe’s: “[A]fter accounting for all taxes and transfers, the US appears to redistribute a greater fraction of its national income to the poorest 50% than any European country,” the paper says. One reason is Europe’s greater use of indirect taxes such as VAT, which are less progressive than direct taxes.

Europe’s relative success in terms of extending prosperity to all is a result of creating an economy that is less unequal before taxes and transfers. That is not to say that government taxation and spending do not contribute to equality — what Europe proves is that creating an economy with opportunities for all takes work. Extensive public spending on services, for example, plays an important role even when it does not arithmetically reduce inequality (because they benefit everyone about the same). Conversely, mere redistribution does not make much of a dent to very skewed market opportunities. Prosperity for all requires fixing markets, not just compensating for their results.Which brings us back to taxation, because public services need to be funded. Since one thing we do know is that overall wealth and wealth inequality seems to have increased in the pandemic, it is natural to think that high wealth is a good tax base. The Resolution Foundation, in a new report, points out that a £3tn windfall to UK homeowners from house price growth in the past 20 years (one-fifth of the country’s total private wealth) is “unequal, unearned and untaxed”, and explores options for taxing it. The World Inequality Report estimates that a modest net wealth tax on the global top 1 per cent wealth owners can raise 1.6 per cent of global income in revenue. The debate on wealth taxation is only likely to get hotter.Other readablesThe EU has launched its answer to China’s Belt and Road infrastructure megaproject. My take is that it’s a step in the right direction but more ambition is needed.The signs are accumulating that, as we suggested last week, the German government is aiming to make both domestic and European fiscal rules allow more public investment. We have also noted the new economic thinking in President Joe Biden’s White House, which I think of as progressive supply-side economics. This week, the US Treasury presented a new example with a speech on how wages have stagnated because of insufficient competition among employers, what economists call monopsony.Numbers newsCan higher wages lead to productivity growth? A new survey of leading economists shows a majority think that in some cases, this can be true but are sceptical about the ability of governments to exploit such cases. More

FRANKFURT/VILNIUS (Reuters) -China has told multinationals to sever ties with Lithuania or face being shut out of the Chinese market, a senior government official and an industry body told Reuters, dragging companies into a dispute between the Baltic state and Beijing.China downgraded its diplomatic ties with Lithuania last month, after the opening of a representative office by Taiwan in Vilnius. Lithuania’s ruling coalition had agreed in November last year to support what it described as “those fighting for freedom” in Taiwan, putting its relations with China at risk.China views self-ruled and democratically governed Taiwan as its territory and has stepped up pressure on countries to downgrade or sever their relations with the island.China’s foreign ministry spokesman Wang Wenbin said on Thursday that China followed international trade rules and again criticised Lithuania for its stance on Taiwan.”It has created the false impression of Taiwan being separate from China, gravely harmed China’s sovereignty and territorial integrity, and started an egregious precedent among the international community,” he said. “China will firmly safeguard its sovereignty, territorial integrity and core interests.” Taiwan has other offices in Europe and the United States but they use the name of the city Taipei, avoiding reference to the island itself.Lithuania’s direct trade with China is modest, but its export-based economy is home to hundreds of companies that make products such as furniture, lasers, food and clothing for multinationals that sell to China. “They (China) have been sending messages to multinationals that if they use parts and supplies from Lithuania, they will no longer be allowed to sell to the Chinese market or get supplies there,” Mantas Adomenas, Lithuania’s vice-minister for foreign affairs, told Reuters. “We have seen some companies cancel contracts with Lithuanian suppliers.”He did not name any companies or suppliers affected.THREATS THAT BECAME REALITYThe Lithuanian Confederation of Industrialists, which represents thousands of Lithuanian companies, confirmed that some multinational companies that buy goods from Lithuania suppliers were being targeted by China. “This week was the first time we saw direct Chinese pressure on a supplier to drop Lithuanian-made goods,” Vidmantas Janulevicius, the Confederation president, told Reuters. “Previously, we only had threats it could happen, now they became reality.””For us, the most painful part is that it’s a European company,” said Janulevicius, referring to the multinational. “Many Lithuanian businesses are suppliers for such companies.”He did not name any companies.Lithuania is looking at setting up a fund to shield local companies from Chinese retaliation, a senior government official told Reuters.The Lithuanian government is in talks with the companies at risk of fallout from the China dispute about offering possible financial support, such as loans, the government official said.Lithuania has also appealed to the European Commission for support.In a letter sent earlier this week to top officials at the Commission and seen by Reuters, Lithuanian foreign minister Gabrielius Landsbergis asked for support in rebuffing China.”A strong reaction is necessary at the EU level in order to send a signal to China that politically motivated economic pressure is unacceptable and will not be tolerated,” the letter said.The European Commission responded in a statement that the EU was ready to stand up against all types of political pressure and coercive measures applied against any member state.”The development of China’s bilateral relations with individual EU Member States has an impact on overall EU-China relations.” When asked about China’s actions, George Magnus of Oxford University’s China Centre said that while there was a “constant drumbeat of toys being thrown out of the pram” by China, targeting third-party companies was unusual and had not been seen previously. Adomenas said that Chinese authorities were also curtailing exports to Lithuania, including by stopping export credit guarantees for Lithuanian imports from China.”It has affected food stuffs, lasers, raw materials, pharmaceuticals, furniture, clothing.””We will not bend to this pressure,” he said. “What we decide to do, by calling Taiwan Taiwan, is up to Lithuania, not Beijing.” (Writing By John O’Donnell; additional reporting by Ryan Woo and Yew Lun Tian in Beijing. Editing by Jane Merriman) More

BEIJING/SAO PAULO/JAKARTA (Reuters) – Key crops, from Brazilian corn to Malaysian durians, are at risk after tight supplies and blistering prices of fertiliser have caused farmers to scrimp on vital crop nutrients, adding to global food security and inflation fears.Fertiliser costs soared this year amid rising demand and lower supply as record natural gas and coal prices triggered output cuts in the energy-intensive fertiliser sector. Urea surged more than 200% this year while diammonium phosphate (DAP) prices have nearly doubled. With global food prices at their highest in more than a decade, rising fertiliser costs will only add to pressures on food affordability, especially in import-reliant economies, while stretched budgets leave little room for government subsidies, said Frederic Neumann, HSBC’s co-head of Asian economics research. (Graphic: Global fertiliser prices, https://fingfx.thomsonreuters.com/gfx/ce/zjvqkywnwvx/Fertiliser%20price%20chart.jpg) “At a time when COVID-19 already decimated the lives and livelihoods of untold millions, soaring food costs are hitting the poor especially hard,” he said. “This raises the risk that higher fertiliser costs will not only hit farmers but will also be passed on to consumers via higher food prices.” WORSE BEFORE IT GETS BETTERWith the United Nations Food and Agriculture Organization’s (FAO) food price index at its highest since 2011 – when high food prices helped foment the “Arab Spring” uprisings – the world’s farmers are already under strain to increase food supply.But analysts say fertiliser supply tightness will worsen early next year. European, North American and North Asian farmers all need to step up purchases ahead of spring planting, while key producers China, Russia and Egypt have curbed exports to ensure domestic supplies. “Most stockpiles of urea are now secured, meaning global producers will be ‘sold out’ until Jan. 1,” said U.S.-based Josh Linville, director of fertiliser at StoneX Group Inc. “Producers start the new year very low on unsold inventories and they will be met by sizeable global demand in Q1 as U.S., Canada, Brazil, Europe, Asia all step forward to purchase.” (Graphic: Fertiliser output chart, https://fingfx.thomsonreuters.com/gfx/ce/xmvjonrbnpr/Fertiliser%20output%20chart.jpg) In response, farmers across the world are either delaying purchases or reducing fertiliser use to save money. India and Egypt – both major farm economies – increased government subsidies in November, with India’s fertiliser ministry boosting supplies to districts with low stocks to ensure availability for winter-planted crops. NO CROP SPAREDSo far, high crop prices have cushioned the blow for many growers, and some can switch from nitrogen-hungry wheat and corn to soybeans next season. (Graphic: Fertiliser agriculture usage, https://fingfx.thomsonreuters.com/gfx/ce/xmpjonnkovr/Agri%20usage%20chart%20new.jpg) But in 2022, few crops or farmers will be spared, sources say. In Germany, farmers hit by price increases are likely to reduce fertiliser use, which could lower harvest volumes “depending on the scale that this takes place,” said Bernhard Kruesken, secretary-general of German farming association DBV.”Crop types which achieved higher producer prices in past months will be in consideration for sowing,” Kruesken added.Brazil, the world’s top soybean grower and third-largest corn producer, feeds 10% of the global population. The country has warned of a fertiliser shortage next year that is predicted to slow soy, corn and cotton farm expansions.”Soy partially dodged it because a lot of inputs had been (already) purchased, but the second corn crop of the cycle is going to run head-on into that rise in fertiliser costs,” said Andre Pessoa, partner at Brazilian agribusiness consultancy Agroconsult. “For the 2022/23 cycle, I would say we are going to have some problems. I’ve told farmers the problem isn’t even price anymore. Now it’s guaranteeing availability.” (Graphic: Fertiliser trade chart, https://fingfx.thomsonreuters.com/gfx/ce/zdvxoxnqjpx/Fertiliser%20trade%20chart.jpg) Even in North America, home to some of the world’s wealthiest farmers, growers have delayed purchases they usually make ahead of spring plantings, hoping prices drop. SMALLHOLDERS SUFFERAlthough weather conditions, disease, pests and water supply also are crucial in determining how crops develop, fertilisers are among the most potent production factors that farmers control.But many growers, and especially the millions of smallholders who produce a third of the world’s food, will have little choice but to reduce fertiliser usage in 2022.In Southeast Asia, which produces most of the world’s palm oil, growers are bracing for higher output costs with industry players already seeing disruptions in fertiliser procurements and lower imports. “Malaysia imports 95% of its fertiliser supply. Production of fruits and vegetables, including durian, will be hit worse than oil palm, as it requires higher quality fertiliser,” said Teo Tee Seng, Malaysian managing director of agrochemical supplier Behn Meyer AgriCare.Albertus Wawan, an Indonesian oil palm smallholder who already cut fertiliser use by a third, will delay his next application to January to save on two month’s usage. “Once fertiliser prices increase, it won’t go down,” Wawan said. “This is the challenge for farmers in the future.”Recent dips in oil prices could provide some relief to fertiliser producers, but any future energy shocks caused by unexpected cold snaps would trigger higher food prices, according to an FAO report in November.”We need to understand that all policy measures that lift energy prices will lift food prices,” said Josef Schmidhuber, deputy director at FAO’s trade and markets division. “This must not mean that we de-emphasize climate change mitigation measures, but we need to find ways to increase fertiliser use efficiency… and critically review our energy policies.” More