Economy

The IMF’s former chief economist Olivier Blanchard needed just three words to respond to the news that Brazil and Argentina would begin preparatory work on creating a common currency. “This is insane,” he tweeted.While economists have questioned the viability of the idea, political analysts have been less dismissive, pointing out that the desires of South America’s mainly leftwing presidents to promote regional integration and challenge the US dollar’s dominance should not be underestimated. For the first time in more than seven years, Brazil and Argentina are politically aligned under leftist leaders, with both Luiz Inácio Lula da Silva and Alberto Fernández keen to present a united front. Brazil’s president told reporters in Buenos Aires earlier this week that, “God willing”, the finance ministers and leaders of the two central banks would have the “intelligence, competence and good sense” to begin work that could eventually produce a common currency.His Argentine counterpart said while he did not know “how a common currency with Brazil and the region would work,” the two nations would have a “much deeper strategic bond” that would last “for decades.”The two leaders made clear that an eventual common currency would, at first, be limited to use in trade and would run in tandem with Brazil’s real and the Argentine peso, rather than replacing them.

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This is not the first time that the idea has been floated. People close to the previous rightwing administration in Brazil confirmed that former finance minister Paulo Guedes had defended the idea several times on the grounds that the currency would help impose fiscal discipline and that there would be fewer global currencies in the future so it would be beneficial if the region established its own. Guedes even suggested a name, the “peso real”, and predicted a 15-year timeline for such a project in Latin America. Argentina’s former central bank chief Federico Sturzenegger, who served from 2015-2018 under the conservative administration of Mauricio Macri, was supportive of establishing a central bank among members of the Mercosur trade bloc. Latin America’s left has long wanted to reduce the region’s historic dependence on the United States and sees a common currency as a clever way to claim greater economic sovereignty while also pursuing a long-held dream of closer political union. In a nod to those tensions with its rival north of the equator, Brazil’s current finance minister Fernando Haddad last year co-authored a piece suggesting a common currency called the “sur”, or south. Underpinning the political support is a desire to stabilise Argentina’s battered economy. The country has been on the brink of insolvency for years, its central bank reserves are dwindling, tight exchange controls have fed a rampant black market in the dollar and confidence in the peso has collapsed. “Argentina needs an external anchor to restore credibility,” economist Rodrigo Wagner, an expert on new currency adoption, said. The financial chaos has weighed on trade between the two economies. At roughly $30bn in 2022, flows between Brazil and Argentina are lower than the $40bn level recorded a decade ago. That is partly because Argentina has a chronic shortage of US dollars — the common currency of global export markets — to purchase Brazilian exports. “Trade is certainly facilitated by a common currency and eliminating FX risks brings advantages,” said Nannette Hechler-Fayd’herbe, global head of economics and research at Credit Suisse. However, she highlighted that monetary unions also posed challenges to member states, as the history of the EU’s single currency project showed. Pierpaolo Barbieri, founder of the Argentine fintech Ualá, said it was too easy to be cynical about the plans. “Brazil wants a larger market for its exports and to lower trade barriers,” he added. A common unit of exchange would be an “ultimate vehicle” towards achieving both.

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Digital currencies, such as Tether and Bitcoin, were already offering alternatives. “Anything that opens up our extremely closed market is a step in the right direction,” said Barbieri. Everton Guimarães Negresiolo, president of the Argentine-Brazilian Chamber of Commerce, Industry and Services, has said “a bilateral trade tool” in a currency “other than the dollar” would be beneficial to the businesses they represent — though he acknowledged that a string of economic imbalances between the two countries posed “very important challenges”. “It is very positive news to learn that we are working towards greater regional integration,” said Gustavo Grobocopatel, who heads one of Argentina’s largest farming groups, Los Grobo, adding that the announcement was one way to get member states to “start doing the homework” on the imbalances.

Wagner said the lack of an alternative to dollars meant South American nations, including his native Chile, were missing out on valuable trading relationships. But others argue the scale of the disparity between the two countries makes the project a non-starter. Buenos Aires has been cut off from international debt markets since a default in 2020 and has tight foreign exchange controls. The real, meanwhile, is fully convertible, and a better grip on government spending means the country has full access to international markets. Annual inflation in Argentina reached 94.8 per cent in December, against a far more manageable 5.79 per cent in Brazil. Marcos Casarin, chief economist at Oxford Economics, said: “Argentina has more inflation in a single month than Brazil [has] in a year.” “My perception is this common currency is not going to be feasible. And if it is feasible, it is going to create increasing turbulence in our economy,” said Walter Schalka, president of São Paulo-based Suzano, one of the world’s biggest pulp and paper companies. “Argentina and Brazil are facing different economic moments. They’re in a completely different situation. This is something that is not going to create any value for Brazil.”Additional reporting by Jonathan Wheatley More

Watches and Wonders has become the new Swiss megafair after the demise of Baselworld © Fabrice Coffrini/AFP via Getty ImagesIs the watch fair debate finally over? Organisers and exhibitors seem to think so. After years of mud-slinging and uncertainty — peaking with the very public demise of the Baselworld Swiss megafair — the clock may no longer be ticking for the survival of the watch show. But, while the dust has settled, divisions remain.“There is big momentum in Watches and Wonders,” says Matthieu Humair, chief executive of the Watches and Wonders Geneva Foundation (WWGF), the non-profit organiser of what is now Switzerland’s only major watch fair, opening on March 27. “It’s the fashion week of the [watch] industry.”Rolex, Patek Philippe, Cartier and Tag Heuer will be among the exhibitors at this year’s event, which is expected to break attendance records. The 2022 gathering recorded almost 22,000 visitors but, unlike last year, the fair will now be open to the public at the weekend, when Humair expects 10,000 paying customers to show up.Last year’s fair was closed to the public but, following an outcry from exhibitors and the success of watch events designed to reach outside the industry — such as the biennial Dubai Watch Week hosted by retailer Ahmed Seddiqi & Sons — the foundation has changed tack.“We want to involve the general public and talk about watchmaking not only in Palexpo [the host convention centre] but in Geneva,” Humair says. Tickets to the public days will cost SFr70 ($76), which could bring in meaningful revenues but, given exhibitors are paying millions, the impact on the organisers’ bottom line may not be as significant.Over the same week, another fair called Time to Watches will also return to Geneva. Last year’s debut event attracted 36 smaller watch brands, such as Corum, Vulcain and Louis Erard.

Time to Watches is also taking place in Geneva at the same time as the bigger Watches and Wonders event © Time to Watches

Exhibitors believe the tide has turned. “Before the pandemic, everyone was questioning the fairs,” says Jean-Marc Pontroué, chief executive of Panerai, one of the Richemont group of brands exhibiting in Geneva. “There was a general agreement and, to be cool, you had to say the show was useless. But we need this.”Some critics admit they got it wrong. “I was convinced that, after Baselworld, the brands would go over to digital content,” says Oliver Müller, founder of Swiss luxury consultancy LuxeConsult. “But the first W&W . . . that happened digitally . . . was a disaster. Even technology-driven brands like Apple or Tesla need public events to create an atmosphere. Fairs still can create the magic of physical encounters.”

If shows such as W&W are now useful, it is because they have reorganised. The old-fashioned business-to-business sales model is all but gone, replaced by a stronger focus on the end consumer.“Today, I don’t care about the sales results, because I have them before the show starts,” says Pontroué, adding that the Geneva fair costs him “millions” and is one of his business’s “top three investments for the year”.“What I care about now is the press and media coverage,” he says. “I have that feedback every day [at the fair]. And it pays for the investment in W&W Geneva big time. The fact you have one show gives you a magnitude of coverage you wouldn’t otherwise have.”Other exhibitors share his view. “It’s a nice stage to show what we do and it’s very positive in terms of image to be there,” says Julien Tornare, chief executive of Zenith, one of three LVMH watch and jewellery division brands that will be at Geneva. “That’s what we pay for.”But, despite newfound confidence in watch fairs, plenty are staying away. Some brands that exited Baselworld and W&W’s precursor, the Salon International de la Haute Horlogerie, before the pandemic are yet to return.Audemars Piguet, Richard Mille, Breitling and the Swatch Group of brands, which includes Omega and Longines, have stayed away. Swatch Group left a gaping hole in Baselworld five years ago, when its chair Nick Hayek famously stated he had better ways to spend $50mn.Another W&W outlier is Bulgari, which will be exhibiting in Geneva at the time of the show, but not as part of it.

“W&W remains a high-cost event,” says Bulgari chief executive, Jean-Christophe Babin, who also exhibits at LVMH Watch Week each January and was the founder of Geneva Watch Days, a decentralised mini-show attended by around 20 brands that is scheduled to run for a fourth consecutive year this August. “My three events cost me about half what W&W would cost me. And we gain total freedom of doing what we want.”Babin also says he will not exhibit at the event while LVMH is excluded from the board of the WWGF, which was established in October by Rolex, Riche­mont and Patek Philippe. “The question is more whether the foundation is ready to acknowledge LVMH as a major actor in watchmaking and, as a consequence, whether it deserves the space and influence a major player should have in that organisation,” he says. “If those conditions were met, probably there would be an opening on our side.”According to Humair, there are no plans to extend an invitation or to change the board’s make-up. Big exhibitors are invited to join an organising committee, but not the board.Some analysts have suggested Babin’s demand is unreasonable, though. “LVMH is not a member of the board because it does not need the fair,” says Astrid Wendlandt, editor of luxury news site Miss Tweed. “It has its own events for which it masters expenditures, timing, format and communication.”

Others appear closer to a return. “Audemars Piguet could easily go back if the format were to be changed,” says François-Henry Bennahmias, the company’s outgoing chief executive, adding he would like to see more frequent client-focused events organised during the year in east Asia, the Middle East and the US, as well as Geneva. AP pulled out of SIHH after the 2019 event. It now mixes online launches with in-person presentations, either at its manufacturing centre in Switzerland or in its global network of what it calls AP Houses.Bennahmias says that, while he is in favour of a fair, his conditions are unlikely to be met. “The whole watch industry should be involved and we shouldn’t see different fairs where one brand is going this way and the other one’s going that way,” he says. “It should be everyone under the same roof. ”Humair says he would love nothing more. “All year long, each brand can do their own initiative, but for one week they have a common project with the same mission to talk together about watchmaking,” he explains. “This is for future generations.”Is the debate over? “I hope it is,” says Mark Toulson, head of watch buying at retailer Watches of Switzerland Group. “Rolex and Patek Philippe see the value in it, and smaller brands piggyback on that. They all want to promote mechanical watchmaking and drive interest in the whole industry.”Zenith’s Tornare believes brands need to take a long-term view. “We want to make sure future generations are interested in mechanical watches. So my dream would be to have a large-scale event where everybody can join.”Some believe it’s simpler than that. “Selling luxury is all about relationships,” says Rob Corder, founder of the London event WatchPro Salon. “That will include WhatsApp and social media but, if 2022 taught us anything, it is that people want to spend time with others with shared passions.” More

(Reuters) -Visa Inc’s revenue growth continued to wind back to pre-pandemic levels in the first quarter as the post-lockdown travel craze ebbed and consumer spending slowed in a tough economy.The world’s largest payments processor still surpassed Wall Street targets for profit, sending its shares up 1.4% to $227.82 in after-hours trading on Thursday.Cross-border volumes – a key measure that tracks spending on cards beyond the country of issue – jumped 22% year-over-year on a constant dollar basis as a stronger greenback boosted out-of-U.S. travel by softening the hit from inflation and rising interest rates.Total payment volumes rose 7%.The growth was, however, far lower than a 40% surge in cross-border volumes in the first quarter of 2021 and a 20% jump in payments volumes.”Year-over-year growth rates are going to moderate as you get past the big (pandemic) recovery,” Visa (NYSE:V)’s chief financial officer, Vasant Prabhu, told Reuters.Visa’s revenue recorded its slowest pace of growth in seven quarters, gaining 12% to $7.9 billion. The firm’s exit from Russia will impact reported payments volume growth rates in the second quarter, Prabhu said on a post-earnings call. Earlier in the day, rival Mastercard Inc (NYSE:MA) forecast current-quarter revenue growth below expectations as pent-up demand for travel was seen slowing going forward. “Growth in the travel sector may be harder to come by in 2023 as some of the pent-up demand that stacked up during the pandemic and was unleashed in 2022 is fading,” said Ted Rossman, senior industry analyst at Bankrate.com.Visa reported a profit of $2.18 a share, comfortably above the $2.01 estimated by analysts, according to Refinitiv. More

(Reuters) – Intel Corp (NASDAQ:INTC) said on Thursday it expects to lose money in the current quarter, surprising investors with a bleaker-than-expected outlook for both the PC market and slowing growth in its key data center division.The company’s shares fell 9.5% in trading after the bell. “We stumbled, right, we lost share, we lost momentum. We think that stabilizes this year,” Chief Executive Pat Gelsinger told investors on a conference call. He said Intel has been losing market share in the data center market, a nod at the strength of rival Advanced Micro Devices (NASDAQ:AMD)Two of Intel’s most important markets are showing weakness after two years of strong growth as remote work boomed during the pandemic. Now, the PC industry is struggling with a glut of chips after demand for consumer electronics fell off a cliff and business customers wary of a recession are slowing spending on data centers.Gelsinger told Reuters that customers also were emptying inventory.”We expect some of the largest inventory corrections literally that we’ve ever seen in the industry taking place that’s affecting the Q1 guide in a meaningful way,” he said.”Everything hinges on the PC market recovery. AMD isn’t immune to this either,” said Wayne Lam, an analyst at CCS Insight. “Don’t think we’ve seen the bottom for INTC…They are not running a sustainable business model.”Intel expects profit margins to fall further after dropping from 58.4% in the fourth quarter of 2020 to 43.8% in the fourth quarter of 2022. “Its safe to say that ambitions to return to a 60% margin in the future is light years away,” said CFRA Research analyst Angelo Zino. GRAPHIC: Intel’s profit margin falls as demand crashes (https://www.reuters.com/graphics/INTEL-RESULTS/znpnbzwmbpl/chart.png) Intel reiterated its medium-term goal of 51-53% gross margin, and 54-58% longer term.Shares of other microchip companies fell as well, with AMD down 2.6% and Nvidia (NASDAQ:NVDA) Corp down 2%. PC shipments fell 16.5% to 292.3 million units in 2022, per data from research firm IDC, forcing chipmakers to cut back production and slash revenue forecasts. GRAPHIC: PC Shipments fell steeply in 2022 (https://www.reuters.com/graphics/PCMARKET-RECOVERY/jnpwywwajpw/chart.png) Shrinking PC demand also pressured Microsoft Corp (NASDAQ:MSFT)’s More Personal Computing segment, which includes Windows, devices and search revenue, leading to a 19% drop in the segment in its second quarter.Meanwhile, the data center market has also slowed from double-digit growth as businesses cut costs to ride out an economic slowdown. After Gelsinger returned to the company nearly two years ago, Intel has focused on regaining the lead in chipmaking technology. Outsourcing the chipmaking process has helped rivals like AMD make much smaller and faster chips and outpace Intel’s technology.The company forecast first-quarter revenue in the range of about $10.5 billion to $11.5 billion. Analysts on average were expecting total revenue of $13.93 billion, according to Refinitiv data.The company expects an adjusted loss of 15 cents per share versus expectations of a 24 cents per share profit.Revenue in the fourth quarter fell 32% to $14 billion. Analysts on average expected revenue of $14.46 billion. GRAPHIC: Intel quarterly revenue falls most in at least two decades (https://www.reuters.com/graphics/INTEL-RESULTS/REVENUE/mypmogzxzpr/chart.png) More

PRAGUE (Reuters) – Former Czech army chief Petr Pavel, a mainstream pro-Western candidate backing aid for Ukraine, held a commanding lead over billionaire ex-premier Andrej Babis as Czechs headed to a run-off vote for a new president on Friday and Saturday.Pavel, 61, a bearded retired general, ran as an independent and had the support of the Czech Republic’s centre-right cabinet. Czech presidents do not carry many day-to-day powers but pick prime ministers and central bank leaders, have a say in foreign policy, are powerful opinion makers and can push the government on policies.Betting agencies put him at 10 times more likely to win than Babis, and he led final opinion polls released on Monday.Voting starts at 2 p.m. (1300 GMT) on Friday and ends at 2 p.m. on Saturday, with results expected later that day.Pavel enlisted in the army during the Communist era when Prague was part of the Soviet-led Warsaw Pact, and was decorated for peacekeeping services in former Yugoslavia in the 1990s. He rose to lead the Czech general staff and was chairman of NATO’s military committee for three years before retirement in 2018.Pavel’s colleagues have said they value his calm, determined decision-making, his ability to find consensus, and his resistance to stress.He ran on a platform to keep his central European country strongly anchored in the European Union and NATO, and backs further military aid for Ukraine against Russia’s invasion.Pavel also favours adoption of the euro common currency, a step that has been on the back-burner for years, and progressive policies such as gay marriage.At a final rally that brought thousands to Prague’s historic Old Town Square on Wednesday, Pavel sought to project himself as a candidate who could bridge political trenches.”When I served in the army, I served the country and all in it regardless of political preferences, and I wish to serve like that as president,” he told the crowd. “We all want democracy, freedom, tolerance, decency, solving problems through cooperation.”BABIS PLAYS WAR CARDBabis, 68, is a combative business magnate in the chemicals, food, farming and media sectors who was prime minister in 2017-2021. He has had warm relations with Hungary’s Viktor Orban, who has clashed with EU partners over rule of law. Babis built the finale of his campaign on fears of the war in Ukraine triggered by Russia’s invasion spreading. He said he would offer to broker peace talks and suggested that as a former soldier, Pavel could drag the Czech Republic into a war. Pavel rejected the accusations as nonsense and warmongering.Babis had the support of outgoing President Milos Zeman, a divisive figure who pushed for closer ties with China and, until Russia invaded Ukraine, Moscow, as well as fringe forces such as the pro-Russian Communist Party.As head of the largest opposition party, Babis also presented the vote as a protest against a government he said did little to help people cope with soaring energy prices. More

The president has found a welcome foil in a new conservative House majority and its tax and spending plans, sharpening a potential re-election message.WASHINGTON — President Biden on Thursday assailed House Republicans over their tax and spending plans, including potential changes to popular retirement programs, ahead of what is likely to be a run for re-election.In a speech in Springfield, Va., Mr. Biden sought to reframe the economic narrative away from the rapid price increases that have dogged much of his first two years in office and toward his stewardship of an economy that has churned out steady growth and strong job gains.Mr. Biden, speaking to members of a steamfitters union, sought to take credit for the strength of the labor market, moderating inflation and news from the Commerce Department on Thursday morning that the economy had grown at an annualized pace of 2.9 percent at the end of last year. In contrast, he cast House Republicans and their economic policy proposals as roadblocks to continued improvement.“At the time I was sworn in, the pandemic was raging and the economy was reeling,” Mr. Biden said before ticking through the actions he had taken to aid the recovery. Those included $1.9 trillion in pandemic and economic aid; a bipartisan bill to repair and upgrade roads, bridges, water pipes and other infrastructure; and a sweeping industrial policy bill to spur domestic investment in advanced manufacturing sectors like semiconductors and speed research and development to seed new industries.Republicans have accused the Biden administration of fanning inflation by funneling too much federal money into the economy, and have called for deep spending cuts and other fiscal changes.Mr. Biden denounced those proposals, including a plan to replace federal income taxes with a national sales tax, curb safety net spending and risk a government default by refusing to raise the federal borrowing limit without deep spending cuts. Why, he asked, “would the Americans give up the progress we’ve made for the chaos they’re suggesting?”Speaker Kevin McCarthy and House Republicans have not yet released a detailed or unified economic agenda.Haiyun Jiang/The New York Times“I will not let anyone use the full faith and credit of the United States as a bargaining chip,” Mr. Biden said, reiterating his refusal to negotiate over raising the debt limit. “The United States of America — we pay our debts.”But the president also sought to reach out to working-class voters — in places like his native Scranton, Pa. — who have increasingly voted for Republicans in recent elections. Mr. Biden said those voters had been left behind by American economic policy in recent years, and he tried to woo them back by promising that his policies would continue to bring high-paying manufacturing jobs that do not require a college degree to people who feel “invisible” in the economy.“They remember, in my old neighborhoods, why the jobs went away,” Mr. Biden said, vowing that under his policies “nobody’s left behind.”The Biden PresidencyHere’s where the president stands as the third year of his term begins.State of the Union: President Biden will deliver his second State of the Union speech on Feb. 7, at a time when he faces an aggressive House controlled by Republicans and a special counsel investigation into the possible mishandling of classified information.Chief of Staff: Mr. Biden plans to name Jeffrey D. Zients, his former coronavirus response coordinator, as his next chief of staff. Mr. Zients will replace Ron Klain, who has run the White House since the president took office two years ago.Voting Rights: A year after promising a voting rights overhaul in a fiery speech, Mr. Biden delivered a more muted message at Ebenezer Baptist Church in Atlanta on Martin Luther King Jr.’s birthday.The speech built on a pattern for Mr. Biden, who has found the new and narrow Republican majority to be both a political threat and an opportunity.Republicans in the chamber have begun a series of investigations into Mr. Biden, his family and his administration. They have also demanded deep cuts in federal spending in exchange for raising the borrowing limit, a position that risks an economic catastrophe given the huge sums of money that the United States borrows to pay for its financial obligations.The president has refused to tie any spending cuts to raising the debt limit and has called on Congress to increase the $31.4 trillion cap so the nation can continue paying its bills and avoid a federal default..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.But Mr. Biden, who is facing a divided Congress for the first time in his presidency, is increasingly acting as if the newly empowered conservatives have given him a political opening on economic policy. As he prepares for a likely re-election bid in 2024, he is seizing on the least popular proposals floated by House members to cast himself as a champion of the working class, retirees and economic progress.Mr. Biden’s speech on Thursday waded deep into policy details, including the acreage of western timber burned in fires linked to climate change, the global breakdown of advanced chip production and the average salary of new manufacturing jobs, as he recounted his legislative accomplishments.House Republicans have not yet released a detailed or unified economic agenda, and they have not made a clear set of demands for raising the debt limit, though they largely agree that Mr. Biden must accept significant spending curbs.But members and factions of the Republican conference have pushed for votes on a variety of proposals that have little support among voters, including raising the retirement age for Social Security and Medicare and replacing the federal income tax with a national sales tax.Mr. Biden has sought to brand the entire Republican Party with those proposals, even though it is not clear if the measures have majority support in the conference or will ever come to a vote. Former President Donald J. Trump, who has already announced his 2024 bid for the White House, has urged Republicans not to touch the safety-net programs. Other party leaders have urged Republicans not to rule out those cuts. “We should not draw lines in the sand or dismiss any option out of hand, but instead seriously discuss the trade-offs of proposals,” Senator Michael D. Crapo of Idaho, the top Republican on the Finance Committee, wrote in an opinion piece for Fox News, in which he called for Mr. Biden to negotiate over raising the debt limit.Representative Kevin Hern, Republican of Oklahoma, who sits on the House Ways and Means Committee, told a tax conference in Washington this week that there are “lots of problems” with the plan to replace the income tax with a so-called fair tax on consumption. Those include incentives for policymakers to allow prices to rise rapidly in the economy in order to generate more revenue from the sales tax, he noted.“Let’s just say it’s going to be very interesting,” Mr. Hern said at the D.C. Bar Taxation Community’s annual tax conference. “I haven’t found a Ways and Means member that’s for it.”Despite those internal disagreements, Mr. Biden has been happy to pick and choose unpopular Republican ideas and frame them as the true contrast to his economic agenda. He has pointedly refused to cut safety-net programs and threatened to veto such efforts.“The president is building an economy from the bottom up and the middle out, and protecting Social Security and Medicare,” Karine Jean-Pierre, the White House press secretary, told reporters this week. “Republicans want to cut Social Security, want to cut Medicare — programs Americans have earned, have paid in — and impose a 30 percent national sales tax that will increase taxes on working families. That is what they have said they want to do, and that is clearly their plan.”The focus on Republicans has allowed Mr. Biden to divert the economic conversation from inflation, which hit 40-year highs last year but receded in the past several months, though it remains above historical norms. On Thursday, he chided Republicans for a vote to reduce funding for I.R.S. enforcement against wealthy tax cheats — a move the Congressional Budget Office says would add to the budget deficit, and which Mr. Biden cast as inflationary.“They campaigned on inflation,” Mr. Biden said. “They didn’t say if elected, they planned to make it worse.”Progressive groups see an opportunity for Mr. Biden to score political points and define the economic issue before the 2024 campaign begins in earnest. That is in part because polls suggest Americans have little appetite for Social Security or Medicare cuts, and have far less focus on the national debt than House Republicans do.“It is a political gift,” said Lindsay Owens, the executive director of the Groundwork Collaborative, a liberal nonprofit in Washington. More

The continued growth in the fourth quarter showed the resilience of consumers and businesses in the face of rising inflation and interest rates.The economy remained resilient last year in the face of inflation, war and a Federal Reserve intent on curbing the pace of growth.A repeat performance in 2023 is far from guaranteed.U.S. gross domestic product, when adjusted for inflation, increased at an annual rate of 2.9 percent in the fourth quarter of 2022, the Commerce Department said on Thursday. That was down from 3.2 percent in the third quarter, but nonetheless a solid end to a topsy-turvy year in which the economy contracted in the first six months, prompting talk of a recession, only to rebound in the second half.Beneath the quarterly ups and downs is a simpler story, economists said: The recovery from the pandemic recession has slowed from the frenetic pace of 2021, but it has retained momentum thanks to a red-hot job market and trillions of dollars in pent-up savings that allowed Americans to weather rapidly rising prices. Over the year as a whole, as measured from the fourth quarter a year earlier, G.D.P. grew 1 percent, down sharply from 5.7 percent growth in 2021.“2020 was the pandemic; 2021 was the bounce-back from the pandemic; 2022 was a transition year,” said Jay Bryson, chief economist for Wells Fargo.The question is, a transition to what? Mr. Bryson, like many economists, expects a recession to begin sometime this year, as the effects of higher interest rates ripple through the economy.The initial rebound from the pandemic recession was much stronger in the United States than it was in much of the rest of the world. The gap widened last year as the war in Ukraine threatened to push Europe into a recession and the strict Covid suppression policies in China constrained growth there.But the U.S. economy faces fresh challenges in 2023. Inflation remains too high by many measures, and the Fed is expected to continue increasing rates in an effort to bring prices under control. A congressional showdown over raising the debt ceiling could cause further turmoil in financial markets — or a crisis if lawmakers fail to reach a deal.Inflation F.A.Q.Card 1 of 5What is inflation? More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.Spurred by a solid rally on Wall Street after upbeat U.S. economic growth data on Thursday, Asian stocks on Friday are set to continue their remarkable run and chalk up a fifth weekly rise in a row. Investors are already feeling positive about China’s economic re-emergence from nearly three years of COVID-19 restrictions, pouring record sums into emerging market debt and equity funds, according to Bank of America (NYSE:BAC). Fourth quarter U.S. GDP figures on Thursday further fueled risk appetite, giving investors hope that the Fed can engineer a soft landing for the U.S. economy.There are no major Asian economic indicators or corporate earnings releases on Friday to really drive market direction, and volumes will be relatively light due to China still being closed for Lunar New Year. That leaves Thursday’s feel good factor free to filter into Friday unless investors indulge in a spot of profit-taking, although surprisingly weak revenue forecasts from Intel (NASDAQ:INTC) after the closing bell on Thursday may sour sentiment.Still, it will take a fall of at least 1.7% – something not seen in almost three months – for the MSCI Asia ex-Japan index to end the week in the red.It rose to a seven-month high overnight, up more than 30% from the October low, and has risen in 11 of the last 13 weeks.Hong Kong’s Hang Seng is open again after the Lunar New Year holiday, and its 2.37% surge to a 10-month high on Thursday was the regional standout. If MSCI Asia ex-Japan’s 31% rise since the October low is remarkable, the Hang Seng’s 55% rally is extraordinary, and the Hang Seng tech index’s 75% surge over the same period is another level of staggering. The main Asian economic data point in an otherwise light calendar on Friday is Tokyo inflation figures, which are expected to show prices excluding fresh food rising in January at an annual 4.2% pace, the fastest since 1982. It’s worth noting that this measure of annual inflation was negative for most of 2021 and only 0.2% a year ago. Food for thought for the incoming Bank of Japan Governor.Three key developments that could provide more direction to markets on Friday:- Japan inflation (December)- Australia producer price inflation (Q4)- U.S. PCE inflation (December) More