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    A $7.40 fee could ruin your next trip to Europe. Miss it and ‘you won’t board the plane,’ expert says

    Americans will soon need to apply for a travel authorization to visit 30 countries in Europe.
    The application has a nonrefundable fee of 7 euros a person, or about $7.40.
    Travelers must get the authorization via the European Travel Information and Authorisation System prior to their trip. It’s expected to be operational sometime in 2024.
    The new system is meant as a security measure.

    Vernazza, a village in Cinque Terre, Italy.
    Mstudioimages | E+ | Getty Images

    Americans will soon have to apply for a travel authorization to visit Europe, and failing to get one may ruin your next trip.
    The requirement, slated to start in 2024, currently applies to 30 European nations, including popular destinations such as France, Germany, Greece, Italy, Portugal and Spain.

    Travelers must apply for the travel authorization via the European Travel Information and Authorisation System, or ETIAS, prior to their trip.
    The online application carries a nonrefundable fee of 7 euros a person, or $7.40 at prevailing exchange rates as of noon ET on Thursday. People under 18 years old or over 70 years old are exempt from payment.
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    Europe is the top destination region for international travelers from the U.S., according to travel app Hopper. But Americans won’t be allowed to visit without the authorization.
    “If you forget to do it, you won’t board the plane,” said Sofia Markovich, a travel advisor and founder of Sofia’s Travel.

    Why Europe is requiring a travel authorization

    Mstudioimages | E+ | Getty Images

    The authorization isn’t a visa and doesn’t guarantee entry. Travelers with a valid visa don’t need the authorization.
    In 2016, the European Commission proposed to establish the ETIAS to strengthen security checks on Americans and nationals from roughly 60 other nations who are able to visit Europe’s Schengen area without a visa.  
    The new European system is similar to one the U.S. put in place in 2008.
    “After 9/11, things changed in the world,” Markovich said. “It’s really about keeping things safe and knowing who comes in and who goes out.”

    When travelers should apply

    A couple walking around the Sagrada Familia church in Barcelona, Spain.
    Jordi Salas | Moment | Getty Images

    The good news: Travelers don’t have to do anything yet.
    The European Union expects the ETIAS to be operational in 2024 but hasn’t set a firm rollout date. The program isn’t yet accepting applications.
    “There is nothing anyone can do or needs to do now,” Sally French, a travel expert at NerdWallet, said. “But it’s something they need to keep tabs on.”
    The requirement has already been delayed a few times and could be again, French said. It was initially meant to take effect in 2021 and then in 2023.

    Most applications will be processed in minutes and within 96 hours at the latest, according to the EU. However, it can take up to an additional 30 days for travelers asked to provide extra information or documentation or do an interview with national authorities, the EU said.
    “As soon as you make the booking, make sure you file for your ETIAS,” Markovich said.
    The EU even strongly advises obtaining the travel authorization before buying tickets and booking hotels.
    “Seven euros is small potatoes in the scheme or your European trip,” French said of the application fee. “You don’t want to have paid for the flights, hotels and tours, and realize you can’t take the trip because of this small step.”
    The ETIAS authorization is valid for three years or until your passport expires, whichever comes first. Travelers with a valid ETIAS don’t need to apply for a new one each time they visit Europe.Don’t miss these CNBC PRO stories: More

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    As U.S.-China tensions rumble on, fintech unicorn Airwallex pushes into Latin America with Mexico deal

    Global fintech giant Airwallex said it has acquired MexPago, a rival payments company based out of Mexico, for an undisclosed sum.
    The deal will help Airwallex, which is backed by the likes of Tencent and Li-Kashing, Hong Kong’s richest man, expand in the Americas.
    Latin America is a particularly attractive spot for fintech companies, not least because of its high proportion of young people in the population.

    Airwallex’s cofounders, from left to right, Xijing Dai, Lucy Liu, Jack Zhang and Max Li.

    Global fintech giant Airwallex on Thursday said it has agreed to acquire MexPago, a rival payments company based out of Mexico, for an undisclosed sum to help the firm expand its Latin America footprint.
    The company, which competes with the likes of PayPal, Stripe, and Block, sells cross-border payment services to mainly small and medium-sized enterprises. Airwallex makes money by pocketing a fee each time a transaction is made.

    The deal, which is subject to regulatory approvals and customary closing conditions, marks a major push from Airwallex into Latin America, a market that has become more attractive for fintech firms thanks to a primarily younger population and increasing online penetration.
    Jack Zhang, SumUp’s CEO, said the company was looking at Mexico as something as a hedge as it deals with geopolitical and economic uncertainty going on between the U.S. and China.
    “U.S. people export to Mexico to sell to the consumer there,” Zhang told CNBC. “Because of the supply chain, you can also export out of Mexico to other countries like the United States.”
    “You get both the inflow and outflow of money,” he added. “That’s really what we like the most. We can take a global company to Mexico and also help the global companies making payments to the supply chain.”
    U.S.-China trade tensions have escalated in recent years, as Washington seeks to address what it sees as China’s race to the bottom on trade.

    The U.S. alleges China has been deliberately devaluing its currency by buying lots of U.S. dollars, thereby making Chinese exports cheaper and U.S. exports more expensive, and worsening the U.S. trade deficit with China.
    China has sought to address these concerns, agreeing to “substantially reduce” the U.S. trade deficit by committing to “significantly increases” its purchases of American goods, although it’s struggled to make good on those commitments.
    “Mexico is one of the largest populations in Latin America,” Zhang added. “As the trade war intensifies in China and the US, a lot is shifting from Asia to Mexico.”
    “[Mexico] is very close to the U.S. Labour is cheaper compared to the U.S. domestically. A lot of the supply chain is shipping there. There’s a lot of opportunity from e-commerce as well.”

    A maturing fintech

    Airwallex operates around the world in markets including the U.S., Canada, China, the U.K., Australia, and Singapore. The Australia-founded company is the second-most valuable unicorn there, after design and presentations software startup Canva, which was last valued at $40 billion.

    The company, whose customers include Papaya, Zip, Shein and Navan, processes more than $50 billion in a single year. It has also partnered with the likes of American Express, Shopify and Brex, to help it expand its services internationally.
    It has been a tough environment for fintech companies to operate in lately, given how interest rates have risen sharply. That has made it more costly for startup firms to raise capital from investors.
    For its part, Airwallex has raised more than $900 million in venture capital to date from investors including Salesforce Ventures, Sequoia, Tencent and Lone Pine Capital. The company was last valued at $5.6 billion.

    At this stage we are still expanding against our mission, which is to enable those smaller businesses to operate anywhere in the world and keep building software on top.

    Jack Zhang
    CEO, Airwallex

    Zhang said that the company is at a stage where it has reached enough maturity to consider an initial public offering — the company says it now processes more than $50 billion in annualized transactions. However, Airwallex won’t embark on the IPO route until it gets to a certain amount of annual revenue, Zhang added.
    Zhang is targeting $100 million of annual recurring revenue (ARR) for the business within the next year or two. Once Airwallex reaches this point, he says, it will then look at a public listing.
    “At this stage we are still expanding against our mission, which is to enable those smaller businesses to operate anywhere in the world and keep building software on top … to protect our margins [and] grow our margins from a cost point of view, not just infrastructure,” Zhang said.
    MexPago offers much of the same services as Airwallex — multi-currency accounts for small and medium-sized businesses, foreign exchange services, and payment processing — but there are a few more payment methods it has on offer which Airwallex doesn’t currently provide.

    Why Latin America?

    A big selling point of the MexPago deal, Zhang said, is the ability to obtain a regulatory license in Mexico without having to embark on a long process of applying with the central bank. The company has secured an Institution of Electronic Payment Funds (IFPE) license from MexPago.

    That will allow Airwallex’s customers, both in Mexico and around the world, to gain access to local payment methods such as SPEI, Mexico’s interbank electronic payment system, and OXXO, a voucher-based payment method that lets shoppers order things online, get a voucher, and then fulfill their order with cash.
    “The ability to access the license for the native infrastructure over there will give us a significant advantage with our global proposition,” Zhang told CNBC.
    Airwallex has seen huge levels of growth in the Americas in the past year — the company reported a 460% jump in revenues there year-over-year.
    Airwallex isn’t the only company seeing the potential in Latin America.
    SumUp, the British payments company, has been active in Latin America since 2013, opening an office in Brazil back in 2013. The firm’s CFO Hermione McKee told CNBC in June at the Money 20/20 conference that it plans to ramp up its expansion in the region.
    “We’ve had very strong success in Latin America, in particular, Chile recently,” McKee told CNBC in an interview.
    “We are looking at launching new countries over the coming months.”
    More than 156 million people in Latin America and the Caribbean are between the ages of 15 and 29, accounting for over a fourth of its population. These consumers tend to be more digital-native and mistrusting of established banks. More

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    Net worth surged 37% in pandemic era for the typical family, Fed finds — the most on record

    Net worth for the typical U.S. household grew 37%, after inflation, from 2019 to 2022, according to the Federal Reserve’s triennial Survey of Consumer Finances, issued Wednesday.
    That growth was the highest on record, fueled by higher home and stock prices and pandemic-era government stimulus.
    However, not all groups saw wealth grow equally, and large wealth gaps persist. Poverty also rose in 2022.

    Standret | Istock | Getty Images

    Net worth surged for the typical family during the pandemic era, largely on the back on higher home and stock prices and government stimulus measures, the Federal Reserve reported Wednesday in its triennial Survey of Consumer Finances.
    Net worth is a measure of household assets after accounting for liabilities. After accounting for inflation, median net worth jumped to $192,900, a 37% increase from 2019-22, the Fed found.

    That percentage growth was the largest since the Fed started its modern survey in 1989. It was also more than double the next-largest increase on record: Between 2004 and 2007, right before the Great Recession, real median net worth rose 18%.
    Increases in net worth were “near universal across different types of families,” the Fed said.
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    “Americans got a lot wealthier during the pandemic,” said Mark Zandi, chief economist of Moody’s Analytics.
    In large part, that was due to the Federal Reserve lowering interest rates to rock bottom at the onset of the pandemic, easing borrowing costs for consumers, Zandi said. An expanded social safety net made it less likely people had to take on debt. And when became clear the U.S. economy would recover quickly from the early pandemic shocks, due to government support and vaccines, asset prices like stocks and homes “took off,” Zandi said.

    Of course, not everyone benefited equally: Assets like homes and stocks are generally not held by families in the bottom 20% by income, for example, the Fed said.

    And wealth gaps are still big: Families in the bottom 25% by wealth had a median net worth of $3,500 in 2022. The top 10% had $3.8 million.
    “Those that have big a net worth in America keep getting bigger and those have no net worth are not making much progress,” said certified financial planner Ted Jenkin, CEO and founder of oXYGen Financial in Atlanta and a member of CNBC’s Advisor Council.

    Home and stock values increased significantly

    The pandemic saw an unprecedented scale of federal relief funds — like stimulus checks, and enhanced unemployment benefits and child tax credits — issued to prop up households. The government also took measures that alleviated debt burdens, like a pause on student loan payments and interest.
    The typical family’s “transaction account” balances — like checking, savings and money market accounts — jumped 30% to $8,000 from 2019 to 2022, according to Fed data.
    At the same time, the values of financial assets like homes and stocks increased significantly.

    Those that have big a net worth in America keep getting bigger and those have no net worth are not making much progress.

    Ted Jenkin
    CEO and founder of oXYGen Financial

    For example, the median net value of a house rose to $201,000 in 2022, from $139,100 in 2019 — a 45% increase, the Fed said. The S&P 500 stock index grew by roughly 20% from the end of 2019 through 2022. Balances of the typical retirement account like 401(k) or individual retirement account grew by 15% to $86,900, according to Fed data.
    Not only did stock values grow, but more people also began investing. Direct ownership of stocks also increased “markedly” between 2019 and 2022, from 15% to 21% of families, the largest change on record, the Fed said.

    Racial wealth gap narrowed, but remains significant

    The racial wealth gap also narrowed over that three-year time frame, as home, stock and business ownership all increased relatively more for non-white than for white families, the Fed said.
    However, these gaps are still large: The typical white family had about six times as much wealth as the typical Black family, and five times as much as the typical Hispanic family, the Fed said.
    And, when it comes to income, Black and Hispanic families’ wages after inflation stagnated over 2019-22, the Fed added.

    There are also signs many families are struggling despite pandemic-era wealth gains. The poverty rate jumped to 12.4% in 2022 — up 4.6 percentage points from 2021 and up 0.6 points from the pre-pandemic rate in 2019, according to the Census Bureau. (This poverty rate reflects the Supplemental Poverty Measure, which factors government benefits like food stamps and housing subsidies into income measures.)
    The expanded pandemic-era social safety net had largely withered away by 2022, right around the same time that inflation was hitting 40-year highs.
    In fact, household wealth likely peaked in mid-2022, Zandi said.
    “If the Fed did another survey today, I suspect they’d find net worth is lower, particularly for folks in the lowest income groups, in part because their debt loads are now higher,” Zandi said. “They have been borrowing quite aggressively since the government support wore off.” More

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    How free-market economics reshaped legal systems the world over

    The legal system that operates in the United Arab Emirates (uae)—like that in many countries across the Gulf—is a blend of French civil and Islamic Sharia law. But this summer Dubai announced that it was exploring the introduction of English common law to 26 free-trade zones. These are jurisdictions that are exempt from local taxes and customs duties, and have their own independent legal systems and courts. The region is increasingly dotted by such common-law islands, reflecting the belief that the Anglosphere’s legal tradition is better for business.Such an idea can be traced back to Friedrich Hayek. Fifty years ago this month, the Nobel-prize-winning economist and philosopher published the first volume of his magnum opus, “Law, Legislation and Liberty”. In it, he argued that the common-law approach is more amenable to freedom than its civil-law counterpart. Later, in the 1990s, Hayek’s ideas inspired the “legal-origins theory”, which made both an empirical and theoretical case that common law is better for the economy. The theory has been as influential as it has been controversial, leading to sweeping reforms in civil-law countries around the world.image: The EconomistThe common-law tradition emerged in England. Under its strictures, the judiciary is bound by precedent: principles established by judges in previous cases are binding for future ones. This establishes case law on an equal footing with legislation. In contrast, the civil-law tradition traces back to the Code Napoléon, a legal system that was set up in France under Napoleon Bonaparte, which restricted both the independence and the discretion of the judiciary, subordinating it to the legislature.England’s approach was transplanted across the globe by the British empire and underpins the legal systems of 80 or so countries, including America. The Code Napoléon was transplanted across Europe by French occupations during the Napoleonic Wars and was introduced around the world by the French empire. China, Japan, South Korea and Taiwan all based their modern legal systems on Germany’s approach, which is also based on civil law. In total, civil-law traditions underpin the legal systems of about 150 countries today, including around 30 mixed systems.Hayek argued that common law is a better basis for a legal system than civil law for similar reasons that markets are a better foundation for an economy than central planning. A decentralised judiciary has access to “local knowledge”—the subtleties and idiosyncrasies of actual legal cases—that a centralised legislature does not. This is analogous to the way in which the butcher, the brewer and the baker are better placed to know what goods to produce, in what quantities and at what market price than a collection of well-meaning bureaucrats. A legal system based on judicial precedent allows judges to adapt the body of law to real-world circumstances.Common senseThe arguments put forward by Hayek mostly concerned the law’s ability to protect individual liberty, but they apply to its ability to promote economic growth, too. Twenty-five years ago, in a landmark study in the Journal of Political Economy, Andrei Shleifer, Rafael La Porta and Florencio Lopez-de-Silanes, then at Harvard University, as well as Robert Vishny of the University of Chicago, used data from 49 countries to show that investors’ rights are better protected in common-law countries. The paper gave credence to Hayek’s ideas and set off a flurry of research into the relationship between legal origins and the economy.In three subsequent papers, Simeon Djankov, a World Bank economist, working with Messrs Shleifer, La Porta and Lopez-de-Silanes, used data from more than 100 countries to tease out the impact of legal origins on the regulation of startups, the stringency of labour protections and the efficiency of contract enforcement. “What we found is that regulation was consistently less onerous and contract enforcement consistently more efficient in common-law jurisdictions,” says Mr Shleifer. The difference was sharpest in the barriers facing entrepreneurs. The number of forms to fill out and business days needed to process an application, and the cost of administrative fees, were all higher under civil-law jurisdictions. In 2001 Paul Mahoney of the University of Virginia analysed data from across the world and found that, in the three decades to 1992, gdp per person had grown 0.7 percentage points a year slower in civil-law countries than in their common-law counterparts.These findings were influential, particularly at multilateral institutions. The World Bank’s Ease of Doing Business Index was shaped by the legal-origins theory. Indeed, Mr Djankov jointly founded and ran the initiative from 2003. In the decade and a half to 2020, more than 400 studies using data from the index were published. Leaders including France’s Emmanuel Macron, Germany’s Angela Merkel and Japan’s Abe Shinzo made rising up the rankings a goal. The result was a wave of reform in civil-law countries, which tended to rank lower. As Mr Djankov notes, there was “a dramatic international convergence in rules and regulation to the common-law standard”.Has this produced a surge in economic growth? Perhaps not. More recent studies have splashed cold water on the legal-origins theory, says Holger Spamann of Harvard University. Ones that control for a wider array of confounding factors have found that a country’s legal tradition does have an effect on its economic prospects, but one that is not nearly as strong as the original studies implied. Moreover, some economists argue that legal traditions act as a proxy, indirectly capturing the impact of entirely different inheritances, such as those relating to colonial legacies or cultural attitudes. Under this reading, moving from a civil-law approach to a common-law one is unlikely to be worth the significant hassle for places like Dubai.Yet such a switch may nevertheless have been worth it in an earlier era, albeit for the wrong reasons. Before it was discontinued in 2021, when World Bank staff were alleged to have fiddled data partly in response to pressure from China, the Ease of Doing Business Index made civil-law countries seem like a less attractive destination for foreign investors. For a time, then, the legal-origins theory may have become self-fulfilling—leading to faster economic growth simply because it was supposed to lead to faster economic growth. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

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    Why it is time to retire Dr Copper

    Doctors are famously reluctant to hang up their stethoscopes. But a time comes in the career of every medic when their skills fade, and a gentle push is the best thing for them—and their patients. The same applies for the metaphorical physicians of the financial world, whose ability to diagnose the market’s health changes over time. Now the end may be nigh for the most illustrious of all such physicians: Dr Copper.Copper, a metal crucial to the construction of all manner of fittings, pipes and wires, has earned its nickname on Wall Street owing to its role as a bellwether for the health of global industry. A surge in copper prices is taken as an early sign of an economic upswing; a big drop is a portent of recession, or at the very least a manufacturing downturn.So what is going on at the moment? Manufacturing looks peaky. Global industrial output is up by just 0.5% year on year, well below the average of 2.6% over the past two decades, and the rich world is in an industrial recession. A wobble of a similar scale in 2015 sent copper prices plunging by about a quarter. Yet so far this year they are down by only 6%. Futures maturing in 2025 are flat, and those maturing in 2026 are up a bit.The breakdown in the usual rules of thumb is most striking in China, which consumes over half of the world’s annual copper supply. Its stricken housing market might have led you to think the metal was doomed. After all, investment in property, once a key driver of copper demand, is down by 9% year on year. Curiously, though, Chinese demand for the metal is up by around 10% this year.The explanation for this lies in the radical shifts that are under way in the energy system. China will install around 150 gigawatts (gw) of copper-intensive solar-energy capacity this year, according to Goldman Sachs, a bank, almost double the amount it installed last year. And methods for storing energy require the metal, too. Pumped-storage hydropower is one example. This involves moving water from one reservoir to another, either to hoard excess energy from wind and solar power or to release it. China already has 30% of the world’s hydropower-storage capacity, at 50gw. Another 89gw of capacity is being built, which will require vast amounts of copper.Other countries are also spending big on the green transition, and putting in place legislation that will increase appetite for the metal. s&p Global, a financial-data firm, suggests that demand for refined copper will almost double by 2035, to 49m tonnes. Batteries, energy transmission, solar cells, transport—all need the metal. An electric car contains over 50 kilograms of the stuff, more than twice the amount used in a conventional vehicle. Across the world new rules, intended to reduce emissions, will steer consumers towards electric vehicles and away from their copper-light predecessors. In Europe sales of new petrol-powered cars will be banned from 2035.The squeeze on supplies will therefore be historic, meaning that sky-high copper prices will no longer be indicative of optimism on the part of industrial machinery-makers, construction firms, electronics manufacturers and the like. Instead, rising demand for copper will increasingly reflect a desire among politicians for more environmentally friendly energy, and sometimes also a reduced dependence on imports.In normal times, building an electrical network from scratch would at least be a signal of greater economic activity to come. However, the energy transition is intended to replace existing activity, rather than add to it. In the case of energy infrastructure, China’s new solar investment this year can generate 150 gigawatt-hours of energy when working at full pelt, which is equivalent to almost 90,000 barrels of oil per hour. That is energy which China now does not need to purchase from overseas producers. The result may well be good for the planet, but it will not have much effect on aggregate economic activity.With so much of the growth in demand for copper locked in, and proceeding in large part according to legal diktat, the metal’s price will over time say less and less about the state of the global economy, and more and more about the state of the energy transition. Copper prices will still be worth watching, then, albeit for different reasons. Investors wanting a hint about the state of the global economy will be replaced by policymakers wanting a sense of how their green policies are faring. Dr Copper’s retirement may be a sad moment, but it is not the end of the story. ■Read more from Buttonwood, our columnist on financial markets: Investors should treat analysis of bond yields with caution (Oct 12th)Why investors cannot escape China exposure (Oct 5th)Investors’ enthusiasm for Japanese stocks has gone overboard (Sep 28th)Also: How the Buttonwood column got its name More

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    Will Binance come over to the light side?

    “The luke skywalker and the Darth Vader of crypto.” That is how Michael Lewis, author of “Going Infinite”, a recent book about the rise and fall of Sam Bankman-Fried, founder of ftx, a now-bankrupt crypto exchange, is supposed to have described the intense rivalry between his subject and Changpeng Zhao (pictured), the boss of Binance, a rival firm.Until Mr Bankman-Fried’s exchange collapsed with an $8bn hole in its balance-sheet, the analogy seemed apt. The two men controlled the two largest crypto exchanges in the world. Both were known by acronyms: “sbf” and “cz”. Young, talented and seemingly in favour of playing nice with regulators, sbf was something of a wunderkind, and cz was his shadowy foil. Keen to avoid being pinned down by national laws, his exchange was based “nowhere”. Binance had long been under investigation for possible money-laundering and criminal-sanctions violations by America’s justice department. cz had invested in ftx before the two turned on each other. Then sbf publicly goaded cz about his legal problems, and a tweet by cz probably helped set off the run on ftx.image: The EconomistNow, with ftx out of the picture and sbf on trial, charged with various kinds of fraud, which he denies, cz looks a lot like the last man standing in crypto. Binance utterly dominates crypto trading (see chart). A whopping 40-50% of it by volume takes place on the platform. The big question, which cz discussed in an interview with The Economist in Bahrain on October 11th, is how Binance will now evolve.For as long as crypto exchanges have existed, financial laws have been ill-suited to them. Given the nature of the assets that are traded, they are in effect hybrids of exchanges, brokers and settlement firms. If crypto exchanges were largely unregulated that was at least partly because few laws had been written to govern them.But, in the wake of ftx’s collapse, the situation is starting to change. Legislators and regulators around the world are rushing to pen new laws or crack down on the industry. This has two big implications for exchanges. First, regulators want to make sure that they are not mishandling or improperly using customer funds, as ftx did. Second, they want to ensure that exchanges are not facilitating financial crimes.cz insists that customers can trust his exchange. “There are so many ways” Binance is structured differently to ftx, he says. The firm has met heavy redemption requests from clients, including in choppy markets. He points out that the Securities and Exchange Commission (sec), America’s financial regulator, spent a long time investigating Binance for this kind of misconduct. The regulator could provide “zero evidence” that Binance was commingling user funds, says cz, “which actually helps us to prove that we don’t do it.” Other complaints by the sec, including that the company issued securities without a licence, are still to be heard in court.Yet it is the second requirement that might turn out to be trickier for Binance. In December Reuters, a news service, reported that prosecutors at America’s justice department were split on whether or not to charge the firm with money-laundering or sanctions violations. According to Bloomberg, another news service, Binance withdrew its application to become a licensed exchange in Singapore in 2021, where it was based at the time, in part owing to its inability to comply with strict anti-money laundering rules. The sec quotes evidence from a former employee, who admitted that the company thought it was an “unlicensed securities exchange” and “did not want to be regulated, ever”.cz dismisses this as “private chat by an ex-employee”, and adds it “was not the right thing by far”. He notes that Binance is “the most licensed crypto firm in the world”, with permission to operate in 18 countries across Asia, Europe and the Middle East (its American arm operates in 44 states). Binance now appears to be playing nice with various authorities. A spokesperson confirms that in recent days it has frozen “the small number of accounts” soliciting donations in support of Hamas, to comply with international sanctions laws.The test for the firm now will be in Europe. America is cracking down on crypto, and is unlikely to pass new laws soon. By contrast, European legislators have written a “Markets in Crypto-Assets” or “mica” framework, which entered into force in June. Exchanges can keep operating under existing licences until 2026, unless refused under mica, which will require strong policies against money-laundering and terrorist financing. cz says that, in addition to such policies, a full licence means that authorities look at “your wallet infrastructure, your security, your customer support policies, your refund policy. They look at your whole business.”A crypto exchange can no longer argue that it cannot comply with national rules because they do not exist. Failing to meet Europe’s standards would reveal that Binance does not want, or is unable, to follow even clear laws. In “Star Wars”, Yoda warns Luke Skywalker that it is easier to amass or wield power by turning to the Dark Side. It is harder to operate in the light. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

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    Israel turns to financial weapons as well as military ones

    In less than a fortnight, some 3,500 Gazans have been killed, 12,000 injured and more than a million displaced—on whose behalf America and the un are attempting to open a passage into Egypt. Entire neighbourhoods in the strip have been bombed to dust. Cut off from food, water and medical supplies, the un warned on October 16th that Gaza’s 2.3m people were on “the verge of an abyss”. Since Israel’s strikes began, war has drained nearly every source of economic life from the territory.For the better part of two decades, Gaza has relied on support from international donors for its financial survival. On October 18th Binyamin Netanyahu, Israel’s prime minister, said that his country would allow a modest amount of food and medicine across Egypt’s border into the territory, which would be the first supplies let in since Hamas launched its brutal attack against Israel on October 7th. Israel’s allies, including America, are pushing for more to be admitted. Yet at the same time, Israel wants to suffocate Hamas by any means possible, which requires using economic as well as military weapons.Averting a humanitarian catastrophe is made all the more difficult by the miserable pre-war state of the Palestinian economy. Israel, Gaza and the West Bank share a single market, governed by a deal that the un brokered in 1994. The idea behind the agreement was that Palestinians would work in Israel and that Israeli capital would flood into Gaza and the West Bank, where rich returns were waiting. In reality, Israeli restrictions remained in place and the Palestinian economy still depends on handouts. On the eve of the war, the average Israeli was 15 times richer than the average Palestinian. Only a third of West Bankers have access to a sewage system; some 10% manage without a water supply. West Bankers have been allowed to work in low-skilled jobs in Israel, but have been subject to tight restrictions on their movement.In Gaza, things have been even worse. Growth in gdp per person in the West Bank averaged 2.8% a year from 2007 to 2022. The average Gazan became poorer during the same period, with the local economy shrinking by 2.5% a year. The territory has operated under a near total blockade from Israel since Hamas took power in 2007. Until recently, it was supplied with electricity by Israel, but received only a third of the amount it sought. Each of the three wars fought between the two sides—in 2008, 2014 and 2021—cost Gaza the equivalent of at least a year of gdp.image: The EconomistIf there is nothing for an economy to generate, it is not just growth that suffers. Unemployment is rife. More than half of the Gazan adult population were living below the imf’s poverty line in 2021. There are few ways to make money. One way used to be dealing imports and exports through tunnels under Gaza’s southern border, but Egypt cleared out most after a bust-up with Hamas in 2014. Another way is to rebuild what war destroys. One of Gaza’s main businesses is construction, which grew by 20% last year. It will presumably grow by more once this round of war ends.Others cobble together incomes from a range of outside sources. Some 70,000 Gazans remain on the payroll of the Palestinian Authority (PA), even though its officials who run the West Bank were kicked out of Gaza by Hamas in 2007, and none of them actually goes to work. Qatar deposits cash—some $10m a month—into the bank accounts of thousands more locals. The PA pays Gaza’s electricity bills, which Israel subtracts from the tax it collects on behalf of the PA in the West Bank. The un educates 300,000 Gazan children; a network of hospitals it runs with charities provides the territory with basic health care.The strip’s assetsAnother organisation on which Gazans depend is Hamas, whose administrative branch runs the strip’s government. Since it took power, Hamas has expanded the public payroll from roughly 20,000 to 50,000 civil servants. Last year its spending contributed 0.8% to gdp growth, compared with 0.3% from all household and business spending. As charities run so many of the strip’s schools and hospitals, and the PA keeps the lights on, Hamas is able to spend lavishly elsewhere.image: The EconomistIt finances its spending with an adroit tax system. Though Gaza gets no imports from Israel, it does get them from Egypt, from which trade had recently increased, and the West Bank. Hamas taxes food and fuel crossing the Egyptian border; picks up 16.5% of the value of products from baby food to jeans; charges three shekels ($0.75) per kilo of fish caught by fishermen; and levies income tax. Altogether economists reckon that Hamas may take in somewhere in the region of 1.5bn shekels a year.Other sources of finance are already in Israel’s sights. Gaza’s various Islamist groups receive maybe $100m a year from Iran, according to America’s best guess. Hamas also receives individual donations from the Gulf and the West, some of which are furtively transferred across borders using cryptocurrencies. Israel and its allies have already come down hard on these sources of finance where possible, freezing accounts in Istanbul and London.Will aid to Gaza end up strengthening the position of Hamas? In the past, Israel has been wary of multilateral organisations working in the strip. Other governments have found that links between charities and Hamas are rare, however. In Gaza, few believe rumours that Hamas taxes aid. So grim is the situation that “a few bits of fuel getting lost is worth it”, argues the boss of a think-tank in Gaza.Israeli policymakers also face dilemmas in the West Bank. Just a few thousand Gazans work in Israel; in contrast, a quarter of the West Bank’s labour force works over the border or in Jewish settlements. Israel does allow exports and imports through the West Bank—the duties on which make up around two-thirds of the PA’s budget. These taxes are collected by Israel and occasionally held up for months at a time before being transferred. Some Israeli officials reportedly want to cut such payments, either to redirect money towards Gazan reconstruction or in the hopes of stopping payments to Gazan families. Other Israeli officials insist that the PA needs more, not less, funding in order to keep a fragile peace.In some ways, the choices facing Israeli politicians are exaggerated versions of ones that they have faced in the past. When Israel wanted to contain Hamas, it made no sense to help the group collect taxes. Now that Israel wants to destroy Hamas, it makes no sense in military terms to allow supplies into Gaza. Yet if it restricts the flow of supplies even more harshly, a humanitarian disaster will ensue. On October 17th Gaza’s health ministry begged for generators. Without them, it said, hospitals were about to shut down. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

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    Do Amazon and Google lock out competition?

    Anti-monopoly cases have been known to reshape corporate America. In 1984 at&t’s telephone network was found to have excluded competing firms. The company was controversially broken up in a move that ultimately led to a boom in innovation among its rivals. Meanwhile, a case against Microsoft in 1998 may have kept the door open for Google’s subsequent rise. Microsoft had bundled together its Internet Explorer browser with its Windows operating system, and made other browsers more difficult to install. Some business historians think the case, by stopping this practice, made life easier for new browsers. It may also have distracted Microsoft from developing its own search engine.Today, two big cases could redefine the limits of monopolies in the internet age. On September 12th America’s Department of Justice (doj) began its court battle against Google over the firm’s deals to obtain default status on phones and browsers. On September 26th the Federal Trade Commission (ftc), chaired by Lina Khan, sued Amazon for allegedly penalising third-party sellers that offered lower prices on other sites, among other harmful practices. In both cases, the government thinks the tech giants are so dominant that their attempts to preserve market power are suspect. This raises a question: what counts as anticompetitive?Historically, practices that might be ignored for a startup have not been tolerated in a dominant firm. John Rockefeller’s Standard Oil was broken up in 1911, in part for striking deals with railroads that made it impossible for other oil firms to compete. Antitrust historians still debate the extent to which these deals were abusive—after all, Standard Oil benefited from economies of scale and bulk orders commonly receive discounts. But its size and bargaining power led to scrutiny. Before the firm’s break-up, it had cornered 90% of oil refineries. Microsoft’s bundling was found to be problematic because it had over 90% of the market for operating systems on personal computers. In both cases, the courts believed that dominant firms had made life too difficult for newcomers.Today’s cases have echoes of those past. Start with Google. It pays more than $10bn to Apple and other companies to be the default search engine on their platforms. The doj argues this creates a barrier to entry for competitors. Because having lots of data lets a search engine show users more tailored advertisements, a dominant search engine has a larger expected ad revenue from an extra user. The twist is that if a smaller competitor happened to grow, it would be willing to pay more for additional users, thus bidding up how much Google would have to pay—and explaining why Google may be willing to pay large sums to prevent rivals from gaining a foothold. Yet it is easier to use a different search engine on an iPhone than it was to download a new browser on Windows. And Microsoft’s dominance in operating systems seems to have been greater than Google’s is in search. So the case is not airtight.The case against Amazon is stronger. Luigi Zingales of the University of Chicago thinks that if the alleged facts are found to hold, the ftc should win. Sellers complain that Amazon penalises them for offering cheaper prices on other platforms by downranking products or removing them from the “Buy Box”, which allows instant purchases. Antitrust scholars call practices that force sellers to behave similarly across platforms “most-favoured-nation” (mfn) treatment, and they have come under growing scrutiny. In the past Amazon has had explicit mfn contracts with sellers.The problem, according to the ftc, is that Amazon has raised the cost of doing business on its platform. It charges sellers a fee for selling, one for using its logistics services and more for advertising. Sellers say that it is next to impossible to qualify for the Buy Box without paying for logistics, and that buying ads has become a must because search results are increasingly cluttered with them. Although the exact figures are redacted, regulators allege that Amazon now collects a larger share of sales on its marketplace as fees than it did a decade ago. In a competitive market, Amazon’s cost hikes and restrictions on pricing more cheaply elsewhere would cause sellers to leave the platform. And in fact, some large retailers, like Nike, have done so. But Amazon’s market share in e-commerce has grown (it currently stands at 40-50% in America), suggesting most sellers feel that the platform is too important to quit.Amazon denies all this. As with Google, there is a chance that the case becomes a debate about how dominant the firm really is (Amazon argues that it is dwarfed by the multitude of brick-and-mortar stores). American retail is efficient and broadly consumer-friendly—hardly the sign of an industry in need of repair. Amazon also says that if a seller can offer a lower price on another platform, it should do so on its site, too. One can imagine a seller thinking that Amazon Prime customers are rich and price insensitive, and therefore charging more on Amazon than other platforms.Ready for a remedyBut if that is the case, Amazon has plenty of options available, says Fiona Scott Morton, formerly of the doj. Imagine, for example, that Amazon thinks that the seller of a particular item is charging too much. It is free to prioritise other sellers of that item in its search results. If it cannot find any on its platform, it can recruit one from outside. If it still cannot find one, then perhaps Amazon is simply an expensive platform on which to do business.In this final case, a possible solution is a so-called behavioural remedy, in which Amazon is made to stop penalising sellers that offer lower prices elsewhere. In Europe, where Amazon has also faced scrutiny, the company has made several concessions, including treating all sellers the same when granting access to the much sought-after Buy Box. Ms Khan of the ftc has said she does not like remedies that only target the behaviour of companies, since they are at best short-term fixes when set against more drastic measures, like breaking them up. Sometimes, however, nothing more is needed than a slap on the wrist. ■Read more from Free exchange, our column on economics:To beat populists, sensible policymakers must up their game (Oct 12th)To understand America’s job market, look beyond unemployed workers (Oct 5th)Why the state should not promote marriage (Sep 28th)For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More