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In the 'Star Wars' Economy, One Thing Doesn't Pay – Financial Post

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By Adam Minter

(Bloomberg Opinion) — Junk is surprisingly pervasive in “Star Wars,” playing an understated role in nearly every film in the series. In “The Phantom Menace,” we meet young Anakin Skywalker, the future Darth Vader, working at a small electronics scrap yard and repair shop. In “A New Hope,” Luke Skywalker’s uncle buys R2-D2 and C-3PO from a group of Jawas, a species that drive massive, sand-crawling junk trucks. The recently released “Rise of Skywalker” is largely a coming-of-age story for Rey, the last of the Jedi, who spent her youth scavenging electronic scrap on Jakku, a remote outer planet.As a third-generation descendent of earthbound scrap-metal recyclers, I’ve subjected myself to repeated “Star Wars” viewings (even of the bad films), partly just to spot all the junkyard tidbits. Over the years, I’ve developed a theory or two about the waste and recycling economy in the series, and enjoyed sharing it with (primarily) other junkyard descendants. But in 2018, I realized there might be a larger audience for these insights.That year, China — for decades the world’s biggest importer of recyclables — started imposing stringent restrictions on what recycled stuff it would still accept from overseas. In the aftermath, prices for recyclables dropped steeply, raising costs and reducing profits for businesses around the world.Alas, “Star Wars” doesn’t offer any advice on how to find new markets for used plastic detergent jugs. And no, Rey can’t conjure the Force to boost the price of used cardboard boxes. But if you watch the films carefully, they have a good story to tell about turning waste into something that people might want — and, even better, buy.The “Star Wars” universe generates tons of trash, much of it recyclable. Yet for all the scrap yards and scavengers, you see very little actual recycling. Mostly, the metal, plastic and paper seems to get tossed out with the trash. My favorite example occurs in “The Empire Strikes Back.” At a crucial moment, an Imperial star destroyer dumps stadium-sized chunks of metallic garbage into space before jumping to hyperspace (this, according to Han Solo, is Imperial protocol). From an earthbound perspective, this is commercial suicide: Metals are the world’s most recyclable materials, and even villains know there’s money to be made in selling them.But a similar pattern repeats throughout the series. In “The Force Awakens,” early scenes on Jakku are dominated by the wreckage of an immense star destroyer. It’s reminiscent of the huge seagoing vessels that are run onto the beaches of India, Bangladesh, and Pakistan, then disassembled by hand and recycled in a matter of months — down to the individual screws. Crash a star destroyer in Alang, India, one of the world’s hubs for beaching and recycling ships, and pieces of it will be on sale in local markets by lunchtime.The reason for this seemingly irrational behavior is that the “Star Wars” universe doesn’t suffer from a scarcity of resources. There are dozens of mining outposts mentioned in the series, and there always seems to be another planet waiting to be exploited. In a galaxy that enjoys such surpluses, recycling won’t save much money. And the Empire, with its massive spending on planet-destroying weapons like the Death Star, doesn’t seem overly concerned about the environment.So what, then, is the business model that supports so many junkyards and scavengers? Rey, the Jawas, and everyone else who scavenges in the series recognize that there’s more value in a working gadget or spare part than in the raw materials that constitute them. The value is in the energy, engineering and manufacturing required to make the stuff. So, for example, that crashed star destroyer on Jakku isn’t stripped for metal; instead, we see Rey risk her life to scavenge it for reusable components that she can sell. Characters from Chewbacca to Luke Skywalker later demand her recovered parts for the devices and ships that they’ve learned to repair on their own.That business model wouldn’t work for plastic recyclers here on Earth. But the so-called e-waste industry — a category that includes everything from used smartphones to server racks — is rapidly diversifying into business models that look very similar to those practiced by Rey and the Jawas. At a time when recycling markets are depressed, these businesses need a new revenue stream. So rather than trying to recover raw materials that aren’t financially attractive at the moment, they’re seeking out whole gadgets and the parts within them.Robin Ingenthron, the head of Good Point Recycling, tells me that his company was making about $60 a week selling gadgets for reuse out of its scrap pile in 2015. As commodity prices fell, he reoriented the business to extract parts from old televisions and better identify the reusable gadgets already on offer. Today, sales of reusable stuff account for more than $50,000 a month, and around a third of the company’s revenue. Sims Recycling Solutions Inc., one of the world’s biggest electronics recyclers, has steadily shifted away from its traditional shred-and-recycle model to incorporate more reuse and refurbishment in recent years. Others are going even deeper, recovering specific chips from motherboards for reuse.This might come as a surprise to earthly environmentalists. But in the “Star Wars” universe, it’s the way business has always been done. In this respect, at least, the series may offer a model that works just as well here as it does in a galaxy far, far away.

To contact the author of this story: Adam Minter at aminter@bloomberg.net

Bloomberg.com

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Posthaste: Sorry, but the economy isn't over COVID — and won't be for some time – Financial Post

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CIBC economists see long stretch of higher rates and low growth ahead

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Good Morning!

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A lot of weird things have been happening in our economy lately. Roaring inflation that took everybody by surprise, a drum-tight labour market and now the prospect of sputtering growth, if not outright contraction.

The explanation for these unexpected and in some cases unprecedented conditions, argue CIBC economists, is that COVID continues to disrupt the functioning of the economy.

Canada, the U.S. and Europe have tried to move on from the pandemic, lifting vaccine mandates and restrictions on activity, thus resulting in an increase in consumer demand.

“But COVID isn’t fading away as a supply constraint, or as a health issue,” CIBC economists Avery Shenfeld and Andrew Grantham wrote in a recent note.

Variants that spread more rapidly have meant that more people have died of COVID in 2022 than the previous year, even though fewer cases were fatal, they said.

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And while demand has recovered, supply chains have not, partly because of the war in Ukraine, but also because of COVID.

The lockdowns this year in China are the most obvious example. Omicron restrictions here caused exports to fall even more than during the first 2020 lockdown.

In Canada it is showing up in employee illness. “Flights are cancelled when crew members call in sick, hospitals cut back services because staff members are ill and live entertainment shows are postponed for the same reason,” wrote the economists. Omicron has been associated in Canada with a significant increase in working hours lost to illness.

Long COVID has caused some to actually withdraw from the workforce. The numbers are small in Canada, they said, but the U.K. serves as an example of what could happen if we fail to control future waves of the virus.

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In Britain, where public health restrictions have been lighter, 0.6% of the population have been “severely affected” by Long COVID, according to a recent study.

COVID is also impacting capital spending, said the economists. An uncertain outlook due to potential waves of the virus in future may be contributing to businesses’ reluctance to spend, but COVID supply-chain issues have also made getting capital equipment more difficult as well.

“The result is less production capacity in sectors where equipment is on back order, or where COVID uncertainties have forestalled investment,” they said.

The unprecedented COVID recession and recovery is also why there is a mismatch between job availability and hiring in the economy today, argue the economists.

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During the pandemic some work was almost completely shut down and stayed dormant for a long period. Now that the economy has reopened, those employers are scrambling to rehire in great numbers, a situation we have not seen before, they said.

“A typical recession doesn’t see air travel drop by 90% and doesn’t see live theatres close outright. A typical recovery doesn’t see the sudden opening we’re experiencing in these same sectors,” they wrote.

Workers who held these jobs, like restaurant staff and baggage handlers, in 2020 had two years to move on, unlike a typical recession that lasts just two or three quarters.

CIBC believes this mismatch will eventually even out, but the impact of COVID on supply chains and missed work could remain.

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So what does the future hold?

While traders are already talking about rate cuts after the hiking cycle winds up either at the end of this year or early 2023, CIBC sees the Bank of Canada keeping rates at 3.25% through the whole of 2023.

It also sees GDP growth slowing to 0.9% in the fourth quarter of this year and gaining only 1.5% in 2023.

“Even if a recession is avoided, we’re in for a protracted period of sub-par growth,” said the economists.

The policy of dropping COVID mandates meant to improve the economy may actually be working to extend the economics costs of the virus, they said.

“While helping on the demand side, diminished public health restraints, particularly during surges in case counts, are cutting into the economy’s supply capabilities. Their absence is likely elevating the peak levels for COVID cases, and thereby increasing the costs of worker absenteeism, and perhaps, as we’ve seen in the UK, risking longer term labour market damage due to Long COVID,” they said.

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The economists said lockdowns should be behind us, but a push for the use of masks, global vaccination and improvements of indoor air quality would help reduce the economic impact of COVID.

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Check out the latest from Sea Doo maker BRP Inc. This electric surfboard called the Sea-Doo Rise in one of three products that Bombardier Recreational Products announced recently in its first foray into electric vehicles. The EV push also means a return to the award-winning two-wheeled motorcycles that BRP produced in the ’70s and ’80s. The Can-Am Origin and Can-Am Pulse motorcycles, along with the Sea-Doo Rise, will all be electric and will be available to purchase in mid-2024, said BRP. Photo by BRP

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  • Blockchain Futurist Conference begins in Toronto
  • Toronto Ontario Lieutenant Governor Elizabeth Dowdeswell delivers Speech from the Throne
  • Unifor’s 4th Constitutional Convention
  • Jonathan Wilkinson, minister of natural resources, will make an announcement to support electric vehicle charging infrastructure in Manitoba
  • Earnings: Hydro One, Bausch Health Companies, Nuvei, Kinaxis, Coinbase Global___________________________________________________

 

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Cryptocurrencies have been having a rough go of it lately, with Bitcoin shedding 47% of its value so far this year. The crypto bear market has become entrenched after a spate of company bankruptcies and the failure of major decentralized finance project Terra in May — and despite small rallies fails to meaningfully recover ground. Fans, however, might take heart from the map below that shows how common cryptocurrencies have become. According to Hellosafe, a comparison site for financial products, 99 out of 195 countries in the world now allow the use of cryptocurrencies, or 50.8% of them. Cryptos are legal in all the European Union countries and in 18 countries or 51.4% of the Americas continent. Only two countries in the world, however, have legalized Bitcoin as legal tender: El Salvador on Sept. 7, 2021 and the Central African Republic on April 27, 2022.

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Today’s Posthaste was written by Pamela Heaven (@pamheaven), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com, or hit reply to send us a note.

Listen to Down to Business for in-depth discussions and insights into the latest in Canadian business, available wherever you get your podcasts. Check out the latest episode below:

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Economy

Ontario's Plan to Build Supporting Stronger Province and Economy – Government of Ontario News

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Ontario’s Plan to Build Supporting Stronger Province and Economy  Government of Ontario News



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China’s gamers hit pause button amid few releases, tough economy – Al Jazeera English

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Beijing, China – Before China began cracking down on video games, Zhang “Yvan” Yifan had no shortage of new titles to play.

These days, Zhang and his friends struggle to find games that grab their interest, after authorities implemented a nine-month freeze on issuing licences amid concerns about rising addiction in the world’s most populous nation.

So far this year, the Chinese market has released just 105 new games, compared with 755 titles in 2021, and more than 9,300 in 2017.

“Most of my friends like playing competitive first-person shooter games,” Zhang, a university student in Beijing, told Al Jazeera. “But we cannot find a game we all want to play these days. Having fewer games to choose from is really sad to me.”

Zhang’s frustration is reflected in falling sales across the sector.

Video game revenues in the first half of 2022 fell for the first time since data became available in 2008, declining 1.8 percent to 147.8 billion yuan ($21.9bn), according to industry figures published by the China Audio-Video and Digital Publishing Association and the Gaming Industry Research Institute of China. Excluding overseas sales, revenue shrank a steeper 4.25 percent.

China’s slowing economy under “zero COVID” has compounded the sector’s woes, with many young people finding they have less money for non-essential purchases such as video games.

The world’s second-largest economy barely avoided contraction in the last quarter, growing just 0.4 percent, as authorities continued to roll out harsh lockdowns to control the spread of COVID-19.

In June, youth unemployment hit 19.3 percent, the highest level on record.

China video games
Chinese gamers are cutting back on game purchases amid a lack of new titles and a slowing economy [File: Brent Lewin/Bloomberg]

For Jon, a 29-year-old Shanghai resident who often plays mobile games such as Honor of Kings, the dicey economic conditions have meant cutting back on his hobby.

“I spend less on games now than I used to, even though I earn more now than in previous years,” Jon, who asked to be referred to by his English first name, told Al Jazeera.

“That’s because I’m worried I’ll have to save more during these uncertain times, because I might be put under lockdown or face unemployment.”

Free-to-download games have not escaped the downturn either. Popular mobile titles such as Fate/Grand Order and Azur Lane rely on in-game purchases by players trying to get a leg up on their peers to make money.

“The economy and the job market are really bad,” Wang Liang, a 22-year-old university student in Beijing who enjoys first-person shooters, told Al Jazeera.

“So most gamers like me will inevitably have less disposable income to spend on games.”

The sector’s current difficulties follow an even rockier 2021. Under a sweeping regulatory crackdown on the sector, Beijing introduced time limits for online gaming by minors and real-name verification rules to prevent anonymous in-game purchases.

Although the end of a nine-month freeze on new titles in April provided a glimmer of hope for the industry, the number of releases has been a trickle compared with previous years.

The two biggest domestic players, Tencent Holdings and NetEase, which together account for about 60 percent of the market, and foreign publishers have yet to have a single title approved for release.

“Although many dozens of titles have been approved, these resourceful players who understand the Chinese gaming market and tastes of the players very well have not been able to launch new titles,” Nir Kshetri, an economics professor at the University of North Carolina at Greensboro who has researched China’s gaming industry, told Al Jazeera.

Once thriving industry

The industry’s declining fortunes mark a sharp reversal for the once thriving industry.

In 2017, China became the world’s gaming capital on the back of popular smartphone titles such as Honor of Kings and Fantasy Westward Journey, taking almost one-quarter of the $101.1bn global market, according to research by venture capital firm Atomico.

Despite the regulatory and economic challenges, China’s gaming market raked in 296.5 billion yuan ($46.6bn) in sales revenue in 2021 overall, up 6.4 percent from the previous year, according to official government data.

China’s e-sports sector the same year was worth an estimated $403.1m, making it the largest market on earth, according to research by Niko Partners.

Some industry figures see this strong foundation as cause to be optimistic about the future.

The co-founder and COO of a Tencent-owned gaming studio, who spoke on condition of anonymity, said greater regulation had been needed and the easing of the licensing freeze was a cause for hope.

“There are still many ways to stimulate the market,” the co-founder told Al Jazeera, pointing to in-app purchases and advertising, greater efficiency in production, and emerging technologies like VR and the metaverse as potential solutions.

He played down the negative effect of the economy on the outlook for the industry.

“Less disposable income means that people will be more cautious about spending on games. But it does not necessarily mean that they will spend less on games,” he said.

“Gamers will be more and more demanding, so poor-quality games can’t earn money as easily as they used to. Only high-quality games can attract gamers to continue to pay. Therefore, game companies need to follow trends, focus on improving the quality of games, create more high-quality content and explore more monetisation possibilities.”

Tencent
Major Chinese gaming companies like Tencent have not been granted approval to release games this year [File: Qilai Shen/Bloomberg (Bloomberg)

Others suggest the industry will need a significant period to recover.

More than 14,000 gaming-affiliated companies shut down during the first six months of the licensing freeze, according to a report in the South China Morning Post in January. Many other firms in adjacent sectors such as merchandising, advertising and publishing also suffered heavy losses during the period.

“Chinese developers are likely to face significant challenges to monetise their games until the ecosystem is rebuilt again,” Kshetri  said.

In the meantime, frustrated gamers like Zhang can only wait in hope for a loosening up of the government’s grip on the sector.

He also hopes that the current turmoil will give the industry a necessary shake-up, ultimately leading to better quality games.

“The most important thing for multiplayer competitive games is the game environment, even more so than the game content, I think,” he said. “So if the game makers can give a better environment to the player, that will definitely make them happy again.”

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