When economists consider the costs of the Tokyo Olympics playing out as we speak, they naturally focus on dollars spent. Though the official figure is in the $15 billion range, private estimates can approach double that amount.
Yet the real one is what economists call “opportunity cost.” Since the moment in 2013 when then-Prime Minister Shinzo Abe scored the 2020 Games, his government had every opportunity to implement his bold-sounding plan to end deflation and recreate a little 1964 magic.
Yes, yes, these are the Tokyo Games. But you’ll notice that Tokyo Governor Yuriko Koike barely has a role in them. It’s all about the ruling Liberal Democratic Party harnessing a few weeks in the global spotlight to increase Japan’s geopolitical clout 1964-style.
That year, Tokyo staged one of modern history’s truly spectacular Olympiads. Japan’s postwar coming-out extravaganza announced its emergence as a technological powerhouse about to upend the world order. Tokyo wowed the world with skyscraper-strewn, neon-lit skylines, avant-garde stadiums and futuristic bullet trains zooming by at 130 miles per hour.
Japan’s big return to the global community was courtesy of Abe’s grandfather, Nobusuke Kishi, the prime minister who scored the 1964 Games. For Abe, Tokyo 2020 was a means of both closing the family-legacy circle and recreating the post-1964 economic boom 56 years later.
Covid-19 flipped the script, of course. Not only did Japan have to pay billions more to delay the 2020 Games by a year. It also lost out on the 40 million tourists Abe’s party expected to attract surrounding the event.
But the sprawling gulf between the tech renaissance 1964 proved to be and now is what amazes most. 2020 finds Japan as Asia’s second-biggest economy, behind China, in a technological rut.
Japan Inc., which once changed everything with the Walkman, computers, Trinitron color TVs, new gaming systems now lags South Korea in smartphones and memory chips. One of the biggest complaints from visiting sportswriters: troubles with mobile apps and websites they’re required to use. Not a great look.
The Abe era’s obsession with putting on a great show to rival granddad’s tells you everything you need to know about why Japan’s economy is falling behind.
In December 2012, Abe returned to power five years after a one-year 2006-2007 stint as premier. Abe 2.0 was suddenly a bold reformer—a Japanese amalgam of Margaret Thatcher and Ronald Reagan. He laid out a multi-pronged program to cut red tape, shake up a change-averse bureaucracy, incentivize innovation, empower women and attract foreign talent.
Instead, Abe, between 2012 and 2020, really had a two-pronged plan: aggressive Bank of Japan easing and Tokyo 2020. Abe and his LDP blundered by thinking that rekindling the collective spirit that lifted the nation after 1964 would, somehow, magically, euphorically, restore the innovative energy of years past.
This might sound oversimplistic. But from the moment Japan secured the Olympics in 2013 until Covid-19 hit in early 2020, the vast majority of Abe’s top upgrades went quiet. Either because of distraction or sincere hope that the Olympics would be an economic game-changer, the Abe years were a reform dud.
Even the perceived successes have lost their sheen. Japan’s apparent progress in tightening corporate governance didn’t avoid the Carlos Ghosn fiasco at Nissan Motor. It didn’t head off a recent scandal at Toshiba Corp. concerning board seats. And a decade on, who’s going to jail for the safety failures that resulted in the nuclear crisis at Fukushima?
The deflation that the Abe years had supposedly defeated, meantime, is trying to make an untimely return. As the West frets runaway inflation, the most Japan’s core consumer prices could do was perk up 0.2% in June from a year earlier. The upward price pressures Japan actually is experiencing are the bad kind: importing pricy commodities.
What is Japan doing about it? Nothing obvious. In mid-2020, Japan tossed an additional $2 trillion of stimulus at the economy, or 40% of gross domestic product. The BOJ larded up its balance sheet with additional asset purchases. Yet since Yoshihide Suga replaced Abe last September, he’s spent far more time avoiding cancellation of the Olympics than recalibrating the economy.
Besides, Prime Minister Suga’s team figured, Covid risks would recede soon enough, and Japan would pull in many millions of tourists by July 2021 to add vigor to the economy. That gamble has aged very poorly.
The best-case scenario now is that Tokyo 2020 isn’t a super-spreader event that upends the economy in 2022 and beyond. Or that history doesn’t remember these few weeks as a gold-medal caliber incubation opportunity for a new Tokyo variant.
Oil prices climb to highest in years as COVID recovery, power generators stoke demand
Oil prices hit their highest in years on Monday as demand continues its recovery from the COVID-19 pandemic, boosted by more custom from power generators turning away from expensive gas and coal to fuel oil and diesel.
Brent crude oil futures rose 87 cents, or 1%, to $85.73 a barrel by 0111 GMT, the highest price since October 2018.
US West Texas Intermediate (WTI) crude futures climbed $1.12, or 1.4%, to $83.40 a barrel, highest since October 2014.
Both contracts rose by at least 3% last week.
“Easing restrictions around the world are likely to help the recovery in fuel consumption,” analysts from ANZ bank said in a note on Monday.
“The jet fuel market was buoyed by news that the U.S. will open its borders to vaccinated foreign travellers next month. Similar moves in Australia and across Asia followed.”
They added that gas-to-oil switching for power generation alone could boost demand by as much as 450,000 barrels per day in the fourth quarter.
Still, supply could also increase from the United States, where energy firms last week added oil and natural gas rigs for a sixth week in a row as soaring crude prices prompted drillers to return to the wellpad.
The U.S. oil and gas rig count, an early indicator of future output, rose 10 to 543 in the week to Oct. 15, its highest since April 2020, energy services firm Baker Hughes Co said last week.
China’s economy, meanwhile, likely grew at the slowest pace in a year in the third quarter, hurt by power shortages, supply bottlenecks and sporadic COVID-19 outbreaks.
The world’s second-largest oil consumer issued a new batch of oil import quotas for independent refiners for 2021 that show total annual allowances were lower than last year, a first reduction of import permits since these firms were allowed into the market in 2015.
(Reporting by Jessica Jaganathan; Editing by Kenneth Maxwell)
Stop handing out free money (and other ideas for getting the economy back on track) | TheHill – The Hill
Supply chain shortages and inflation are hurting consumers and Democratic election prospects in 2022 and 2024. The Biden administration, no doubt aware of this possibility, is taking action to address the ill-effects of scarcity and higher prices. Recently, the administration mandated that the Port of Los Angeles remain open 24 hours a day so merchandise idling in shipping containers can be delivered faster to fill empty supermarket shelves and consumer shopping carts.
But this response may be coming too late, because shortages and inflation have created uncertainty in the minds of consumers that cannot be easily reduced.
While the administration has handled the COVID-19 pandemic well, it has been much less successful in dealing with the negative effects of the ensuing adjustments, including shortages, inflation, supply chain disruptions, high demand and uncertainty.
The widespread shortages were caused by sudden and rapid increases in consumer demand and by manufacturers and suppliers that were too slow or unable to respond swiftly.
Once supply chain disruptions are straightened out as manufacturers increase their production and distributers move their products faster, shortages are bound to ease, though some could linger.
The U.S. economy is also experiencing a modest annual inflation rate of 5.4 percent, caused by the trillions of dollars that the Treasury gave Americans in 2020 to spend to avert a pandemic-induced depression. Flush with this cash and what they had saved while sheltering in their homes during the pandemic, consumers quickly increased demand for most products and services. They became less price sensitive and pushed inflation higher. Still, though worrisome, an annual inflation rate of 5.4 percent is hardly runaway or stagflationary.
But the excess cash is tapering off. Without it, consumers will be forced to reduce their demand and thereby push most prices downward. As a result, future inflation won’t be as drastic or widespread, especially since the Federal Reserve Board is planning to reduce the money supply, which will dampen inflation.
But the uncertainty produced by the pandemic is likely to prevent people from getting back to normal and might foster some continued shortages and inflation.
Americans have been feeling confused and unsure about their future. Before the pandemic, they took stable prices and product availability for granted, knew the content and location of their jobs, woke up in the mornings to feed their kids and send them to school and were fairly content with their lives. Not anymore. Their world had changed, and the new one seems unfamiliar and scary to many. As a result, 4.3 millions have left the labor force since the onset of the pandemic.
What can the White House and Congress do to alleviate shortages, inflation and uncertainty? Here are four ideas.
1. Take measures to ease shortages. Mandating that the Port of Los Angeles work nonstop will increase some supplies, but it’s not enough. It should be followed by similar action in other ports. Likewise, factories should be instructed to increase production. Such measures are easy to take in the case of consumer staples but more difficult in the case of computer chips, as chips are part of a global industry, and increasing their production requires building large factories and investing billions of dollars.
2. Stop handing out free money to consumers. With less money to spend, demand and inflation will ease. Though Americans are no longer receiving government manna, many still have cash to spend, which will continue to exert some upward inflationary pressures.
3. Think again about the size, timing and spending schedule of infrastructure and Build Back Better initiatives. Pumping trillions of dollars into the economy could create a new round of inflation inflammation.
4. Reduce uncertainty. Unfortunately, policymakers lack the knowledge, skills and tools to address this effectively. What is desperately needed is trusted and steady leadership to assure Americans that their lives as consumers, employees, parents and human beings will be more certain again. Unless they can be made to feel more content with their lives, the economy may continue to sputter and keep a fuller economic recovery at bay.
Can these challenges be successfully addressed in the coming year or two? Maybe. The U.S. discovered and produced a life-saving vaccine against COVID-19 in record time and enacted policies that averted depression. Likewise, I expect shortages and inflation to subside and a sense of normalcy to rise. This, plus efforts to make consumers feel more confident, would put the country on a more prosperous path.
Avraham Shama is the former dean of the College of Business at the University of Texas – Pan American. He is a professor emeritus at the Anderson School of Management at the University of New Mexico. His book, “The Impact of Stagflation on Consumer Psychology,” was published by Praeger publishing.
Shekel surplus weighs down Palestinian economy – FRANCE 24
Issued on: 17/10/2021 – 05:06Modified: 17/10/2021 – 05:04
Ramallah (Palestinian Territories) (AFP)
Palestinian businesses flush with too much Israeli cash: it may not be the most talked about aspect of the occupation, but experts warn it is a growing concern for the Palestinian economy.
Palestinians in the West Bank use the Israeli shekel but, beyond that commonality, the two financial systems are dramatically different.
In Israel, as in many advanced economies, digital payments are rapidly growing, taking the place of transactions once done with bills and coins.
But in the West Bank, a territory under Israeli military occupation since 1967, cash is still king.
Tasir Freij, who owns a hardware store in Ramallah, told AFP he now has to pay a two percent commission to deposit paper money because his bank is reluctant to receive it.
“This is a crisis… and we are feeling its effects,” Freij told AFP.
Much of the paper money is brought in by the tens of thousands of Palestinians who work inside Israel or Jewish settlements in the West Bank, and who get their wages in cash.
Experts and business people say the buildup of hard currency risks stifling the Palestinian financial system.
Freij fretted that buying goods from abroad typically requires converting shekels into foreign currencies, especially dollars or euros, but the abundance of shekels in the market has forced him to accept painfully unfavourable rates.
– ‘Dumping ground’ –
The Palestinian Monetary Authority, which functions as the central bank in the West Bank, has warned that paper shekels are building up because it has no way to return the hard currency to Israel.
PMA governor Firas Melhem told AFP that the cash buildup was “a very worrying problem,” causing headaches for banks and businesses.
“If the problem is not resolved quickly, the Palestinian market will turn into a dumping ground for the shekel,” he added.
The shekel was established as the official currency in the Palestinian territories as a result of economic protocols known as the Paris agreements that followed the Oslo Accords between Israel and the Palestinian Territories.
Much has changed since those 1994 agreements.
As they lean more on digital transactions, Israel’s banks no longer want to reabsorb paper cash that accumulates in the West Bank but does not circulate rapidly through the Israeli economy.
The Bank of Israel cited security as another reason.
“We stress that uncontrolled cash transfers could be misused, especially for money laundering and terror funding, and would not be in compliance with international standards on the prohibition of money laundering and terror funding,” the bank told AFP in a statement.
– Solutions? –
Palestinian banks have tried to encourage customers to moderate their cash deposits, but that risks limiting the capital available to banks, which would lower their ability to offer loans.
The cash surplus predicament has fuelled renewed calls from some Palestinian experts in favour of ditching the shekel, either in favour of a unique Palestinian currency or that of another nation, including the Jordanian dinar, which also circulates in the West Bank.
The Palestinian Monetary Authority is also pushing the Bank of Israel to take back more hard currency.
But Melhem stressed that Palestinians also needed to “keep up with developments in financial technologies,” and move towards more cashless payments.
© 2021 AFP
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