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In May we wrote that geopolitical factors posed an upside risk to oil prices. Those risks have materialised. Last week the oil price reached $82 a barrel, up 40% over the last 12 months and the highest level in almost four years. Some analysts are warning of a spike above $100.
Last week the team came across some remarkable data. The Oxford economist Max Roser estimates that in 1820 more than 90% of the world’s population lived in extreme, absolute poverty, defined as living on less than $2 per day in today’s money. By 1981 this had fallen to 44% of the world’s population. Today it stands at less than 10% of the world’s population.
Economists of all stripes would agree that investment and the application of technology drive economic activity. For decades governments around the world have made strenuous efforts to encourage investment and new technologies. Last year this orthodoxy came under fire from an unexpected source.
It would be hard to imagine life without mortgage and consumer credit.
Mortgages have extended home-ownership beyond the ranks of those on high incomes or with large amounts of capital. Credit has helped bring other major purchases, such as a new car or a kitchen, within the reach of most households. For the wider economy there are benefits too, since access to credit helps keep households going when incomes are under pressure.
The summer months tend to be pretty thin for media coverage of economics and finance. Like the rest of us, journalists take their holidays in July and August. Yet economics is no respecter of holidays and events and data have continued to pile up.
Emerging market economies have been the main losers from US protectionism and higher US interest rates.
Capital has flooded out of emerging economies to the US to benefit from rising interest rates. This has meant less liquidity and has sent some emerging economy currencies through the floor. Emerging market governments or businesses which borrowed in dollars, and many have, are having to cope with rising financing costs and a heavier local currency debt burden.
The imposition of tariffs on imports of steel and aluminium by the Trump administration in March has sparked a cycle of retaliatory tariffs. This is a serious outbreak of protectionism, one that is already acting as a drag on growth. Yet the global trading system is in rather better shape than it looks. This week’s Briefing explains why.
First, the bad news.
Holidays often prompt ideas of a new life in some idyllic part of the world. But money matters and liveable, pleasant places are often pricey. Exchange rates are obviously key and the ups and downs of foreign exchange markets can deliver odd outcomes (at a village market in Provence yesterday I paid around 50% more for a week’s shopping than I would at a Waitrose in London).
Our summer quiz offers a test of your knowledge of holiday-related trivia through an economics lens. The answers along with a brief explanation are at the end of this note.
The price of housing in emerging economies and the West has surged since the financial crisis. According to the Organisation of Economic Cooperation and Development (OECD), house prices in the richer, industrialised nations that make up OECD member states, have risen 26% since the trough in 2009. Emerging market economies have seen far greater increases.