Economy

(Moscow)

In a tit-for-tat move by the Kremlin, Moscow has announced that it is enacting sanctions of its own on the US and EU. Russia will lay a blanket ban on all agricultural imports from the US, and all fruits and vegetables from the EU. The move will likely be a major blow to Europe, for whom Russia is the largest export market for fruits and vegetables, accounting for 28% and 21.5% of the market, respectively; the sanctions will hurt the US much less, as the country forms only 1% of the US’ exports. Many analysts say the sanctions are ill-advised as they may end up hurting Russians more than their target audience. Russia imports over 40% of its food, and the country has little ability to immediately account for the loss of EU and US imports, which is likely to stoke already high 7.5% inflation.


FINSUM: For a nationalist government, one can see that attempting to stoke domestic supply makes sense as a backdrop to sanctions, but this just seems like it might inflame the country’s already doubtful economic situation.

(New York)

A new study by S&P is proving to be a very significant symbolic step for consideration of wealth equality in economic forecasting. The S&P has released a report which finds that high wealth inequality in the US may be holding back the economy, and is likely responsible for the country’s feeble recovery from the Financial Crisis. Considering wealth inequality as a source of economic underperformance has until now been the domain of left-leaning academics, but the fact that the S&P, who is a premier economic and ratings house servicing the mainstream investment market, has taken such a step to highlight it give the idea much more credence. S&P argues that because wealthier people tend to save a higher proportion of their incomes, the fact that so much of America’s economic output is funneling back into wealthy hands correspondingly means that proportionally less is being spent than would be if middle and lower income families were earning more.


FINSUM: This is a very good study which plausibly and rationally explains why wealth inequality may be hurting the economy. Such a study could be a start towards a wider call for change that might lead to a policy shakeup.

(London)

In what is likely to prove an explosive bit of news, London Mayor Boris Johnson has just received the outcome of a major study he commissioned, and the results are very important. Johnson commissioned a study into whether London would be economically better off if it were in or out of the EU.  The study found that Britain would be significantly better off independently than if the status quo relationship with the EU persisted, and the report makes eight demands for reform of Britain’s relationship to Brussels. Johnson, who is considered a potential candidate for prime minister, is planning to announce the results tomorrow and give them his backing. The results are likely to hasten calls for a referendum vote to take place before PM Cameron’s planned poll in 2017, though Johnson favours using the report as leverage to simply renegotiate the EU relationship on more favourable terms for Britain rather than fully depart the Union.


FINSUM: This is likely going to be a major explosive report, as it gives the unexpected, though politically dubious, result that the UK may be just a well off economically if it were independent. Fear of an economic downturn is about the only thing that holds back Britain from leaving the EU.

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