They portray themselves as impartial and objective but a survey exposed their biases, unconscious or otherwiseMany economists put a lot of weight on the idea that their profession is unbiased and non-ideological. Over time, the discipline has focused on applying complicated maths to data, as part of a “positivist” movement seeking to claim economics as a “real science” where economists show what they have found, not what they think.Such self-perception coexisted with the critique of less mainstream economists that the profession has an ideological bias, generally rightwing. Markets work, humans are self-interested, the state messes things up, and so forth. The latest salvo from proponents of the latter view, including Ha-Joon Chang, Cambridge University’s prominent opponent of mainstream economics, comes via creative new research. Continue reading...

The EU has opposed brutal animal welfare and rampant tech monopolies. Post-Brexit Britain will be exposed to bothA trade deal with the US would be a defining moment for the UK. It is not an exaggeration to say it would reveal the country’s direction of travel more than any other decision in the aftermath of Britain quitting the European Union.Amid the confusing array of government pledges – more police and more spending on the regions while also cutting taxes for the better off (mostly in London and the home counties) – it is the basics of any trade deal that will set Britain’s course for decades to come.US regulators believe the only test of food is whether it is safe. Beyond this, the state abdicates responsibility Continue reading...

Last week’s upheavals in bond values were an all-too-rational response to a cocktail of economic troublesEvery year the Federal Reserve Bank of Kansas City hosts a symposium in the Grand Teton resort of Jackson Hole. Some years, guests have little to do but chew the fat and listen to distinguished speakers explain points of economic importance. Sometimes, though, the conclave in Wyoming takes place with a crisis looming. One such year was 2008. This year is shaping up to be another.Global financial markets certainly fear the worst. Share prices slumped last week amid fears that the first recession since the big crash of 2008-09 is just around the corner. The trigger was developments in the bond markets, which is where investors trade the debt that governments issue to cover their spending.Germany has already suffered one quarter of falling growth and could easily be heading for a secondWhat is the yield curve? Continue reading...

London traders were unable to buy and sell shares in Britain’s top companies this morning, as unexplained glitch strikes the City

Current political uncertainty or trade restrictions could shock business confidence, but policymakers are fixated on financeThere’s a hoary old proverb in the financial markets that a crisis happens precisely when the institutional memory of the last crisis has faded: when all the key chairs are occupied by people who aren’t scared any more, the same mistakes get repeated.On that basis, in the face of grim economic news around the world, we ought to be reasonably safe from another Lehman Brothers-type meltdown, or even a repeat of the eurozone crisis. But what might be a little bit more worrying is that there are surprisingly few people left who remember how the normal kind of recession happens.In order to have felt the fear in the 80s, you’d need to be quite a bit older than most of today’s key policy advisorsRelated: Is a recession coming to the US? Here’s what to watch for Continue reading...

From cutting student debts to index-linking the minimum wage, the dream can be rebuiltIt is time to admit that the “American Dream” is dead. Its underlying conditions – strong, consistent economic growth and a meritocracy structured to keep the rich from gaming the system – no longer hold true.Nonetheless, an American Dream 2.0 is still possible, and it will be up to those now contending for the White House to offer a blueprint for making it a reality. For starters, America’s leaders need to explain the problem clearly. The Declaration of Independence proclaimed the “pursuit of happiness” a central feature of American life. Since 1776, each generation has sought upward social mobility; and for a long time, many – though not all – met with prosperity.Related: Trump foolishly thinks gold standard will usher in a golden ageRelated: Top US bosses earn 278 times more than their employeesRelated: Trump adds a dismal dimension to the US-China trade dispute | Jeffrey Frankel Continue reading...

From the US-China trade war through to the problems affecting Germany, Brazil, the UK and moreStock markets have taken fright over a number of warning signs from key economies, the latest this week being the inversion of the US bond yield curve and news of a contraction in the German economy. Here is a guide to the trouble spots in the global economy that are rattling investors.What is the yield curve? Continue reading...

Index of Britain’s top 100 firms at six-month low and oil prices fall 3% to below $58 a barrelStock markets in Europe extended their losing streak on Thursday and oil prices fell 3% to below $58 a barrel as mounting recession concerns continued to hit investor confidence.The index of Britain’s top 100 firms dropped more than 1% to hit a six-month low and and stock markets in continental Europe also dipped in response to investors channelling their funds into financial safe havens. However, US stocks staged a modest recovery after heavy sell-offs on Wednesday.What is the yield curve? Continue reading...

Eddie Tulasiewicz of the National Churches Trust, Clare MacInnes, Chris Weeks, Cllr Iain Malcolm of South Tyneside council and Martin Davies respond to an article by Aditya ChakraborttyAditya Chakrabortty suggests churches have gone from many suburban areas (The blackouts summed up a crisis of our public spaces, 14 August). But our research shows that there are around 40,300 church buildings in the UK open to the public and being used for worship – more than the UK’s 39,000 pubs.As well as being places of worship, church buildings benefit the wider community, being used for playgroups, lunch clubs, food banks, and social and cultural activities including concerts and exhibitions. Continue reading...

Beijing has alarmed investors by threatening counter-measures against the US, threatening to escalate the trade war

Consumers are not fretting about Brexit but you can understand why retailers are uneasy over 31 OctoberThose with long enough memories may recall that Viv Nicholson won what was then a small fortune on the football pools in 1961. Asked what she was going to do with the money, she replied: “Spend, spend, spend.” Which she duly did until there was nothing left.The latest official retail sales figures show that the spirit of Viv Nicholson lives on among Britain’s shoppers. Moreover, the spend, spend, spend mentality will be what prevents the economy from sliding into recession, at least for now.Related: Online shoppers and Amazon Prime Day lift UK retail sales Continue reading...

Small rise confounds City forecasts as even troubled department stores record increaseOnline spending bolstered UK retail sales last month, while department stores notched up their first increase this year, as consumers shrugged off Brexit fears.The quantity of goods bought rose 0.2% in July, buoyed by the annual Amazon Prime Day, according to the Office for National Statistics. The figures wrong-footed City economists who had expected a 0.2% decline.Related: Spend, spend, spend: spirit of Viv Nicholson lives on among shoppers | Larry ElliottWhat's the problem? Continue reading...

The president’s nominee for the Fed believes pegged exchange rates will fix the US trade deficit. Not soThere are now scores of efforts to psychoanalyse the US president Donald Trump’s nomination of Judy Shelton to the Federal Reserve board. Some emphasise Shelton’s fidelity as an early adviser to the Trump campaign. Others point to her conversion into “a low-interest-rate person”. Still others highlight her advocacy of the gold standard as insulating US monetary policy from an unreliable Fed.These interpretations all miss the point, which is that Shelton is a proponent of fixed exchange rates. Her belief in fixed rates is catnip to an administration that sees currency manipulation as a threat to winning its trade war.Related: Trump adds a dismal dimension to the US-China trade dispute | Jeffrey Frankel Continue reading...

Poppy Trowbridge on her work as a special adviser in Hammond’s Treasury as it tried to plan for Brexit and avoid crashing out with no deal. Plus, Carey Gillam on how the biotech company Monsanto tried to destroy her reputationParliament is gearing up for an autumn showdown over the possibility of a no-deal Brexit. Philip Hammond, until recently the chancellor of the exchequer, has accused Boris Johnson of shutting down any hope of securing an agreement. But the prime minister’s team continues to argue that Britain must leave the EU by 31 October.It has been quite a journey for the Treasury: from accusations of “project fear” when it warned against any Brexit at all under George Osborne in 2016, to Hammond’s hopes of minimising the damage with an orderly withdrawal, and now, under Sajid Javid, preparing for the economic impact of no deal. Continue reading...

Investors are alarmed to see longer-dated UK and US bonds trading at lower interest rates than shorter alternatives, a possible sign of recession

Slowdowns in China and US add to sense of panic, leading investors to dump shares and buy bondsThe prospect of Germany sliding into recession and sharper-than-expected slowdowns in China and the US sent jittery financial markets spiralling downwards across the world to lows last seen in May.Investors dumped shares and bought safer government bonds, adding to the sense of panic that has grown steadily following Donald Trump’s threat this year of extending tariffs to all Chinese exports to the US.What is the yield curve?Related: Globalisation as we know it will not survive Trump. And that’s a good thing | Larry Elliott Continue reading...

It falls to a former chancellor to speak blunt truths from the backbenches because Boris Johnson employs only those willing to embrace denial and deceitFormer chancellors often criticise serving prime ministers but usually when they represent different parties. The case of Philip Hammond is all the more remarkable: only a month has elapsed since he sat in the Treasury and already he is savaging Boris Johnson for pursuing a no-deal Brexit.On that point, the two men might as well be in different parties. Mr Hammond is conservative in an old-fashioned sense of the word – inclined to preserve things; suspicious of ideology; fiscally hawkish. Mr Johnson represents the new style of conservative radicalism – contemptuous of governing conventions, profligate and prone to nationalistic bombast. Both would describe themselves as Eurosceptic, but for the former chancellor that means wariness of the federalising side of the European project. For the prime minister it extends to aggressive severance of Britain’s ties to the continent, without alternative arrangements. Continue reading...

WeWork may have left it a tad late for its IPO unless the central bank makes a swift and decisive cutWeWork, the loss-making US office rental company, is planning a stock market launch next month to fund its global expansion. All the signs on Wall Street on Wednesday were that Silicon Valley’s next big thing may have left it a tad late.On a day when global stock markets took a tumble, WeWork will doubtless be hoping that swift and decisive action by the Federal Reserve can hold off a bear market in shares for just a bit longer. Otherwise the company’s float will be remembered for the wrong reason: as the one that marked the top of the cycle. Continue reading...

Chief executives earned an average of $17.2m each last year and their pay grew more than 1000 % since 1978, survey findsChief executives at the US’s top companies took home $17.2m in pay last year – 278 times the salary of their average worker.Between 1978 and 2018, the average pay of the bosses of the US’s largest 350 companies has grown by 1,007.5%, adjusted for inflation, according to the Economics Policy Institute’s latest survey. Continue reading...

British workers’ pay rose 3.9% over last three months in sharp contrast to slowing economyBritish workers’ basic pay is growing at the fastest rate for more than a decade despite mounting risks to the economy as Brexit looms.In sharp contrast to the broader economic slowdown that has taken Britain to the brink of recession, the Office for National Statistics said annual average pay – excluding bonuses – rose by 3.9% in the three months to June, the highest rate since June 2008. Continue reading...

President asserts that the recent depreciation of the yuan amounts to currency manipulation. Not trueThe trade war between the US and China is heating up again, with the US president, Donald Trump, abruptly announcing plans to impose a 10% tariff on the $300bn (£248bn) worth of imports from China that he had so far left untouched. The Chinese authorities then allowed their currency, the yuan, to fall below the symbolic threshold of seven to the dollar. The Trump administration promptly responded by naming China a “currency manipulator” – the first time the US had done that to any country in 25 years. Pundits declared a currency war and investors immediately sent global stock markets lower.The US assertion that the recent depreciation of the yuan amounts to currency manipulation is not true. It would be more correct to say that the Chinese authorities gave in to market pressure – the immediate source of which was none other than Trump’s announcement of the new tariffs.Related: Global trade disruption is a symptom of a deeper malaise | Mohamed El-ErianRelated: Could devaluation of China's yuan trigger the next financial crisis? | Larry Elliott Continue reading...

Anyone looking around for bad economic news in this ‘silly season’ is spoilt for choiceEvery now and then, August belies its reputation as a sleepy month when nothing happens and throws up an event that shakes financial markets.The Latin American debt crisis began in August 1982; oil prices soared after Iraq invaded Kuwait in August 1990; the Asian debt crisis had its genesis in the same month in Thailand seven years later. Then there are the crises that simmer away in August and finally come to the boil in September: the buildup to Black Wednesday in 1990; the weeks leading up to the collapse of Lehman Brothers in 2008. Continue reading...

ONS survey reveals increasing job insecurity as Brexit looms and risks of recession mountBritish households are more worried about losing their jobs than at any time in the past five and a half years, according to official figures, in a sign of the pressure on workers across the country.Despite unemployment falling to the lowest point since the mid 1970s, the Office for National Statistics said people’s expectations for rising joblessness in the year ahead have been climbing.Related: UK jobs growth slows amid Brexit uncertainty Continue reading...

Resolving US-China trade war is not enough to ward off what many fear is a looming worldwide recessionIt is only a matter of time until the escalating tensions between China and the US prompt many more economists to warn of an impending global economic recession coupled with financial instability. On 5 August, Bloomberg News said that the yield curve, a closely watched market metric, “Blares Loudest US Recession Warning Since 2007”. And Larry Summers, a former US treasury secretary who was also closely involved in crisis-management efforts in 2008-09, recently tweeted: “We may well be at the most dangerous financial moment … since 2009.”Many economists argue that resolving US-China trade tensions is the best way to avoid significant global economic and financial disruption. Yet, while necessary, this would be far from sufficient.Related: Globalisation as we know it will not survive Trump. And that’s a good thing | Larry Elliott Continue reading...

New Economics Foundation says putting money in workers’ pockets will raise productivityGiving workers more public holidays and raising their wages could boost the strength of the British economy, according to a report.The New Economics Foundation said that driving up the spending power of consumers would give firms a greater incentive to raise their productivity, as they could have greater confidence there would be demand for their products and services.Productivity is an economic measure of the efficiency of a workforce. It typically measures the level of output per hour of work, or per worker. Continue reading...

Chancellor Sajid Javid faces a diverse list of runners but under this government it may not pay to put money on a safe betThe moment is fast arriving when Sajid Javid will choose Mark Carney’s replacement as the governor of the Bank of England, and Westminster is alive with speculation.One of Javid’s first requests on being made chancellor was to be brought up to speed on the runners and riders for the Threadneedle Street race, although the official Treasury line is that an announcement will be made in the autumn.Related: Bank of England: No-deal Brexit could cause 'significant' market turmoil - business live Continue reading...

Brexit-related recession looks ever more likely, and with their poor investment levels, UK firms are worse-placed than many to withstand the shockDowning Street must add the likelihood of a UK recession to its list of possible scenarios after official figures showed that the economy contracted in the second quarter by 0.2%.The prospect of a further decline in GDP in the third quarter, which would make a recession official and might be clearly on the cards before the 31 October Brexit deadline, should dominate the prime minister’s deliberations.UK companies have borrowed heavily since the crash, but most of the money was used to pay generous dividends, rather than being ploughed into new equipment Continue reading...

Johnson may have come to power by legitimate means, but his language and actions in No 10 have been disturbing indeedI continue to recommend re-reading Joseph Heller’s great novel Catch-22 for those of us who want to avoid being driven crazy by this Brexit farce.As we are told that the cabinet is operating on a “war footing” and that frantic preparations are made for the austerity and hardship that would follow no deal, my mind goes back to the shortages I witnessed as a small boy during and after the second world war.With the world economy losing steam, the trade and currency war between America and China could get much nastier Continue reading...

Visitors to Manhattan are finding that several retail landmarks are fading fastThere is a lot to do in Manhattan – but shopping? Maybe not so much these days. Once one of the hottest markets on the planet, New York’s retail sector is suffering.Surveying the empty storefronts on Fifth Avenue, holidaymaker Gill Stewart, from Stokesley in Yorkshire, said she was surprised by the number of vacancies. “We’ve come across a few places that are empty or under refurbishment, certainly many more than we expected,” she said. As the family wondered which direction to go in, Stewart noted that her teenage children, Nathan and Eleanor, weren’t even clamouring to visit the shops. Continue reading...

Brexit uncertainty has acted like a handbrake on business activity and dictating corporate cautionWhen Boris Johnson became prime minister he said the “doubters, doomsters, gloomsters” had got Britain wrong.After that first speech on the steps of Downing Street, the prime minister faces an early test, with official figures suggesting the economy is on the cusp of recession.Gross domestic product (GDP) measures the total value of activity in the economy over a given period of time.Related: The dramatic drop in sterling is only a taste of what is to come | Sam Gyimah Continue reading...

It would be naive to think social and economic decisions do not bear on the timing and numbers of births that couples choose, says Allan G Hill. Plus Roger Plenty points out that having one fewer child saves 58.6 tonnes of CO-equivalent per yearGaby Hinsliff (Journal, 3 August) is right to insist that the ultimate decision on numbers of children is in the hands of women and their partners but ignores the many ways that any modern state already makes so many of the rules regarding sex and reproduction. Just think of all the rights and allowances that determine the length of maternity leave, resuming work, flexible working, equal pay and the like. Then, there are decisions by states to subsidise or not the costs of childcare, including all the costs of education from pre-school to university and college. Throughout, there are rules and regulations about which maternity and childcare services are state- or authority-provided.Couples reproduce in such economic and regulatory environments and it would be naive to think that such powerful social and economic decisions do not bear on the timing and numbers of births they choose. A declining population is not in anyone’s interest, reducing the pool of new talent in the next generation and encouraging an imbalance between those concerned with the cost of TV licences and others eager to see young innovators moving through our age cohorts. Continue reading...

A 0.2% contraction between April and June is first fall in GDP in six and a half years

GDP shrank by 0.2% in the second quarter amid manufacturing slump

Carmakers face perfect storm of EU exit uncertainty and weaker demand in ChinaWith British manufacturing contracting sharply in the second quarter, industrial firms large and small are under pressure. Nowhere is that more the case than in the car industry, which is contending with a backlash against diesel and weaker demand in China that has coincided with Brexit uncertainty stifling investment.The “perfect storm” for carmakers has quickly been passed down the supply chain, according to David Caro, the owner of Qualplast, a Birmingham-based maker of flock coatings for car parts such as glove compartments and coin trays in vehicles made by Jaguar Land Rover, Nissan and Bentley. The company, which employs 17 people, has seen a fall in orders from some of its major customers as they adjust to lower sales.One of the two main definitions of recession in the UK is at least two quarters of negative economic growth. Judged by this yardstick, the UK was last in recession in 2008-09, when there were six consecutive quarters of negative growth. Continue reading...

Despite what critics say, many economists are focused on real-world problems such as mental health and the climate crisis

The markets are spooked, but we need a new world order which makes room for local solutions and the nation stateThe significance of the trade war between China and the US goes well beyond the impact of tit-for-tat tariffs, or which of two self-styled strongmen wins the bragging rights. As was the case in the 1930s, the seemingly inexorable drift towards protectionism is part of a deeper crisis of the international status quo. When Beijing this week accused the US of “deliberately destroying the international order”, it was really saying that US hegemony will no longer go unchallenged. Globalisation as we have known it is coming to an end and that’s by no means unwelcome.Related: China accuses US of 'deliberately destroying' world order Continue reading...

Sales of cars and machine parts to far east fall as US–China trade conflict takes its tollGerman industrial production has suffered its biggest annual decline in nine years after the escalating trade war between the US and China took its toll on exports.Europe’s economic engine, which has increasingly relied on exports to Asia to bolster factory output, was left teetering on the edge of recession in the second quarter after a 1.5% fall in industrial production in June, which is expected to be repeated in July.Related: China's yuan sinks amid fears Beijing may give up on US trade talks Continue reading...

Rise comes amid concerns over US-China trade conflict and European marketsThe price of gold has risen to $1,500 an ounce (£1,234.45 at market rates on Wednesday) for the first time in six years as investors seek shelter in low-risk assets amid concerns about the global economy.The spot gold price rose 1.75% to $1,500.29, its highest level since 2013, taking the metal’s gains this year to 17%.“Three more Central Banks cut rates.” Our problem is not China - We are stronger than ever, money is pouring into the U.S. while China is losing companies by the thousands to other countries, and their currency is under siege - Our problem is a Federal Reserve that is too.........proud to admit their mistake of acting too fast and tightening too much (and that I was right!). They must Cut Rates bigger and faster, and stop their ridiculous quantitative tightening NOW. Yield curve is at too wide a margin, and no inflation! Incompetence is a.........terrible thing to watch, especially when things could be taken care of sooo easily. We will WIN anyway, but it would be much easier if the Fed understood, which they don’t, that we are competing against other countries, all of whom want to do well at our expense! Continue reading...

Tweet in support of US farmers suggests dispute with Beijing could extend well into 2020Donald Trump has dropped the broadest possible hint that he is ready to dig in for the long term in the Washington’s trade war with China, after the latest escalation in the long-running dispute between the world’s two largest economies.The US president said he was ready to provide support for US farmers in 2020 should they face pressure from China, as economists at Goldman Sachs said the standoff could continue until after the US presidential election in November 2020.As they have learned in the last two years, our great American Farmers know that China will not be able to hurt them in that their President has stood with them and done what no other president would do - And I’ll do it again next year if necessary! Continue reading...

While nurses beg on TV for pay rises and neighbours feud about benefits, the wealthy continue to take without givingThink of a football stadium. Not one of the vast caverns like Old Trafford or Wembley, but somewhere rather smaller and more bijou. Somewhere like Fulham’s Craven Cottage, which, once its new stand is completed, will pack in only about 30,000 fans. Now imagine this stadium of 30,000 souls rising up into the air and hovering unnoticed over central London. Thirty thousand men in late middle-age living the high life with the capital at their feet – and there, stuck way below on terra firma are their 66 million fellow Britons, tearing lumps out of each other.Congratulations: you’ve just pictured the central problem stalking the UK today. Not Brexit. Not the breakdown in civil debate. Not the dark money contaminating Westminster. These are urgent and vitally important, but there is one big factor that forms a large part of the backdrop to all of them. It can be summed up by that gulf between a mid-sized football stadium of super-rich men in their 50s, and the rest of us spread out across our suburbs, our towns, our unpretty stretches of urban sprawl.Related: London is increasingly home to the top 1% by income, study findsRelated: Working class versus minorities? That’s looking at it the wrong way | Kenan Malik Continue reading...

Readers respond to recent Guardian articles on environmental issuesJohn Vidal hit the nail on the head by linking Meghan and Harry’s choice to limit their family size for the sake of the climate to the lack of access many women globally have to services that would enable them to make the same choice (Having kids is bad for the planet. So are the royal jets, 1 August). Vidal highlighted that “many in areas of high growth want fewer children but cannot access contraception”, and as CEO of a global organisation providing women and girls with access to family planning, I agree. More than 214 million women and girls worldwide are unable to access contraception. Yet we know that when they have access to contraception and safe abortion, they often choose, like Meghan, to have smaller families.Women are increasingly and disproportionately bearing the burden of the climate crisis. It often falls on women to care for growing families in worsening conditions. Droughts mean limited access to food and water. Rising sea levels lead to floods. Humans and animals are competing for dwindling resources, especially in countries that contribute least to global carbon emissions. Continue reading...

Luxury chain made famous by Sex and the City has debts of up to $500mBarneys New York, the US luxury department store chain made famous by Sex and the City, has filed for bankruptcy and put itself up for sale.The retailer, which first opened its doors in New York in 1923, said it would close 15 of its 22 stores, including flagship branches in Chicago, Las Vegas and Seattle, five small concept outlets and seven Barneys Warehouse discount stores. Barneys’ flagship shops on New York’s Madison Avenue, and in Beverly Hills, San Francisco and Boston, are to remain open.Related: Bankruptcy for Barneys? Symbol of New York luxe faces uncertain future Continue reading...

Trade war rhetoric ratchets up as Beijing responds to US claim of being ‘a currency manipulator’China stepped up the trade war rhetoric on Tuesday, accusing the US of “deliberately destroying international order” with “unilateralism and protectionism”.A day after Washington branded China a currency manipulator in a rapidly escalating trade dispute, China’s central bank said it “deeply regretted” the move by the US and said such behaviour “seriously undermined international rules” and damaged the global economy.Related: Chinese state media accuse US of 'destroying international order' – business live Continue reading...

Total sales increase by 0.3%, according to data compiled by the British Retail ConsortiumBritish retailers have recorded the worst month for sales in July since records began, as consumers tighten their belts with Brexit approaching.According to British Retail Consortium sales data compiled by the accountancy firm KPMG, total sales increased by 0.3% in July, compared with a rise of 1.6% in July last year. Continue reading...

Concerns over full-scale currency war as Trump renews attack on ChinaFinancial markets around the world have fallen sharply amid growing fears that the US-China trade dispute could escalate into a full-scale currency war, with damaging consequences for the world economy.The roots of the dispute come from US president Donald Trump’s “America first” project to protect the US’ position as the world’s leading economy, while encouraging businesses to hire more workers in the US and to manufacture their products there.Related: Global markets take fright as Trump ramps up US-China trade war Continue reading...

Weak wage growth and years of austerity mean Brexit downturn will be harder for poorLow-income households in Britain are more vulnerable to recession than they were before the financial crisis, the Resolution Foundation has warned, amid the mounting risks of a Brexit downturn.According to the thinktank, a decade of weak wage growth has left the poorest UK households and middle-income families less prepared for another downturn. It also warned the gradual dismantling of the benefits system under the policy of austerity imposed over the past decade by Conservative-led governments has left people without the same degree of support. Continue reading...

New PM has changed UK tactics of chicken while US and China battle to see who blinks firstTwo cars are hurtling towards each other down a narrow country lane. Both have the option to pull over but neither driver wants to give way first. What happens next?This is the sort of scenario that lies at the heart of game theory, the use of models to show how rational decision-makers interact with each other. Game theory is big in economics and, in the current circumstances, that’s hardly surprising because two key political issues lend themselves to game theory analysis.Related: When Trump turns up the heat on trade, Americans will feel it tooXi Jinping thinks Donald Trump will be wary of spooking the stock market Continue reading...

Until now, the US has tried to avoid hurting consumers when imposing tariffs. From next month, they will be fully exposedThe timing could not be better. On 1 September 1939, German troops crossed the border into Poland, triggering the start of the second world war. Eighty years to the day later, on 1 September 2019, Donald Trump plans to impose a 10% tariff on a fresh range of Chinese imports into the US. If that happens, it will mark the moment when trade’s cold war turns hot.Make no mistake, the unexpected announcement threatens to have serious consequences. Up until now, the Chinese goods targeted for tariffs have been carefully selected to avoid hurting consumers. That is no longer the case. From next month, almost everything China sends to the US will be affected. In bald terms, that means Americans are going to be paying more for their smartphones, laptops and clothes. Trump boasts that the US is going to be “taxing the hell out of China” but he has got the economics completely wrong. The taxes will be paid by Americans faced with paying more for imports.China is waiting to see whether someone with less protectionist instincts wins the race for the White House next year Continue reading...