Economist 7/1/14

  1. ON JULY 1ST 1944 the rich world’s finance experts convened in a hotel in the New Hampshire mountains to discuss the post-war monetary system.The Bretton Woods system that emerged from the conference saw the creation of two global institutions that still play important roles today, the International Monetary Fund (IMF) and the World Bank.  It also instituted a fixed exchange-rate system that lasted until the early 1970s. The strain of maintaining fixed exchange rates had proved too much for countries in the past, especially when their trade accounts fell into deficit. The role of the IMF was designed to deal with this problem, by acting as an international lender of last resort.The Bretton Woods exchange-rate system saw all currencies linked to the dollar, and the dollar linked to gold. To prevent speculation against currency pegs, capital flows were severely restricted.But in the end it proved too inflexible to deal with the rising economic power of Germany and Japan.
  2. LOW-COST long-haul flying has been a notoriously difficult nut to crack ever since Laker Airways, a transatlantic British airline, introduced the concept in 1977. When AirAsia X pulled out of London in 2012, it blamed taxes for the failure. That was nonsense. Fuel prices alone sounded the death knell, and would probably do so again today even with A330s. There are only three ways for an airline to beat high fuel costs. One is to boost revenue by adding sizeable business-class cabins (at which point your low-cost credentials go out the window); another is to boost revenue by cramming in passengers like sardines Cebu Airlines (which Filipino workers will tolerate, but others may not); the last is to buy ultra-fuel-efficient planes that reduce your operating costs. Norwegian Air Shuttle hopes to do the latter with its Boeing 787 Dreamliner flights from London to New York. But because modern jets cost the most to lease.
  3. SIX years after India and America agreed to co-operate on civil-nuclear matters both sides are still waiting for the benefits.But a decision this week by India’s government to ratify a related, long-delayed, international protocol offers some hope. Under American pressure the 48-member Nuclear Suppliers’ Group ended its isolation of India. The International Atomic Energy Agency (IAEA) signed an India-specific “additional protocol” giving its inspectors access to India’s civil sites, though not its military ones. India’s government said on June 23rd it had at last ratified that protocol.But expansion requires imported uranium as fuel (miners fail to extract enough from domestic deposits) plus foreign capital and expertise to build big reactors of 1,000MW or more.Uranium will come. Australia, notably, is negotiating terms to export the fuel, ending a ban as it seeks strategic ties with a fellow Asian democracy.The most serious deterrent is India’s 2010 law on nuclear liability, which puts heavy financial responsibility on suppliers and contractors in case of an accident.
  4. THE framers of America’s constitution knew nothing about mobile phones, but they knew a thing or two about unreasonable searches.Chief Justice John Roberts began by observing how attached Americans have become to their mobile devices: “the proverbial visitor from Mars,” he wrote, might mistake them for “an important feature of human anatomy”. Smartphones can contain “[t]he sum of an individual’s private life…from the mundane to the intimate.” In fact, the ruling reads, thumbing through a mobile phone is potentially far more revealing than “the most exhaustive search of a house”. Without the benefit of “more precise guidance from the founding era,” Mr Roberts explained, the court must weigh individual privacy against “the promotion of legitimate governmental interests”.
  5. THE Philippine police had clapped two senators in jail by June 26th and had two secure hospital rooms ready for a third.They are accused of benefiting from the suspected embezzlement of billions of pesos from the Priority Development Assistance Fund, known as the pork barrel. Each year, the government used to give each of the 24 senators 200m pesos ($4.6m) from the pork barrel, and each of the 290 congressmen 70m pesos. They were meant to spend it on development projects. The effect was to give political dynasties the wherewithal to buy the loyalty of generations of voters, and to give presidents the wherewithal to buy the loyalty of the political clans. Last year the Supreme Court ruled the fund illegal, but only after a newspaper exposed a scheme to funnel money from it to bogus NGOs, which would then give kickbacks to politicians.

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