Economist 1/21/16

  1. REAL MADRID remain the richest club in Europe, extending their unbeaten run to 11 years, according to Deloitte’s football money league. Their arch-rivals Barcelona have closed the gap significantly over the past year, leapfrogging Manchester United into second place after a hugely successful season in which they won a league, cup and European treble. English clubs increasingly dominate the ranking. Thanks to a lucrative broadcasting deal agreed in 2012, there are now nine Premier League clubs in the world’s top 20, and 17 in the top 30.
  2. In the solar system itself, the list of planets has actually shrunk—Pluto having been downgraded from that status in 2006.Now, a pair of astronomers from the California Institute of Technology think they have evidence that will restore the sun’s tally to its previous value. Their analysis of objects orbiting in the Kuiper Belt, a ring of frozen asteroids that circle beyond the orbit of Neptune (and of which Pluto is now regarded as the largest member), suggests to them that something about ten times as massive as Earth has distorted those orbits.
  3. The rule of thumb is that a 10% fall in oil prices boosts growth by 0.1-0.5 percentage points.In the past 18 months the price has fallen by 75%, from $110 a barrel to below $27. Yet this time the benefits are less certain. Although consumers have gained, producers are suffering grievously. The effects are spilling into financial markets, and could yet depress consumer confidence.Saudi Arabia is pumping at almost full tilt. It is widely thought that the Saudis want to drive out higher-cost producers from the industry, including some of the fracking firms that have boosted oil output in the United States from 5m barrels a day (b/d) in 2008 to over 9m b/d now. Saudi Arabia will also be prepared to suffer a lot of pain to thwart Iran, its bitter rival, which this week was poised to rejoin oil markets as nuclear sanctions were lifted, with potential output of 3m-4m b/d.Despite the Saudis’ efforts, however, producers have proved resilient. Many frackers have eked out efficiencies.They will not pack up so long as prices cover day-to-day costs, in some cases as low as $15 a barrel.
  4. In the past cheap oil has buoyed the world economy because consumers spend much more out of one extra dollar in their pocket than producers do. Today that reckoning is less straightforward than it was. American consumers may have been saving more than was expected.Cheap oil also hurts demand in more important ways. When crude was over $100 a barrel it made sense to spend on exploration in out-of-the-way provinces, such as the Arctic, west Africa and deep below the saline rock off the coast of Brazil. As prices have tumbled, so has investment.The possible financial spillovers are hard to assess.With GDP in Russia falling, the government could well face a budgetary crisis within months. Venezuela, where inflation is above 140%, has declared an economic state of emergency.
  5. SINCE he took over as China’s leader in 2012, Xi Jinping has been a busy globetrotter. Last year he visited more countries than Barack Obama, America’s president (14 against 11).He just visited Saudi Arabia.He then visited Egypt and was due to finish his tour in Iran. No Chinese president had toured the region since 2009. China’s leaders had worried about getting embroiled in the region’s intractable disputes. But China has a big stake in the Middle East. It is the world’s largest oil importer and gets more than half of its crude from the region.Mr Xi, like his predecessors, likes to present China as a non-interfering champion of peace. In the long run, China may find it hard to avoid taking sides. To some extent it has already done so in Syria: it talks to representatives from both the Syrian government and the opposition, but by vetoing UN resolutions on intervention it tilts, in effect, in the government’s favour.
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