Economist 2/1/16

  1. A NEW ranking of restaurants in American airports has been released by the makers of AirportXP, a market-research smartphone app. Based on the responses of around 88,000 of its users, it found that Honolulu is the worst airport in the country for a pre-flight meal, followed by Washington Reagan and Los Angeles. Tampa, Salt Lake City and Minneapolis St. Paul, meanwhile, came top. There are many reasons why airport dining is so terrible. For a start, there is rarely enough competition. In the terminal, a small number of establishments vie for a large, captive clientele. Restaurants do not rely on repeat trade—at least not to the extent that a local eatery does—so there is even less incentive to offer high levels of service.There is also the lack of space problem. It is difficult to hive off an area in a cramped terminal and make it beautiful.
  2. Brokers are now putting probability estimates on the chance of a recession in America this year. Royal Bank of Canada uses the jobless claims numbers to come up with a 15% probability; Bank of America comes up with 20%.This blog has returned from time to time to some old-fashioned measures; the goods that are being moved by truck and train. The American Trucking Association reports that December’s volumes were 1.1% higher than the same month in 2014. This hardly suggests an economy at full throttle but nor does it point to outright recession.Those figures look pretty upbeat compared with the data out of the Association of American Railroads; its latest weekly numbers (to week ending January 23) show a 10.5% decline in shipments over a year ago. The decline in the oil price may have played a big part.Separate Bank of America research suggests that declines in railroad freight volume tend to be associated with recessions. Perhaps the shale effect destroys the usefulness of this as an indicator.
  3. Of 168 countries surveyed by Transparency International, an anti-corruption group Germany, in its annual Corruption Perception Index, Nigeria ranks 32nd from the bottom.Whistleblowers sometimes try to estimate how much cash has gone missing from Nigeria’s public purse. In 2014 a respected former central-bank governor lost his job after claiming that $20 billion had been stolen. But this captures only a small share of the damage done by corruption.Nigeria’s tax-to-GDP ratio is only about 8%, compared with more than 25% in South Africa. Given rampant theft, many people are reluctant to pay their taxes on the ground that the money will just be squandered.This may in part explain why, despite its oil wealth, there is a rising share of Nigerians who are classified as below the poverty line. A survey of living standards (using data from 2010, the most recent figures available) suggested that 61.2% of the population lives in absolute poverty, an increase of over six percentage points on the previous figures from 2004.
  4. The term “shadow bank” was coined in 2007 by Paul McCulley of PIMCO, a big bond fund to describe risky off-balance-sheet vehicles hatched by banks to sell loans repackaged as bonds. Today, the term is used more loosely to cover all financial intermediaries that perform bank-like activity but are not regulated as one. These include mobile payment systems, pawnshops, peer-to-peer lending websites, hedge funds and bond-trading platforms set up by technology firms. Among the biggest are asset management companies. In 2013 investment funds that make such loans raised a whopping $97 billion worldwide.Shadow banks have flourished in part because the traditional ones, battered by losses incurred during the financial slump, are under pressure.
  5. Critics worry that unlike banks, which lend against deposits from customers, non-banks loan money using investor’s cash and rotating lines of credit. This is especially risky when skittish investors who bet on short term gains withdraw their money at once. But non-bank financing need not always be a bad thing. It offers an additional source of credit to individuals and businesses in countries where formal banking is either expensive or absent.In January last year, America’s Federal Housing Finance Agency proposed new rules that would require all non-banks to have a minimum net worth of $2.5m plus a quarter percentage point of the outstanding loan stock that they service. Only then would they be able to sell their loans to Fannie Mae and Freddie Mac, which buy American mortgages from banks.

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