Economist 4/5/16

  1. BERNIE SANDERS enters today’s Democratic primary election in Wisconsin with the wind in his sails following his recent triumphs. But if he wins it will be only his fifth victory in a primary election; all his other successes, including his most recent, have been in states that hold caucuses, a more complex system for choosing delegates to the party’s national convention. Caucuses are local meetings of party loyalists that have much lower participation rates than primary elections. They also tend to be dominated by activists.So Mr Sanders has been piling up delegates through the caucus system, though Mrs Clinton remains some 2.4m votes ahead. Happily for Mrs Clinton there are only two caucuses left in the Democrats’ nomination calendar.
  2. The Venezuelan government spends like Father Christmas after too much eggnog, subsidising everything from rural homes to rice. It cannot pay its bills, especially since the oil price collapsed, so it prints money.Cash machines in Caracas spit out crisp new bills with consecutive serial numbers.The IMF predicts that inflation will be 720% in Venezuela this year, a figure Zimbabwe hit in 2006.The prices of several staple goods were fixed to make them “affordable”. They promptly vanished from the shelves.Suppliers, rather than giving goods away at the official price, prefer to sell them on the black market.Outside a state-owned supermarket, a dozen national guardsmen equipped with body armour, truncheons and tear-gas are stopping a pregnant woman from coming in. It’s not one of her designated days of the week for shopping, they explain. (You get two.) Shoppers must show their identity cards to enter the store and have their fingerprints scanned before buying their ration of price-controlled goods. Wily entrepreneurs find ways around price controls without violating the letter of the law.Venezuelan firms have added garlic to rice, called it “garlic rice” and sold it at unregulated prices.By the most overvalued official exchange rate, ten bolívares are worth one American dollar. On the black market, the same dollar fetches 1,150 bolívares.
  3. In our latest round-up of global housing, we find that prices have risen in 20 of the 26 countries we track over the past year, at an (unweighted) average pace of 5.1% after adjusting for inflation. Prices in pre-eminent cities in these countries, however, have risen by 8.3% on average.The value of homes in four cities on the Pacific—San Francisco, Vancouver, Sydney and Shanghai—has increased by 12% a year over the past three years, twice the average national pace.In the conurbations in question, the number of households is rising fast as hordes of ambitious millennials pour in. Two in five of Zurich’s residents were born outside Switzerland; 44% are between the ages of 20 and 44. The boom towns also have tight labour markets and therefore relatively high income growth: the unemployment rate in San Francisco and Stockholm is around a percentage-point lower than the national averages. Some are havens for second homes and money seeking safety: foreigners snap up half of London’s princeliest dwellings.
  4. To determine whether homes are fairly valued The Economist looks at the relationship between prices and disposable income (an indicator of affordability) and between prices and rents (a substitute for buying a home). Across America house prices, after falling by 25% from their peak between 2007 and 2012, are now at fair value compared with rents and incomes. In San Francisco, too, they are at fair value when compared with rents, but 45% overvalued relative to incomes. Thanks largely to their big cities, housing appears to be more than 40% overvalued in Australia, Britain and Canada, according to the average of our two measures. Between 2002 and 2012 the typical London home sold for seven times the city’s average annual salary. That figure has since risen to 12 times.
  5. DISASTER struck Malaysia Airlines twice in 2014.Two years on, Malaysia’s struggling national carrier is still flying, but its financial health remains under scrutiny.Both crashes appeared to have been beyond the firm’s control but hurt business nonetheless. Customers deserted the airline. Chinese flyers feared it was jinxed: sales in China, a crucial market, fell by 60% immediately after the first crash. Shortly after the second disaster, in August 2014, Malaysia’s government renationalised the airline, rescuing it from collapse.In fact the airline was in a mess before the two tragedies. Malaysia last made a profit in 2010. In 2013 the firm lost $356m. Malaysia has all the attributes of a bloated national carrier—too many staff and costs that far outweigh leaner low-cost carriers. It has made some cuts. Last year it fired 6,000 of its 20,000 workers.Unable to compete with the likes of Air Asia for the low-cost market or with Gulf airlines for long-haul customers, Malaysia will concentrate on middle-distance routes. In December it announced a tie-up with Emirates, letting it withdraw from most of the long-haul destinations it still serves in Europe.The airline will rebrand itself after improvements such as introducing on-board Wi-Fi, tarting up its lounges and providing tastier food.
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