Economy

In a sign of the unease about Vladimir Putin’s ongoing war in Ukraine that exists behind closed doors in Moscow, one of Russia’s most senior bankers was fired yesterday after a series of critical comments he made earlier in the year about the fragility of Russia’s economy. Warning that Russia was “falling behind” globally both technologically and economically, Andrey Klepach stated the country would fail to win the economic “war of attrition” against Ukraine. “The Ukrainian economy, despite everything, is surviving,” he said. Klepach, chief economist at Russia’s second-largest, state-owned bank VEB, gave a speech in May, during which he linked the pressure on the country’s economy with Putin’s invasion of Ukraine.

The management consulting giant Accenture has laid off 11,000 people. The reason? It turns out that a smart chatbot can churn out meaningless waffle about “boiling the ocean” just as well as a recently hired MBA. Oracle has cut more than 20,000 jobs, as it discovered that Claude or ChatGPT could code as effectively as the quiet guy with glasses, while the legal giant Baker McKenzie is laying off as many as 1,000 people after figuring out that a machine could churn out a letter about “the aforementioned party of interest” as effectively as any of their junior lawyers. America is getting both sides of a process of ‘creative destruction’ Almost every day, another round of white collar professionals falls victim to the AI-driven jobs apocalypse.

Even for an economy as large as the United States, $70 billion still counts as a significant sum of money. After the first round of President Trump’s tariffs were ruled illegal by the Supreme Court, customs officials have already issued that amount in refund checks. Here’s the problem, however: none of it appears to have been passed on to consumers in the form of lower prices. In reality corporate America is pocketing the money – but it is also playing with fire by inviting retaliation from President Trump. Almost no major policy has ever been quite so chaotically implemented as the tariffs imposed by President Trump on the oddly named Liberation Day in April last year.

The most interesting piece of economic policy from the Trump White House is not a tariff, nor is it an AI export restriction. It’s a brokerage account for babies. Under the new Trump Accounts program, eligible American children born between 2025 and 2028 will receive $1,000 from the Treasury, to be invested in a broad index of American companies. Parents, employers, and other benefactors can contribute up to $5,000 more annually. Before these children can walk or speak, they will own their slice of corporate America.  At first glance, this seems uncharacteristically left wing – as if a fever dream from Andrew Yang’s presidential platform had escaped and somehow convinced the Trump administration of its merits.

It won’t be anything on the scale of 1973, when President Nixon imposed year round daylight saving time to reduce electricity consumption as well as a 50mph highway speed limit. Nor are we likely to see the thermostat restrictions, or the standby plans for rationing, that were introduced by President Carter in 1979.  The "oil shocks" of the 1970s were not just from a different era, they were of a different magnitude as well.  Trump may well step in with some form of oil export controls Yet that does not mean that the American economy is immune to another crisis, nor that we won’t see a dramatic response from the White House - because, in reality, the US could easily run out of oil later this year.

For a country that pumps roughly nine million barrels of oil a day – the third highest of any country in the world – Russia has managed to achieve something genuinely remarkable: it cannot keep its own gas stations stocked. More than half of its regions are now reporting shortages, the consequence of a Ukrainian drone campaign that has struck with increasing frequency and precision at the refinery infrastructure on which the country's civilian economy depends. The sometimes hours-long lines that have appeared – even in Moscow, for what may be the first time in the war – carry a symbolic weight that no amount of official reassurance from the Kremlin has managed to dispel. How this has come about is obvious enough.

Vladimir Putin likes good statistics. At a government meeting on April 15, even as he acknowledged that growth was slowing, he pointed proudly to Russia's unemployment rate: 2.1 percent, a record low. Proof, he suggested, that the economy remains fundamentally sound despite everything the West has thrown at it. The Russian President would do better to worry. A record low unemployment rate is not, in normal circumstances, cause for alarm. In Russia's case it signals something closer to a slow-motion emergency. For the first time in its post-Soviet history, Russia has run out of workers.

The head of Swedish military intelligence has dropped what he clearly regards as a bombshell. Thomas Nilsson told the Financial Times this week that Russia's economy is far weaker than it appears, that the Kremlin systematically manipulates its statistics to fool Ukraine's Western allies, and that the central bank is understating inflation, which he believes is closer to 15 percent than the official 5.86 percent. For good measure, he endorsed the German intelligence service BND's earlier estimate that Russia's budget deficit is understated by $30 billion. One need not be a Kremlin agent to find this less than convincing. That Russia's economy is struggling is not in dispute.

Donald Trump's second presidency began with a blaze of executive orders which horrified and impressed in equal measure. It also begged the question: if it really were so easy for a president to circumvent the legal obstacles and assert his will, how come none had behaved in this way before? A year on, we are learning the truth: no, a president can't just do what he likes, and there is a horrible price to pay if he tries. In the case of Trump's "Liberation Day" tariffs the notional bill is $166 billion. That is the sum that US Customs believes it will have to refund to importers who paid tariffs which were ruled unlawful by the Supreme Court in February. A computer portal to handle the refunds was set up this week, the administration of which adds more cost.

A ceasefire has been agreed with Iran. The Straits of Hormuz will reopen. And the oil market will get back to normal very quickly. By Wednesday morning, it looked as if the energy crisis was over. Finance ministers will be breathing a sigh of relief as the crisis abates. But hold on. In reality, the truce is fragile, and huge amounts of supply have been taken out of the market. So long as that remains true, the price of oil, and with it the global economy, will remain stuck. The average price of $90 to $100 a barrel is not what anyone really thinks a barrel of oil is worth The price of oil has been on a wild ride ever since the United States and Israel started the attack on Iran a month ago.

It was, on the surface, a fairly routine proposal. Officials from the BRICS nations, made up of Brazil, Russia, India, China and South Africa, have decided to discuss, at a summit in New Delhi later this year, how to deepen trade and collaboration. No one was paying very much attention when the decision was made. And yet, according to a report in the well-informed newspaper Berliner Zeitung, a resolution was quietly suggested that might turn the global monetary system upside down. It was the start of what might be termed the “plot against the dollar.” America’s currency is likely to face its most serious challenge of the post-World War Two era. BRICS Pay may not sound very exciting.

Have markets and governments horribly underestimated the fallout from the Iran war, or is it the doomsters who have got it horribly wrong? President Trump’s announcement has rather caught the world off guard. This morning, he posted on Truth social saying that he is seeking a negotiated settlement with Iran and has postponed his planned attacks on energy infrastructure. Many expected a huge escalation in hostilities this week. Could this be yet another example of TACO (Trump Always Chickens Out), or was his threat to bomb energy infrastructure another crafted bluff – and that order to the global economy will be swiftly restored?