Economy

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?

The war with Iran is exposing a vulnerability at the heart of the global gas market: the extraordinary concentration of liquefied natural gas supply in the Persian Gulf. Qatar alone accounts for roughly a fifth of global LNG exports, almost all of it passing through the narrow Strait of Hormuz. The conflict has illustrated how easily a single maritime chokepoint could interrupt a significant share of the world’s gas trade. Even if the war ends soon, the vulnerability it has exposed will not disappear President Donald Trump has suggested the conflict may soon end, describing the campaign as largely achieved and possibly over "very soon." The Gulf monarchies also appear eager for a quick resolution, even as they continue to face missile and drone attacks.

Of all the parties watching the chaos in the Middle East unfold, one should be rubbing its hands together with particular satisfaction. Russia has not fired a shot in this conflict, lost no allies it cannot afford to lose and has so far gained rather a lot, with more to come. A cynic might call it the perfect war for Vladimir Putin. Moscow's public reaction has been characteristically theatrical. The Foreign Ministry denounced American and Israeli actions as a "reckless step" and a "dangerous adventure." Things have gone no further. There has been no announcement of political or military support for Iran from the Kremlin – nor is there likely to be: Russia needs its drones and missiles for Ukraine.

Today marks the 250th anniversary of the publication of The Wealth of Nations: Adam Smith's seminal text in the history of economics. Smith gave his name to the institute that I co-founded, so you might expect me to advocate for reading his most famous text. But you shouldn’t. It’s very long, written in elegant but spacious prose and full to exasperation of examples, observations and terminologies that puzzle a modern reader. Read my Condensed Wealth of Nations instead or wait for my cartoon graphic novel to come out later in the year. Smith would see the scale of government today as the greatest tyranny Nonetheless, modern unreadability doesn’t mean that The Wealth of Nations is unimportant.

At a rally in Georgia on Thursday night, President Trump declared that he couldn’t wait “forever” for the Supreme Court to rule on the legitimacy of his sweeping tariff policy. Whether or not the court was listening to his complaint, forever arrived today as it handed Trump a thumping defeat. It struck a blow not only for fiscal but also political sanity. Government intrusion upon the free enterprise system is bound to prove inimical to prosperity and liberty The language of the ruling was as lapidary as it was persuasive. “President asserts the extraordinary power to unilaterally impose tariffs of unlimited amount, duration and scope,” Chief Justice John Roberts wrote in the 6-3 opinion.

“The Somali pirates who ransacked Minnesota remind us that there are large parts of the world where bribery, corruption and lawlessness are the norm, not the exception,” said Donald Trump in his State of the Union address last night, as the Democrats booed and heckled him. Media commentators scoffed at Trump’s inflammatory rhetoric. But the President, who estimated that $19 billion had been lost to fraud in Minnesota alone, is if anything underplaying the scale of the problem. The extent of fraud across blue state (that is, Democrat-led) America is truly monstrous, and each week brings fresh revelations of swindling on a truly epic scale.

As the hype builds for the reported $1.5 trillion IPO of Elon Musk’s SpaceX later this year, there will be plenty of critics who argue the company’s marketing has more hot air than one of its rockets. It has been claimed by some that the IPO will be worth more than the top seven companies currently listed on the London Stock Exchange – including century-old giants such as Shell, HSBC and AstraZeneca – combined. And yes, sure, there is probably an element of wishful thinking in these reports, as there often is with Musk. But SpaceX also has the potential to become one of the giants of the 21st-century economy and is very likely to prove its worth. SpaceX's will be the biggest IPO of the year.