Mar 15 update

America’s consumer price index rose by 6% year-on-year in February. Annual core inflation, which excludes volatile food and fuel prices, was 5.5%, a 0.1 percentage-point drop from January. The collapse of Silicon Valley Bank may well see the Fed ease tightening and opt for a quarter-point, rather than a half-point, interest-rate rise later this month.

Eva Högl, the German parliament’s defence ombudsman, said that “not a single euro or cent” had been spent of her country’s €100bn ($107bn) fund to modernise its run-down army. Chancellor Olaf Scholz announced the extra spending—double the annual defence budget—three days after Russia’s invasion of Ukraine. Since then there has been little sign of increased military procurement.

American regulators will try again to find a buyer for Silicon Valley Bank, after a first auction for the collapsed lender failed to tempt any big banks, according to the Wall Street Journal. Other mid-tier banks’ share prices plunged amid fears that they would also face a run. First Republic’s fell by nearly 62% on Monday. Asian stocks, including in Japanese banks, dropped sharply when markets opened on Tuesday.

China said America, Australia and Britain were treading the “path of error and danger” by signing the AUKUS defence pact. On Monday the three Anglophone countries announced new details of the deal, aimed to counter Chinese naval strength in the Pacific. Australia will buy three of America’s Virginia-class nuclear-powered submarines, with an option to buy two more.

Credit Suisse found “material weaknesses” in its financial reporting controls for the years 2022 and 2021. The weaknesses relate to the Swiss bank’s failure to maintain effective risk assessments in its financial statements. It is now adopting a remediation plan. Last week Credit Suisse had to delay the release of its now-published annual report, after regulators in America raised questions about its cash-flow statements.

Cyclone Freddy, the longest lasting tropical storm on record, killed more than 100 people in Mozambique and Malawi in overnight mudslides. Setting off from the coast of Australia, Freddy crossed the entire Indian Ocean before first hitting land at Madagascar. The storm, which has now persisted for 35 days and follows a rare loop trajectory, hit the southern African countries twice in one month.

Britain’s Office for National Statistics removed digital cameras, certain CDs, alcopops (colourful low-alcoholic beverages) and other relics of a bygone era from the basket of goods and services it uses to calculate inflation. Products like vegan spreads, e-bikes and frozen berries have replaced them. The new basket will inform Britain’s February inflation data, which will be released on March 22nd.

Fact of the day: 10%, the fall in enrolment in New York City’s public schools in the three years since the pandemic started. Read the full story.

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PHOTO: GETTY IMAGES

How Russia divides the world

On Tuesday Sergei Lavrov, Russia’s foreign minister, attended the inaugural meeting of the International Russophile Movement in Moscow. The organisation, which is linked to Tsargrad, a right-wing, Russian-Orthodox media group, aims to promote Russian culture and society abroad. Mr Lavrov’s spokesperson claims it will counteract the West’s “anti-Russia campaign”, and that delegates from “several dozen” countries will attend.

Russia’s invasion of Ukraine has seen it cast as an international pariah by many—but not all. Earlier this month only five countries (Belarus, Eritrea, Syria, North Korea and Russia itself) rejected a resolution in the UN General Assembly condemning the invasion, out of 181 that voted. But 35 others abstained, including China and India. Moreover, a study of global polling data by the University of Cambridge suggests that in some parts of the world, notably South and South-East Asia, as well as sub-Saharan Africa, public perceptions of Russia remain broadly positive. In such places, the information war still rages.

PHOTO: GETTY IMAGES

Europe’s electricity market gets an update

Electricity markets are tricky to design—especially in Europe, where countries with vastly different energy policies must agree on common rules for electricity production and trading. The EU’s design came under heavy criticism in 2022 when energy costs soared. Like any homogenous good, electricity prices are set by the most expensive supplier. So profits at some power plants with low operating costs, such as wind farms, rocketed. Meanwhile, consumers and businesses had to be supported with billions in taxpayer money.

On Tuesday the European Commission will unveil proposals for an updated electricity market. Those hoping for sweeping changes will be disappointed. Instead the EU will introduce some long-term focus and stability to the market so as to protect consumers from the type of volatility seen last year. For example, countries will be allowed to support longer-term, fixed-price contracts between renewable generators and customers. A repeat of the crisis in 2022 is unlikely. But insulating the market for a more volatile, renewable future still makes sense.

PHOTO: REUTERS

Banking stocks in turmoil

The fallout from Silicon Valley Bank’s collapse is reverberating through markets. Other American regional lenders have been hit especially hard. On Monday two of them, First Republic Bank and Western Alliance Bank, saw their share prices fall by more than 61% and 47% respectively. For these and a clutch of other mid-tier banking stocks, trading was punctuated through the day by repeated pauses due to high volatility. The jitters have spread across the world: Europe’s Stoxx index of bank share prices was down by 7% on Monday. Asian stocks slumped as markets opened on Tuesday.

SVB was brought down by loading up on long-term securities, the value of which fell as interest rates rose; one fear is that after years of low rates others have been similarly reckless. Another concerns an old central-banking adage: that to quell inflation, the Federal Reserve must tighten monetary policy until something breaks. Contagion from SVB may be contained, but its failure suggests that the breakage phase is under way.

PHOTO: AP

San Francisco debates reparations for black residents

Reparations for slavery, under debate in America, are meant to acknowledge both the horrors of the slave trade and its legacy of racial discrimination. In 2019, Evanston, Illinois became the first city to approve a limited government-run reparations scheme, which will distribute $10m over ten years.

On Tuesday, San Francisco’s city council will hold its first public hearing about planned reparations to black residents harmed by past discriminatory policies. The committee that drafted the plan suggests the city should pay each eligible resident $5m, and create housing, education and health policies to tackle racial disparities.

Slavery was never legal in California, but committee members argue that the city owes black San Franciscans compensation for generations of discrimination. City officials seem unlikely to adopt the costly plan. The Hoover Institution, a conservative think-tank, estimates that the lump sums alone could cost the city, already operating with a budget deficit, up to $175bn. And details of how the scheme would be funded are scant.

PHOTO: ALAMY

A hit football TV series returns

Since 2020 “Ted Lasso”, a television series, has offered viewers a cheerful depiction of English football. Ted is an out-of-his-depth American coach hired to run AFC Richmond, a fictional Premier League club. For two series he won over his detractors with little more than kindness and southern charm, motivating players with a homemade sign reading “Believe”. His star players are generally decent.

Season three, released on Apple TV+ on Wednesday, introduces a touch more realism. Nate, a status-obsessed former assistant coach at Richmond, has taken charge at West Ham, a rival (and real) English club. He humiliates his players and takes potshots at Ted in the press. But Ted rises above the petty rivalry.

Yet “Ted Lasso” remains a feel-good comedy, skipping any mention of the human-rights violations, sexual-assault charges or dodgy financial dealings that dog the real sport. Perhaps the writers want viewers to believe that a better way is possible.