World Economy

Credit Suisse in problem

Credit Suisse is taking “decisive measures” to boost its liquidity and for this purpose will borrow up to 50 billion Swiss francs from the Swiss National Bank (SNB), the bank’s management announced. It was also pointed out that this loan is fully secured by prime property values. In addition, the bank offered to issue documents for a cash payment of up to three billion francs.

 

The announced measures came after Switzerland’s financial watchdog pledged help for Credit Suisse to preserve liquidity as the bank’s share price fell 30 percent on Wednesday (March 15th). In this way, Credit Suisse became the first globally systematically relevant bank to receive such assistance after the great financial crisis.

Just hours after it was announced that Credit Suisse would lend money, the value of the bank’s shares rose again. It first jumped to almost 33 percent, and then stabilized at plus 18 percent.

 

Bank of wealthy clients

Credit Suisse is a global Swiss bank and one of the largest banks in the world. She is particularly known for doing business with very wealthy clients. The bank was founded in the 19th century and plays a major role in the Swiss economy, but also in the global financial system. In recent years, however, she has lost quite a bit of her reputation due to various scandals and losses.

In addition, Credit Suisse is currently in the midst of an extensive restructuring costing billions and including the elimination of 9,000 jobs. In the future, the bank wants to focus primarily on doing business with millionaires and billionaires and no longer intends to engage in venture investment banking.

The Swiss National Bank and the financial market supervision agency Finma previously announced in a joint statement that Credit Suisse meets all requirements for systemically relevant banks in terms of capital and liquidity. It is also pointed out that so far there are no indications that the problems of the American banks could also affect the Swiss ones.

The drop in value has caused concern around the world

The collapse of several regional US banks in recent days has caused uncertainty in the banking sector. This particularly affected Credit Suisse, which was already volatile.

Investors also began to pull back as a major Saudi shareholder, the Saudi National Bank, announced on Wednesday (March 15th) that it could not make additional financing available to the Swiss bank. Credit Suisse posted a loss of 7.3 billion francs last year, and customers withdrew 123 billion francs worth of deposits during that period.

The dramatic drop in the value of the shares of that bank, which is the second largest in Switzerland, also caused a drop in the securities of other European banks. The Stoxx Europe 600 Banks banking sector index fell 6.9 percent. In Germany, the shares of Commerzbank lost 8.7 percent – but today those values ​​have recovered again.

Financial supervisory agencies around the world, governments and other financial institutions try to assess the risks. Some governments behind the scenes asked Switzerland to take the necessary measures – which it then did. “FINMA and the SNB are following the development in detail and are in close contact with the Ministry of Finance to ensure financial stability,” the two institutions said in a statement.

What was going on Credit Suisse before this meltdown?

Credit Suisse has been struggling for years.

It was widely seen as the weakest link among Europe’s large banks, according to Kenningham.

The company has been plagued by a series of missteps and compliance failures in recent years that cost it billions and led to several overhauls of top management. And over the past decade, the Swiss bank has been hit with fines and penalties related to tax evasion, misplaced bets and other issues.

In 2014, Credit Suisse pleaded guilty to federal charges that it illegally allowed some U.S. clients to evade their taxes. The bank paid a total of $2.6 billion to the federal government and New York financial regulators as part of the settlement.

The bank’s reputation was damaged by an accounting scandal at Luckin Coffee. Credit Suisse acted as an underwriter when the company went public on the Nasdaq in 2019. The Chinese firm was pulled off the US exchange after it fraudulently inflated sales.

In 2020, Credit Suisse CEO Tidjane Thiam resigned after two high-profile spying scandals involving top bank officials.

A year later, the collapse of the US hedge fund Archegos Capital cost Credit Suisse $5.5 billion and damaged the bank. An independent external investigation later found that Credit Suisse allowed Archegos Capital to take “voracious” and “potentially catastrophic” risks that culminated in the US hedge fund’s spectacular collapse.

In 2022, the bank was hit by social media speculation that it was on the brink of collapse, leading customers to withdraw billions of dollars. That has made profitability a near impossibility for the bank, which has been hemorrhaging money for years.

And last month, Credit Suisse’s stock plunged to record lows after it posted its biggest annual loss since the financial crisis in 2008 and a report surfaced that regulators were reviewing comments the lender’s chairman made about the health of its finances.

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More people are falling behind on car payments

car-loan-delinquencies

Despite the low unemployment rate and stable economy in the United States, the number of delinquent car loans has been on the rise. In fact, according to a Moody’s Analytics analysis, the percentage of auto loans that were more than 30 days behind on payments hit its highest level since 2010. This is a concerning trend, especially since the past few years have been financially beneficial for consumers.

 

Why are More Americans Struggling with Car Loan Payments?

One of the biggest factors that contribute to the rise in car loan delinquencies is the current state of inflation. The prices of everyday goods and services are on the rise, which can make it difficult for people to keep up with their financial obligations. For car owners, this inflation has caused a significant increase in the prices of vehicles, making them more difficult to afford.

Many consumers took out large loans to buy these cars, which means that they have less breathing room when it comes to keeping up with payments. This can put them in a difficult position if they face a financial emergency or unexpected expense.

 

 

 

 

 

Who is Most Affected by Car Loan Delinquencies?

People with low credit scores are the most vulnerable when it comes to car loan delinquencies. According to Moody’s Analytics, approximately 9.3% of auto loans that were extended to people with low credit scores were more than 30 days behind on payments at the end of last year. This highlights the importance of having a good credit score, as it can make it easier for people to access credit and avoid falling behind on their financial obligations.

What are the Consequences of Car Loan Delinquencies?

Falling behind on car loan payments can have a number of consequences, both financial and non-financial. For example, it can lead to additional fees and interest charges, which can make it even more difficult for people to catch up on their payments. Additionally, it can hurt people’s credit scores, which can make it harder for them to access credit in the future.

In some cases, delinquency can lead to repossession, which can be a devastating blow for people who rely on their vehicles to get to work or take care of their families. This can put them in a difficult position, as they may struggle to find alternative transportation options that are affordable and reliable.

What Can Consumers Do to Avoid Car Loan Delinquencies?

The best way to avoid falling behind on car loan payments is to be proactive and plan ahead. This means being realistic about what people can afford and budgeting accordingly. It also means paying attention to interest rates and terms before signing any loan agreements, so that people can be sure that they understand what they are agreeing to.

Additionally, it’s important for people to have an emergency fund that they can rely on if they face unexpected expenses or financial hardships. This can help them avoid falling behind on payments and protect their credit score.

Conclusion

The rise in car loan delinquencies is a concerning trend that highlights the importance of financial responsibility and planning. With inflation on the rise and car prices increasing, it’s more important than ever for consumers to be mindful of their finances and make smart decisions when it comes to borrowing and budgeting. By being proactive and planning ahead, consumers can avoid falling behind on car loan payments and protect their financial wellbeing.

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Benefits from globalization

The Advantages and Disadvantages of Globalization: A Comprehensive Guide

 

Globalization has become a buzzword in recent years, but what exactly does it mean and what are the benefits and challenges associated with it? This article aims to provide a comprehensive guide to the topic of globalization, including its definition, advantages, and disadvantages.

What is Globalization?

Globalization refers to the increasing interconnectedness and interdependence of the world’s economies, societies, and cultures. It is a process that has been driven by advances in technology, transportation, and communication, and has led to a more integrated global marketplace.

Advantages of Globalization

One of the main advantages of globalization is increased trade and investment. With the removal of barriers to trade, businesses and individuals can trade goods and services with people from other countries, leading to increased economic growth and job creation.

Another advantage is the ability for businesses to tap into new markets. By expanding into new markets, businesses can increase their customer base and reach new audiences. This can help them to increase their profits and grow their business.

Additionally, globalization has led to increased cultural exchange and understanding. With greater access to information and the ability to communicate with people from all over the world, people are exposed to different cultures and ways of life, leading to increased understanding and tolerance.

Disadvantages of Globalization

Despite its many benefits, globalization also has its downsides. One of the main disadvantages is that it can lead to job loss as companies move their operations to countries where labor is cheaper. This can be particularly harmful to workers in developed countries, who may find it difficult to find new employment.

Another disadvantage is the negative impact that globalization can have on the environment. With increased trade and travel, there is a greater demand for resources and a greater impact on the environment. This can lead to environmental degradation and climate change.

Furthermore, globalization can also lead to the exploitation of workers in developing countries. Companies may pay low wages and ignore labor laws, leading to poor working conditions for workers.

Conclusion

Globalization is a complex issue with both advantages and disadvantages. While it has led to increased trade and investment, job loss, environmental degradation, and worker exploitation are all potential downsides. As such, it is important for governments and businesses to work together to address these challenges and ensure that the benefits of globalization are shared by all.

In conclusion, while globalization has brought many benefits, it is important to carefully consider its impact and to work towards creating a more sustainable and equitable global economy.

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Oil price cap

Industrialized countries in the Group of Seven are imposing a price cap on refined Russian oil products such as diesel and kerosene, as part of a coalition that includes Australia and a tentative agreement from the European Union.

The cap follows similar price limits put on Russian oil exports, with the goal of reducing the financial resources Russian President Vladimir Putin has to wage the nearly year-long war in Ukraine.

“Today’s agreement builds on the price cap on Russian crude oil exports that we set in December and helps advance our goals of limiting Russia’s key revenue generator in funding its illegal war while promoting stable global energy markets,” U.S. Treasury Secretary  Yellen said in a statement.

On Friday, EU governments tentatively agreed to set a $100-per-barrel price cap on sales of Russian diesel to coincide with an EU embargo on the fuel. Diplomats representing the 27 EU governments set the cap on Russian diesel fuel, jet fuel and gasoline ahead of a ban taking effect Sunday. It aims to reduce Russia’s income while keeping its diesel flowing to non-Western countries to avoid a global shortage that would send prices and inflation higher.

Details about the cap were provided by a G-7 statement and diplomats from three different EU member nations, who agreed to discuss the cap on the condition of anonymity.

The $100-per-barrel cap applies to Russian diesel and other fuels that sell for more than the crude oil used to make them. Officials agreed on a $45-per-barrel limit on Russian oil products that sell for less than the price of crude.

The deal follows a similar G-7 agreement to limit the price of Russian crude oil to $60 a barrel. All the price ceilings are enforced by a requirement for the world’s largely Western-based shippers and insurers to abide by sanctions and handle oil products only priced at or below the limits.

 

RUSSIA REACTION

 

Russia has said it will not sell to countries obeying the oil cap, but because its oil is selling for less than $60 per barrel, it has kept flowing to the global market. The price caps encourage non-Western customers that have not banned Russian oil to press for discounts, while outright evasion — though possible — carries additional costs such as organizing off-the-books tankers.

The ambassadors of the 27 EU nations put forward the decision, and national governments have until early Saturday to react with a written objection. No changes to the deal were expected.

Europe has been steadily reducing its diesel supplies from Russia from around half of all imports. Diesel is key for the economy because it is used to power cars, trucks carrying goods, farm equipment and factory machinery. Prices have spiked since Russia invaded Ukraine on rebounding demand and limited refinery capacity in some places.

If the price cap works as intended and Russian diesel keeps flowing, fuel prices should not skyrocket, analysts say. Europe could get alternate supplies of diesel from the U.S., India and the Middle East, while Russia could seek new customers outside Europe.

However, the impact of the cap will be unpredictable as shippers reroute flows of the fuel to new destinations, and longer sea journeys could strain tanker capacity.

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Inflation in EUROZONE

Inflation in EUROZONE

INFLATION IN EUROZONE



Inflation in the eurozone fell more than expected in December, ending a two-month period when the rate was in double digits.

The flash index of consumer prices among the 20 European member countries rose at an annual rate of 9.2 per cent in December, down from the 10.1 per cent rate the previous month and a record annual rate of 10.6 per cent in October.

The drop exceeded expectations of a fall to 9.5 per cent in a Bloomberg survey of economists.

Core inflation, excluding volatile energy, food and fuel prices, however, rose to a new high of 5.2 per cent, highlighting policymakers’ fears that lower petrol and energy prices would bring down the headline rate without addressing underlying inflationary pressures.

With core inflation rising and more than twice the European Central Bank’s 2 per cent target, Philip Rush, founder of consultancy Heteronomics, said: “Inflation won’t be able to sustainably return to the target until this core problem is conquered.”

François Villeroy de Galhau, the French central bank governor, said on Thursday that the ECB would need to keep raising interest rates to address the problem of underlying price pressures.

He said the programme of monetary tightening would probably end by the summer, but did not say how much further he thought interest rates needed to rise from the current 2 per cent rate. Financial markets expect a peak in eurozone interest rates of roughly 3.5 per cent.

Inflation Rates Across Europe May Be Falling

…but they still are considerably above target

In the short term, unseasonably warm weather has calmed fears of an energy crunch and brought gas prices down to pre-war levels. But with the euro region now only expected to experience a short and shallow recession, demand — and inflation, in turn — could hold up.

Separate figures Friday showed economic sentiment recovering for a second month in the euro area in December, while remaining below its long-term average.

The latest ECB projections see price gains averaging 6.3% in 2023 and still remaining above the 2% target in 2025.

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Average UK house price falls for fourth month in a row

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Average UK house price falls for fourth month in a row

The average UK house price fell for the fourth month in a row in December, according to Halifax, with experts expecting a further slowdown amid a long recession.

Property values decreased by 1.5% in December, the lender’s monthly index revealed, after a 2.4% drop in November, a 0.4% decrease in October and a 0.1% dip in September.

 

The annual rate of house price growth more than halved, to 2% in December, from 4.6% in November. That marked the lowest annual growth rate recorded since October 2019, when a 1.1% increase was recorded.

 
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The UK housing market has been through a volatile period in recent months. The Bank of England has raised interest rates nine times in the past year, and it believes that the country has already entered what could be the longest recession in 100 years. Mortgage payers forced to refinance their loans are among the worst hit by the cost of living crisis after many found their annual bills increasing by more than £3,000 a year.

Across the UK the average house price in December was £281,272, Halifax said. That was 4.3% below the record high of nearly £294,000 in August, although still above the price at the start of 2022.

Higher interest rates have also deterred housebuilders from embarking on new projects, according to data published on Friday that shows the construction sector contracted in December.

Orders for new homes slumped while plans for civil engineering projects and commercial office building were also put on hold, according to the latest S&P Global/CIPS construction purchasing managers index, which fell from 50.4 in November to 48.8 in December. A figure below 50 indicates activity in the sector shrank.

 

Martin Beck, the chief economic adviser to the EY Item Club, said: “With a slowdown in the housing market and an expected outright [annual] fall in house prices, it’s likely the appetite for new home construction has deteriorated.”

The difficulties for housesellers in 2022 were compounded by the UK government, whose disastrous “mini-budget” under then prime minister Liz Truss and her chancellor Kwasi Kwarteng in September triggered a surge in mortgage rates.

A policy reversal by their successors eventually restored some calm to the market, and lenders this week responded to falling demand for mortgages by cutting mortgage rates. TSB will cut rates on five-year fixed rate mortgages for buyers by up to a percentage point from Monday. The rate for a five-year fixed rate mortgage when borrowing 85% of the property value will fall to 5.49%.

Nationwide, the UK’s largest building society, will cut up to 0.6 percentage points from its mortgage rates on Friday. The rate for a five-year fixed rate mortgage when borrowing 85% of the property value dropped to 4.84%.

Andrew Wishart, senior property economist at Capital Economics, a consultancy, said the Halifax price data suggested that “the house price correction is further advanced than we previously thought”.

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Germany risks a factory exodus as energy prices bite hard

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Germany risks a factory exodus as energy prices bite hard

FACTORY EXODUS

Potential factory exodus in Europe’s industrial heartland faces  manufacturers of German car parts, chemicals and steel struggle to absorb power prices that rocket to new highs almost every day.

Power and gas prices in Germany more than doubled in just two months, with year-ahead electricity — a benchmark for the continent — soaring past 540 euros ($545) per megawatt hour. Two years ago, it was 40 euros.

“Energy inflation is way more dramatic here than elsewhere,” said Ralf Stoffels, chief executive officer of BIW Isolierstoffe GmbH, a maker of silicone parts for the auto, aerospace and appliance industries. “I fear a gradual deindustrialisation of the German economy.”

The nation relied on gas from Russia to fuel its power plants and factories, but now it’s preparing for an unprecedented challenge to keep lights on and businesses running after Russia slashed those flows. Temporary shutdowns due to high prices have been seen before, with fertilizer and steel production curbed in December and March.

Now, prices are seeing an even more sustained rally that’s tightening the squeeze. European gas for next month settled Thursday at a record high of 241 euros per megawatt-hour, about 11 times higher than usual this time of year.

While the government is limiting the increases faced by households to some extent, businesses aren’t immune to those soaring costs, and many are set to pass on increases to customers or even shut altogether.

“Prices are placing a heavy burden on many energy-intensive companies competing internationally,” said Matthias Ruch, a spokesman for Evonik Industries AG, the world’s second-largest chemical producer with plants in 27 countries.

The company is substituting as much as 40% of its German natural gas volumes with liquefied petroleum gas and coal, and passing some higher costs on to customers. But the notion of relocating is a nonstarter, a spokesman said.

Still, there’s evidence that Germany’s industrial position is slipping. In the first six months of this year, the volume of chemical imports rose by about 27% from the same period last year, according to government data analyzed by consultancy Oxford Economics. Simultaneously, chemical production fell, with output in June down almost 8% from December.

The International Monetary Fund said last month that Germany is set to be the worst performer in the Group of Seven nations this year due to industry’s reliance on Russian natural gas.

Europe’s largest copper producer, Hamburg-based Aurubis AG, aims to minimize gas use and pass on power costs to customers, CEO Roland Harings said August 5. Sugar giant Suedzucker AG devised emergency energy plans in the event Russia completely cuts off gas supply to Germany, a spokesperson said by email.

BMW AG is stepping up its preparations for a potential shortage. The Munich-based automaker runs 37 gas-powered facilities that generate heat and electricity at plants in Germany and Austria, and it’s considering using local utilities instead.

Packaging firm Delkeskamp Verpackungswerke GmbH plans to close a paper mill in the northern city of Nortrup because of high energy costs, with 70 workers losing their jobs.

A prolonged ascent for energy prices may wind up transforming the continent’s economic landscape, said Simone Tagliapietra, senior fellow at Brussels-based think tank Bruegel.

“Some industries will go under serious stress and will have to rethink their production in Europe,” he said.

Chinese factory exodus

The exodus of Chinese manufacturing goes hand-in-hand with a surge of outbound investment. This is up more than 50% in the first 11 months of 2016 from a year earlier, with manufacturers involved in more than a third of China’s overseas mergers during that period. At the same time, China’s private sector investment at home rose just 3.1%.

The prospect of reaching a Trans-Pacific Partnership (TPP) agreement accelerated such supply chain shifts. TPP would make Vietnam an open economy and a favourable destination for FDI. With other ASEAN countries intent on joining too, a pattern similar to 1990s’ Pearl River Delta was emerging with countries such as Indonesia introducing economic stimulus packages to encourage foreign investment, and keeping currency at low levels. The whole regional block was poised to replace the Pearl River Delta region, benefit from lower labour costs, and emerge as the world’s low cost manufacturing centre.

President Trump’s abrupt cancellation of TPP has now thrown doubt on the viability of importing to the US. In the short-term, reshoring and FDI in the US should gain renewed impetus. But one thing is for sure, these manufacturers will not be returning to China.

 

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America v Europe: A comparability of riches leaves either side red-faced

comparability of riches

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comparability of riches
America v Europe: A comparability of riches leaves either side red-faced

Can comparibility of riches be made?

 

When David Hockney’s mom visited the British artist in Los Angeles she made an commentary that factors to the difficulties with transatlantic financial comparisons. “Strange,” she stated, after a few days within the solar, “all this lovely weather and you never see any washing out.”

It is an commentary many European guests have echoed. American travellers to Europe, in the meantime, typically despair at washer-dryer machines that depart garments damp. Indeed, for some American writers the dearth of standalone dryers is symbolic of the continent’s backwardness. While financial statistics ought to remedy such debates—by permitting for apples-to-apples comparisons—they don’t seem to be resistant to the issues posed by cultural variations. Is it that Europeans can’t afford correct tumble dryers? Or are they merely getting their “drying services” freed from cost?

Questions like these are vital when evaluating nations. On the floor, America has by far one of the best case for prosperity. Gross home product (gdp) per individual is nearly $70,000. The solely European nations the place it’s larger are Luxembourg, Switzerland, Norway and Ireland, the place figures are distorted by corporations’ revenue shifting.

In Germany, Europe’s financial powerhouse, gdp per individual (adjusted for purchasing-power parity) is $58,000. That places it degree with Vermont, however far beneath New York ($93,000) and California ($86,000). The comparisons are even much less flattering for different European nations. Incomes in Britain and France are equal to these in Mississippi ($42,000), America’s poorest state.

Yet loads is hidden by these figures. To perceive why, think about how they’re calculated. Spending is deflated by some measure of worth, to permit correct comparisons between nations of the quantity of products and providers bought. For manufactured items it is a simple calculation: the quantity Americans spend on dryers, divided by an index of their value, will give a fairly correct determine for complete consumption.

For providers, it’s tougher to work out an affordable deflator. And that issues as a result of it’s right here, relatively than family home equipment, the place Europe and America differ most. Combined spending on well being care, housing and finance accounts for about half the distinction in consumption between America and the most important European economies. In 2019 Americans consumed $12,000-worth of well being providers per individual; Germans managed simply $7,000.

The problem in figuring out an affordable deflator is partly conceptual. What are individuals paying for after they purchase well being care, a service or an end result? Is a unit of “health-care services” the price of a selected therapy or the price of well being? What does being wholesome even imply?And can we make comaprability of riches International worth indices merely (and a bit unsatisfactorily) calculate the worth per therapy. These differ considerably.

The oecd, a membership of largely wealthy nations, estimates {that a} hip alternative in Norway prices seven occasions as a lot as one in Latvia and Lithuania. In any case, whereas American costs are larger than European ones, the hole shouldn’t be sufficiently big to account for the distinction in health-care consumption: Americans additionally endure tons extra medical therapy.

Simon Kuznets, a Nobel-prize-winning economist and statistician, advised estimates of gdp ought to exclude issues an “enlightened social philosophy” would think about harms relatively than advantages. For him, that included weapons, promoting, a lot of finance and something essential to “overcome difficulties that are, properly speaking, costs implicit in our economic civilisation”.

Many Europeans would counsel this class rightfully contains American health-care spending. Life expectancy in America is 5 years decrease than in Italy; a number of cash is spent fixing the harm finished by larger ranges of violent crime, site visitors accidents and weight problems. Follow Kuznets’s recommendation—by eradicating from the calculation finance, well being, public administration and defence spending—and the hole between America and Germany in gdp per hour labored drops from $11 to only $4.

Much of the remaining hole is accounted for by “housing services”, a class of consumption equally bedevilled by conceptual difficulties. International comparisons are finished on the premise of the rental value per sq. metre. That flatters sparsely populated America and its sprawling cities, the place rents are usually cheaper. While practically everybody would relatively have a much bigger home, preferences for suburban over city dwelling are hardly common.

 

Top greenback

 

There are diminishing returns to America’s spending on well being care. But treating all of it as an extra value can be a mistake. Cancer survival charges are larger in America than Europe. Health-care spending will be thought-about a luxurious good {that a} richer nation could select to spend extra on (Germany, Norway and Switzerland spend essentially the most in Europe). Meanwhile, as American defence hawks prefer to level out, Europe’s low army spending is feasible solely due to America’s largesse and the safety it gives.

America has different real benefits. The mixture of upper productiveness and the truth that employees spend extra time at work permits Americans to get pleasure from higher portions of client electronics, vehicles, furnishings and garments. The solely classes wherein Germans and the French constantly eat extra are schooling, spending overseas, and food and drinks, suggesting there’s something to stereotypes of Europe’s cosmopolitan café tradition and America’s infatuation with client items.

Still, whereas arguments will be made for Europe, there isn’t any means of slicing the info, regardless of your columnist’s greatest efforts, to make the continent’s greatest economies richer than America. Even within the areas the place Europe does eat greater than America, the old-world economies should not forward by a lot. Maybe the true lesson of the comparability is that neither facet must be glad: Europeans needs to be sad with their decrease incomes; Americans actually needs to be getting much more from their riches. ■

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