Financial repression refers to a set of governmental policies that keep real interest rates low or negative and regulate or manipulate a captive audience into investing in government debt. This results in cheap funding and will be a prime tool used by governments in highly indebted developed market economies to improve their balance sheets over the coming decades. … We should all be familiar with the effects of financial repression by now. If not, compare the declining amount of interest income coming out of your savings account to the rising costs you pay for groceries, gasoline, or (shield your eyes) college tuition. It has been nearly five years since we heard a loud “THUD” as the nominal yield of the short term U.S. Treasury note hit zero percent. The resulting negative real interest rates have become a pervasive feature of our economic landscape, and we expect them to persist for a very long time.

Something is going to have to give. The credit boom could presage a pick up in near-term growth, but the point is that sooner or later, the government is going to have tighten credit policy and shadow banking regulation more than it has done so far. Sooner would risk some economic growth, later would risk financial stability. It’s a political choice, which the government must feel emboldened and confident to make: five years of 5% real growth, for example, gets you to the same place as a year of around 8%, followed by four years at 4%, but without disruptive and politically sensitive consequences.

Is the new central-bank governor’s optimism warranted? … WHEN Mark Carney was governor of the Bank of Canada he made a habit of warning his compatriots that a day of reckoning was coming if they did not stop piling up debt. The central bank would not keep interest rates low forever. Eventually the overnight rate would rise from 1%, where it has been since 2010, putting pressure on indebted Canadians. ... Mr Carney is now grappling with Britain’s overleveraged consumers. His successor at the Bank of Canada, Stephen Poloz, has been delivering a cheerier message since he took over in June, even though household debt and house prices are at record levels (see chart). He has expressed confidence that Canadian consumers are doing the arithmetic in order to manage their debts, and looks forward to the day when exports and investment drive economic growth. Has the situation changed, or just the man?

Rodney Durham stopped working in 1991, declared bankruptcy and lives on Social Security. Nonetheless, Wells Fargo lent him $15,197 to buy a used Mitsubishi sedan. ... “I am not sure how I got the loan,” Mr. Durham, age 60, said. ... Mr. Durham’s application said that he made $35,000 as a technician at Lourdes Hospital in Binghamton, N.Y., according to a copy of the loan document. But he says he told the dealer he hadn’t worked at the hospital for more than three decades. Now, after months of Wells Fargo pressing him over missed payments, the bank has repossessed his car. ... This is the face of the new subprime boom. Mr. Durham is one of millions of Americans with shoddy credit who are easily obtaining auto loans from used-car dealers, including some who fabricate or ignore borrowers’ abilities to repay. The loans often come with terms that take advantage of the most desperate, least financially sophisticated customers. ... Auto loans to people with tarnished credit have risen more than 130 percent in the five years since the immediate aftermath of the financial crisis, with roughly one in four new auto loans last year going to borrowers considered subprime — people with credit scores at or below 640. ... While losses from soured car loans would be far less than those on subprime mortgages, the red ink could still deal a blow to the banks not long after they recovered from the housing bust. Losses from auto loans might also cause the banks to further retrench from making other loans vital to the economic recovery, like those to small business and would-be homeowners. ... In another sign of trouble ahead, repossessions, while still relatively low, increased nearly 78 percent to an estimated 388,000 cars in the first three months of the year from the same period a year earlier, according to the latest data provided by Experian. The number of borrowers who are more than 60 days late on their car payments also jumped in 22 states during that period.

It’s 2 a.m. at the La Factoria bar in Puerto Rico’s Old San Juan, a hipster joint with a sagging couch, tile floors, and Christmas lights that wouldn’t be out of place in Brooklyn’s Williamsburg. While Get Lucky plays, tipsy couples slink out the doors onto the colonial city’s cobblestone streets and into this warm April night. At the bar, a 28-year-old hedge fund trader—the type of person who posts his SAT results on his LinkedIn page—is ranting about the tax code. He’s obsessed with it, complaining that the U.S. is the only major country taxing citizens on their worldwide income, no matter where they reside. That’s why he moved here. ... Struggling to emerge from an almost decadelong economic slump, the Puerto Rican government signed a law 18 months ago that creates a tax haven for U.S. citizens. If they live on the island for at least 183 days a year, they pay minimal or no taxes, and unlike with a move to Singapore or Bermuda, Americans don’t have to turn in their passports. (Puerto Ricans are U.S. citizens but cannot vote in federal elections.) About 200 traders, private equity moguls, and entrepreneurs have already moved or committed to moving, according to Puerto Rico’s Department of Economic Development and Commerce, and billionaire John Paulson is spearheading a drive to entice others to join them. ... Most of the new arrivals downplay Puerto Rico’s fiscal problems, which include runaway pension obligations and an underground economy that leads to low tax collection rates. They’re also convinced their 20-year contracts with the government guaranteeing the tax benefits are sacrosanct. They will survive the inevitable Internal Revenue Service audits, they say, as long as they follow the residency rules.

Investors are wary that the tranquility in eurozone bond markets could breed complacency ... Whether this new phase in the eurozone crisis is sustainable or simply the calm before the next storm will help determine the eurozone’s future. The stability reflects market confidence in the eurozone’s prospects – and the fact that fickle international investors fled at an early stage of the crisis. But overreliance on domestic investors has thrown Europe’s economic integration into reverse and may prove dangerous. While the calm may provide breathing space – lower bond yields cut financing costs – it could breed complacency. ... arguably a much bigger reason for the recent stability in eurozone bond markets across much of the rest of the region is that foreign investors have retreated. So far this year, domestic investors have accounted for almost 100 per cent of the net issuance of Italian and Spanish government debt, according to calculations by BNP Paribas. Of outstanding Spanish bonds, almost 70 per cent is currently held domestically. For Italy, the figure is almost 60 per cent. ... Japan has illustrated how a country, with strong domestic ownership, can operate with a level of public sector debt equivalent to more than 200 per cent of national output and still keep official borrowing costs down. Yields on 10-year Japanese government bonds are just 0.6 per cent. ... Yet the stability created by “re-domestication” of eurozone bond markets could prove fragile. A mounting concern of eurozone policy makers is the increased mutual dependence between banks and governments in the eurozone periphery, which could quickly exacerbate financial instability if a fresh crisis erupted somewhere in the financial system. ... The links between banks and sovereigns “basically changes the nature of the eurozone. Banks are acting as the arms of the central bank to help governments avoid default” ... Without outside investment, the struggling periphery economies could find it even harder to escape recession and produce the growth needed to reduce public-sector debt mountains.

“We’ve lost credibility in the market,” said Sergio Marxuach, director for policy development at the Center for a New Economy, a nonpartisan research institute in San Juan, the capital. “We used all that money to finance current expenditures, to refinance debt that had little or no impact on the real economy.” ... Colon de Armas said Puerto Rico’s leaders haven’t done enough to make local industry competitive in the global economy and are instead counting on tax incentives or other assistance from Washington to protect businesses. The global slowdown and Detroit’s bankruptcy are less important, he said. ... “We were in recession when the world was having good economic times,” he said. “It’s true that the world has had bad economic times recently, but we are uniquely depressed.” ... Besides the economy, rising crime is also persuading people to leave. The homicide rate is about 27 for every 100,000 people, compared with the U.S. average of 4.7, according to 2012 data from the FBI.

From the cyclical monthly high in interest rates in the 1990-91 recession through June of this year, the 30-year Treasury bond yield has dropped from 9% to 3%. This massive decline in long rates was hardly smooth with nine significant backups. In these nine cases yields rose an average of 127 basis points, with the range from about 200 basis points to 60 basis points (Chart 1). The recent move from the monthly low in February has been modest by comparison. Importantly, this powerful 6 percentage point downward move in long-term Treasury rates was nearly identical to the decline in the rate of inflation as measured by the monthly year-over-year change in the Consumer Price Index which moved from just over 6% in 1990 to 0% today. Therefore, it was the backdrop of shifting inflationary circumstances that once again determined the trend in long-term Treasury bond yields. ... In almost all cases, including the most recent rise, the intermittent change in psychology that drove interest rates higher in the short run, occurred despite weakening inflation. There was, however, always a strong sentiment that the rise marked the end of the bull market, and a major trend reversal was taking place. This is also the case today. ... Presently, four misperceptions have pushed Treasury bond yields to levels that represent significant value for long-term investors. These are:
1. The recent downturn in economic activity will give way to improving conditions and even higher bond yields.
2. Intensifying cost pressures will lead to higher inflation/yields.
3. The inevitable normalization of the Federal Funds rate will work its way up along the yield curve causing long rates to rise.
4. The bond market is in a bubble, and like all manias, it will eventually burst.

According to the city, the Taxi King controls 860 cabs (Freidman says he actually operates more than 1,100). That’s more than anyone else in town. Factor in the hundreds of vehicles he has in Chicago, New Orleans, and Philadelphia, and he’s almost certainly the most powerful taxi mogul in the country. Freidman makes money by leasing the cabs to drivers on a daily or weekly basis. ... To own a cab in New York, you need a medallion—a metal shield displayed on the vehicle’s hood—and there are a fixed number issued by the New York City Taxi & Limousine Commission (TLC). Until very recently, medallions were a good thing to have a lot of. In 1947, you could buy one for $2,500. In 2013, after a half-century of steady appreciation, including a near-exponential period in the 2000s, they were going for $1.32 million. ... desperate medallion sellers are trying to fob off their little tin ornaments for as little as $650,000. ... This has had a profound effect on Freidman, whose net worth appears to be in free fall. ... The day the cap was defeated, 22 of Freidman’s companies, owning 46 medallions, filed for bankruptcy. ... “Honestly, I would love the piece not to be about ‘We had breakfast at Cipriani, then we walked over to his Park Avenue apartment, then we got into his Ferrari.’ ” ... If Uber is chiefly responsible for driving down the price of taxi medallions, Freidman played a big role in driving it up in the first place. Allow him to explain his strategy: “I’d go to an auction, I’d run up the price of a medallion, then I’d run to my bankers and say, ‘Look how high the medallions priced! Let me borrow against my portfolio.’ And they let me do that.” ... According to the Citibank bankruptcy filing, Freidman’s companies owe roughly $750,000 on each Citibank medallion.

For Zeines and Hurwitz, their time in the promised land has turned out to be a little disappointing. Given the things they’ve seen, life’s long since lost the ability to surprise. With a pound of lox as a housewarming gift, I’ve come to their tax-haven sex mansion to hear their improbable story—how two sons of an ultrareligious Jewish neighborhood in Brooklyn witnessed the birth of a new kind of lending, made a fortune, and then saw it all come to an end. Not in the form of an FBI raid, but with Wall Street bankers paying millions to take over the action. ... Zeines and Hurwitz made their money in a field that’s now called merchant cash advance. ... At Second Source, the best customers were the most desperate. Often they were immigrants with poor English. Brokers bragged about their biggest rip-offs. For motivation, Hurwitz would tape $100 bills to the wall. Salesmen who weren’t cutting it would have their chairs taken away. “Why are you sitting on my chair,” Hurwitz would yell, “if you’re not making me any money?”

Beware the Ides of March, or the Ides of any month in 2015 for that matter. When the year is done, there will be minus signs in front of returns for many asset classes. The good times are over. ... Timing the end of an asset bull market is nearly always an impossible task, and that is one reason why most market observers don’t do it. The other reason is that most investors are optimists by historical experience or simply human nature, and it never serves their business interests to forecast a decline in the price of the product that they sell. Nevertheless, there comes a time when common sense must recognize that the king has no clothes, or at least that he is down to his Fruit of the Loom briefs, when it comes to future expectations for asset returns. Now is that time and hopefully the next 12 monthly “Ides” will provide some air cover for me in terms of an inflection point. ... Even with the recognition of the Minsky Moment in 2008 and his commonsensical reflection that “stability ultimately leads to instability,” investors have continued to assume that monetary (and at times fiscal) policy could contain the long-term business cycle and produce continuing prosperity for investors in a multitude of asset classes both domestically and externally in emerging markets. ... If real growth in most developed and highly levered economies cannot be normalized with monetary policy at the zero bound, then investors will ultimately seek alternative havens. Not immediately, but at the margin, credit and assets are exchanged for figurative and sometimes literal money in a mattress. As it does, the system delevers, as cash at the core or real assets at the exterior become the more desirable holding. The secular fertilization of credit creation and the wonders of the debt supercycle may cease to work as intended at the zero bound.

Future business activity will reflect two economic realities: 1) the over-indebted state of the U.S. economy and the world; and 2) the inability of the Federal Reserve to initiate policies to promote growth in this environment. ... The first reality has been widely acknowledged, as developed and developing countries both have debt-to-GDP ratios sufficiently large to argue for a slowing growth outlook. ... The second economic reality is the failure of the Federal Reserve to produce economic progress despite years of wide-ranging efforts. The Fed’s zero interest rate policy (ZIRP) and quantitative easing (QE) have been ineffectual, if not a net negative, for the economy’s growth path. ... The evidence speaks for itself: the Fed cannot print money. The Fed does not have the authority or the mechanism to print money. They have not, they are not and they will not print money under present laws.

On a typical day Westlake finances 750 cars. It currently has 336,000 outstanding loans, each originating from one of the 23,000 dealerships it works with (everyone from CarMax to small mom-and-pop used car lots). ... most of Hankey’s borrowers aren’t average–they are financial underachievers with credit scores below 600. Many have bankruptcies, past repossessions or limited credit histories–things that make them unattractive to traditional lenders. That’s where Hankey steps in. While Westlake offers loans as low as 1.65%, it specializes in financing credit-challenged car buyers–at an eye-popping rate of 19%, more than double the average for used car loans. ... They typically shell out $344 per month over 49 months, or $16,860 on a $12,000 loan. That translates to an extra $3,920 in interest over the life of the loan when compared to the 3.67% rate a borrower with good credit gets when buying a new car, according to Experian. Sure, each month the company has to write off about $17 million in unpaid loans, but it still banks a profit of around $20 million. In 2014 Westlake netted $230 million on $600 million in revenues. ... He joined forces with the ride-share leviathan in September 2014 as its only outside financing partner. Spanish bank Santander had been working with Uber, offering a lease-to-own program, but that relationship ended earlier this year. Would-be Uber drivers who are looking to purchase a car can get pre-qualified online in a matter of minutes. ... so far a greater portion of its Uber drivers are behind on their payments compared to its typical subprime borrowers, apparently not earning enough to cover the costs.

Major advanced economies have made mixed progress in repairing the private sector’s balance sheets. This column explores private sector deleveraging trends and calls for a set of policies that will return debt to safer levels. Monetary policies should support private sector deleveraging and policymakers should not ignore the positive impact of debt restructuring and write-offs on non-performing loans. ... Projections of debt ratios based on World Economic Outlook data of inflation and growth suggest that nominal growth might not be sufficient to eliminate high debt loads everywhere. Blanchard (2015) warns that there are no magic long-run debt-to-GDP numbers to target but a number of countries that saw sharp increases in debt levels would still remain above their pre-crisis averages (Figure 1). For example, gross non-financial corporate debt in France, Japan, Portugal, and Spain would remain above or near 70% of GDP by 2020 under current World Economic Outlook projections of growth and inflation, higher than their pre-crisis averages and higher than those of other major advanced economies.

Europe is beset by so many crises that it can be hard to remember them all. In rough order of prominence, they are: homegrown terrorism, the largest migration of people since World War II, sovereign debt, doubts about the euro’s viability, the rise of extreme right-wing parties such as France’s National Front, Russia’s menace to its western neighbors, growing Euro-skepticism (especially in Britain, which may easily vote to leave the European Union in a forthcoming referendum), the election of hard-line governments in Central and Eastern Europe, and the Catalan independence movement. Many of these are related—the sovereign-debt crises and doubts about the euro, for example—but they have combined over the last two years into a perfect storm which, with the notable exception of Germany’s Angela Merkel, has shown Europe’s leadership to be wanting in both speed and imagination. ... This is exactly what ISIS wants: to shut non-Muslim Europe down, to close the schools and places of culture and have people trembling in their beds, which, to be fair, was what ordinary Belgians were saying. ... The last time I knew for certain that I was witnessing history was on the night of the fall of the Berlin Wall, 26 years ago, perhaps the most optimistic moment in Europe’s postwar era. Today, this trek of the needy and desperate through Europe’s hopelessly undefended borders may not be as cinematic as the images of people tearing down the wall between freedom and dictatorship, but it is every bit as transformative, and it does now threaten the “tranquil sway” of the Continent.

In recent years, a growing number of African governments have issued Eurobonds, diversifying away from traditional sources of finance such as concessional debt and foreign direct investment. Taking the lead in October 2007, when it issued a $750 million Eurobond with an 8.5% coupon rate, Ghana earned the distinction of being the first Sub-Saharan country – other than South Africa – to issue bonds in 30 years. ... This debut Sub-Saharan issue, which was four times oversubscribed, sparked a sovereign borrowing spree in the region. Nine other countries – Gabon, the Democratic Republic of the Congo, Côte d’Ivoire, Senegal, Angola, Nigeria, Namibia, Zambia, and Tanzania – followed suit. By February 2013, these ten African economies had collectively raised $8.1 billion from their maiden sovereign-bond issues, with an average maturity of 11.2 years and an average coupon rate of 6.2%.

Economists are always right, even when they are not, aren’t they? Fat chance. The reality is very different. Writing these letters is akin to being constantly exposed, and – at times - looking rather silly. But I still enjoy it, so allow me to stick my neck out again and go against the consensus, because that is, at the end of the day, how you make money in this industry. ... The broad consensus is that DM countries are finally returning to some sort of normality (often called the New Normal), following years of Zombie-like conditions. There is, admittedly, a growing recognition that GDP growth is likely to disappoint for quite a while to come, but I believe that ‘quite a while’ should be measured in decades and not, as most seem to believe, in years ... In the following, I will argue that GDP growth will disappoint for a very long time to come, and that will obviously have an effect on corporate earnings growth as well. As I see things, most investors are still way too optimistic on GDP growth and corporate earnings growth for the next many years. ... There are in reality not one but at least four reasons why returns on financial assets will1 disappoint in the years to come, and they are (in no particular order):
1. Regulatory changes.
2. The end of the debt super-cycle.
3. Wealth-to-GDP to normalise.
4. A deteriorating demographic outlook.

One thing we are exceptionally good at in the West is to blame China for pretty much anything that goes haywire. If you believe various commentators, it is all China’s fault that global equity markets have caught a serious cold more recently and, before that, China was blamed for the extraordinary weakness in industrial commodity prices. They have weakened - or so the argument goes - because China’s growth is not quite what it used to be, and commodity producing countries are over-producing as a result. ... Whilst entirely correct that China’s GDP growth rate has indeed slowed substantially, perhaps someone should consider whether China is as much the consequence as the cause; whether China is in fact a victim rather than a villain? Let me explain. ... I see no reason why the present combination of low oil prices and attractive foreign exchange rates shouldn’t invigorate economic growth across emerging markets ... EM equities could quite plausibly end up being the bargain of the year, although I am concerned about corporate leverage in many EM countries. One would therefore have to step carefully ... Finally a general observation: This is not a repeat of 2008, as many have suggested. An EM crisis is not likely to do nearly as much damage to the financial system in our part of the world, as the GFC did. Why? Because the banking system in DM countries have only limited exposure to corporates in EM countries.

Most significant for future growth, however, is that the additional layer of debt in 2015 is a liability going forward since debt is always a shift from future spending to the present. The negative impact, historically, has occurred more swiftly and more seriously as economies became extremely over-indebted. Thus, while the debt helped to prop up economic growth in 2015, this small plus will be turned into a longer lasting negative that will diminish any benefit from last year’s debt bulge. ... Our economic view for 2016 remains unchanged. The composition of last year’s debt gain indicates that velocity will decline more sharply in 2016 than 2015. The modest Fed tightening is a slight negative for both M2 growth and velocity. Additionally, velocity appears to have dropped even faster in the first quarter of 2016 than in the fourth quarter of 2015. Thus, nominal GDP growth should slow to a 2.3% - 2.8% range for the year. The slower pace in nominal GDP would continue the 2014-15 pattern, when the rate of rise in nominal GDP decelerated from 3.9% to 3.1%. Such slow top line growth suggests that spurts in inflation will simply reduce real GDP growth and thus be transitory in nature.

The New Normal is when plain logic no longer applies; when common sense takes the back seat. I have for a long time been defending the Federal Reserve Bank, and have not at all agreed with all those hawks who thought the Fed was sitting on its hands. Until recently, I felt very comfortable taking that view, but I am no longer so sure. Common sense suggests to me that the Fed ought to tighten a great deal more than they have already done, but does common sense apply? That is what this month’s Absolute Return Letter is about. ... something is not quite right, but what is it? Before I answer that question, let me share one more observation with you. Because the Fed is so inactive, there are signs of moral hazard growing in magnitude. Complacency appears to be sneaking in through the back door yet again. We humans never learn, do we? ... As GDP growth slows, more debt needs to be established in order to service existing debt, which will cause GDP growth to slow even further. I therefore think that, unless it suddenly becomes fashionable to default, debt will continue to rise and GDP growth will continue to slow in the years to come. ... I have changed my view in one important aspect. As debt levels continue to rise (short of any massive debt restructuring), governments will bend over backwards to keep interest rates at very low levels, as the only realistic alternative to low interest rates is default. ... Historically, when central banks have sat on their hands for too long, the end result has almost always been a bout of unpleasantly high inflation, and that has nothing whatsoever to do with the changing demographics.

The goal: neutralize crude oil as an economic weapon and find a way to persuade a hostile kingdom to finance America’s widening deficit with its newfound petrodollar wealth. And according to Parsky, Nixon made clear there was simply no coming back empty-handed. Failure would not only jeopardize America’s financial health but could also give the Soviet Union an opening to make further inroads into the Arab world. ... The basic framework was strikingly simple. The U.S. would buy oil from Saudi Arabia and provide the kingdom military aid and equipment. In return, the Saudis would plow billions of their petrodollar revenue back into Treasuries and finance America’s spending. ... The current tally represents just 20 percent of its $587 billion of foreign reserves, well below the two-thirds that central banks typically keep in dollar assets. Some analysts speculate the kingdom may be masking its U.S. debt holdings by accumulating Treasuries through offshore financial centers, which show up in the data of other countries. ... While oil’s collapse has deepened concern that Saudi Arabia will need to liquidate its Treasuries to raise cash, a more troubling worry has also emerged: the specter of the kingdom using its outsize position in the world’s most important debt market as a political weapon, much as it did with oil in the 1970s.

Today the Glencore CEO believes that the industry is suffering from a glut of commodities on world markets. If mining companies could only get a handle on production, Glasenberg says, prices would inevitably rise. “Mining companies have to wake up and stop increasing supply and look at demand,” he says. “And that is it.” ... When you travel around the Copperbelt in Africa, it quickly becomes clear just how big a player Glencore is. At the tiny Kolwezi airport in the DRC’s southernmost province of Katanga, Glencore paid to rebuild the small runway and put up new buildings in 2011. On the road leading to the Mutanda copper mine, our vehicle rumbles over a new bridge crossing the Lualaba River, funded recently by Glencore at a cost of $10 million. ... For Glencore’s long haul as a public company, Glasenberg must continue to do what investors have demanded over this bruising year: Control spending and cut debt. Meanwhile, it waits for markets to rationalize.

American Apparel launched in 1988 as a T-shirt business that founder and former CEO Dov Charney ran out of his dorm room at Tufts University. After Charney opened his first retail store, on Los Angeles’s Sunset Boulevard in 2003, the brand quickly became a phenomenon, famous for its local, sweatshop-free manufacturing and notorious for its sexually charged advertising. ... As it became a public company in 2007 (through a reverse merger), American Apparel had 143 stores in 11 countries and was valued at nearly a billion dollars. ... It wasn’t just the merchandise that set the company apart. From the beginning, American Apparel eschewed fast fashion (the practice of copying new runway trends immediately and cheaply) in favor of generating its own iconoclastic staples. Instead of outsourcing manufacturing to low-wage overseas workers, it produced almost everything it sold for wholesale and retail in its own factory in Los Angeles ... Production and design now follow a strict calendar, set by Schneider. "You have to have your raw materials where they’re supposed to be, your bundling down, your product cut up and ready to sew—there are a thousand steps that go into making this run smoothly," Schneider says. "And it’s more complicated [at American Apparel] because you’re knitting your own yarn, you’re dyeing your own fabric, and you’re manufacturing everything here and shipping everything yourself." In part, as a result, niche items that fall outside of American Apparel’s knit-production expertise—sweaters, denim—are now being outsourced to other factories around Los Angeles.

The medical student told me to use his name. He said he didn’t care. “Maduro is a donkey,” he said. “An a**hole.” He meant Nicolás Maduro, the President of Venezuela. We were passing through the wards of a large public hospital in Valencia, a city of roughly a million people, a hundred miles west of Caracas. The hallways were dim and stifling, thick with a frightening stench. ... Why were hospitals so heavily guarded? Nobody threatened to invade them. The guards had orders, it was said, to keep out journalists. Exposés had embarrassed the government. ... For decades, the country had been ruled by two centrist parties that took turns winning elections but were increasingly out of touch with voters. A move to impose fiscal austerity was rejected, in 1989, with a mass revolt and countrywide looting—a paroxysm known as the Caracazo—which was put down by the Army at a cost of hundreds, perhaps thousands, of lives. Chávez was an Army lieutenant colonel, from a humble background—his parents were village schoolteachers. He crashed the national stage in 1992, by leading a military-coup attempt. The coup failed, and Chávez went to jail, but his televised declarations of noble intent caught the imaginations of many Venezuelans. He offered a charismatic alternative to the corrupt, sclerotic status quo. After his release, he headed a small leftist party and easily won the Presidency. ... He soon rewrote the constitution, concentrating power in the executive. ... After Chávez barely survived a 2002 coup attempt, the Cubans also sent teams of military and intelligence advisers who taught their Venezuelan counterparts how to surveil and disrupt the political opposition Cuban-style, with close monitoring, harassment, and strategic arrests. ... Polar employs about thirty thousand workers (it is the country’s largest private employer) and is responsible for more than three per cent of Venezuela’s non-oil gross domestic product. Besides corn flour and the country’s top-selling beer, Polar produces pasta, rice, tuna fish, wine, ice cream, yogurt, margarine, ketchup, mayonnaise, and detergent. Yet it operates in an atmosphere of continual uncertainty, its planners and logistics mavens never sure what roadblock or subterfuge the government will toss up next. ... The crisis has a small but crucial constituency, starting with the generals and other high government officials who are thriving financially, mainly through smuggling, graft, and import fraud.

In the next 15 years India will see more people come online than any other country. Last year e-commerce sales were about $16 billion; by 2020, according to Morgan Stanley, a bank, the online retail market could be more than seven times larger. Such sales are expected to grow faster in India than in any other market. This has attracted a flood of investment in e-commerce firms, the impact of which may go far beyond just displacing offline retail. ... India’s small businesses have limited access to loans; most of its consumers do not have credit cards, or for that matter credit. The e-commerce companies are investing in logistics, helping merchants borrow and giving consumers new tools to pay for goods. ... Amazon wants to make India its second-biggest market, after America. For the time being, though, with just 12% of the market, it lags behind the home-grown successes, Flipkart (45%) and Snapdeal (26%). All three, as well as some smaller competitors, are spending at a blistering rate. ... The prospect of a second market growing to a near-Chinese size attracts those who made a packet the first time round. ... Indian regulations bar foreign-backed e-commerce firms from owning inventory, and so acting as a straightforward retailer is not an option. As a result India’s top e-commerce companies look much more like Alibaba.