TheChek News Flow

Stock purchases by company insiders are encouraging sign for markets, say some analysts

Corporate executives have this month bought shares in their companies at a rate not seen since the early days of the Covid-19 pandemic in what some Wall Street analysts said was an encouraging sign for the US stock market.

Between the start of the month and May 24, insider buying at S&P 500 companies has been the strongest since March 2020, according to figures from VerityData. For the broader Russell 2000 index, there have been more insider buyers than sellers this month for the first time since March 2020, VerityData said.

Despite retail investors pulling out of the stock market and the looming threat of a slowdown or recession, “corporate insiders are holding a non-consensus view across most sectors and [are] actively buying the dip”, analysts at JPMorgan said in a May 27 note, adding that the share purchases were encouraging for the direction of stock markets.

US stocks snapped a seven week losing streak on Friday although the benchmark S&P 500 index is down 12.8 per cent so far this year.

Strong insider buying “has historically been a pretty good sign of market bottoms”, said David Giroux, portfolio manager at T Rowe Price.

“Insiders are saying ‘we don’t see a massive event coming’ . . . [that] these are really good buying opportunities,” he added. “This is just another confirming data point that should be positive for the market over six to 12 months if not longer.”

Earlier this month Howard Schultz bought $15mn of Starbucks shares after returning as interim chief executive in March to the company he turned into a global coffee chain. It was the first insider stock buying at Starbucks since August 2018, VerityData said. Starbucks shares are down about 35 per cent so far this year.

Vladimir Shmunis, co-founder and chief executive of RingCentral, a web-based app company that replaces landline phones, spent $1.2mn on his first stock purchase since the company went public in 2013. RingCentral has seen its share price plunge more than 60 per cent this year.

Representatives from Starbucks and RingCentral did not respond to a request for comment.

“There is certainly message sending [with] buying and some of it is performative,” said Ben Silverman, research director at VerityData.

However, Silverman said that he would have expected “more intense buying right now”, especially at S&P 500 companies.

“In March 2020, no one had any clue how the next two years would play out,” he said, adding that at the start of the pandemic “we saw a lot more [buying] conviction”.

Given its unique location, the hotel wants to offer guests access to a multitude of cultural experiences, on top of the usual beach and sunshine.

The Standard, which has established itself as a hub for creatives in cities like New York, Los Angeles and London, has opened its doors in Ibiza, a hot spot for top fashion designers like Jonathan Anderson to spend their summers.

Located in the old town part of the Spanish island, a location that deviates from the many coastal luxury hotels, The Standard is set in a stark-white building and designed by Spanish creator Lázaro Rosa-Violán, with interiors by Oskar Kohnen in collaboration with the hotel’s in-house design team.

With 67 rooms and suites, starting from 255 euros per night (and 550 euros for high season), a street-level restaurant called Jara, rooftop bar, Up, with a 15-meter swimming pool and panoramic views of the island, and a separate building called Casa Privada for group bookings, the hotel said the design aims to “celebrate the resurgence of the energy that originally attracted so many to Ibiza and the rejuvenation of Flower Power with a chic new ’60s vibe.”

In an interview with WWD, Amber Asher, chief executive officer of Standard International, said given its differentiated location, the hotel wants to offer guests “access to a multitude of cultural experiences,” on top of the beach and sunshine.

“The streets around the old town are lined with world-class restaurants, cafés and local bars while historical sites like the UNESCO World Heritage-listed fortified old town and castle sit just a short walking distance away. The area is great for people watching and for wandering the narrow cobbled streets to explore the myriad local shops and galleries,” she explained.

“We are also steps from the port where our guests can take a short boat trip to the many cultural sites around Ibiza or go island hopping for the day and explore unique destinations like Formentera for lunch and an afternoon swim,” she added.

Other great spots to check when staying in the old town also include the bar Paradise Lost, the Museo Arqueológico de Ibiza y Formentera, Museo de Arte Contemporáneo de Ibiza and the Calle De La Virgen, Asher said.

She hopes that instead of just capturing seasonal tourists, the hotel can be “a year-round, adult-only, social epicenter for drinking, dining, listening to music and gathering with friends for locals.”

“We opened The Standard London, our first in Europe in 2019 to our growing community of friends in fashion, the arts, business, technology and hospitality, with a priority placed on embracing London locals,” she said. “The Standard Ibiza will cater to a similar dynamic and worldly mix of guests.”

The hotel will reflect local culture with its culinary offerings as well as its music programs, which will embrace the essence of Ibiza’s Balearic sounds, with DJs during dinner at Jara and occasional live acoustic shows on the roof at Up, Asher said.

The hotel has also commissioned Madrid-based artist Nicolas Villamizar to paint murals that are a celebration of life, music and dancing, as a tribute to life on the island of Ibiza.

For this summer, especially when the fashion crowd will collectively descend on the island from Paris after Haute Couture fashion week, The Standard Ibiza has prepared a great lineup of music performances to entertain the guests, including a live show with Quinn Luke Lamont on July 13.

For a little warm-up, the hotel flew young Hollywood actors Florence Pugh, Will Poulter, Aron Piper, Yahya Abdul-Mateen 2nd, model Soo Joo Park, British drag queen Bimini Bon Boulash, and fashion designers Maximilian Davis, Harris Reed and Chet Lo on private jets for the opening party on May 21. They began the evening with cocktails at the rooftop bar and continued with an all-night party at Jara with a performance by Irish singer Róisín Murphy, and music by Maurice Felton and Benji B.

French luxury skiwear brand Fusalp plans to open stores in the U.S. and launch footwear this year, as new investors join its capital.

PARIS — French luxury skiwear brand Fusalp is looking to break new ground, particularly in the U.S., with the backing of new investors who will enter its capital on Tuesday.

“We are a family-owned company, so we like to know our partners very well. We had this conversation for some time, speaking about the business, getting to know each other and now we feel that we need to really seize the moment to develop ourselves, especially in America. [So] we felt they could be the right partners because [we share] the same ways of seeing business, continuity and strengthen the business in the long term,” Fusalp co-president Sophie Lacoste told WWD.

Swiss investment funds Mirabaud Patrimoine Vivant and Mirabaud Lifestyle Impact & Innovation, founded and led by David Wertheimer, Renaud Dutreil and Luc-Alban Chermette, will take a combined minority stake through a 12.5 percent capital increase.

Founded in 1952, the French company based in the Alps is best known for its early technical advancements such as contour-fit ski pants, ski stirrup pants and one-piece suits worn by the French national ski teams in the 1960s.

After hitting hard times in the mid-1980s, Fusalp was purchased by siblings Sophie and Philippe Lacoste, grandchildren of tennis legend and Lacoste founder René Lacoste, and former Lacoste executive Alexandre Fauvet in 2014.

The deal was several years in the making, a process that is part of the trio’s overall slow-and-steady approach to doing business.

That said, Sophie Lacoste said Fusalp had grown its 6-million-euro turnover in 2014 to an expected 40 million euros for the current fiscal year, which ends in May, to the tune of 30 percent a year — excluding the 2020 fiscal year impacted by the pandemic.

“When we choose a partner and when they choose us, we need to make sure that our values are aligned — business-wise but also in a more general way — because we like to see things long term,” Philippe Lacoste said, describing that vision as “building a high-quality brand with high-quality products bringing something unique to the market,” one apt to grow internationally.

“We are very happy to join the Fusalp adventure alongside passionate entrepreneurs who have style, sport and France in their genes,” stated Dutreil, a former LVMH Moët Hennessy Louis Vuitton executive who served as French minister in charge of small and medium-size enterprises in the early 2000s.

The executives at the investment funds lauded the successful relaunch led by Sophie and Philippe Lacoste, the brand’s combination of style and technical performance as well as its global potential.

The funds have previously taken stakes in companies that “represent the French industrial know-how and lifestyle” such as footwear brands Clergerie and Heschung, sportswear label Le Coq Sportif and shirt specialist Anne Fontaine. They will join individual investors such as Frédéric Biousse and Elie Kouby, the founders of Experienced Capital, and Galeries Lafayette managing director Nicolas Houzé. The Lacoste family will remain majority shareholders.

Through the new partnership plans are to further develop the business in North America, a market that is currently the brand’s second-largest on its e-commerce, said Sophie Lacoste. In the U.S., a boutique in Aspen is slated to open in November, followed by another on New York’s Madison Avenue. These openings will bring the brand’s retail footprint to a total of 55 boutiques by the end of 2022, up from three in 2015.

Developing wholesale in the U.S. will be the next order of business, with the recent recruitment of an executive to handle this territory and help establish the brand in high-end department stores.

Further afield, the Fusalp executives plan on “seeing what works there…we feel we can really build something strong” before pursuing opportunities in places like Chicago, Los Angeles or Toronto, Canada.

While France remains the main market for the brand, accounting for 70 percent of sales, the growth in the rest of the world is progressing apace with last year’s doubling of overall revenues.

While South Korea has emerged a strong entry point into Asia, developments in China are on hold due to the country’s closed borders and despite the recent Beijing Olympics, where Fusalp dressed the U.K.’s GB Snowsport alpine and para-alpine ski teams.

Also on the cards is the launch of footwear, slated for the fall. This comes as the brand looks to leverage its sports heritage into a wardrobe fit for consumers who expect their clothes to accompany them seamlessly from biking to work, working from home and heading into business meetings, as she put it.

With a near-even split between male and female consumers, Sophie Lacoste described the brand as “transgenerational” with its core market aged between 30 and 45 years old.

“A jacket can be worn by a 25-year-old and almost their grandfather. The durability of our clothing — in terms of quality and style — is also very pertinent for us. It is stuff that you can wear with great pleasure for a long time,” said Sophie Lacoste, who described Fusalp customers as “a population of people that are passionately educated and look for products [offering] great value.”

This segues into current conversations around sustainability, an “ongoing process” that Fusalp started looking into two years ago. “We need to make sure that sustainable development is at the center of everything we do. But we still have many things to learn both ourselves and as an industry,” said Philippe Lacoste.

For now, the brand, which signed the Fashion Pact in 2021, will continue to focus on offering durable, repairable products “because that’s the best way to do it…and then look at other subjects,” said Sophie Lacoste, citing the impact of natural fibers and a current lack of transparency on recycling as some of the issues to close the loop.

“It’s really about thinking deeply about what we do before doing [them] because sometimes you have some ideas coming that proved to be very wrong. So you have to be very careful on the decision you take — this matters,” she added.

Protesters voice frustration with Islamic republic’s new wealthy elite as inflation escalates and nuclear talks stall

The evidence suggests that when the 10-storey Metropol Twin Towers Complex collapsed in the Iranian city of Abadan, property developer Hossein Abdol-Baghi was one of the 32 victims.

There was an official DNA match. He was pictured in the building before the collapse. His family have been seen weeping on television.

But that has not been enough to convince those who have taken to the streets over the past week to protest against corruption. Deeply suspicious of the official narrative, they say his influential backers helped him flee the country and escape their wrath.

“It is too obvious that he is not dead. If his face and body were so smashed to necessitate a hasty DNA test, why were his identification cards in his pocket unscathed?” said Reza, an unemployed 28-year-old man in Abadan.

“Why was Abdol-Baghi allowed to build such a non-standard building?” he added, implying it was because of his links to high-level officials.

The view that Abdol-Baghi must have escaped speaks to the level of anger at corruption in the Islamic republic, where people are already struggling with rising prices and a battered economy. With inflation at nearly 40 per cent, talks with western powers over a deal to curb Iran’s nuclear ambitions in return for the lifting of US sanctions have also stalled.

The province of Khuzestan, sitting on Iran’s biggest oil and gas reserves, was the centre of anti-regime protests in 2019. Demonstrations against the rising cost of fuel ended in violence, with more than 300 people dead across the country, according to Amnesty International.

Local people say not only has their share of the oil-rich province’s natural wealth been meagre but that new development projects have also benefited the corrupt.

“Discrimination and corruption of officials bother people in Khuzestan the most. We walk on oil but our houses are still made of mud and bricks,” said Hosna, who left her native Abadan for Tehran. “Such incidents are a pretext for people to go to the streets and get rid of their pent-up anger.”

Iranian leaders have acknowledged that corruption is a significant problem and have promised to deal with it. They blame it on dishonest individuals and say it is not an institutional problem. Analysts say a generation of young businessmen has emerged, loyal to the regime. Their expensive cars and big houses often rankle with ordinary Iranians.

“In every city, there are some ‘Hossein Abdol-Baghis’,” wrote Mostafa Tajzadeh, a reformist politician in Tehran on Instagram. “They have certain things in common: they have astronomical wealth, run charities, hold religious ceremonies . . . are close to members of the parliament and city councils . . . have several major construction projects . . . As simple as that.”

The authorities’ delayed response to the tragedy has also angered protesters. Official condolences were delivered a few days after the building collapsed. The government of Ebrahim Raisi called Sunday a national day of mourning.

Iran’s supreme leader, Ayatollah Ali Khamenei, has been the main target of slogans in Abadan. Protesters have also used a new revolutionary hymn, “Hello Commander”, which has been widely promoted on social media, to signal their disapproval. Many post videos of the disaster on social media, saying “Hello Commander, see this”.

In one film on social media, a woman walks through the ranks of the riot police in Abadan. She can be overheard asking them: “You are [sent by] ‘Hello Commander’? . . . Are we rioters? All of us?”

The anger “is rooted in the extreme poverty in this very rich province”, said Ahmad, 32, who has migrated to Tehran from Khuzestan to look for a job in the hospitality sector. “Even for oil companies, non-locals are recruited. Everywhere you go, you see lots of young men standing in the streets idle and chatting and smoking.”

There are no reports yet of any deaths during the protests. Unofficial accounts say security forces have fired live ammunition and birdshot and used tear gas. “It is a disastrous situation. There are demonstrations every night,” said a resident of Abadan who did not want their name published. “All main streets are surrounded [by security forces].”

Authorities have said they will take action against those responsible for the tragedy. Some officials, including the mayor, were arrested on suspicion of failing to oversee the building project properly.

But Reza doubts the protests will bring change. “People will protest a bit more and soon they have to go back home and continue their miserable life while Abdol-Baghi enjoys his luxurious life in Dubai,” he said.

Currency swings will continue until globalising forces, such as resilient supply chains, resume

Foreign exchange markets have this year been jolted by a sudden increase in volatility. There are many reasons for this, but at the heart of the shift is deglobalisation.

To understand why, consider first the opposite. In a hypothetical, perfectly globalised world, there would be no barriers to international trade, meaning goods could be produced in one country and transported to the other without cost or friction.

Let us focus on Japan and the US in our hypothetical world, and suppose that each country produces goods called widgets of identical quality. In such a world the real foreign exchange rate cannot deviate from 1.0. That is because if the cost of a Japanese widget expressed in dollars were cheaper than a US-produced version, traders in international goods markets would buy more Japanese widgets, put them on ships and sell them in the US. The traders would continue until the arbitrage opportunity is competed away, forcing the real foreign exchange rate back to 1.0. Therefore there is little, if any, volatility in the real exchange rate.

Since the coronavirus pandemic hit in 2020, the world we have been moving towards resembles our hypothetical world much less. The Global Supply Chain Pressure index produced by the Federal Reserve Bank of New York measures global transportation costs and other supply chain pressures. It has moved to the highest levels that we have seen.

This is just one component of what is broadly being labelled “supply constraints”. Correspondingly, we are seeing somewhat dramatic variations in the real exchange rate.

The yen may weaken and Japan may continue to run with lower inflation than the US. But with transportation costs so high, and with Covid-19 and other supply chain disruptions, it becomes more difficult for traders and business to take advantage of a cheap yen exchange rate. With such reduced demand, the yen is more vulnerable. The trade-weighted level of the yen has weakened by about 10 per cent in 2022 in real terms (after accounting for inflation), and by 20 per cent since the start of 2020. Our hypothetical world would not have seen such volatility.

A second source of the high currency volatility we are experiencing comes from divergence in central bank policy rates, which are in turn driven by divergent international economies.

The pandemic-driven economic collapse in 2020 and vaccine-driven recovery in 2021 were internationally shared experiences. During this period, there was broadly no reason for central banks across developed market economies to take different policy paths. But, this year, a divergence has begun.

This is normal after a crisis: economies should be expected to react and cope with their respective debt burdens in different ways. However, the energy price shock — spurred on by the war in Ukraine — has created further divergences, with energy importers such as Europe, Britain and Japan suffering a negative impact, while energy-neutral countries such as the US have fared better.

Markets are pricing in a total of 250 basis points of rate rises by the US Federal Reserve in 2022, compared with 100 basis points from the European Central Bank, 180 basis points from the Bank of England and potentially none at all from the Bank of Japan.

Even in our hypothetical world, in which real foreign exchange rates are fixed, such divergence would cause volatility in nominal spot rates. The reason is that more interest rate rises bring down inflation expectations, thereby lifting the future purchasing power of the currency. With the Federal Reserve leading the way, it is no surprise that contracts to exchange the euro, sterling and yen at a future date have all moved substantially in favour of the dollar. And spot rates are trading at even higher premiums than usual to these forward rates because of higher US interest rates.

This has been the lesson from history. Foreign exchange volatility remained broadly contained relative to what was seen in equity, interest rate and credit markets during the 2008-10 financial crisis. Yet between 2011 and 2017, we saw numerous idiosyncracies, such as the European sovereign debt crisis, Abenomics and the Brexit referendum.

In 2017, currency fluctuations eased. But we are once again in a period of macro divergences. Until globalising forces re-emerge, the post-pandemic world will remain one of high foreign exchange volatility.

A clutch of books makes an alarmingly persuasive case that the warning lights are flashing redder than at any point since 1861

In the summer of 2015, America caught a glimpse of how its future could unfold. The US military conducted a routine exercise in the south that triggered a cascade of conspiracy theories, particularly in Texas. Some believed the manoeuvre was the precursor to a Chinese invasion; others thought it would coincide with a massive asteroid strike. The exercise, called Jade Helm 15, stood for “homeland eradication of local militants”, according to one of the right’s dark fantasy sites. Greg Abbot, Texas’s Republican governor, took these ravings seriously. He ensured that the 1,200 federal troops were closely monitored by the armed Texas National Guard. In that bizarre episode, which took place a year before Donald Trump became the Republican nominee for president, we see the germs of an American break-up.

As with any warning of impending civil war, the very mention of another American one sounds impossibly alarmist — like persistent warnings from chief Vitalstatistix in the Asterix comic series that the sky was about to fall on Gaulish heads. America’s dissolution has often been mispredicted.

Yet a clutch of recent books make an alarmingly persuasive case that the warning lights are flashing redder than at any point since 1861. The French philosopher Voltaire once said: “Those who can make you believe absurdities can make you commit atrocities.” As the University of California’s Barbara Walter shows in her bracing manual, How Civil Wars Start, US democracy today is checking all the wrong boxes.

Even before Trump triumphed in the 2016 presidential election, political analysts were warning about the erosion of democracy and drift towards autocracy. The paralysing divisions caused by Trump’s failed putsch of January 6, 2020, has sent it into dangerous new territory. Polls show that most Republicans believe, without evidence, that the election was stolen by Democrats backed by the so-called “deep state”, the Chinese government, rigged Venezuelan voting machines, or a feverish combination thereof.

In This Will Not Pass, a book by New York Times reporters Jonathan Martin and Alexander Burns, Joe Biden is quoted telling a senior Democrat: “I certainly hope [my presidency] works out. If it doesn’t I’m not sure we’re going to have a country.” That a US president could utter something so apocalyptic without raising too many eyebrows shows how routine such dread has become.

In 1990, the CIA correctly forecast that Yugoslavia would break up within two years because its politics was hardening into ethnic factions. In 2022, America’s two parties are increasingly sorted along racial and identity lines. Republicans are white, small town and rural — the party now holds just one truly urban congressional district in New York’s Staten Island. Democrats are now almost entirely urban and multi-ethnic. The habits of a normal democracy in which the losing party forms a loyal opposition are vanishing.

More than a third of Republicans and Democrats today believe violence is justified to achieve their political ends, compared with less than a tenth apiece in 2017, the year Trump took office. His rhetoric opened the floodgates to separatist feelings. When one party loses, its voters feel as though their America is being occupied by a foreign power. America, Walter points out, has become “a factionalised anocracy” — the halfway state between autocracy and democracy — that is “quickly approaching the open insurgency stage”. Violence stalks America’s political language. As Stephen Marche, a Canadian novelist, writes in The Next Civil War, a richly imagined jeremiad about America’s coming disunion, the country “is one spectacular act of violence away from a national crisis”.

How did America reach this pass? Take your pick of grim milestones — Newt Gingrich’s scorched earth approach to his term as polarising speaker of the House of Representatives in the 1990s, the Supreme Court’s 5-4 ruling that handed the 2000 election to George W Bush, America’s unhinged response to the 9/11 terrorist attacks, the FBI’s fateful probe into Hillary Clinton’s almost comically trivial emails, Democrats attributing Trump’s win to Vladimir Putin, Trump’s attempt to uproot every guardrail within reach, or Congress’s failure to unite on the need to punish a violent assault on itself. America’s democratic backsliding is like Ernest Hemingway’s famous observation on going bankrupt: “Gradually then suddenly.”

Burns and Martin provide a diligently researched and often illuminating chronicle of America’s recent political degeneration. Much of it boils down to the absence of character. As the dust settled on last year’s Capitol Hill assault — composed of an almost entirely white rabble of retired policemen, nurses, property developers, doctors, lawyers and small-business owners carrying confederate flags, nooses, Smith & Wesson handguns, stun devices, firecrackers, handcuffs, chemicals and knives — Republican leaders breathed a sigh of relief. The Capitol may have been littered with glass; its corridors smeared with fecal matter. But the Trumpian spell had been broken. This “despicable human being” had “finally discredited himself”, said Mitch McConnell, the Republican Senate leader. Kevin McCarthy, his counterpart in the House, said Trump’s actions were “atrocious and totally wrong”.

Three weeks later, McConnell voted to acquit Trump for what he had called a “failed insurrection”. McCarthy backtracked even more, heading to Mar-a-Lago, Trump’s Florida retreat, to renew his fealty. In the intervening weeks, he had concluded that his only pathway to becoming Speaker was with the blessings of the disgraced ex-president. “Trump was on life support,” said Adam Kinzinger, one of just 10 Republicans who voted to impeach him. “He [McCarthy] resuscitated him.” The authors brand McCarthy as “perhaps the most ingratiating figure” in the Republican party. There is fierce competition for that honour; South Carolina’s Lindsey Graham, among others, is hard on McCarthy’s heels.

It was not absurd to hope that Biden’s folksy touch would lower America’s fever. It was nevertheless forlorn. America is even more bitterly separated into imagined rival nations that it was under Trump. Biden did not help matters by promising to restore bipartisan normalcy — a pious hope shredded under Barack Obama — while also vowing to be a transformative Franklin Roosevelt-style president. With a 50:50 Senate, this was never realistic. Joe Manchin, the obstinate West Virginia Democrat, who has blocked Biden’s big reform bills, did not hold the balance of power in FDR’s Washington.

Democrats thus retreated into their by-now routine ethnic division of spoils. Biden treated his cabinet selection as an “identity politics Rubik’s Cube”, write Burns and Martin. Far from dangling the hope of a new generation, his vice-president, Kamala Harris, has been “fixated on real and perceived snubs in ways the West Wing found tedious,” they write. Their party faces likely decimation in this year’s midterm elections in November, which will set up a crushingly depressing 2024 rematch between Biden and Trump. A popular Trumpian T-shirt says: “I’d rather be a Russian than a Democrat”.

More seriously, the number of rightwing militias in the US has exploded in recent years. White supremacist sentiment has also penetrated US law enforcement agencies, says Walter. The numbers of armed potential insurgents is a multiple of the left insurgent groups, such as the Black Panthers, and Symbionese Liberation Army, that caused such panic in the early 1970s.

How would a 21st century US civil war actually happen? Nothing like the first time. Unlike the 1860s, when America was neatly split between the slave-owning confederates and the north, today’s separatist geography is marbled. Unlike then, America’s armed forces today cannot be outgunned. Even in a country that, uniquely, has more privately owned guns than people (at more than 400mn), many of which are military-grade, it would be no contest. Yet America, of all countries, knows that asymmetric warfare is unwinnable. Think of Vietnam, Iraq and Afghanistan.

Think, also, of how America was born — its revolutionary army lost almost every encounter with Britain’s vastly better equipped redcoats. Yet, with the help of the French, America’s guerrilla forces prevailed. Now substitute today’s federal army for the redcoats. Armies have a terrible record of pacifying restive populations. Every casualty breeds 10 more rebels.

“They will slip in and out of the shadows, communicating on message boards and encrypted networks,” writes Walter. “They will meet in small groups in vacuum-repair shops along retail strips. In desert clearings along Arizona’s border, in public parks in southern California, or in the snowy woods of Michigan, where they will train to fight.”

Walters’ book lays out America’s possible roads to dystopia with impressive concision. Her synthesis of the various barometers of a country heading to civil war is hard to refute when applied to the US. But she mars her case with a number of basic errors. Nowhere near 60 per cent of the world’s countries are “full” democracies, as she claims. Nor is India a “strictly secular democracy”. Its constitution celebrates rather than shuns all religions. Her book is nevertheless indispensable.

None of the writers offer a simple antidote for America’s continued democratic slide. Their remedies — find ways of making multi-ethnic democracy work, get money out of politics, teach civics to American children — have the air of wishful afterthoughts, rather than serious game plans.

Though Canadian, Marche is poignantly aware of the degree to which global liberty rides on what happens to America. In spite of its inaugural hypocrisies, no other nation was founded on the creed that it could live with — and indeed thrive on — fundamental differences between strangers. Marche concludes with these stirring words: “It would be a lie, an evil lie, to say that the American experiment did not give the world a glorious and transcendent vision of human beings: worth affirming in their differences, vital in their contradiction. That is still a vision of human existence worth fighting for.”

Yet the warning signs have become impossible to ignore. At the end of their book, Burns and Martin quote Malcolm Turnbull, Australia’s former prime minister, on America’s tendency to self-sooth with familiar homilies. They are no longer helpful. “You know that great line that you hear all the time: ‘This is not us. This is not America?’” Turnbull asks. “You know what? It is actually.”

Berlin reaches consensus on more military spending—for now.

One big question facing the North Atlantic alliance after Russia’s invasion of Ukraine is whether Germany is serious about Chancellor Olaf Scholz’s pledge to rearm Europe’s largest country. An answer of sorts emerged Sunday evening, and allies will be somewhat reassured.

Mr. Scholz in late February promised rearmament after 30 years of underinvestment in the German military. The centerpiece of his “turning point” in foreign policy was a twin commitment to create a €100 billion ($108 billion) special fund for defense procurement and to spend 2% of gross domestic product on defense in line with the North Atlantic Treaty Organization goal.

It was an ambiguous promise. Mr. Scholz didn’t clarify whether he intended to create the special procurement fund in addition to reaching the 2% goal, or whether money from the special fund would be used to top up the annual budget to hit 2%. He also hedged on how the procurement fund might be spent. Berlin has committed to buy 35 American-made F-35 fighter jets to bolster Germany’s contribution to NATO’s nuclear deterrence, but calls have been growing to divert some of the money to boondoggles such as foreign aid.

Now Germany’s four main political parties have decided what Mr. Scholz meant. A deal reached Sunday among the three ruling parties (Mr. Scholz’s Social Democrats, the Greens, and the Free Democrats) as well as the opposition Christian Democrats paves the way for a constitutional amendment creating the special procurement fund.

Allies will be relieved that Berlin’s hawks have ring-fenced the special fund for genuine military procurement. Partly they’ve done this by setting aside even more money for worthy defense purposes. Foreign Minister Annalena Baerbock of the Greens had argued for using some of the special fund for cyber defense. The four-party deal rebuffed that in favor of limiting the special fund to military hardware, but the deal promises additional spending from the regular budget for cybersecurity.

Yet this appears to have come at a political price related to the 2% goal. The agreement says this will be treated as a multiyear average target, meaning defense spending below 2% in some years can be offset by spending above 2% in others. In practice this will let Berlin count procurement financed by the €100 billion special fund toward the 2% goal.

This avoids the danger that using the special fund as a top-up would have exhausted that money in only four years. But it leaves open the question of Berlin’s commitment to hitting 2%, on average or otherwise, whenever the special fund runs out.

Allies can still count Berlin’s political agreement as a step forward. It demonstrates a broad consensus in favor of rearmament, and Germany’s noisy pacifist movement for once failed to water down defense commitments. But the transformation Mr. Scholz promised requires a sustained attitude change in Berlin.

Having shown Germany can take the first budgetary step, now Berlin will need to take the next, and the step after that. The threat from Russia, and elsewhere, won’t end once the war in Ukraine does.

Companies in Bristol are being forced to raise prices for customers

Stuart Hignell, who runs Bristol Gas Supplies, has known many of his customers in the English city of Bristol for years — he has a Polaroid photo of one of his elderly clients on the corkboard behind his desk — and is conscious that many are on fixed incomes.

But as petrol prices rise and the costs of delivering gas canisters around the city grow, Hignell is being forced to make a difficult choice: put up the prices for his customers or protect them by absorbing ever increasing costs.

“How can I turn around to these people and tell them their prices are going up?” he asked. “But something’s got to give — you can’t just keep sucking it in and sucking it in”.

Many small business owners are, like Hignell, struggling to absorb the impact of spiralling prices as UK inflation hits a 40 year high. Rising costs for energy and goods and services have become the top two concerns of businesses throughout the UK.

In June last year, only 30 per cent of UK businesses with 10-49 employees reported above normal input prices to the Office for National Statistics. By March of this year, the proportion had jumped to 57 per cent.

Many can no longer hold off passing these increases on to customers. Aleksis Gailans, who runs a costume hire company on the outskirts of Bristol, struggled to think of any product or service that his business uses which hasn’t gone up in price. While his company has “tried to hold off for as long as we can”, he said, it has had to begin passing on costs.

Gailans is not alone: around 41 per cent of UK businesses with between 10 and 50 employees indicated in late April that they have already begun increasing prices.

Matt Griffith, director of policy at Business West, the chamber of commerce for England’s western region, is in close contact with many enterprises in the area and is clear that they need to start recouping costs. Increasing prices is “the only route left” for many, he said. “Financially they have nowhere else to go.”

Vicky Lee, who heads the Bristol City Centre Business Improvement District, agreed. Many of the companies that she works with in the city centre cannot keep their costs down. They don’t have “the buying power, the strength to reduce cost per unit by purchasing on a larger scale”, she said.

She added that the shadow of the pandemic continues to affect many small businesses in the area. While they have managed to “bounce back quickly”, they had to borrow to keep going during the crisis. Debt repayments on these loans have further tightened margins and pushed businesses to raise prices.

Passing the increased costs on to customers has not been an easy decision for many small business owners, despite the challenges of the current environment, said Chris Jenkins, who has worked in Bristol’s wholesale fruit market for most of his life. In the face of steep transport costs, his company tried to become more efficient.

“We’ve got no excess staff whatsoever. All of us are working flat out all the time. And, we’ve just got no fat. It’s just been cut, cut, cut everywhere we can go to try and minimise costs”, he said, adding that there was “nothing else they can do” to keep prices down.

The knock-on effect of rising prices on consumer spending is another worry. Jeremy Kynaston managing director of No1 Harbourside, a bar, restaurant and live music venue situated on Bristol’s historic harbour, and two other venues in the city, acknowledged that people are just beginning to feel the increase in prices, but is hoping that they will continue to eat out.

“When people go out, they know it’s going to cost a little bit more, and it’s up to us to make sure we’re clever about our quality and standards”, he said.

However, Kynaston is worried about the impact the increase in the energy price cap in the autumn will have on his business. Ofgem predicts that household energy prices will increase by around 42 per cent in October, after a 54 per cent rise in April.

“It’s daunting — the October price rises. But we do have a plan at least. It’s better than having no plan at all,” said Kynaston.

To address the impact of spiralling energy prices on the cost of living, UK chancellor Rishi Sunak last week introduced a £15bn package of support. It included a one-off payment of £650 to around 8mn households in receipt of welfare payments.

But those further up the supply chain, such as Jenkins, are nervous that even with the extra government support, increasing energy prices will suck demand out of the local economy.

“Come November, December, they’re [households] really going to feel it,” he said. He added that the pressure on household budgets in the coming months may see the fruit he sells to retailers become “more of a luxury”. 

Most economists acknowledge that price pressures may get worse before they get better, but predict that the energy shock, pandemic supply chain impacts and higher interest rates will taper off quite rapidly from the start of next year onwards.

However, for Jenkins hope that a brighter period may lie ahead is hard to find.

“I’ve been in the job for all my life. I was born into it,” he said. “In all that time, you’ve always been able to see the light at the end of the tunnel. You can’t seem to see it now.”