Knowing and Making

Jim O'Neill at Goldmans has graciously  decided to admit four, no doubt very grateful, new countries into the BRIC category. Brazil, Russia, India and China have done quite well over the nine years since the BRICs were invented. The caveat is Russia, which remains highly dependent on oil and gas prices, and has institutions which are, shall we say, not fully trusted by everyone. But the other three have been firmly endorsed by events as serious players - well beyond the traditional emerging markets category. The lucky new candidates are South Korea, Turkey, Mexico and Indonesia. I am slightly surprised to see South Korea in here, as it's already an OECD member, with GDP per capita on a par with several European countries (though not quite caught up with any of the Western European EU members). It is ranked around 32nd in the world in GDP per capita - depending on exchange rates - higher than any of the original BRICs (Russia at 54 is the highest of those). But I guess if...

Not satisfied with interrupting our gas supplies, Russia has raised the stakes by sending us 10 inches of snow from Siberia in the last 24 hours. Of course these two policies interact nicely - both driving up the price of gas, which will help to offset some of Russia's $1 billion a day of lost revenue from the collapsed oil price. Now you may say that it's not in Russia's power to dump that much snow on the British market - but I would point out that is only true in a model with perfectly flexible exchange rates. Clearly in this weather the exchange rate, along with everything else, is frozen. Walking around London today I think it's clear that there will be a measurable impact on quarterly GDP. Most shops and restaurants are closed, and lots of people didn't go to work today. Naturally some demand will simply be stored up, but some will be lost forever. Given around 60 working days in a quarter, a 20% loss of output on one day translates to about a 0.3% decline in...