Early Headlines: China Bear Turns Bullish, Microsoft Buys Uber Stake, New Low Growth Record for U.S., $350 Gold, Puerto Rico Default and More
Early Bird Headlines 01 August 2015
Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.
- Microsoft Said to Invest About $100 Million in Startup Uber (Bloomberg Business) Microsoft Corp. has agreed to invest about $100 million in Uber Technologies Inc. at a valuation of approximately $50 billion. Uber plans to use the cash for expoansion into new cities around the globe. Microsoft acquired 0.2% ownership in Uber, valuing the company at $50 billion.
- Opinion: Study predicts gold could plunge to $350 an ounce (MarketWatch) The forecast of Claude Erb, a former commodities manager at fund manager TCW Group, and co-author (with Campbell Harvey, a Duke University finance professor) of a mid-2012 study that forecast a plunging gold price, are currently predicting an eventual bottom at $350. If that comes to pass then the bear market for gold has seen only about half of its eventual decline.
- Emerging Market Central Bankers Are Getting Nervous About Their Plunging Currencies (Bloomberg Business) The biggest decline in emerging-market currencies since the global financial crisis is quickly turning from a welcome event for countries seeking to make their economies more competitive into something destructive. The selloff has become so swift and so deep that officials are abandoning hands-off policies on concern the drop will fuel inflation, deter investment from foreigners and act as a drag on their economies at a time when global growth is already decelerating. To counter the declines, policy makers from Mexico to South Africa and Turkey have either stepped up intervention, increased interest rates or signaled an end to monetary easing.
- Puerto Rico is about to default: What’s next for bond investors (MarketWatch) About 30% of U.S. muni bond funds own Puerto Rican paper, so a default by the territory would hit many U.S. investors.
- Jimmy Carter: The U.S. Is an "Oligarchy With Unlimited Political Bribery" (The Intercept) Hat tips to Chuck Spinney and Roger Erickson. This article includes the transcript of an interview of former president Jimmy Carter. He said that the United States is now an "oligarchy" in which "unlimited political bribery" has created "a complete subversion of our political system as a payoff to major contributors". Both Democrats and Republicans, Carter said, "look upon this unlimited money as a great benefit to themselves." Econintersect: How ironic that the man who started the neoliberal transformation of government is now condemning it.
- The U.S. Economy Is on Track to Finish a Decade Without Significant Growth (Bloomberg) It would take a miracle for growth to reach 3% this year, marking a decade without it. This will be a new low for growth in the post-World War II years.
- The Euro, Like The Gold Standard, Is Doomed To Fail (Social Europe) Hat tip to Roger Erickson. Anne Pettifor reviews the history of the euro and its deliberate architectural mirroring of the 19th century gold standard for Europe. She calls the euro a product of utopian neoliberal economists and their ambitions for a monetary system governed only by market forces, beyond the reach of any European state. She compares and contrasts the gold standard and the euro:
The parallels between the two systems include the abandonment by governments of control over exchange rates; the loss of a central bank accountable to the state; the initial euphoria as an over-valued exchanged rate cheapens imports & capital mobility encourages reckless lending; subsequent deflationary pressures; the absence of a co-ordinating body to check imbalances across the zone, and finally growing political resistance to the monetary system.
However it is important to note also just how much the two systems differ. The genius of those who designed the European Monetary Union (EMU) was this: unlike the architects of the gold standard, which attempted to remove central bank and state control over the exchange rate - Delors's bankers simply abolished all European currencies, and replaced them with a new, shared currency, the euro - well beyond the reach of any state.
That currency - the euro - not only acts as a store of value and facilitates financial transactions across borders - it also acts as a powerful symbol of European unity. So in addition to serving the interests of Luxembourg bankers and European financiers - the euro was in part created, and heavily sold to citizens, as a perceived way and a symbol for bringing Europe and Europeans together. Like gold under the gold standard, the currency acquired the status of a fetish for many, both amongst the European elites in Brussels and Frankfurt, but also amongst those in periphery countries.
- China's Great Short Seller Suddenly Turns Bullish (Bloomberg) Jon Carnes built his career on wagers against Chinese companies, bets so successful that one analyst ranks the 41-year-old among the best short sellers worldwide. Now Carnes says he's an advocate of investment in China Inc. - with a 111% rally forecast for the Shanghai Composite Index.
- China shares suffer worst month in nearly 6 years (MarketWatch) The Shanghai Composite had quite a month in July: There was a rally of 18% and the index was down 14% for the month. The headline says it was the worst decline in six years. But by our calculations it was the second worst month; June had a loss of 17.5%.
- India, Bangladesh To Swap Enclaves To End Decades-Old Border Dispute (International Business Times) Due to past botched treaties, enclaves belonging to India have been existing inside of Bangladesh and vice versa. A treaty to exchange those "island" possessions has finally been implemented, 41 years after it was signed.
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