Early Headlines: $1 Trillion EM Outflows, Flash Crash Scapegoat, California Sinking, Putin Propaganda Factory, QE Did Not Boost Economy and More

August 19th, 2015
in News, econ_news, syndication

Early Bird Headlines 19 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.

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Follow up:

Global

U.S.

  • California's Central Valley is sinking -- here's why (CBS News) Parts of California's Central Valley are dropping by one foot each year. Some areas are ten feet lower than they used to be. This is because the water pumped out for agriculture has left voids in the subsoil which have collapsed.
  • Current Federal Reserve Policy Under the Lens of Economic History: A Review Essay (Stephen D. Williamson, Research Division, Federal Reserve Bank of St. Louis) There is a lot of great research reviewed in this paper. One widely quoted conclusion is that there is no evidence that QE boosted the economy. This is a gross oversimplification of the complexity of the issues, Here is an excerpt which gives a sense of that complexity:
Evidence in support of Bernanke's view of the channels through which QE works is at best mixed. For a review of the empirical work on QE, see Williams (2014) and Neely (2015). Much of the work on the quantitative effects of QE consists of event studies, whereby researchers look for effects on asset prices close to the date of an announced QE intervention. There is also some a structural regression evidence. All of this research is problematic, as it is a theoretical. There is no way, for example, to determine whether asset prices move in response to a QE announcement simply because of a signalling effect, whereby QE matters not because of the direct effects of the asset swaps, but because it provides information about future central bank actions with respect to the policy interest rate. Further there is no work, to my knowledge, that establishes a link from QE to the ultimate goals of the Fed inflation and real economic activity. Indeed, casual evidence suggests that QE has been ineffective in increasing inflation. For example, in spite of massive central bank asset purchases in the U.S., the Fed is currently falling short of its 2% inflation target. Further, Switzerland and Japan, which have balance sheets that are much larger than that of the U.S., relative to GDP, have been experiencing very low inflation.
  • Navinder Singh Sarao part 2: scapegoat for a crash? (Financial Times) The depiction of malevolent trader who masterminded market mayhem has received skepticism within the financial world. Econintersect: For those with simple arithmetic skills the charges that Mr. Sarao caused (or even contributed significantly to the May 2010 Flash Crash) simply do not add up.
  • Fact Versus Fiction on Seattle Minimum Wage (Invictus, The Big Picture) Invictus takes to task American Enterprise Institute scholar Mark Perry (who has contributed to GEI). Invictus says there is simply no relevant data to judge conomic effects of the recently enacted Seattle minimum wage hike which will take place over the next five years. His criticism:
    The inability to source the ideal metric should not, of course, excuse someone for taking a piece of irrelevant data and using it to advance his argument that the increased minimum wage is already failing miserably. Which is exactly what the American Enterprise Institute's Mark Perry did.

EU

  • US led TTIP trade deal will undercut EU’s influence, says French lawmaker (International Business Times) The upcoming Trans Atlantic Trade and Investment Partnership will injure the interests of many European Union states, says a French lawmaker in European Parliament. Jean-Luc Schaffhauser is of the view that TTIP will weaken the international influence of European states.

France

  • Moody's: France May Miss Deficit Targets Due To Weak Growth (Deutsche Borse Group) France's weaker-than-expected economic growth in the second quarter raises the risk that that the government won't reach its deficit targets for the year, Moody's Investors Service said Monday. France has pledged to reduce its budget deficit to 3.8% of GDP this year, 3.3% next year and 2.7% in 2017. The European Commission earlier this year gave Paris until 2017 to reach the 3.0% deficit goal after a 2015 deadline was missed because of a weak economy. Moody's said it expects France GDP to grow by 1% this year.

Germany

  • Schaeuble Asks Backing for Greek Bailout as IMF Set Aside (Bloomberg Business) German Finance Minister Wolfgang Schaeuble asked lawmakers to back Greece's third bailout, saying it offers a "sustainable path" even though the International Monetary Fund hasn't committed to footing part of the bill.

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Greece

  • Tsipras not set to rush decision on snap elections (ekathimerini) Although last week it seemed certain that Tsipras would quickly call a confidence vote, perhaps then leading to another trip to polling centers for Greek, the prime minister and his advisers now seem to be holding off on any sudden moves. He wants to wait for the disbursement of the first tranche of the €86 billion bailout (€26 billion).

Russia

  • Bad news for Putin as support for war flags beyond Russia’s ‘troll farms’ (The Conversation) While the case of Lyudmila Savchuk might have highlighted a major push by the Kremlin to control online opinion, the reality on the ground does not look good for Putin. See next article.
  • Woman who sued pro-Putin Russian 'troll factory' gets one rouble in damages (The Guardian) A Russian court has ordered a secretive pro-Putin "propaganda factory" to pay symbolic damages to an employee who sued them in a bid to expose the workings of the Kremlin's online trolls. The Agency for Internet Studies, which hired people to write pro-Kremlin propaganda from a nondescript St. Petersburg address, was sued by ex-employee Lyudmila Savchuk for alleged non-payment of wages and for failing to give workers proper contracts. The freelance journalist claimed she had gone undercover as a pro-government internet troll to expose the outfit.

China

 


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