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posted on 10 November 2015

Early Headlines: Obama Immigration Plan Blocked, Deflationary QE, London Office Boom, Turkey's Authoritarian Drift, Russia's Pain - Gain And More

Written by Econintersect

Early Bird Headlines 10 November 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.


Early Bird is not so early today due to technical difficulties.


  • Is it time to blow up the New Keynesian model? (The Money Illusion) Hat tip to Rob Carter. This is an confounding piece which describes what sounds like nonsense (New Keynesian business cycle model). This we will have to look into. Will also have to look at A theory of house temperatures (Scott Sumner).

  • Obama's immigration action blocked again; Supreme Court only option left (Reuters) President Barack Obama's executive action to shield millions of undocumented immigrants from deportation suffered a legal setback on Monday with an appeal to the Supreme Court now the administration's only option. The 2-1 decision by the 5th U.S. Circuit Court of Appeals in New Orleans to uphold a May injunction deals a blow to Obama's plan, opposed by Republicans and challenged by 26 states. The states, all led by Republican governors, said the federal government exceeded its authority in demanding whole categories of immigrants be protected.

  • FOMC Is In Session And Banks Are Salivating (Seeking Alpha) The author says that a rate hike will have little impact on the general economy, but he believes it will be quite significant for the banking industry. Why this author thinks this is well explained, accompanied by an exceptionally well written description of QE (quantitative easing) in very simple language. The new policy of the Fed paying interest on reserves is a key component of why the banks will greatly profit from rising discount rate (see graph below). The author also explains why he feels the Fed will maintain its expanded balance sheet for some time to come. If the Fed were to return assets to the private sector and drain reserves, as many expect, there would by an significant expansion of inflation. Banks can't "spend" reserves but if they are replaced by assets from the Fed those assets are "spendable". Following this great essay makes it clear why QE was deflationary and why reversing it will be inflationary.



  • Cranes fill London's skyline as office building activity hits seven-year high (City A.M.) Building activity in central London has jumped by 28% in the last six months to a reach a seven-year high, according to data released today. Deloitte Real Estate's latest Crane Survey, which tracks building activity across the capital, said there were 26 new starts in the period totalling three million square feet and taking total space under construction in central London to 11m sq ft. The City office market led the way with 13 new starts in the period including Brookfield's 100 Bishopsgate which, at 867,000 sq ft, was the largest tower to get underway. Overall, construction in the City rose by a quarter to 5.7m square feet. However despite a surge in activity, this is still half the amount of space under construction at the last peak in 2002 (19.5m sq ft) and comes at a time when vacancy rates in the capital are at a 15-year low, which has put pressure on rents.


  • Afghans Arriving in Germany May Find the Welcome Is Wearing Thin (The New York Times) A growing sense that Afghanistan is slipping into greater chaos and will not stabilize anytime soon is driving rising numbers of Afghans to flee for Europe, hopeful that they will enjoy the same welcome given to Syrians and Iraqis seeking safety from war and terror. But German officials argue that Afghanistan is not universally unsafe, so not all migrants should be granted asylum and migrants will be processed on a case-by-case basis.

  • How one German millennial chose to live on trains rather than pay rent (Domain) Hat tip to Roger Erickson. German college student Leonie Muller has been living on a train since last spring for a cost of about $380 per month (vs. $450 she used to pay for rent). She is blogging on the experience and it will be the subject for her final undrgraduate paper.


  • Turkey's Authoritarian Drift (The International New York Times) Turkey's Nov. 1 election gave the ruling Justice and Development Party, or A.K.P., a major victory that nobody expected. The period of political uncertainty that began in June, when the A.K.P. lost its parliamentary majority for the first time in 13 years, has ended. In other words, the past five months did not mark the beginning of the end of A.K.P. dominance, as the opposition hoped. They were merely a short intermission in the long-lasting dominance of President Recep Tayyip Erdogan. Some fear that Mr. Erdogan could simply keep accumulating power, leading to a system with an all-powerful Russian-style presidency without checks and balances. (The A.K.P. has so far failed to get the parliamentary supermajority it needs to make constitutional amendments, but nothing is impossible in the ever-volatile Turkish parliament.)




  • Myanmar's Aung San Suu Kyi: NLD has won election majority (BBC News) Myanmar's Aung San Suu Kyi has told the BBC she believes her party has won a parliamentary majority, in her first interview since the historic elections. Early results point to a sweeping victory for her National League for Democracy (NLD), but final official results will not be known for days. The election was seen as the most democratic in Myanmar for 25 years.


  • The Buddhist Priest Who Became a Billionaire Snubbing Investors (Bloomberg) Hat tip to Roger Erickson. The key to growing a successful comapny? Ignore the shareholders (Econintersect: the parasites) and focus on the employees (Econintersect: The job creators). A great quote from Kazuo Inamori, entrepreneur, management guru and Buddhist priest:

"If you want eggs, take care of the hen. If you bully or kill the hen, it's not going to work."


  • China's Crackdown on Financial Markets Gets Top-Level Support (The New York Times) President Xi Jinping of China called for more measures to protect stock market investors after meeting with financial regulators, the state news media said on Tuesday, signaling top-level support for a national campaign to crack down on market manipulation and to increase transparency. Xu Xiang, the billionaire owner of a Chinese investment firm who is sometimes compared to Carl Icahn, was detained on suspicion of insider trading on Nov. 1 and has been held incommunicado. In the days since, Chinese government officials appear to have broadened their investigation, amid the adoption of new regulatory measures.

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