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.
Asian shares, currencies slide after Paris attacks, data (Reuters) Asian stocks fell to six-week lows on Monday and emerging market currencies wilted as investors sought the safety of the greenback in the wake of Friday's attacks in Paris and downbeat economic data. Financial spreadbetters expect Britain's FTSE 100 to open 0.70% lower, Germany's DAX to open down around 1.3%, and France's CAC 40 to open 2.2-2.3% down.
Tanker Backlog Threatens World Oil Market Gridlock (Oil Pro) So much oil is now being stored on tankers there is a danger that no transport will remain available for surging oil production to be moved to market. The result could be further downward pressure on crude prices creating an excessive and catastrophic collapse. While recent news about the lowest level ever for the Baltic Dry Index (for other bulk material shipments), the cost to hire a supertanker - each capable of carrying 2 million barrels of oil - recently hit its highest level since 2008 at over $100,000 a day last month and currently remains at over $70,000 a day. Note: The high cost in 2008 coincided with the last collapse in oil from nearly $150 to just above $30 a barrel.
G20: Barack Obama and Vladimir Putin agree to Syrian-led transition (The Guardian) Hat tip to Roger Erickson. The United States and Russia have reached consensus at the G20 on the need for "a Syrian-led and Syrian-owned political transition" following a sidelines meeting between U.S. President Barack Obama and Russian President Vladimir Putin on Sunday. Fears of ISIS capability to bring terror to western cities loom over talks after it emerged one attacker had a Syrian passport flagged as arriving in Greece. The thaw between Obama and Putin came in the lead-up to the summit's working dinner, where G20 leaders were due to focus on strategies to counter violent extremism. A White House official said Obama and Putin had agreed the United Nations would mediate negotiations between the Syrian opposition and the regime after a ceasefire.
Debt Market Distortions Go Global as Nothing Makes Sense Anymore (Bloomberg) Across developed markets, the conventional relationship between government debt -- long considered the risk-free benchmark -- and other assets has been turned upside-down. Recently government debt (U.S., UK, Australia) has been paying the same or higher interest than supposedly riskier corporate paper. (See U.S. chart below). Econintersect: Rather than the common assertion that the Fed has been holding government rates too low, a logical argument is that the market is saying those rates are too high. See also next article (in U.S. section).
Federal Reserve Actually Propping Up Interest Rates: What This Means For mREITs (Seeking Alpha) Note: This is repeated from yesterday's 'What We Read Today'. The author says that mortgage REITS are extremely underpriced today and are a compelling buy. The reason, he says, is that the money supply is being completely misread by the market and it is far lower than many believe. He argues that interest rates are artificially high (most think they are being held at artificially low levels by the Fed). The author says that without the 0.25% yield on reserves at the Fed that short-term rates would be negative today. Thus he expects that raising the Fed funds rate will have little effect on short-term market rates and maintain a profitable spread for leveraged mortgage securities which are currently being sharply discounted by the market in anticipation of rising rates. Here are a couple of related comments by the author attached to another article:
Today it is mostly your credit card that allows you to spend. We no longer have a fiat money system. Today we have a credit money system. Just because there is still some fiat money does not negate the fact that we are on a credit money system.
A reasonable ballpark estimate of the credit money supply is that it was $70 trillion in 2007 compared to $50 trillion today. The effective money supply is the sum of the traditional fiat money aggregates plus the credit money supply. Thus, despite the claims of Ron Paul and Ted Cruz to the contrary, the effective or true money supply has fallen
Is US Monetary Policy Made in China? (Barry Eichengreen, Project Syndicate) Hat tip to Rob Carter. BE has contributed to GEI. The proposition is that China's selling of U.S. Treasuries is the opposite in effect of QE and produces an upward pressure on U.S. interest rates. The effect is such that U.S. interest rates are about 0.25% higher than they would have been otherwise. Thus China is doing the Fed's tightening job for it.
U.S. maternal mortality rate is twice that of Canada: U.N (Reuters) Women are twice as likely to die from causes related to pregnancy or childbirth in the United States than in Canada, a new global survey of maternal mortality published by the United Nations and the World Bank showed on Thursday. The United States was also one of only 13 countries to have worse rates of maternal mortality in 2015 than in 1990 - a group that also includes North Korea, Zimbabwe and Venezuela.
Guns, God and grievances - Belgium's Islamist 'airbase' (Reuters) "A breeding ground for violence" the mayor of Molenbeek called her borough on Sunday, speaking of unemployment and overcrowding among Arab immigrant families, of youthful despair finding refuge in radical Islam. But as the Brussels district on the wrong side of the city's post-industrial canal becomes a focus for police pursuing those behind Friday's mass attacks in Paris, Belgian authorities are asking what makes the narrow, terraced streets of Molenbeek different from a thousand similar neighborhoods across Europe.
France launches air strikes in Syria; Paris investigation widens (Reuters) French warplanes pounded Islamic State positions in Syria on Sunday as police in Europe widened their investigations into coordinated attacks in Paris that killed more than 130 people. Islamic State has claimed responsibility for Friday's suicide bombings and shootings, which have re-ignited a row over Europe's refugee crisis and drawn calls to block a huge influx of Muslim asylum-seekers. French police have launched an international hunt for a Belgian-born man they believe helped organize the assaults with two of his brothers. One of the brothers died in the attacks, while the second is under arrest in Belgium, a judicial source said.
Greeted like a rock star in London, Modi must face up to rising religious tension in India (The Conversation) Narendra Modi, the prime minister of India, touched down in the UK to an extraordinarily ecstatic welcome. Britain's diaspora Indian community greeted him like a rock star, the highlight being a huge rally in Wembley arena with singing and dancing and tens of thousands of cheering fans. Even by the standard of the receptions he has received in other countries, this was a momentous visit and it proceeded in good spirit. But the situation at home in India for Modi is less jubilant. Under his leadership, religious tension is on the rise - and a serious backlash appears to be beginning. A major issue now in India is the mainstreaming of right-wing Hindu politics. At times it appears that Modi himself has little to no control over some of his supporters.
Japan Enters Recession as Economy Contracts in the Third Quarter (Bloomberg) Japan's economy contracted in the third quarter as business investment fell, confirming what many economists had predicted: The nation fell into its second recession since Prime Minister Shinzo Abe took office in December 2012. The 3Q decline was at an annualized rate of -0.8%, following -0.7% in 2Q 2015. Weakness in business investment and shrinking inventories drove the contraction as slow growth in China and a weak global outlook prompted Japanese companies to hold back on spending and production. While growth is expected to pick up in the current quarter, the GDP report could put pressure on Abe and Bank of Japan Governor Haruhiko Kuroda to boost fiscal and monetary stimulus. The BOJ holds a policy meeting later this week.
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