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posted on 06 December 2015

Early Headlines: Global Recession, Oil Headed Lower, Obama To Address Nation, US Fiscal Loosening, Greece Fiscal Tightening, Gold Flows To Asia And More

Written by Econintersect

Early Bird Headlines 06 December 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-301-180

Global

  • Japan's Back in a Recession: We're Next (Harry Dent, Economy and Markets Daily) Harry Dent has had some spectacular successes and dramatic failures in near-term and mid-term economic projections. But few will argue with his long-term logic. Population growth is a major factor in economic growth and many countries, including all the very largest today, are facing population growth stagnation and/or decline in the coming decades.

  • Social media companies step up battle against militant propaganda (Reuters) Facebook, Google and Twitter are stepping up efforts to combat online propaganda and recruiting by Islamic militants, but the Internet companies are doing it quietly to avoid the perception that they are helping the authorities police the Web. On Friday, Facebook Inc said it took down a profile that the company believed belonged to San Bernardino shooter Tashfeen Malik, who with her husband is accused of killing 14 people in a mass shooting that the FBI is investigating as an "act of terrorism". Just a day earlier, the French prime minister and European Commission officials met separately with Facebook, Google, Twitter Inc and other companies to demand faster action on what the commission called "online terrorism incitement and hate speech".

  • OPEC Won't Cut Production to Stop Oil's Slump (Bloomberg) OPEC signaled no respite from the global oil glut that has driven prices to a six-year low. The Organization of Petroleum Exporting Countries will keep pumping about 31.5 million barrels a day, the group's President Emmanuel Ibe Kachikwu said Friday after a meeting of ministers in Vienna. Members set aside their previous daily output target of 30 million barrels, a ceiling breached for 18 months. OPEC will wait until June to decide on a new limit, Secretary General Abdalla El-Badri said.

  • The party is over for oil (CNBC) Not only is the projection of analysts that oil will remain in the 40s for the rest of the year but it will head lower in the first half of 2016.

U.S.

  • Obama Will Address the Nation on California Attack, Terrorism (Bloomberg) President Barack Obama will give a nationally televised address Sunday evening at 8 p.m. EST on the shooting rampage that killed 14 people in California, as U.S. authorities pursue evidence that the attack was an act of terrorism that may have been inspired by Islamic State.

  • Lawmakers Near Deal on Billions in Tax Cuts (The New York Times) Hat tip to Rob Carter. Republican and Democratic negotiators closed in Friday on a major package of tax cuts for businesses and individuals that could exceed $700 billion in forgone revenues over a decade. The package would extend or make permanent around 50 temporary tax breaks that have expired or will soon lapse. By combining business breaks that are priorities of Republicans with tax credits for lower-income workers and families that are critical to Democrats, negotiators are seeking a balanced package that could transcend the partisanship that often paralyzes Congress. Econintersect: The term "balanced" here is not in the sense of a "balanced budget" (the proposals would increase deficits) but balanced in dividing the benefit of the increased deficits between high income individuals, businesses and the poor. That's correct we said benefits, which is exactly what deficits produce in an underperforming economy with low inflation.

  • Amazon Buying Trucks is Boring but Absolutely Necessary (Wired) You're about to see Amazon-branded big-rigs out on the highway, driving between the company's sprawling warehouses. Amazon has long shunned profits in favor of growth, and over the past 20 years has poured resources into building a massive logistics infrastructure - much of it kept hidden from public view. The idea, which Amazon has discussed before, is to have that blender you ordered appear on your doorstep as if by magic. While control programs, robots and drones are all very interesting and critical to the future of the company, so are the dull details of getting masses of products from point A to point B as efficiently as possible when the two points are miles apart.

  • End the Gun Epidemic in America (The New York Times) The Editorial Board of The Times explains why they assert:

It is a moral outrage and national disgrace that civilians can legally purchase weapons designed to kill people with brutal speed and efficiency.

EU

  • Draghi Says There Can't Be a Limit to ECB Action Within Mandate (Bloomberg) Mario Draghi defended the European Central Bank's expansion of its stimulus program a day after investors panned it, while saying further action can be taken if needed. The euro fell. Draghi argued that the newest measures announced -- including the reinvestment of principal payments on the debt held -- will add some 680 billion euros ($740 billion) in liquidity to the system by 2019.

Greece

  • Greek parliament approves austere 2016 budget (BBC News) Greece's parliament has narrowly approved the 2016 budget that includes sharp spending cuts and some tax increases amid economic recession. The budget was passed with a majority of only eight votes - 153 to 145. Econintersect: The economy is starved for money so the solution is to increase the amount of money removed from the economy. This has the same logic as bloodletting as a treatment for anemia. Here are the projected results from this article:

The budget makes €5.7bn in public spending cuts including €1.8bn from pensions and €500m from defence. It also includes tax increases of just over €2bn.

Despite the cuts, the budget will still have a greater deficit than the 2015 budget.

China

  • Shanghai Gold Exchange Has 49 Tonnes of Gold Withdrawn the Week Ending 27 November (Jesse's Cafe Americain) There were 48.86 tonnes of gold withdrawn from the Shanghai Gold Exchange for the week ending 27 November. Year to date, there have been a record 2,362 tonnes of gold withdrawn, far in excess of any other year at this time. What is the reason for this? Jesse says it represents a flood of gold into Asia as fiat currencies are considered overvalued in that part of the world. He quotes Gresham's Law:

"When an official market or cartel overvalues one type of money or asset and undervalues another with respect to its fair market value and risks, the undervalued money or asset will leave the country as best it can, or will disappear from circulation into hoards, while the overvalued money or assets will flood into circulation."

Brazil

  • Brazil's No-Win Impeachment Battle (Bloomberg Editorial Board) Brazil's legislature has opened impeachment proceedings against the country's president. The charges may or may not be justified, but if ever there were a political culture that deserves to be put on trial, it is Brazil's. Brazil's voters -- never mind its legislators -- can hardly be blamed for their unhappiness with President Dilma Rousseff. She has overseen a worsening economy and has been embroiled (but so far not implicated) in a long-running corruption scandal involving Petrobras, Brazil's state-run oil company. But she is also merely an illustration of the larger problem: Brazil's unhealthy statist model, which fuels corruption and retards development and growth. The entire impeachment process is quite counter productive in the Bloomberg view - Regardless of how this convoluted process plays out, the months of political maneuvering will make Brazil's immediate fiscal crisis harder to fix.

Puerto Rico

  • Wal-Mart Sues Puerto Rico Over 'Astonishing' Tax Increases (Bloomberg) The Puerto Rico unit of Wal-Mart Stores Inc. sued the island's government, seeking to overturn a new tax the retailer calls unfairly high. Enacted in May, Puerto Rico's Act 72-2015 increases to 6.5% from 2% the tax on goods imported from offshore affiliates to local companies with gross revenues of more than $2.75 billion. The increase comes as the U.S. commonwealth struggles to restructure $70 billion in debt, more than every U.S. state but New York and California.

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