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.
Asia markets mixed, with Shanghai off 1.8%, Kospi up 0.4% (CNBC) Asian markets were mixed Wednesday, with China shares dropping, as analysts pointed to renewed investor concerns over the mainland's economy following lower-than-expected trade data for February. South Korea was higher but Tokyo and Hong Kong were lower. In Oz the wizard had stocks up almost 1%.
The trouble with the IMF: Missing one crisis is understandable, missing three is a disaster (City A.M.) The top ranked mainstream Journal of Economic Perspectives is hardly the place we would expect to read a strong criticism of the IMF. But in the latest issue, this is exactly what Barry Eichengreen of Berkeley and Ngaire Woods of Oxford have done. They argue that the effectiveness of the IMF has many similarities with that of a football referee. A great deal depends upon whether the players and spectators perceive the referee as being competent and impartial. With this in mind, Eichengreen and Woods level charges against the IMF on several counts. Perhaps the most serious is its track record in monitoring the world economy and warning of potential crises. Keynes, who was a great enthusiast for creating the IMF, envisaged that a key role would be as a "blunt truth teller". Elected politicians may try to fudge and obfuscate, but the IMF should tell things how they really are. It would be unrealistic to expect anyone to have anticipated and warned of the US sub-prime crisis, the global financial crisis and the Greek sovereign debt crisis. But as Eichengreen and Woods put it, "the IMF batted zero for three on these three events, which suggests that its capacity to highlight risks to stability leaves something to be desired". Using a different analogy, if a doctor fails to spot the symptoms of a disease, why should we trust his proposed cure?
WHO: Sexual transmission of Zika more common than thought (Associated Press) Sexual transmission of the Zika virus is more common than previously thought, the World Health Organization said Tuesday, citing reports from several countries. After a meeting of its emergency committee on Tuesday, the U.N. health agency also said there is increasing evidence that a spike in disturbing birth defects and neurological problems are caused by Zika, which is mostly spread by mosquito bites. When WHO declared the explosive outbreak in the Americas to be a global emergency last month, it said that the evidence that Zika was responsible was only circumstantial. WHO Director-General Dr. Margaret Chan said "reports and investigations in several countries strongly suggest that sexual transmission of the virus is more common than previously assumed". The U.S. is investigating more than a dozen possible cases of Zika in people who may have been infected through sex.
Five Tests for the Commodities Bounce (Bloomberg) There are reasons to take both sets of data with a pinch of salt. Market prices are prone to speculation, momentum trading and short squeezes, all of which could explain some of the movement in iron ore and oil. For one thing, much iron ore is shipped internationally and the Baltic Dry Index, which measures demand for bulk shipping, has just barely risen from all-time record lows.
March 8 Primary Election Results (The New York Times) Donald on his way to 3 states out of 4 over Cruz and an increase in delegate lead. Bernie upset Hillary in Michigan but she still added to her delegate lead with a lopsided victory in Mississippi. This is being called Super Tuesday 2, but it is a lot less super than last week. Analysts wonder if Hillary has an Achilles heel in the rust belt and the heartland.
Buffett's Berkshire Plans $9 Billion Bond Sale to Repay Loan (Bloomberg) Warren Buffett's Berkshire Hathaway Inc. sold $9 billion in debt, the conglomerate's biggest bond deal ever, in the latest offering from a blue-chip company tapping investor demand for the most creditworthy borrowers. Berkshire sold the debt in seven parts, according to data compiled by Bloomberg. Proceeds will help pay down a $10 billion loan used to finance its purchase of Precision Castparts Corp. Buffett had said earlier that Berkshire used about $23 billion of its cash for the deal and would borrow the rest.
Migrant crisis: Slovenia moves to 'shut down' Balkans route (BBC News) Slovenia has introduced new border restrictions for migrants as part of efforts to close the Balkans route from Greece to Western Europe. Only migrants who plan to seek asylum in the country, or those with clear humanitarian needs will be allowed entry. In reaction, Serbia said it would close its borders with Macedonia and Bulgaria to those without valid documents. The future of the EU's passport-free Schengen zone is already in doubt. Econintersect: The abandonment of free passage within the EU, comparable to the situation in the U.S. would be another nail in the coffin spike in the heart of the EU.
Bank of England warns of Brexit risks, provoking ire of eurosceptics (The Business Times) Exiting the European Union could hurt Britain's $2.9 trillion economy and prompt some banks to abandon London's global financial powerhouse, Bank of England (BoE) Governor Mark Carney said on Tuesday. In his strongest intervention so far in Britain's debate about EU membership, Mr Carney said he was not making any recommendation about how to vote in the June 23 referendum but that uncertainty created by an exit could hurt the economy.
Six reasons why taxing EPF was a stupid idea in the first place (First Post) Hat tip to Sanjeev Kulkarni. The Indian government has decided to withdraw their plan to tax the corpus accumulated by investing in the Employees' Provident Fund(EPF). As the finance minister Arun Jaitley said in the Lok Sabha today: "In view of representations received, the government would like to do a comprehensive review of this proposal and therefore I withdraw the proposal." The proposal to force retirement savings to be 60% invested in annuities (insurance company products) to avoid taxation was, according to this article, a "very stupid idea at multiple levels".
Five Tests for the Commodities Bounce (Bloomberg) There are two important graphs in this article which show the extent of the slowdown in the Chinese economy. (1) Capacity utilization in China's oil refineries have hit a record low (first graph below). (2) Electricity production growth has nearly flatlined (averaged less than 2% growth y-o-y for 2015) - second graph below. This seems inconsistent with the reported GDP growth near 7%.
Phantom Goods Disguise Billions in China Illicit Money Flows (Bloomberg) Days after the Switzerland-based Bank for International Settlements played down fears over capital flight out of China, new trade data has put the spotlight on a channel used to ferret out billions worth of illicit money flows: phantom goods. A steep rise in China's reported imports from Hong Kong has raised concerns that trade invoices are being manipulated to get capital out of the country amid fears the yuan will continue to weaken. February data released Tuesday show those imports jumped a whopping 89% from a year earlier, even as total imports fell 14%. The rise was even larger in January. Economists said the spikes follow similar patterns in recent months that point to companies using trade channels to pay for goods far in excess of their value or even that don't exist at all.
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