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posted on 15 April 2016

Early Headlines: Asia Stocks Flat, China GDP As Expected, Aussie Dollar Up, Latest On Zika, Living Wills And Breaking Up Banks, 35 Years Of Disinflation, India Running Out Of Water And More

Written by Econintersect

Early Bird Headlines 15 April 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

  • Asia markets subdued after China Q1 GDP as expected (CNBC) Asia markets were mixed in the final trading day of the week, amid a muted reaction to China's gross domestic product (GDP) numbers for the first quarter, which matched forecasts. In the currency market, the Australian dollar was sharply higher after the Chinese data release; the Aussie climbed as high as $0.7715 from around $0.7686 before the numbers. As of 1:25 p.m. HK/SIN time, the currency traded at $0.7711. China is a big market for Australian exports, and the Aussie tends to move in tandem with Chinese data. The Japanese yen held fairly steady against the dollar, with the pair trading at 109.59 in the afternoon local time.

asia.pac.2016.apr.15

  • In Babies With Microcephaly, Unique Damage Wreaked By Zika (PBS Frontline) There are a handful of classic causes of microcephaly: Rubella, cytomegalovirus, genetics, exposure to certain toxins, and maternal drug use, among others. When Brazilian doctors first noticed an unusual number of babies born with microcephaly last year, they initially wondered if it was due to an uptick in one of those causes. But that theory was quickly rejected, in part because their tiny patients' brain damage was notably different than what they were accustomed to seeing in microcephaly patients. In case after case, they were observing a new, specific pattern of damage. There is now widespread scientific consensus that the source of these new microcephaly cases is the Zika virus, a recent arrival in the Americas that rarely causes problems for adults, but can tear asunder the developing nervous system of a fetus. On Wednesday, the director of the Centers for Disease Control and Prevention said there was no longer ambiguity on this point, according to Dr. Thomas R. Frieden, the agency's director:

"There is no longer any doubt that Zika causes microcephaly."

U.S.

  • Why Banks Should Take Living Wills Seriously (Bloomberg Editorial Board) U.S. banks are safer today than they were in 2007, but not yet as safe as they should be. For the second time in two years, regulators have found that some of the country's biggest banks can't adequately explain how they could go under -- should it come to that -- in an orderly fashion, at no cost to taxpayers, and without destabilizing the wider financial system. Econintersect: We suggest reason's would include the election of a president with a program like Bernie Sanders' in which case the 'living will' could become the required business plan for immediate implementation. See next article.

  • Sanders Can't Clarify Wall Street Plan in Testy Clinton Debate (Bloomberg) The debate on Thursday, ahead of the April 19 Democratic primary, gave Sanders a chance to fill in the blanks on how he'd break up big banks and keep them from sinking the economy in a global meltdown, a key part of his campaign. Instead, he retreated to familiar talking points while Clinton seized the initiative on the issue, even as she defended her past paid speech-making for Goldman Sachs Group Inc. That's the way these Bloomberg writers see it, at any rate. Econintersect: We felt that he was very clear how the banks would break up: They would do it themselves after legislation was enacted that limited the maximum size of any American bank. The assumption would be that such a break-up would maximize value for the subdivided parts. But we suggest another outcome: The break-up might be contrived in such a way that would maximize wealth extraction by executives, with value to stockholders, the financial system and the economy of the entire country receiving very meager benefits. This is where pre-established 'living wills', as per Dodd-Frank, would minimize such plundering. See preceding article.

  • Is Inflation Rising or Falling? (InflationData.com) This month's move remains below the mid-channel line meaning long term inflation is still in the bottom half of the channel. So, it could still move all the way to the top of the channel (slightly above 3% annual inflation) and the long term trend could still remain down. However, based on timing alone the long term trend has been down since it peaked in 1980. That is just over 35 years. So it is quite possible that the low of -2.10% in July of 2009 was the low and from here it will create a new channel cyclically moving higher for the next 35 years.

inflation.us.1989.2016.apr.600x500

  • Inflation Adjusted NYSE Stock Index (InflationData.com) In real (inflation-adjusted) terms U.S. stocks peaked 18 months ago. And for long-term investors the only gains since the summer of 2000, on average, have been the dividends collected.

nyse.inflation.adj.1966.201

"Sanders has been on a winning streak in recent weeks, but he arrived at Thursday's debate at the Brooklyn Navy Yard facing a potentially damaging defeat in next week's primary. His sense of urgency was palpable as he repeatedly attacked Clinton. She in turn fired back with the kind of disdain she has rarely shown."

UK

The existing tax system is a result of years of tinkering, reflecting the influence of political views and special interest lobbying. This has created vast complexity. We could look to simplify and debug the current system rather than dream up an entirely new one, but as the tax code has doubled in size since 1997, the prospects aren't great. Remember, it took five pages of legislation to describe the role of the Office of Tax Simplification in the Autumn Statement last year.

Corporate tax is one of the most obvious issues. It could be seen as a moral obligation by shareholders to forego a percentage of their profits in return for the benefits of the legal and economic framework in which their company operates. Being able to hire employees who have been educated by the state should require some contribution from employers.

Russia

  • What's Known About Putin's Wealth After the Panama Papers? (PBS Frontline) Not much, it turns out. Associates of the Russian leader have been found in the Panama Papers, but nothing about Putin himself. But the Frontline investigation has found that much of Putin's wealth is in the name of proxies so there is no way of separating him from the associates that have more than $2 billion revealed in the Panama Papaers. In this article sources are quoted that estimate Putin's wealth to be more than $40 billion. That would make him one of the wealthiest men in the world.

India

  • Water levels in 91 major reservoirs alarmingly low (The Hindu) Water levels in major reservoirs of the country are alarmingly low, weekly data released by Central Water Commission (CWC) shows. Contents are at only 23% of the capacity of India's major reservoirs, which have nearly 2/3 of the country's storage capability. The western and southern regions are the most affected. The live storage level in 27 reservoirs of the western region, which includes Maharashtra and Gujarat, is a mere 18%, compared to double that last year.

  • What to make of the latest IMD monsoon forecast? (The Hindu) After four years of sub-normal monsoon seasons, how hopeful should Indians be about the forecast fro an above-normal monsson for 2016? The answer is: Not very hopeful. Long range forecasts have at times in the past 10 years been in error by very large amounts and have only been accurate within estimated error 4 out of the 10 years. Graph below is for April data. The heart of the monsoon season is June.

india.april.rainfall.2006.2015

Japan

  • Strong quake in Japan kills at least nine, nuclear plants safe (Reuters) The death toll in Japan has risen after Thursday's 6.0 magnitude earthquake near the city of Kumamoto in southwest Japan. At least nine people were killed and nearly 1,000 injured. The quake toppled houses and left thousands without power, but no problems were reported at nuclear plants in the area. Strong aftershocks continued to shake the area around Kumamoto on Friday. While the magnitude was much lower than that of the March 11, 2011 quake that touched off a massive tsunami and nuclear meltdowns at Fukushima, the intensity was similar because the quake struck on land and at a much shallower depth.

China

  • China GDP Grew 6.7% Year-on-Year (Bloomberg) GDP growth came in exactly as expected and some other economic numbers were better than expected. Analysts are suggesting the latest results indicate China's slowdown may be moderating. See China's Economy Stabilized in First Quarter (Bloomberg). But also see next article.

  • Chinese economy shows signs of debt-fueled recovery (Reuters) China posted its slowest economic growth since 2009 but a surge of new debt appears to be fueling a recovery in factory activity, investment and household spending in the world's second largest economy. That's good news in the near-term, economists say, but many worry it marks a return to the old playbook used during the financial crisis, when Beijing hand-cranked its economy out of a slowdown through massive stimulus.

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