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posted on 18 April 2016

Early Headlines: Asia Stocks Down, Oil Drops, Neg. Rates Debated, New EU Bank Transparency Rules, Rousseff 'Hangs By Thread', Ecuador Death Toll Now 272 And More

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Early Bird Headlines 18 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.




  • What's Wrong With Negative Rates? (Joseph Stiglitz, Project Syndicate) Het tip to Rob Carter. Prof. Stiglitz focuses on the need to stimulate expansion of credit in order to create increased demand. He observes that negative interest rates do not seem to be doing that and suggests central bankers are using invalid models. (Econintersect: That's hardly a revelation.) And he says that what investment is taking place is in capital intensive facilities (read automation) and will actually reduce employment. Econintersect: What does not get enough attention in this discussion is the role of high private debt. How can credit expand when existing debt loads limit the ability of borrowers to make good credit risks? We are in a debt deflation cycle and increasing debt will add to deflationary pressures. What is needed is not more credit (debt) - we need less debt. There are basically two approaches: (1) Massive defaults (some would liken this to a debt jubilee); (2) or monetization of debt (as the Fed did with more than $1 trillion of mortgage debt in their QE cycles). The alternative is a long, painful workout period a la Japan for the last 20 plus years.

  • What's Wrong With Negative Interest Rates? (Bloomberg) Discussion by Tom Keene of the Stiglitz paper discussed in the preceding item.


  • Deal Scrapheap Starts to Fill Up As Mega-Mergers Fall Apart (Bloomberg) The deal junkyard is getting crowded. Of the $3.2 trillion in deals announced in the past eight months, about nine percent -- worth $294 billion -- have already fallen apart, according to data compiled by Bloomberg. That's close to double the amount in the same period a year earlier, despite overall deal volumes only ticking up about 23%.


  • Why Europe's new tax initiative is a big deal (The Conversation) Public outcry over revelations in the Panama papers about global levels of tax dodging has led to political action. Europe's five largest economies - the UK, France, Germany, Italy and Spain - have agreed to new transparency rules, which will require banks to identify the ultimate beneficial ownership of assets. If properly implemented, these rules could seriously dent the game that individuals and companies play to evade tax or adopt aggressive tax avoidance planning. As shown, among other revelations in the Panama papers data leak, companies and individuals use strings of shell corporations, set up offshore, in order to avoid detection from their domestic tax authorities. The new rules will make use of shell corporations to hide beneficial ownership a crime.


  • These five London areas were among the worst in the UK for disposable income growth (City A.M.) London accounted for half of the 10 worst performing areas for growth in disposable income over the last five years, according to new research released today, which blamed rising housing costs and lower City bonuses in part for the slowdown. Camden and City of London were the only areas in the UK to have experienced a drop between 2009 and 2013, accounting firm UHY Hacker Young's most recent findings show, falling 1.3% and 0.1% respectively. But despite coming last in the rankings, households in Camden and the City of London were also among the most well-off, with £37,324 to spend or save after taxes and mortgages or rent in 2013 compared with £37,360 in 2009.

  • How Brexit would reduce foreign investment in the UK - and why that matters (The Conversation) According to new research conducted at the Centre for Economic Performance, leaving the European Union could lead to a fall in inward foreign direct investment into the UK of close to 25%. This would damage productivity and could lower people's real incomes by more than 3%. Case studies of cars and financial services - two UK success stories - show, that Brexit would also lower EU-related output of goods and services, and erode the UK's ability to negotiate concessions from regulations on EU-related transactions.

  • UK house prices: Mortgage lending enjoys best first quarter in nine years despite March dip (City A.M.) Mortgage lending enjoyed its best first quarter in nine years thanks to buy-to-let landlords rushing to beat April's stamp duty hike, according to new figures published this morning. An average of 71,710 house purchase loans were approved in the first three months of the year, the data from surveyors e.surv shows - making it the highest opening quarter since 2007 when 116,898 were granted. However, lending dipped by 9.1% on a monthly basis to 61,173 approvals in March compared with 73,871 in February.


  • Ordinary Syrians are risking their lives to protect their cultural heritage (The Conversation) Ordinary Syrian people are going to extraordinary lengths, risking everything to protect their heritage, despite the horror that has engulfed their country. For them, it is not a question of people or stones. The story of the people is embedded in those stones, a crafted story stretching back millennia. Saving that story is saving Syria.


  • Chinese military aircraft makes first public landing on disputed island (Reuters) A Chinese military aircraft has for the first time publicly landed at a new airport on an island China has built in the disputed South China Sea, state media said on Monday, raising the prospect that China could base fighter jets there. The United States has criticized China's construction of artificial islands in the South China Sea and worries that it plans to use them for military purposes, even though China says it has no hostile intent.


  • Rousseff Hangs by a Thread After Losing Impeachment Vote (Bloomberg) Dilma Rousseff's presidency is hanging by a thread after Brazil's lower house of Congress voted in favor of her impeachment, a decision that's likely to cheer investors just as it threatens to bring down the curtain on 13 years of leftist rule. The opposition garnered 367 votes, 25 more than the two-thirds majority it needed to send the impeachment motion to the Senate.


  • Shaken Ecuador hunts for survivors amid 7.8 quake debris (Reuters) Saturday's 7.8 magnitude quake ripped apart buildings and roads, knocked out power, and injured at least 2,068 people in the largely poor Andean country of Ecuador. The death toll has now risen to at least 272, but there is still not an accurate count of how many are missing.

Map below is from CNN.


  • Wisdom from Adam Smith (Forwarded by Roger Erickson) Roger said:

"... and to think that Smith's writings were immediately used to promote opposite of what he said."

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