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posted on 18 June 2016

Early Headlines: Yen Surges, China Fights Capital Flight And Sinking Yuan, Swiss 30-Year Neg. Yield, Does World Need War?, US Trade Surplus, War On Terror Creates Terrorists, Bankrupt Coal, Little England Fantasy And More

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Early Bird Headlines 18 June 2016

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.



  • The Case Against Peace (Foreign Policy) Peace is a wonderful thing. But prolonged periods of peace may also have a downside: They allow divisions within different societies to grow and deepen. Even worse, they may eventually drive the world back toward war.


  • The US Trade Surplus in Services (Timothy Taylor, Conversable Economist) TT coontributes to GEI. The US has been running a trade surplus in services for the last few decades, and it's getting larger. The blue line in the graph below shows the monthly US trade deficit in goods. The red line shows the monthly US trade deficit in goods-plus-services. The red line being above the blue line shows that the US trade surplus in services. Since the end of the Great recession in 2009, the services trade surplus has been much larger than in the two decades before, averaging about $18 billion per year, slightly larger than that the last couple of years.

  • U.N. Genocide Watchdog Suggests Trump, American Hardliners Fueling Hatred of Muslims (Foreign Policy) The U.N.'s top genocide expert waded into the toxic American debate on the massacres of 49 people at a gay bar in Orlando, Florida, and issued a thinly veiled swipe at presumptive Republican presidential nominee Donald Trump and Christian extremists for exploiting the tragedy to fuel anti-Muslim hatred. Adama Dieng, the U.N. special advisor to Secretary-General Ban Ki-moon on the prevention of genocide, said Friday in a statement:

"At a time when there was greatest need for sympathy and solidarity, I was appalled by the immediate and shameful efforts of some political and religious leaders to manipulate and politicize the events in Orlando to fuel fear, intolerance, and hatred."

It's no surprise that the coal industry has received plenty of regulatory attention and its decline has been covered extensively in the press. Consider that in the "War on Coal," EPA and the Department of Interior have combined to impose $312 billion in costs and more than 30 million paperwork burden hours. All of these burdens aren't directed solely at the coal industry, but the Clean Power Plan, coal residuals rule, the MATS measure, and Cross-State Air Pollution Rule will impose nearly $20 billion in annual burdens on the industry. The sharp drop in natural gas prices also plays a role, declining 70 percent since 2008. However, the market cap of four of the largest coal companies was more than $35 billion in 2011. After a flurry of regulation, it's now a smudge on the graph below, a decline of 99 percent. Behold, the steep decline of coal in one chart:


The Little Englanders crave grand vision because for them, the glass of reality is always half-empty - modern Britain, the fifth largest economy in the world, with a London that vies with New York as the world's global city, is not good enough for them: They want radical change that will sweep away the messy web of compromises that have been incrementally built up to respond to the complexity of the real world. This vision strips away all impurities, in order to revert to some kind of original state - an imagined golden past, leading to a promised golden future.


  • Swiss 30-year government bond yield turns negative (MarketWatch) If someone had suggested to you 20 years ago that the day would come when it would cost you to own a 30-year Swiss government bond (rather that paying you interest), you would have thought them to be certifiably insane. Well, investors are now paying for the privilege to park cash for up to three decades in Swiss government debt. The yield on the 30-year Swiss bond became the longest-dated maturity to fall into negative territory on Thursday, as government bond prices continued to rally due to heightened concerns over impending vote in the U.K. on whether or remain or leave the European Union. The 30-year yield declined 5.5 basis points to negative 0.055% on Thursday. Bond yields fall when prices rise and vice versa.


  • Russian athletes ban is 'unfair', says Vladimir Putin (BBC News) Vladimir Putin has said it is unjust and unfair that Russian athletes remain banned from international competition, including the 2016 Olympics in Rio. The International Association of Athletics Federation (IAAF) decided not to lift the suspension, imposed after accusations of state-sponsored doping. Individual athletes can compete as neutrals if they prove they are clean. The Russian president called on other bodies, including the International Olympic Committee (IOC), to intervene. The IOC executive board said it would hold a telephone conference on Saturday to discuss the issue ahead of a full IOC summit in Lausanne on Tuesday. Putin said:

"There are universally recognised principles of law and one of them is that the responsibility should be always personified. The people who have nothing to do with violations, why should they suffer for those who committed the violations? I'm assuming that we'll have a discussion with our colleagues in the World Anti-Doping structure and I hope for a suitable reaction from the International Olympic Committee."



  • China Dumping More Than Treasuries as U.S. Stocks Join Fire Sale (Bloomberg) China is taking drastic measures to combat flight of capital from the country and to try to maintain the value of the yuan renminbi. See first chart below. The Chinese government holdings of U.S. Treasuries ($250 billion sold in last two years) and Wall Street stocks (second chart below) have been shrinking as Beijing tries to increase yuan holdings and decrease dollars. The formula is: sell dollar based assets, use dollars gained to buy yuan to slow its decline and offset capital outflows.


  • Rio state declares 'public calamity' over finances (BBC News) The Brazilian state of Rio de Janeiro has declared a financial emergency less than 50 days before the Olympics. Interim Governor Francisco Dornelles says the "serious economic crisis" threatens to stop the state from honoring commitments for the games. Most public funding for the Olympics has come from Rio's city government, but the state is responsible for areas such as transport and policing. Interim President Michel Temer has promised significant financial help. The governor has blamed the crisis on a tax shortfall, especially from the oil industry, while Brazil overall has faced a deep recession. The measure could accelerate the release of federal emergency funds. Rio state employees and pensioners are owed wages in arrears. Hospitals and police stations have been severely affected.


  • Mexican Congress approves package of anti-corruption bills (Reuters) Mexico's Congress passed a package of anti-corruption bills on Friday, including stiffer penalties for graft, but the legislation was stripped of a provision that would have required public officials to make public their asset declarations. President Enrique Pena Nieto has made the push for tougher anti-corruption laws a top priority of his government, which has been accused by its critics of a lax attitude toward fighting corruption. If signed into law by Pena Nieto, the package of laws would increase fines and jail time for public officials convicted of bribery, embezzlement and illegal enrichment as well as create an independent anti-corruption prosecutor. Lawmakers from Pena Nieto's Institutional Revolutionary Party, or PRI, and its allies in Congress voted down a provision that would have forced elected politicians and other public officials to publicly disclose their assets, taxes and potential conflicts of interests. The same lawmakers, however, voted to approve a requirement that private citizens, including businesses, that receive government funding or contracts, must make such public disclosures.

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