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.
Clearly, the UN is no “enchanted palace"; no international organisation ever has been. Plainly, it has its closed diplomatic backrooms and all the problems that that entails. It is a vast edifice, but it has a great many open doors. And in a global context of seemingly intractable war and the onrushing crisis of climate change, it remains the ultimate and vital arena for monitoring the global balance of power and adjudicating international relations as best we can.
NYU accidentally announces one of its professors wins Nobel Prize (Politico) New York University may have been guilty of a little wishful thinking when it accidentally posted a draft news release online saying that one of its business professors, Paul Romer, won the 2016 Nobel Prize for economics. (He has not.) The award will not be announced until Monday. Econintersect: Paul Romer would be one of our favorites to win because of his critical and outspoken thinking about the defects over the last half century and longer in widely held and taught economic theory. But it is exactly because of that critical thinking that he is unlikely to be recognized. If his thinking were given validity a significant minority of Nobel awards in economics would be devalued (and in good conscience withdrawn, although that would not be done simply for the recipient having exercised defective thinking).
Here's the best theory we've seen of how Trump paid so little tax (Josh Barro, Business Insider) This is a discussion of how Donald Trump managed to personally lose nearly $1 billion in 1995 and not have a personal bankruptcy. We have previously reported the speculation by John Hempton that Trump might have used an illegal 'debt parking' arrangement. Barro suggests (as have others) that the IRS is not likely so incompetent that they would have failed to detect such a subterfuge. Barro quotes a report (subscription only) by tax expert Lee Sheppard which points out an unintentional loophole that existed in 1995 and which would have made the large income loss possible. The IRS felt that wording of the loophole obviously could not be the intent the law because it allowed the owner of a bankrupt "S" corporation to recognize the losses in his personal income without recognizing the forgiven debt as well. The IRS lost a Supreme Court case in 2001 and the loophole was not ended until the law was rewritten in 2002. Barro doesn't know if Trump used this loophole but he says that "it would fit the available evidence very well". If he used the loophole, Barro says:
"...it would help explain how he managed to run up a tax loss so big that it amounted to nearly 2% of all the net operating losses taken on individual income tax returns in the entire country in 1995.
It would also blow up the narrative that Trump's huge loss just reflects the tax code working properly, letting businesspeople offset their real profits with their real losses.
If Trump didn't use the Gitlitz loophole and he really did enjoy a bona fide economic loss of nearly $1 billion, he could prove that by releasing his tax returns in their entirety.
Until he does that, we can't just assume Trump "used the tax code just the way it's supposed to be used," as his running mate, Gov. Mike Pence, claimed Tuesday night. After all, like the rest of us, Pence has not seen the entire tax returns he is purporting to bless."
Pound falls 6% in Asian trading mystery (The Guardian) A flash crash of sterling in early trading may have been ‘fat finger’ error or technical glitch in response to ‘hard Brexit’ warnings. The pound fell by 6% to US$1.1841, with traders confused as to the cause. It sent the FTSE 100 up by 28 points to 7,028 in early trading. The blue-chip index tends to rise when the pound falls, because most of the constituent companies earn the majority of their money in dollars, rather than pounds. At one stage in overnight trading, the pound was down by as much as 10% to $1.1378 until a rogue outlying trade was canceled, leading to a recovery. When the London markets opened, sterling was trading at $1.2430. The chart below from Bloomberg shows the flash crash but not the subsequent recovery.
Deutsche Bank Explores Capital-Raising Options, "All Unattractive" (Zero Hedge) Despite proclamations from various officials, business leaders, and mainstream media pundits that Deutsche Bank's demise was: a) driven by speculators, b) not driven by any need for liquidity, because c) the bank has plenty of capital... it doesn't. As Bloomberg reports, no matter how much the DoJ fine is watered-down (don't expect much), the most systemically dangerous bank in the world is holding informal talks with securities firms to explore options including raising capital; but while the lender has several options, as one analyst noted rather awkwardly, "they’re all unattractive." After three straight days up - soaring 25% off last Friday's lows, thanks to a disproven rumor of a pending settlement with the DoJ - Deutsche Bank closed down 4% from its opening highs today.
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