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posted on 24 May 2017

Early Headlines: Asia Stocks Mixed, Dollar, Oil Up, Gold Steady, Ocean Rise Accelerates, Bitcoin Bubble, Trump Budget, UK High Alert, China Downgrade, And More

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Early Bird Headlines 24 May 2017

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.

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Global

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  • Scientists say the pace of sea level rise has nearly tripled since 1990 (The Washington Post) A new scientific analysis finds that the Earth’s oceans are rising nearly three times as rapidly as they were throughout most of the 20th century, one of the strongest indications yet that a much feared trend of not just sea level rise, but its acceleration, is now underway. Their paper, just out in the Proceedings of the National Academy of Sciences, isn’t the first to find that the rate of rising seas is itself increasing - but it finds a bigger rate of increase than in past studies. The new paper concludes that before 1990, oceans were rising at about 1.1 millimeters per year, or just 0.43 inches per decade. From 1993 through 2012, though, it finds that they rose at 3.1 millimeters per year, or 1.22 inches per decade. The cause is that sea level rise throughout much of the 20th century was driven by the melting of land-based glaciers and the expansion of seawater as it warms, but sea level rise in the 21st century has now, on top of that, added in major contributions from the ice sheets of Greenland and Antarctica. The graph below shows the accelerating decrease in Greenland's ice mass.

  • Bitcoin: Ponzi gone global (Macro Business) Bitcoin is going nuts. See first graph below. The reason is very straight forward. This is a global ponzi scheme and that’s the end of it. As a super-national currency, the only appropriate comparison with bitcoin is gold or other hard assets that hold their value when sovereign paper money does not. Is that going to happen with bitcoin if we reach some at which sovereign currency loses all value? Nope. It’s going to be worthless as well. As well as that, the regulatory risk is enormous. Folks are putting this latest bubble down to a flood of Chinese dough after its recent tightening hit stocks and bonds - second graph below.

U.S.

  • Contempt Charge Against Flynn Possible, Senate Panel Leader Says (Bloomberg) The Senate Intelligence Committee chairman warned Tuesday of a possible contempt citation against former National Security Adviser Michael Flynn if he doesn’t provide documents for the investigation of Russian meddling in the U.S. election. Panel Chairman Richard Burr said the committee sent a letter to Flynn’s lawyer challenging the former adviser’s contention that he can refuse to turn over documents by citing the Constitution’s Fifth Amendment protection against self-incrimination.

  • Fox Retracts Story That Sparked Conspiracy About Slain DNC Staffer (CNBC) Fox News announced Tuesday it is retracting a story published last week that reignited conspiracy theories around the unsolved killing of Democratic National Committee staffer Seth Rich, whose family demanded an apology from the conservative news network. Fox News, citing a single unnamed FBI source, had reported that Rich, who was murdered last year in Washington, D.C., was a potential source of internal DNC emails published by Wikileaks last summer, implying that he was then assassinated for the leak.

Here’s how it works. The budget is counting on economic growth - and a lot of it - to overcome what otherwise would be a projected $1.3 trillion deficit in 2027 and instead achieve balance. A big part of that growth comes from a deficit-neutral tax proposal whose details aren’t spelled out in the budget document.

That’s a bit odd, because the administration has already sketched out the broad contours of its tax policy. That proposal would, on a conventional account, lead to a massive increase in the deficit. The administration says that’s okay, though, because the extra growth unleashed by the tax cuts will offset the loss in revenue.

See the problem? Trump is not only counting on supply-side magic growth to make his numbers work, he’s using the same magic bean twice. First the tax cuts provide enough extra growth to make the tax reform deficit-neutral. Then the deficit-neutral tax reform provides enough extra growth to make the overall budget balanced. It’s ridiculous. Larry Summers, the former Treasury secretary and National Economic Council director, calls it “a logical error of the kind that would justify failing a student in an introductory economics course."

  • Trump's 2018 Budget Makes Room for ACA Programs (ThinkAdvisor) The administration of President Donald Trump has proposed a budget for fiscal year 2018 that could lead to increases in spending on major Affordable Care Act programs and on U.S. Department of Labor benefits compliance efforts. The administration's budget proposal sections for HHS and for the Internal Revenue Service, an arm of the U.S. Treasury Department, show that the administration is preparing for two possibilities: a world with the Affordable Care Act in place and a world without the law in place.

  • California’s single-payer plan costs $400 billion - twice the state’s entire budget (Vox) California is undertaking an ambitious bid to establish a single-payer health care system, and now its plan has a price tag: $400 billion a year. The state legislature has been debating a plan this year to implement a government insurance program to cover all Californians, including those without legal status. It’s a very generous proposal, as currently conceived. The state would pay for almost all of its residents’ medical expenses - inpatient, outpatient, emergency services, dental, vision, mental health, and nursing home care - under the plan, and Californians would not have any premiums, copays, or deductibles. Those sweeping benefits drive up costs. The major test for any effort to create a single-payer health care system is how to pay for it. California now knows the math it’s contending with. The plan, according to the estimate by the state Senate’s Appropriations Committee, would cost twice as much as the entire state budget that Gov. Jerry Brown is proposing for the next fiscal year.

  • California Single Payer Is a No-Brainer (Jacobin) There was coverage yesterday of a new report from the California Senate appropriations committee estimating the budgetary implications of a proposed single-payer health plan for the state (Sacramento Bee, LA Times, Vox). I’ve not yet been able to access the report directly, but the coverage of it is pretty encouraging. After the implementation of single payer, the report says, health expenditures in the state of California would total $400 billion per year, or 15 percent of the state’s GDP. This is three percentage points lower than the share of GDP the United States overall spends on health care.

The reports indicate that, currently, government spending on health care in California is around $200 billion and employer spending on health care is between $100 billion and $150 billion. There is no indication of how much individuals currently spend on top of employers and governments on individual premiums and out-of-pocket expenses. Nonetheless, net of current government spending ($200 billion) and employer spending ($100-$150 billion), the single-payer plan requires an additional $50 to $100 billion of spending, or 1.9% to 3.8% of CA GDP.

For that extra 1.9% to 3.8% of GDP:

The state would pay for almost all of its residents’ medical expenses - inpatient, outpatient, emergency services, dental, vision, mental health, and nursing home care - under the plan, and Californians would not have any premiums, copays, or deductibles.

EU

  • European bureaucrats draw up plans to drag all EU27 nations into the single currency after Brexit (City A.M.) EU bureaucrats have been putting together plans to drag all member states into the single currency after Brexit. Minutes of a meeting between the EU commissioners responsible for policy on the euro, Valdis Dombrovskis and Pierre Moscovici, show how the the pair plan to introduce all EU member states into the Eurozone by 2025, German newspaper Frankfurter Allgemeine reported.

UK

  • Manchester Arena attack leaves 22 people dead and more than 50 injured: Terror level raised to "critical" (City A.M.) Prime Minister Theresa May has revealed that the terror threat has risen to "critical", suggesting another attack on UK soil remains highly likely and could be imminent. Armed military personnel will be deployed on British streets in response to the threat, May said. The level, decided by terrorism experts from across the security services, has not been critical since nearly a decade ago. It was upgraded from "severe".

  • Britain is heading for another 2008 crash: here’s why (The Guardian) David Graeber says that the government wants us to believe our economic growth is sustainable, and that budgetary surplus will fix all our problems. But these are dangerous myths. The big myth he points out is that deficit spending by the government decreases the amount of money on the private sector. And this fallacy is the driving force in government policy. But, Graeber points out, national accounting shows just the opposite: bigger government deficits increase money for the pricate sector, and government surpluses reduces money in the private sector.

Germany

  • Merkel says "weak" euro is to blame for Germany's trade surplus (City A.M.) The German chancellor Angela Merkel has fended off criticism over her country's trade surplus, saying that exports are high because the euro is weak. Several political leaders have complained about Germany's trade surplus, including US President Donald Trump and newly-elected French President Emmanuel Macron.

India

  • India must become a growth engine: PM (The Hindu) Speaking at the annual meeting of the African Development Bank, Indian Prime Minister Narendra Modi summarized the accomplishments of his regime. While laying out the common challenges faced by both India and Africa, Mr. Modi indicated that his government’s priorities were “uplifting our farmers and the poor, empowering women, ensuring our rural communities have access to finance, and building infrastructure".

China

  • China’s credit rating cut to A1 by Moody’s, stocks and renminbi fall (Financial Times) China’s credit rating has been downgraded by Moody’s Investor Services on expectations the country’s financial strength will “erode somewhat" over coming years as debt rises, but its outlook was lifted to stable from negative. That has put Chinese stocks on track for one of their biggest one-day drops this year and has seen the country’s currency weaken in morning trade.

The cut to China’s long-term local currency rating to A1 from Aa3 puts the country on par with Czech Republic, Estonia, Israel, Japan and Saudi Arabia. China’s A1 rating now puts it one notch below other sovereign borrowers, including Taiwan and Macau, and one notch above the likes of Bermuda, Botswana, Poland and Slovakia. In justifying its move, Moody’s said China’s potential growth is likely to fall in coming years, making the economy increasingly reliant on policy stimulus.

  • China's Roaring Old Economy Spurs Sales Boom For Diggers, Steel (Bloomberg) Sales of diggers at a five year high. The price of rebar, a steel product used to reinforce concrete, back at 2012 levels. Crude steel output surging to a record. China’s economy may be slowing down but the nation’s old economy is still booming.

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