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posted on 07 September 2017

What We Read Today 07 September 2017 - Special Public Edition

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Econintersect: Due to a processing error an incorrectly formatted post was made today of this daily column. It also missed the pick-up for the newsletter where it is normally available exclusively to GEI members. As a result a cirrected column is presented here and the public can read today's column. For those who are not members and would like to read a column like this every day, sign up for a FREE GEI membership (below).


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Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.

This feature is published every day late afternoon New York time. For early morning review of headlines see "The Early Bird" published every day in the early am at GEI News (membership not required for access to "The Early Bird".).

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Topics today include:

  • The Promise Of Fiscal Money

  • Who Wants to Deregulate Finance?

  • Fed's Fischer resigns, leaving Trump earlier chance to shape central bank

  • Stanley Fischer, Fed vice-chair, on the risky business of bank reform

  • What Chimpanzees Can Teach Us About Adam and Eve

  • Rural dreams: Upward mobility in America’s countryside

  • Money Mangers Leaving Long Positions in Oil

  • Irma on Collision Course With Miami After Wrecking Caribbean

  • Tracking Irma while also Assessing Harvey Impacts - 07Sep2017

  • Senate approves Trump's debt deal with Democrats

  • White House Considering at Least Six for Fed Chair

  • New amendment from Rep. Adam Schiff would block Secret Service from paying Trump businesses

  • U.S. Manufacturing is Growing

  • August 2017 Manufacturing Survey Growth Remains In Expansion

  • ECB Does Not Change Rates

  • May's government pushes Brexit bill to avoid 'chaotic' departure

  • Spain blocks Catalan independence vote, threatens charges

  • China has Attractive Bonds

  • And More

Global

U.S.

  • Senate approves Trump's debt deal with Democrats (The Hill) The Senate on Thursday approved a short-term bill to fund the government and raise the debt ceiling despite frustration among Republicans about the deal that President Trump struck with Democrats. Senators voted 80-17 on the agreement, which includes an extension of government funding and an increase in the federal borrowing limit through Dec. 8. Those measures are paired with more than $15 billion in hurricane and disaster recovery aid.

Seventeen Republican senators voted against the deal, including Sens. Lindsey Graham (S.C.), John McCain (Ariz.) and Rand Paul (Ky.). No Democrats voted against the measure.

GOP Sen. Ted Cruz (Texas), whose state was hit hard by Hurricane Harvey, supported the measure but stressed, “I would have much preferred a clean Harvey relief bill."

  • White House Considering at Least Six for Fed Chair (Bloomberg) The White House is considering at least a half-dozen candidates to be the next head of the Federal Reserve, including economists, executives with banking experience and other business people, according to three people familiar with the matter.

Some of the other possible contenders include former Fed Governor Kevin Warsh, Columbia University economist Glenn Hubbard and Stanford University professor John Taylor, one of the people familiar said. Lawrence Lindsey, a former economic adviser to President George W. Bush, has been discussed. Former US Bancorp CEO Richard Davis and John Allison, the former CEO of BB&T Corp., have also been considered.

President Donald Trump said in July that both Yellen and Cohn, a former Goldman Sachs Group Inc. president, were being considered for the top Fed job. Since then, Cohn’s prospects have grown cloudy after he publicly criticized remarks the president made in the wake of racially charged violence in Charlottesville, Virginia.

"None of the funds made available by this Act to the United States Secret Service may be used to purchase, rent, or otherwise acquire goods or services, including hotel rooms, office space, or golf carts, from entities that are owned or operated by the President or the immediate family of the President."

EU

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ecb.no.rate.change.2017.sep.07

UK

Spain

A long-running campaign for independence by a group of Catalan politicians, who hold a majority in the regional parliament, came to a head on Wednesday when they approved a law to allow a vote on secession from Spain scheduled for Oct. 1.

The country’s Constitutional Court, Spain’s highest legal authority on such matters, suspended the referendum law late on Thursday to allow judges time to consider whether the vote breaches the country’s constitution.

China

  • China has Attractive Bonds (The Daily Shot) With the currency stable, foreign fixed income investors turn their attention to China’s government bonds. Compared to opportunities in the developed markets, the nation’s yields look attractive.

Other Scientific, Health, Political, Economics, and Business Items of Note - plus Miscellanea

  • The Promise Of Fiscal Money (Yanis Varoufakis, Social Europe) Econintersect: YV, who contributes to GEI, has written a brilliant essay arguing that the concept of central banks being independent of governments no longer has a logical foundation. The reason is that the distinction between money and credit no longer exists in a financialized world. This essay originally appearedin Project Syndicate. Here is an introduction to Varoufakis' thesis:

Setting aside the political controversy, central bank independence is predicated on an economic axiom: that money and debt (or credit) are strictly separable. Debt - for example, a government or corporate bond that is bought and sold for a price that is a function of inflation and default risk - can be traded domestically. Money, on the other hand, cannot default and is a means, rather than an object, of exchange (the currency market notwithstanding).

But this axiom no longer holds. With the rise of financialization, commercial banks have become increasingly reliant on one another for short-term loans, mostly backed by government bonds, to finance their daily operations. This liquidity acquires familiar properties: used as a means of exchange and as a store of value, it becomes a form of money.

And there’s the rub: as banks issue more inter-bank money, the financial system requires more government bonds to back the increase. The growing inter-bank money supply fuels demand for government debt, in a never-ending cycle that generates tides of liquidity over which central banks have little control.

In this brave new financial world, central banks’ independence is becoming meaningless, because the money they create represents a shrinking share of the total money supply. With the rise of inter-bank money, backed mostly by government debt, fiscal policy has become an essential factor in determining the quantity of actual money lubricating modern capitalism.

Indeed, the more independent a central bank is, the greater the role of fiscal policy in determining the quantity of money in an economy. For example, in the eurozone, Germany’s tight fiscal policy is creating a shortage of bunds (German government bonds), which is limiting both the European Central Bank’s capacity to implement its quantitative easing policy and commercial banks’ ability to produce more inter-bank money. Money and government debt are now so intertwined that the analytical basis for central bank autonomy has disappeared.

It is, nonetheless, hard to see why this document should have so rudely disturbed Fischer’s equipoise. Perhaps he was giving us a glimpse of more fundamental disagreements on financial regulation at the heart of the administration. Or perhaps the Fed itself fears that regulatory rationalization is code for some cutback in its own responsibilities, which have been expanded remarkably since the crisis.

  • Rural dreams: Upward mobility in America’s countryside (Brookings) While most of the research on geographical variations in mobility has focused on cities and other urban communities, the new analysis specifically focuses on the most rural counties in the country. It finds that rates of upward mobility in rural counties are generally as high (on average) as in urban areas, but there is great variation across these rural counties. Certain rural counties have some of the highest mobility rates in the country, while others are “mobility traps," where children born to disadvantaged circumstances are extremely unlikely to get ahead. Factors for high mobility include:
  • higher out-migration rates, particularly among youth and young adults,
  • higher quality K-12 education,
  • improved measures of family stability,
  • and stronger local labor markets.

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