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.
The Middle East Crack-Up (Shlomo Avineri, Project Syndicate) A discussion of how multi-ethnic nation-states are giving way to sectarian regional geo-political units, of which the Islamic Caliphate pursued by ISIS is one pretender.
The push for trade agreements fueled so prominently by multinational companies has almost nothing to do with finding new foreign consumers for American exports, and nearly everything to do with finding penny wage workers and other super-cheap factors of production for offshoring-happy corporations.
Argentine Peso Collapses on Top of Rogue Regime (Wolf Richter, Wolf Street) Richter says the collapse of the peso is a designed move by the central bank and the government to impoverish bond holders by forcing them to sell dollar bonds locally (in Argentina) and to also force banks to sell assets locally. See next article.
Argentinian Peso in Massive Slide; Argentina’s Bonds Decline on Plan to Offer Local-Law Swap (Mike Shedlock, MISH's Global Economic Trend Analysis) Repeated from Saturday 23 August. Argentina may use a local country law to offer a swap to new bonds for the 92% of bond holders that agreed to a settlement. U.S. courts have blocked then for doing that in New York. The 8% additional issue owned by "vulture funds" holding out for ful face value would then be left in limbo. The Argentine peso has been crushed by this debt brouhaha.
Earlier this year, rumors of China's impending financial doom - triggered by either a housing-market crash or local-government debt defaults - were rampant. But, in recent months, the economy has stabilized, leaving few doubts about China's ability to grow by more than 7% this year. Given that the Chinese government had ample scope for policy intervention, this turnaround should come as no surprise. But the moment of financial reckoning has merely been postponed, not averted.
The fundamental problems that triggered alarm bells in the first place - including real-estate bubbles, local-government debt, rapid growth in shadow-banking activity, and rising corporate leverage ratios - remain unresolved. Of these, the most immediate threat to China's economic and financial stability is the combination of high borrowing costs, low profitability for nonfinancial corporations, and very high corporate leverage ratios.
Fewer economists believe US policy on right track (Karma Allen, CNBC) Now 36% of economists polled indicate that the U.S. should implement "structural changes" compared to 20% last year. This refers to regulations and fiscal policies since 70% continue to have the opinion that the Fed monetary policies are correct - and almost all of them feel the policies have been a success. The economists polled are members of the National Association of Business Economists.
The Ideological Crisis of Western Capitalism (Joseph E. Stiglitz, Project Syndicate) Hat tip to Rob Carter for this piece from 2011. Prof. Stiglitz sees the world as unreformed by the baptism of the Great Financial Crisis with the ideology of unfettered markets entrenched even more than ever. He decries the ideology that austerity purifies and increases confidence which in turn will produce growth. He says the last experiment in deregulation failed but "increasingly it appears that we will have to endure another one nonetheless". See also Schadenfreude Capitalism (Harold James, Project Syndicate). These two articles are more than 2 1/2 and 3 years old; in hindsight they seem prophetic even though they were written in an attempt to describe contemporary problems. Those problems have become worse since then.
NYSE Margin Debt Remains a Cause for Concern (Doug Short, Advisor Perspectives dshort.com) There is not enough data history to establish statistically significant significant correlations but the data is dramatic enough that we better watch this closely. There are several good charts in the article and one of them is shown below.
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