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What We Read Today 19 March 2015

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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The Price of Oil Is Down, So Why Is Production Still Going Up? (Tom Randall, Bloomberg Business)

oil.video.bloomberg


Articles about events, conflicts and disease around the world

U.S.

Tunisia

  • Islamic State group claims Tunisia attack that killed 23 (Associated Press, Raleigh News&Observer)  Tunisian security forces have arrested nine people, five of them directly connected to Wednesday's attack on the National Bardo Museum by two gunmen who were later slain by police

Israel

Syria

  • Syria Crosses Obama’s New Red Line (Bloomberg View)  Monday, Assad's military killed at least six civilians, including three children, and injured dozens with a chlorine gas bomb attack in the northwestern city of Sarmeen just two weeks after the UN Security Council passed a U.S. proposed resolution calling on Syria to stop the practice.

Ukraine

Russia

India

  • Modi's Biggest Problem May Be the Banks (Bloomberg View)  India's banks need an infusion of capital.  The best way to do that is for the government to sell aubstantial parts of its ownership stakes in the banking sector.

China

Japan

  • Japan debt: It’s not what it looks like (ejinsight)  Adair Turner says that Japan will monetize "away" several trilllion dollars of its national debt without inflation or shrinking growth and the world will yawn.

Afghanistan


The U.S. Trade Deficit Excluding Oil Hit a Record High. Here’s Why It Matters (The Wall Street Journal)  The article doen't even mention the primary reason the U.S. has a trade deficit.  It is because the dollar is the world reserve currency and we must provide the currency the rest of the world needs.  To get that currency these other countries ship us goods and services.

us.trade.deficit


 

The 20 Fastest-Growing Economies This Year (Joshua Robinson, Bloomberg Business)  Emerging markets in Asia and Africa will continue to lead global growth in 2015, according to a Bloomberg survey of economists.  Expectations are for the world to grow by 3.2% this year and a faster 3.7% in 2016.  The U.S. and UK projections for 2015 are 3.1% and 2.6%, respectively.


The SEC’s Andrew Bowden: A Regulator for Sale? (Yves Smith, Naked Capitalism)  Yves Smith has contrbuted to GEI.  She is an "expert witness" on the corruption of government by oligarchy capture and this piece is her katest.  She identifies a regulator, Andrew Bowden, who is the SEC (Security and Echange Commission) lead examiner of compliance cases considered by the agency.  Bowden, who is charged with finding violation of laws and regulations in the securities industry and recommending action by the SEC for violation of regulations or referring to the Department of Justice for violation of law, has been found

"at private equity conferences and in interviews ... making conciliatory remarks that were disturbingly inconsistent with the level and range of wrongdoing his unit had unearthed".

Although wrong-doing had been documented and reported by Bowden's office by private equity firms, after these were made public Smith says little or no action resulted.  In a previous expose Smith went so far as to call it a coverupNaked Capitalism goes on as follows:

Readers may recall that in May, SEC inspection chief Andrew Bowden gave what was by regulatory standards a blistering speech describing widespread misconduct in the private equity industry. His detailed account followed SEC Chairman Mary Jo White setting forth uncharacteristically clear-cut details of private equity abuses in testimony to Congress.

Bowden was specific about the extent of the abuses by general partners, which included what amounts to theft, as in taking funds they weren’t entitled to. Bowden categorically stated that the bad acts implicated over half the firms they’d examined. Moreover, he described in considerable detail the types of grifting they’d found so far. Privately, the SEC has made clear that the abuses weren’t concentrated at small fry but were across the spectrum of firms, including the very top players.

Another GEI contributor,Bill Black, a former experienced regulator who is now a professor of criminal justoce and economics has followed up on the Naked Capitalism piece with What Does it Take to Get Fired at the SEC? (New Economic Perspectives).  Black says:

As I have long stressed, a regulatory agency must always worry about being made ineffective due to the three “de’s” – deregulation, desupervision, and de facto decriminalization.  Bowden exemplifies two of these routes to regulatory failure – desupervision and decriminalization.  He found substantial problems, many of them criminal, at most private equity firms.  How many recommendations for enforcement action did he make?  How many criminal referrals did he make?  Neither number should be confidential.

The reason why White should demand Bowden’s resignation comes from Bowden’s recent public statements that make it clear that he is unfit for office.  He does not believe in supervision.  He does not believe in holding frauds and abusers accountable through criminal prosecutions and enforcement actions.  He is an apologist and a literal cheerleader for the industry he is supposed to regulate.  He is also incapable of financial analysis due to his cheerleader syndrome.

Critics of regulation have been correct in the past couple of decades when they have said that regulations are not effective for economic efficiency.  But they are not thinking of the reason they are not working in the current era:  Regulators aren't working.


A $250,000 Tour With One Aim: Get Chinese to Buy a Home (Bonnie Cao, Bloomberg)  Hat tip to Marvin Clark, GEI Discussion Group, LinkedIn.  Overseas real estate purchases are expected to increase above the $39 billion spent over the last six years.  That has a few U.S. realtors running big, expensive marketing campaigns.  If the totals from 2013 and 2014 are continued, the total for the next six years could be well over $60 billion, with that amount in just the four markets in the graph below.

china.outbound.real.estate


Economy Finally Reaches “Escape Velocity,” Heads South (Wolf Richter, Wolf Street)  The Atlanta Fed started a new approach in 2011. The forecasting model is supposed to reflect a more immediate picture of the economy. Taking into account economic data when it is released, the model adjusts its GDP forecast accordingly and closer to real time.  Well, the real time data in 2015 has driven the Atlanta Fed model (called GDPNow) down close to zero.  Conventional forecasts have been drifting lower but Atlanta is on the verge of forecasting a negative GDP growth for Q

gdpnow.forecast 


How the Fed Erased 1% of the Dollar's Value in a Single Day (Matthew Boesler, Bloomberg Business)  Matthew Boessler has contributed to GEI. The latest Fed announcement has greatly scaled back expectations about aggressiveness in interest rate adjustments and the dollar took a big hit, as did interest rates.  The ten-year U.S. treasury was knocked back well below 2% (after some had predicted it had bottomed in 2012 and would never go back below the 2% mark again after its brief excursion there in January and February.  But an even more unusual one-day adjustment in the U.S. dollar index occurred.  See the graph and the video below.  See also GEI Investing:  Rate Hikes Already Priced into the US Dollar Index, by EconMatters.

us.dollar.index.2014.2015

yellen.dollar.bloomberg.video


Other Economics and Business Items of Note and Miscellanea

Winning the Too-Big-to-Fail Battle (Project Syndicate)  What happens when too big to fail means too big to regulate?

The Race to Get Into Top Colleges May Not Be Worth It (Bloomberg)

Not All their Eggs in One Basket (CMD)  A decade or two ago, urban planners were most concerned about ‘the donut’ as suburbs grew and center cities shrank.  That's all changing.

The sharing economy as a mass destruction weapon. (LinkedIn)  At present the taxi and accomodations industries are facing the prospect of losing thousands of "regular job" as services are obtained though "sharing channels".  Protections provided by law for employees will not apply to the free-lancers operating under the auspices of firms like Uber and Airnb.

Why Bankers Are Leaving Finance for No-Salary Tech Jobs (Bloomberg Business)

The Fed Needs Some Guidance (Bloomberg View)  Clive Crook says the Fed should be paying more attention to the Taylor Rule.

Black Hole “Firewalls” Could Change Physics Forever (Scientific American)  “Firewalls” of particles may border black holes, confounding both general relativity and quantum mechanics

Mystery of Darwin's strange South American mammals solved (Reuters) Fossils of large animals collected by Darwin (extinct for about 10,000 years) have been identified as ungulates related to horses, hippopotamuses and tapirs.

Tesla Slips After Elon Musk's 'Range Anxiety' Announcement (Bloomberg)  Investors not excited by latest Tesla software update.

tesla.range.anxiety.bloomberg.video


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