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 dayin the early am at GEI News (membership not required for access to "The Early Bird".).
The United States has long pressed for a shift away from binding emissions reduction commitments and toward a mix of nationally grounded emission-cutting efforts and binding international commitments to transparency and verification. European countries have often taken the other side, emphasizing the importance of binding targets (or at least policies) for cutting emissions. Now it looks like the big developed countries are on the same page as the United States.
House Democrats Shoot Down Obama’s Trade Deal (Foreign Policy) In a surprisingly lopsided defeat, the House rejected a measure that offered financial assistance to workers who lost their jobs because of free trade, a key component of a bill that would give the president fast-track trade authority. The Republican leadership make make another try for passage later, but as things stand now the president's key second term agenda item for global trade appears blocked.
"We believe that the Central Personnel Data File was the targeted database, and that the hackers are now in possession of all personnel data for every federal employee, every federal retiree, and up to one million former federal employees."
Imagine you’re in prison for not being able to pay your debts. (You’re right, it’s almost unthinkable — civilized societies no longer lock up bankrupt individuals. But bear with me.) After five years of misery, you lead a rebellion, take control of the prison, and demand your release. The jailers respond by cutting off your water supply. Should you back down and return to your cell, perhaps negotiating for slightly less unpleasant conditions, in order to obtain a little liquidity? Or should you keep fighting to be free? That, in essence, is what the standoff between an insolvent Greece and its eurozone creditors is really about.
Class war comes to Iceland (Al Jazeera) Iceland's banks are recovering, but the middle class is angry and demanding change, with thousands on strike.
Turkey Comes Undone (Council on Foreign Relations) These authors think Turkey will suffer as a result of last weekend's election results:
[A]ll the schadenfreude and celebrating should not get in the way of what is actually happening in Turkey. Rather than democracy returning to Turkey as many hope, the country is likely entering a period of political paralysis, instability, and uncertainty. This does not mean instability akin to Syria, Iraq, or Yemen, but rather similar to the years before the AKP came to power, when unstable coalition governments often at war with each other marked Turkish politics in the 1990s and early 2000s.
In Defeat, Erdogan Shows Respect for Democracy (Council on Foreign Relations) This author thinks the Turkish election defeat of the AK Party of Recep Tayyip Erdogan is a blow to Erdogan but a great example for other Muslim countries which have had experienced apparent contradictions between democracy and Islam.
12/6/15: Ukraine Debt Haircuts (Constantin Gurdgiev, true economics) CG contributes to GEI. Gurdgiev proposes that haircuts be applied in proportion to discounts at purchase so vulture capitalists are shaved more than long term investors who bought at higher prices.
Forget skipping coffee. Here's how to really save money. (Timothy B. Lee, Vox) The secret? Live like someone who makes less. If you want to save 10% of what you make and yoiur income is $60,000 spend as if you were making $54,000; spend like you make $52,800. You think that is impossible to do? More than half U.S. households make less than $52,800. And lower incomes can save as well - there are always hoseholds living on less income and until you get belkow the poverty line it is all about making choices. See next article. It is not as if Americans don't know how to do it - they used to:
Other Economics and Business Items of Note and Miscellanea
Corporate Buybacks; Connecting Dots to the F-word (720 Global) Hat tip to TalkMarkets. The author (Michael Lebowitz) doesn't use the term but Econintersect points out that stock buybacks are a form of accounting control fraud. That is clearly where the author gone though because what he describes indicates the F-word has to be "fraud". He documents the rapid growth of stock and option executive compensation over the past dozen years, exceeding 80% of total compensation by 2012. This coincides with stock buybacks and dividends rising steadily and reaching more than 75% of operating earnings starting in 2012 and continuing through 2014. The result of this has been the extraction of an average near $800 billion a year over the past ten years though buybacks, twice the total exceeding $1 trillion. Lebowitz points out that unusually low interest rates over the past five years have seen an increase in corporate debt while equity is reduced. Not only are these larcenous executives eating their companies' seed-corn, they are also increasing the future liabilities for delivery of crop-corn.
Is There a Link between Executive Equity Incentives and Accounting Control Fraud? (Merle Erickson, Michelle Hanlon and Edward L. Maydew, Journal of Accounting Research, jstor.org) Many problems with the conclusions drawn in this article written in 2004 where the authors examined the cases of four corporations and draw the conclusion that there was no association of the equity compensation having influenced where accounting fraud was successfully prosecuted. First big problem, the sample size is way too small for generalization. Second big problem is that the researchers were looking at a very narrow definition of accounting control fraud. The general definition is the extraction of value by executives in the short-term for their own enrichment rather than building future value for the firm. The authors simply were not looking for the real problem. This situation reminds us of the story about the gold mne that suspected employees might be stealing small amounts of gold. The mine owners set up an end-of-day checkout procedure where all workers had to strip, shower and have their clothes washed and dried before they could leave. Several miners left with wheelbarrows which also were washed down to remove any traces of gold. Eventually the owners offered amnesty and a large reward for any who were stealing to come forward and explain what was going on. A group of men came forward the next day and explained: "We are not stealing gold, we are stealing wheelbarrows."
During the Great Depression, big business needed rebranding. Blamed for the crash, belittled in the press, and beset by the New Deal’s regulatory state, corporate leaders decided they had to improve their image, and soon. “The public does not understand industry,” an executive complained, “because industry itself has made no effort to tell its story; to show the people of this country that our high living standards have risen almost altogether from the civilization which industrial activity has set up.”
Accordingly, corporate leaders launched a public relations campaign for capitalism itself. In 1934, the National Association of Manufacturers hired its first public relations director in its four decades of existence, expanding its annual budget in that field from just $36,000 to nearly $800,000 three years later, a sum that represented half of its total budget. NAM marketed the miracles of “free enterprise” with a wide array of advertisements, direct mail, films, radio programs, a speakers’ bureau, and a press service that provided prefabricated editorials and news stories for 7500 newspapers. Ultimately, though, the organization’s efforts at self-promotion were generally dismissed as precisely that.
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