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What We Read Today 24 August 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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Articles about events, conflicts and disease around the world

Global

  • COMMODITIES-Oil leads market rout as China sends investors fleeing (Reuters)  Commodity markets lurched lower on Monday after Chinese equities resumed their slide, fuelling worries of a hard landing in the world's biggest consumer of raw materials.  Crude oil tumbled to its weakest levels in 6-1/2 years while industrial metals prices also hit multi-year lows amid a broad sell-off of risky assets.

U.S.

Too tight monetary policies could precipitate a recession, but much easier credit conditions could prompt a further unsustainable debt splurge and increase risks to financial stability.
 

UK

Austerity is all about spending cuts, which hurt the poor and the vulnerable. This makes the UK government’s recently announced £12bn of extra welfare cuts an unnecessary disgrace in a rich country.

So far there’s been no rebalancing of the UK economy. Exports haven't risen and the government has failed to deliver its promised “march of the makers”. GDP per head is only now approaching where it was before the recession started. Indeed, business confidence in the UK started slowing a year ago, while the labour market has also turned down with unemployment rising for the first time in two years.

Meanwhile the world economy appears to be heading sharply downwards. The prospects of a rate rise in the United States or the UK any time soon disappeared into the ether as stock markets, oil and commodity prices tumbled around the world. 

Syria

  • UN: ISIS Temple Destruction ‘War Crime’ (The Daily Beast)  UNESCO head Irina Bokova called ISIS’s destruction of an ancient temple in Palmyra a “war crime.” Fighters with the terror group allegedly “placed a large quantity of explosives in the Temple of Baalshamin today [Sunday] and then blew it up, causing much damage to the temple."

North and South Korea

  • North, South Korea reach agreement to ease tensions (Reuters)  North and South Korea reached agreement early on Tuesday to end a standoff involving an exchange of artillery fire that had pushed the divided peninsula into a state of heightened military tension.  Under the accord reached after midnight on Tuesday morning after more than two days of talks, North Korea expressed regret over the recent wounding of South Korean soldiers in a landmine incident and Seoul agreed to halt anti-Pyongyang propaganda broadcasts, both sides said.

China Crash: You Can't Keep Accelerating Forever (Steve Keen, Forbes)  China survived the Great Financial Crisis and the crash of 2008 because their debt and credit levels were quite modest compared to much of the world.  That is not true in 2015.  The first graph below shows how debt has bubbled in China at an unprecedented rate over the last five years.  The second graph displays the relationship between the acceleration of debt growth and the growth of the Chinese economy.  Debt can still be growing but at a slower rate of growth and economic growth cannot be sustained.  This is an accounting relationship that all economic cycles have followed.  And it is a relationship not generally recognized by politicians and economists.  And even less understood is that the relationships apply only to private debt - there is no relationship when sovereign debt of currency issuing countries is involved - only as long as the debt is issued in the country's sovereign currency.  Debt owed by a nation in currency issued by some other country or authority behaves much like private debt in effect on the business cycle.  That is the problem of excessive government debt in Eurozone countries (and also U.S. states). 

debt.bubbles

debt.accel.china

Other Economics and Business Items of Note and Miscellanea

  • Center for Health Economics of Treatment for Substance Users Established (Weill Cornell Medical College)  The cost of treating the more than 7 million people with substance use disorder can be taxing for both public and private payers. But sorting out the complex economics of treating substance use disorder is the goal of a new center funded by a $5.8 million grant from the National Institute on Drug Abuse.
  • Is Austerity Opposition Key to Mainstream Economics? (Bloomberg Business) More than 40 economists say the policies of Jeremy Corbyn, poll favourite to lead the U.K. Labour Party, aren’t "extreme," according to a letter published in The Observer. Former Bank of England policy maker Danny Blanchflower was among the signatories.  Does this mean that one can't be "mainstream" unless austerity is opposed?
  • Economics Is Dead, And It Is Being Killed Again (Zero Hedge)  This was submitted by Per Bylund, The Mises Institute.  It has a great start (below) but then degenerates into pure ideology.  Maybe we should have two fields of economics:  One called "Econotheology" and another called "Econoaccounting".   One is related to philosophy and the other to accounting and engineering.

Economics is dead, and economists killed it.

What we have seen over the course of the last eighty years is a systematic dismantling of the contribution of economics to our understanding of the social world. Whatever the cause, modern economics is now not much more than formal modeling using mathematics dressed up in economics-sounding lingo. In this sense, economics is dead as a science, assuming it was ever alive. Economics in mathematical form cannot fulfill its promises and neither the scientific literature nor advanced education in the subject provide insights that are applicable to or useful in everyday life, business, or policy.

But apparently what is dead can be killed again.


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