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What We Read Today 07 September 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


  • Oil Extends Decline as Russia Rules Out Deal With OPEC on Output (Bloomberg)   Oil declined for a second day after another Russian official ruled out cooperation on production cuts with OPEC, adding to signs that a global oversupply will persist.  Brent lost 4% in London. Russia won’t join the Organization of Petroleum Exporting Countries and isn’t able to cut production in the same way, said OAO Rosneft Chief Executive Officer Igor Sechin. Russia’s Deputy Prime Minister Arkady Dvorkovich said last week there is no way the country can artificially reduce supply.
  • Glencore leads European share rebound, but China hits Asia (Reuters)  European stocks rose on Monday, lifted by mining and commodities giant Glencore after it pledged to slash its debt by a third, and countering a fall in Asian markets led by weakness in China following a four-day break there. 
  • Climate Change Means One World’s Death and Another’s Birth (Wired)  Climate change may bring "the end of life as we know it" but it will also "bring a new life not now existing".  Econintersect:  If this is true (it may or may not be) then conservative forces that resist change will be fighting to slow climate change and liberals, who push for change, will not fight it.  U-u-uh?  Does that sound right? 


  • Jailed Kentucky clerk seeks emergency injunction in gay marriage case (Reuters)  Lawyers for jailed Kentucky county clerk Kim Davis said on Monday they had asked an appellate court to force Governor Steve Beshear to let her refuse to issue same-sex marriage licenses based on her religious convictions.  The lawyers sought emergency relief from the 6th Circuit Court of Appeals, asking it to grant Davis an exemption from the "governor's mandate that all county clerks issue marriage licenses," the non-profit legal advocacy group Liberty Counsel, which represents Davis, said in a news release.


  • Volunteers defy police and traffickers with refugee convoy (Al Jazeera)  Volunteers from Austria and Germany have collected hundreds of Syrians from Hungary, driving them out of the country in defiance of possible arrest and criminal gangs that charge huge sums to smuggle refugees to Western Europe.  The convoy of more than 150 cars crossed safely back into Austria early Monday morning, as officials there sought a return to normal border and asylum procedures after a weekend in which more than 12,000 refugees arrived from Hungary.  Most continued to Germany, which on Monday announced plans to spend 6 billion euros ($6.6 billion) next year to help refugees, while Hungary’s leader said he would maintain the tough line on the crisis that has made his country the “black sheep” of the European Union.
  • EU Prepares Plan to Relocate 120,000 Refugees (Bloomberg)  The European Union will this week announce plans to redistribute 120,000 migrants who have arrived in Greece, Italy and Hungary, as the bloc moves to address the biggest refugee crisis since World War II.  European Commission President Jean-Claude Juncker will unveil the proposals on Wednesday, saying the best way to cope with the sudden influx of people fleeing war and poverty in Syria and elsewhere in the Middle East and north Africa is to spread them across the 28-nation bloc -- from Finland in the north to Spain in the south.  Econintersect:  This (120,000) is a small fraction of the refugees already reaching Europe so far this year, with thousands more arriving daily.
  • Farmers set hay alight in Brussels protests (BBC News)  Thousands of farmers from European countries including Belgium, France and Germany took to the streets of Brussels on Monday to protest against plummeting prices for their produce.


  • European Union struggles to formulate refugee crisis response (Al Jazeera)  Germany insists other countries accept more asylum seekers, but many leaders dissent.  Chancellor Angela Merkel, speaking after a weekend in which 20,000 refugees entered Germany from Hungary by train, bus and on foot, described the scope of the migration as "breathtaking" and tried to reassure German citizens that the crisis was manageable.  Germany has committed to accept up to 800,000 refugees in 2015 but is protesting that many countries are doing little.


  • Migrant crisis: Hundreds force way past Hungarian police (BBC News)  Hundreds of migrants have broken through police lines on Hungary's border with Serbia and are walking towards the capital, Budapest.  The migrants had earlier broken out of a registration camp at Roszke.  About 300 are reported to be walking along a motorway, escorted by police officers.  Hungary has become a flashpoint as thousands of migrants and refugees from the Middle East and Africa move north to claim asylum in Germany and other countries.


  • Court criticises 'glaring errors' in Kercher probe (BBC News)  Italy's highest appeals court has criticised "glaring errors" in the investigation into the 2007 murder of British student Meredith Kercher.  The court acquitted Amanda Knox and her ex-boyfriend Raffaele Sollecito of the murder in March.  It said there was an "absolute lack of biological traces" of either defendant in the room where Ms Kercher was killed or on her body.  Ms Kercher, 21, was stabbed to death in a Perugia flat she shared with Ms Knox.  The Court of Cassation, which exonerated the pair, published its reasoning on Monday, as it is required to do under Italian law.



  • Economics For GenNext: How ‘Tweaking’ Numbers Saw India’s GDP Leap (The Quint)  (Econintersect:  Before you read this be sure not to forget that nothing actually changed in India.)  Early this year Indian statisticians played around with some numbers and changed the way they measure the country’s gross domestic product (GDP). By definition, it is the monetary value of goods produced and services provided per quarter. India became the fastest growing economy in the world (in the January-March quarter), even beating China to the game .  Only two quarters before that, India was labelled as an economy “struggling to gain momentum” entrusted with a new government promising reform and restructuring. All of a sudden, the Indian economy was projected to grow at the rate of 7.4% for the year, and not the 5.5% that the Reserve Bank of India (RBI) had projected under the old method of calculation.  Here is the "magic":
  • In January, India switched to a new method to calculate economic growth
  • This included changing the base year and using market price instead of factor cost
  • The base year was changed to March 2012 instead of March 2005


  • China Tells World's Top Economies Its Turmoil Is Set to Subside (Bloomberg)  Senior Chinese officials have telegraphed confidence in their economy’s underlying solidity, predicting a stabilization in their stocks and currency in a presentation set to be tested in coming weeks.  With concerns about China’s outlook helping trigger the biggest monthly sell-off in global stocks in more than three years in August, a gathering of Group of 20 finance chiefs Friday and Saturday focused on China’s efforts to shore up its economy. People’s Bank of China Governor Zhou Xiaochuan said in a statement that the rout in Chinese equities is close to ending, and that state intervention prevented systemic risk and stopped a free-fall.

More "Seller Strikes"? ECB Monetizes Fewest Bonds In August Since Start Of Q€ (Zero Hedge)  Is the ECB (European Central Bank) running out of ABS (asset backed securities) to buy?


Building A Low-Volatility Stock Portfolio (Marc Gerson, Forbes)  Gersohn proposes a low volatility portfolio in an attempt to stay invested in higher volatility markets.  Here is his current portfolio:


The Numbers Are In: China Dumps A Record $94 Billion In US Treasurys In One Month (Zero Hedge)  Contrary to what some might think at first glance, this is not a problem for the U.S.  It is a result of massive capital flight from China - it is China's problem.

Other Economics and Business Items of Note and Miscellanea

George A. Akerlof and Robert J. Shiller, who previously collaborated to produce Animal Spirits, have joined forces again. Their new book is Phishing for Phools: The Economics of Manipulation and Deception (Princeton University Press, 2015).

Their thesis is simple but powerful: that “competitive markets by their very nature spawn deception and trickery, as a result of the same profit motives that give us our prosperity.” (p. 165) Economies “have a phishing equilibrium in which every chance for profit more than the ordinary will be taken up.” (p. 2) Free-market equilibrium undermines our plans to eat healthily, it makes us pay too much for our cars and houses, it transforms rotten assets into gold.

We have weaknesses that can be exploited (monkeys on our shoulders), weaknesses that free markets by their very nature exploit. Akerlof and Shiller modestly claim to be making only “a small tweak to the usual economics (by noticing the difference between optimality in terms of our real tastes and optimality in terms of our monkey-on-the-shoulder tastes). But that small tweak for economics makes a great difference to our lives. It's a major reason why just letting people be Free to Choose—which Milton and Rose Friedman, for example, consider the sine qua non of good public policy—leads to serious economic problems.” (p. 6)

Trillions get “wiped off” stock markets. But they never seem to get “wiped on”.

That's not true, of course. Stocks markets surge just as often as they plummet. It's just that the surges tend not to get so widely reported.

Stock market collapses, like those seen across the world at the start of last week, lead nightly television news bulletins and get splashed across newspaper front pages. They're big news. Stock market recoveries, like those towards the end of the week, tend to receive less publicity. It's human nature. “End of the world” is an engaging headline. “Not the end of the world” isn't.

Does any of it ultimately matter in economic terms? Many would argue that the answer is no. A now ancient joke among economists is that stock markets have predicted 10 of the past five recessions.

Many people are under the impression that the Wall Street Crash (when shares fell 24 percent in two days in October 1929) led inexorably to the Great Recession of the 1930s. It didn't. What caused that colossal economic slump, when GDP fell by 25 percent, was the failure of thousands of American banks and the abject failure of the US authorities to ensure there was enough money circulating in the economy. In Europe the slump was primarily the fault of the old Gold Standard, that ludicrous monetary system (which some libertarian wingnuts want to resurrect) that compelled governments to hike the cost of borrowing in order to prevent gold outflows at the worst possible time for their domestic economies. 

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