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What We Read Today 12 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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Today we have several articles about the political and economic disruption produced by the Middle Eastern-African-European refugee crisis which is now emerging as a global crisis.


Articles about events, conflicts and disease around the world

Global

  • Refugee Flows: a Grand Strategic Weapon of Mass Destruction (Franklin (Chuck) Spinney, The Blaster)  FC has contributed to GEI.  Chuck Spinney suggests the "grand strategy" is an accidental one, but is nonetheless likely to by very disruptive of the developed world.  Here are two key introductory excerpts:

One could argue that the massive refugee flows triggered primarily by ISIS and al Nusrah, and possibly accelerated by alleged indiscriminate attacks on civilians by the al-Assad regime, have mutated into a powerful grand-strategic weapon of mass destruction. I use the term “grand strategic” advisedly, because it involves more the sustainment of cohesion and morale among our allies and attracting the support of as-yet uncommitted nations around the world than it does defeating military forces on the battlefield.

... the tactics and operations of ISIS and al Nusrah (who are supported financially by wealthy Salafis in Saudi Arabia and the Gulf monarchies) have unleashed a wave of terror that has created a flood of refugees in Syria and Iraq.  This refugee crisis is placing the United States, its European allies, and Israel on the horns of a grand-strategic dilemma that promises to become much worse as the cold, rainy winter season approaches.  Our NATO allies, including an increasingly ambivalent Turkey, simply do not have the resources or political will to absorb the millions of desperate people now on the move. The proximate causes of these refugee flows may be the tactics of terror unleashed by Salafi forces, but it is common knowledge that the emergence of ISIS and al Nusrah has been midwifed by America’s interventions and policies in the Middle East — particularly (1) our unprovoked invasion of Iraq in 2003, made without UN authorization and with only limited international support, and (2) by our uncritical support of Israel’s desire to topple the Assad regime in Syria.  Sooner or later, if this humanitarian catastrophe continues to worsen, any remaining empathy held by our allies in Europe and neutral parties around the world for the foreign policy of United States will dissolve into finger pointing, particularly if domestic politics in the US continue to foment war on behalf of Israel, while using the politics of fear to make the US people even more immigration phobic.

U.S.

If he ever got the chance, he’d settle in the United States, Rzgar Abdul said. But for now, he lives in this spare, barracks-style refugee camp, placing much of the blame for his squalid existence on the United States.

After all, the Islamic State proliferated when U.S. forces pulled out of an unstable country. And that proliferation forced him to leave his home, said Abdul, 28, who is from the Iraqi city of Kirkuk.

“Iraq’s problem is America’s problem,” said Abdul, who said he was a translator for the United States during the Iraq war, making him a target. “This crisis is America’s problem. In Iraq, Syria, all over, the U.S. did not do enough.”

EU

  • Refugee crisis may force EU to rethink, update open-borders policy (Al Jazeera)  As governments squabble over quotas, European citizens show solidarity, volunteering to help refugees.  But a showdown over Europe’s refugee crisis response looms. On Monday, ministers from squabbling EU nations will hold crunch talks to discuss a proposed quota system and try to smooth over disagreements as to how to provide shelter to the hundreds of thousands of people fleeing war for European sanctuary. But going into the summit some are questioning if the refugee challenge, and the split national interests it has exposed, could threaten the continued existence of the bloc’s open-border policy — and with it, the very idea of Europe.
  • Another view: The economics of European migration (Brattleboro Reformer)  The European Union is neither accustomed to, nor organized in a fashion that allows for rapid decision making, especially when it comes to political problems like this. Something as knotty as what to do with the influx of over 500,000 illegal immigrants over the past year has taken European leaders out of their comfort zone.  This complicated by cultural and political bias rooted in centuries of conflict of eastern and western empires that has dominated eastern European history.  The author points out that Europeans have spent years ignoring that there was a problem reservoir of millions of refugees building.  Now the dam has broken and those in the floodplain have no idea of how to deal with the water.  (Metaphor is from Econintersect, based on the discussion by the columnist.)
  • The Path Beyond the Waves (Bloomberg)  Europe is swinging between two responses amid its refugee crisis: Xenophobia and a compassionate pragmatism.  Virtue and common decency are more than just their own rewards. Compassion, it turns out, is also a practical way to deal with this destabilizing situation.  This article contrasts different reactions to the flood of refugees, some within a few miles of each other.

Israel

  • The Real Menace (Uri Avery, zope.gush-shalom)  Hat tips to Roger Erickson and Chuck Spinney.  Avery says he is afraid.  He is afraid because of the Israeli government preoccupation with Iran as a primary enemy.  He feels the real enemy, ISIS, is not in proper focus.  The reason is two powerful historic parallels, which at first blush seem totally unrelated:  ISIS as a reincarnation of Adolph Hitler and Hitler as a reincarnation of Mohammed.  He says that Hitler used the same fundamental weapon as The Prophet that we are seeing today in Daesh (first excerpt below) and how the events of the 7th century are related to Hitler and The Islamic State (second excerpt below): 

But the little Munich demagogue had a weapon that did not catch the eye of experienced statesmen and wily politicians: a powerful state of mind. He turned the humiliation of a great nation into a weapon more effective than aircraft and battleships. In a short time – just a few years – he conquered Germany, then Europe and looked set to take on the entire world.

In the early 7th century of the Christian era, a small merchant in the godforsaken Arab desert had an idea. In an amazingly short period of time he and his companions conquered his home town, Mecca, then the entire Arabian peninsula, then the Fertile Crescent, and then most of the civilized world, from the Atlantic ocean to North India and much beyond. His followers reached the heart of France and laid siege to Vienna.

How did a little Arab tribe achieve all this? Not by military superiority but by the force of an intoxicating new religion, a religion so progressive and liberating that its earthly power could not be resisted.

Against an intoxicating new idea, material weapons are powerless, armies and navies crumble and mighty empires, like Byzantium and Persia, disintegrate. But ideas are invisible, realists cannot see them, experienced statesmen and mighty generals are blind to them.

China

  • Professor of Economics at Harvard University Kenneth Rogoff: The Art of Capital Flight (Jewish Business News)  Capital flight is a phenomenon that involves basic capitalist tools:  lying and cheating.    It often involves removal of capital from productive assets and placement into non productive assets, such as foreign luxury apartments and collectibles such as artwork by dead masters.  Prof. Rogoff discusses in detail the capital flight from China, mentioning examples of the subterfuge involved.

The Daily Shot (Walter Kurtz)  An artifact that has encouraged capital flight from China recently has been the valuation spread of offshore vs. domentic yuan renminbi.  The government is intervening to narrow that spread.

yuan.onshore.offshore

Other Economics and Business Items of Note and Miscellanea

  • How Stanford Took on the Giants of Economics (Neil Irwin, from The New York Times, NDTV Profit)  The center of gravity for economic thought in the United States has long been found along the 2 miles in Cambridge, Massachusetts, that run between Harvard University and the Massachusetts Institute of Technology. But there is new competition for that title, and it is quite a bit farther west.  Stanford University has lured an all-star lineup of economists to Palo Alto, California, in the last few years - and fended off Harvard's and MIT's attempts to woo Stanford economists.  This article says there is no "Stanford school of thought" but there is also no indication that there is any heterodox economics going on there such as non-equilibrium economics.  From this article it seems Stanford is just another variation of mainstream thinking.
  • Psychology drives economics (The Pioneer, New Delhi)  Those promulgating "rational behavior" by "representative agents" in mainstream neo-liberal economic theory will reject this article out of hand.  The author discusses equity markets as an example:

A careful analysis of the behaviour of share markets would suggest that they are neither bullish nor bearish. They are cool and tacit tools of manipulation of investor behaviour. The bullish phase is engineered and the bearish phase is doctored. Well, no prizes for guessing who is doing it and why. 

The irony is not that the mindsets of gullible investors are influenced to such a degree that they are forced to act irrationally. The real irony is that the knowledgeable have become a tool for manipulating the poor investors. They act as agony aunts while proclaiming to be omniscient masters of economics. Psychologists have coined a term for this behaviour — awfulising. So even a minor aberration, engineered or mutant, is magnified to appear as a precursor to a major catastrophe. 

The vast majority of small ones who buy this argument say bye to the share markets, while the captain cools are ready to seize the opportunity. Rather they are creators of such opportunities. The scenario is something like this: A business tycoon telephones his secretary that inflation is setting in and share prices are going down. It is a good time to buy. The secretary says bye to the share market and sells her shares to the boss. Share markets are driven by two forces — machinations of the big players and the vacillations of the small. Bulls thrive at the cost of the bears. 

  • Behavioral Economics in Action:  Using Theory to Drive Social Change (Skoll Wolrd Forum)  Driving behavior change at an individual level is an important task for social entrepreneurs. An academic discipline called behavioral economics offers some insights on how to achieve this change.  Behavioral economics sits somewhere between psychology and traditional economics and seeks to understand how we make economic decisions. Crucially there is an emphasis on uncovering how we make errors in our decision-making processes, errors which often stem from mental shortcuts called cognitive biases.  Our cognitive biases tend to serve us well and help us make quick decisions. However we often rely on a shortcut when a longer, more deliberative thought process is required. This can set us up for failure.  This article duscusses some currently active groups working in the area of behavioral economics.
  • Fed Rate Hikes Unlikely To Be Game Changer, Supportive Factors For Gold – Capital Economics (Kitco News)   Although all eyes are fixated on next week’s Federal Reserve meeting, one research firm says an interest rate hike will unlikely be a game changer for commodities, and there are still factors supporting gold.  Analysts from Capital Economic say the Fed is only likely to normalize rates if there is strengthening economic activity, rising inflation and relatively calm financial markets – conditions that would be positive for demand.  Further quote from these analysts:

“Whether the Fed hikes rates this month (a 50-50 call), or later in the year, we continue to take arelatively relaxed view of the implications for commodity prices.  What’s more, the gradual return of U.S. rates towards more normal but still low levels should be more than offset by better news from China.”


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