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What We Read Today 08 October 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

  • New Nobel literature prize winner transcends easy categories (Associated Press)  For the first time ever, the Nobel Prize in literature has been awarded to a journalist.  Svetlana Alexievich of Belarus writes of the catastrophes, upheaval and personal woes that have afflicted the Soviet Union and the troubled countries that succeeded it.
  • New Horizons: Probe captures Pluto's blue hazes (BBC News)  The New Horizons mission has returned its first colour image of Pluto's atmospheric hazes and shows them to have a blue tinge. It is a consequence of the way sunlight is scattered by haze particles, say scientists.

pluto.blue.haze

U.S.

  • McCarthy abruptly withdraws candidacy for House speaker (Associated Press)  Confronting insurmountable obstacles, Majority Leader Kevin McCarthy suddenly withdrew from the contest for speaker of the U.S. House on Thursday, shocking colleagues just before they were to vote and producing ever-deeper chaos for a divided Congress.
  • America’s Mass-Shooting Capital (The Daily Beast)  Some southside Chicago neighborhoods have more killings than the most violent countries in the world.

chicago.chiraq

Germany

  • German Prosecutors Investigating Former Volkswagen CEO (NPR)   German prosecutors announced Monday that they have begun a criminal investigation of Martin Winterkorn, the former Volkswagen CEO who stepped down last week amid a widening scandal involving the automaker's use of technology that cheats emissions tests.  The investigation will focus on whether fraud was committed through the sale of diesel-powered vehicles that claimed to be eco-friendly by highlighting manipulated emissions data. It also aims to find out who had knowledge of and was responsible for the emissions-rigging.

Egypt

  • A dud return to democracy (The Economist)  As head of Egypt’s armed forces, Mr Sisi removed the elected Islamist president, Muhammad Morsi, in a coup in 2013. Less than a year later, having passed a new constitution, he resigned from all his military roles and won the presidency with 97% of the vote in an election that none of the main opposition parties contested. Since then he has run the country by decree (the lower house was dissolved in 2012 and the upper one in 2013). Mr Sisi has stamped on the press as well as foreign and domestic NGOs. And he has banned Mr Morsi’s Muslim Brotherhood, arrested thousands of its supporters, killed hundreds of its demonstrators and sentenced its leaders to death (the executions have not yet been carried out, and may never be).  He is now running new elections in which the major opposition cannot participate.

Syria

  • Obama Official Says Putin’s New War Is a Sign of American Success (The Daily Beast)  U.S. special envoy for Syria Michael Ratney is angering some with his statements indicating Russia's intervention in Syria proves the U.S. policy there has been a success - Assad has been weakened to the point he cannot stand without major power support.

Iran

India

  • Catching up with China (The Economist)  Prime Minister Narhendra Modi wants India to grow as fast over the next 20 years as China has over the past 20. Does that mean Chinese levels of pollution?  Government planners think that, with economic growth of 8-9%, India’s total emissions of carbon dioxide would more than triple by 2030, from 1.7 billion tonnes in 2010 to 5.3 billion tonnes. Per-head emissions would increase to 3.6 tonnes. And that assumes a fair amount of energy savings. If India were to use the same amount of energy per unit of GDP in 2030 as it does now, then emissions would top 6 billion tonnes by 2030. India is on the way to becoming the biggest contributor to increases in greenhouse gases within 15 years—a powerful reason for caring about its progress on environmental matters.

india.carbon

Canada

  • Canadian anti-Muslim sentiment is rising, disturbing new poll reveals (Macleans)  Hat tip to Lorne Warwick, Newsana)   Especially in Quebec, opposition to the wearing of traditional Muslim garb is facing increasing opposition.  Angus Reid’s poll, an online survey of 2,025 adults conducted early last month, discovered that many Canadians who don’t mind other religious clothing do object to Muslim women covering their faces. Asked about the burka, a loose garment that leaves only an opening for the eyes, 90% of Quebecois and 62% in the rest of the country said they shouldn’t be allowed in public sector workplaces. But on the hijab, a much simpler headscarf without a veil, the portion of Quebecers opposed to allowing them dropped to 63%, while fully 65% of Canadians elsewhere supported letting public servants wear them at work.

The Elites’ Private Warning (Dave Gonigam, 5 Min. Forecast)  DG has contributed to GEI.  Looking at the graph below, it’s tempting to think, Yes! Finally, the Chinese and the Russians are dumping Treasuries! Nobody wants them anymore! Soon Treasury prices will crash and interest rates will soar and those spendthrifts in the White House and Congress will finally get what’s coming to them! The deficit will spin out of control and Uncle Sam will be broke! No more welfare, no more crony capitalism, no more stupid foreign wars! Yes, things’ll get ugly for a while, but we can finally get a fresh start! We’ll be a free country again!  But that's not the way things work any more.  According to this article the Fed-backed banking system will soak up any amount of debt instruments the government can produce.  Interest rates can stay low forever.  Econintersect:  Don't believe it?  That's how Japan runs its system - see next article.

treasuries.dumping


BOJ Becomes Top Holder of Japan Government Bonds (The Wall Street Journal)  The Bank of Japan became the biggest holder of the country's sovereign debt for the first time about 15 months ago, showing how the central bank's aggressive monetary easing has transformed the debt market.  The data shown in the graphic below has only increased the share of sovereign debt owned by the central bank since because about 70% of the debt issuance by the government is now funded by the Bank of Japan.  This is referred to by the pejorative "monetizing the debt". See Debt Monetization: A Nearsighted Government Policy? (Investopedia).  Econintersect:  It remains to be seen if debt monetization has limits not yet realized in actions to date.  Since monetization is equivalent to the creation of debt-free money it would seem there must be some limit beyond which inflation would become a problem.  Withdrawing the "excess" money to bring down inflation (via fiscal policy - increased taxes - or by monetary policy - open market operations of the Fed to sell securities, which would replace money in the private sector with government debt instruments) could result in a distressful economic contraction.  John Mauldin has referred to the potential problems for Japan in this regard as a "bug in search of a windshield".  But we are not convinced that monetization necessarily will end with a splat.

japan.buying.up.bonds


Note on Japanese Yen Devaluation (Econintersect)  The increase in monetization discussed above has been accompanied by a significant devaluation ot the Japanese yen.  While this has been a "dramatic" move the exchange rate with the U.S. dollar has been quite volatile over the past 25 years and the latest move is within the range of others.  And the yen has merely returned to an exchange rate region which it has occupied more than 2/3 of the time over the last 25 years.  If some of the dire predictions of an exchange rate of 150 or 200 come to pass then we will revisit how close to the windshield our bug has gotten.  Graph before annotation is from Wikipedia.

jpy.usd.190.2015.annotated

Other Economics and Business Items of Note and Miscellanea

  • Market volatility fails to dent investors' attraction to robo-advisers (Investment News)  Automated investment sites enjoyed a 57% jump in assets under management from December 2014 through July 2015.  The summertime spike in market volatility failed to dent investors' willingness to invest — or invest more of — their assets with robo-advisers, contrary results for what some had felt would be a difficult time for the investment automatons.
  • The Accused (The New Yorker)  When a Chinatown bank was investigated for fraud, a community’s financial way of life was put on trial.  Of all the institutions that were investigated for mortgage fraud after the financial crisis, the only commercial bank that was brought to trial was a small community bank in New York, Abacus, serving the Chinese-American community, whose assets had never exceeded two hundred and eighty-two million dollars—around a hundredth of one per cent of the assets of Bank of America.  Of the four thousand three hundred and ninety mortgages that Abacus held in 2009, only sixteen were in trouble, a delinquency rate less than a twentieth of the national average.  What brought Abacus into the criminal spotlight was the theft of $5,000 by an employee which was reported to the police by the victim.  This is an interesting story of what can happen when a bank is not too big to fail.
The Romans used the word 'Gallus' to mean a member of the tribes that lived in what today we call France and northern Italy. 'Gallus' evolved into 'Gaulois' in French, and then 'Gaul' in English.  The word 'Celt' comes from Greek 'Keltoi' ( Κελτοί), which originally was used to refer to a specific tribe of people living in southern France, around the Greek colony of Massilia (modern Marseilles). Later, the word was used in a much wider and more casual sense, and came to mean nothing more specific than "those barbarians who live north of the Alps".

gallia.caesar


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