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What We Read Today 26 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



  • Congress negotiators near deal on budget, debt limit: sources (Reuters)  U.S. House Speaker John Boehner and other congressional leaders raced to finalize a sweeping two-year budget deal and an extension of the federal debt ceiling until March 2017 before Boehner transfers power to his expected successor, Paul Ryan.  If successful, the deals would mark a final act for Boehner to clear the decks of some politically divisive legislation as Ryan takes over as speaker - assuming a majority of the House of Representatives votes to put him in the top job in an election set for Thursday.  Boehner is set to retire from Congress on Friday.

  • US escalates Deutsche Bank probe into Russian trades (Financial Times)  This probe of Deutsche Bank (NYSE:DB) is one of the first known U.S. investigations of a Wall Street company tied to potential breaches of western sanctions against Russia since the measures were first imposed in the wake of Russia’s 2014 annexation of Crimea.  The US Department of Justice and New York’s Department of Financial Services are investigating possibility of money laundering at DB's Moscow unit. 

  • Ex-Goldman Banker Faces Criminal Case in Leak From Fed (The New York Times)  A Goldman Sachs banker is expected to be jailed over the leaking of confidential information from the Federal Reserve Bank of New York, the investment banker’s former employer.  Federal prosecutors are preparing to this week announce criminal charges against the banker, Rohit Bansal, and an employee of the regulator.  This is a rare criminal action on Wall Street that comes as Goldman itself is facing an array of regulatory penalties over the leak.


  • Slovenia sees end to EU if leaders fail on migrant plan (Reuters)  The European Union faces collapse if the bloc cannot agree on a plan to confront the sudden influx of refugees through the Balkans, Slovenia's premier warned on Sunday as leaders bickered over who was to blame for the crisis.  Nine days after Hungary's move to seal its southern border drove unprecedented migrant flows into tiny Slovenia, Prime Minister Miro Cerar sent out a dramatic call to fellow central and eastern leaders in Brussels for emergency talks.  See next article.

  • EU and Balkans agree plan for 100,000 places in reception centres for refugees (The Guardian)  Brussels summit agrees a 17-point plan to manage the flow of refugees in the Balkans, including more shelter, border registration and increased naval operations.  The European commission said that among the measures agreed between the 11 nations were that 100,000 places in reception centres should be made available along the route from Greece towards Germany, half in Greece and half in the countries to the north. The UN refugee agency would help establish them.  And still they come even as winter approaches.  See Migrant Balkan surge continues amid EU attempt to slow it (Associated Press) and video below from The Guardian


  • Franz Beckenbauer admits 'mistake' in 2006 World Cup bid (BBC Sport)  The futball (soccer) corruption scandal keeps spreading.  Germany's World Cup-winning captain and former coach Franz Beckenbauer has said he made a "mistake" in the bidding process to host the 2006 World Cup, but denied that votes were bought.  Beckenbauer was the head of the World Cup organising committee, which reports allege made a payment to Fifa in return for a financial grant.


  • Kurds say Turkey shot at its forces in northern Syria (Associated Press)  Turkish army units have opened fire on fighters from the main Kurdish force in northern Syria deployed across the border in a majority Arab town, the Kurdish force and an allied rebel said Monday.  There was no immediate comment from Turkish officials on the shooting.  The U.S.-supported Kurdish militia known as the YPG said on its official Facebook page that Turkish military shot at its forces deployed in the town of Tal Abyad twice Sunday, using mostly machine guns. An allied rebel fighter from a contingent of Free Syrian Army fighters called Volcano of the Euphrates, Sharfan Darwish, said no one was injured in the shooting and the Kurdish forces didn't return fire.


  • Russian Ships Near Data Cables Are Too Close for U.S. Comfort (The New York Times)  Russian submarines and spy ships are aggressively operating near the vital undersea cables that carry almost all global Internet communications, raising concerns among some American military and intelligence officials that the Russians might be planning to attack those lines in times of tension or conflict.


  • U.S. destroyer to pass islands in South China Sea within 24 hours (CNN)  The U.S. Navy plans to send a destroyer within 12 miles of China's man-made islands in the South China Sea within the next 24 hours, a U.S. defense official confirmed to CNN.  The official said the mission now has the approval of President Barack Obama.


  • Massive earthquake hits Afghanistan, deaths reported across South Asia (Al Jazeera)  A powerful 7.5-magnitude earthquake struck northern Afghanistan on Monday, with massive tremors felt across Pakistan and India, leaving hundreds dead and many more injured across the region.  The total death toll stood at 249 with at least 185 people killed in Pakistan and at least 64 more in Afghanistan, according to official reports from the two countries.  The death toll could climb in coming days because communications were down in much of the rugged Hindu Kush mountain range area where the quake was centered.  This quake is about 1,800 miles northwest of the site of the deadly Nepal earthquake in April.  The last similar quake in this region was 7.6 magnitude in northern Pakistan just over a decade ago, on Oct. 8, 2005, which killed about 75,000 people.  All three quakes have resulted from the underthrust of the India subcontinent beneath the Eurasian plate to the north

The Four Totally Bad Bear Recoveries: Where Is Today's Market? (Doug Short, Advisor Perspectives)  DS contributes regularly to GEI.  Fed policy has been especially effective in one area:  reflating financial assets. This is especially true when adjustments are made for inflation.



Profit mean reversion and recession (Edward Harrison, CreditWritedowns)  See also This glaring recession warning sign might just be a big false alarm (Sam Ro, Business Insider).,  Here is some of what Ed Harrison has to say:

"... a profits recession generally presages a real recession except perhaps to the degree the profit downturn is caused by the volatile oil sector. While I am not talking about recession yet, I do think we are seeing economic weakness toward the end of the business cycle. And while that doesn’t mean recession in the near-term, it could do in the medium-term."


Other Economics and Business Items of Note and Miscellanea

  • Economists Prove That Capitalism Is Unnecessary (Steve Keen, Forbes)  The absurdity of circular thinking in economics has been discussed forever and also has been ignored forever.  There is perhaps no better spokesman today for this failing in the profession than Steve Keen.  Here is a succinct excerpt from the beginning of this essay which starts with a repudiation of the title in the first sentence and progresses to show that the title is nonetheless supported by common "logic":

Actually they’ve done no such thing. But they do effectively assume that it’s unnecessary all the time.

This transcendental truth became apparent to me in the reactions I have had from mainstream economists to a lecture I gave to my Kingston students this month (which is posted on my YouTube channel and blog). In it I explained that, at a very basic level, the original “Neoclassical” mathematical model of a market economy is mathematically unstable: it doesn’t converge to a stable pattern of relative prices and a stable growth path for the economy, as its developer Leon Walras thought it did.

Mainstream economists reacted to my lecture by saying that, while the argument, which was first made in the 1960s by Jorgenson (who was applying a mathematical theorem from the early 1900s) was mathematically correct, all one had to do was assume that “economic agents” would then notice the instability and change their behavior. The model would then converge to equilibrium—problem solved.

And how would “economic agents” notice this instability? They would realize that a pattern of relative prices that had occurred once before in the past happened again. Hmmm. O.K.A.Y…

I’ve read this sort of nonsense in dozens of mainstream academic papers over the years, and railed against it in an academic sort of way. But maybe because I’d just been reading and teaching Hayek to the same class, the true absurdity of this standard mainstream riposte stood out clearly to me. It’s an assumption that individuals in a market economy are so all-knowing that, in effect, they don’t need markets at all: they can just work it all out in their heads. Yet if anything defines a capitalist economy, it’s the dominance of markets. So effectively the mainstream reaction to anything which disturbs their preferred way of modeling a market economy is to make assumptions that, if they were true, would make a market economy itself unnecessary in the first place.

  • Hot dogs, bacon and other processed meats cause cancer, World Health Organization declares (The Washington Post)  A research division of the World Health Organization announced Monday that bacon, sausage and other processed meats cause cancer and that red meat probably does, too.  The report by the influential group stakes out one of the most aggressive stances against meat taken by a major health organization, and it is expected to face stiff criticism in the United States.  The panel’s decision was not unanimous, and by raising lethal concerns about a food that anchors countless American meals, it will be controversial. 

  • Rethinking college: Disruptive innovation, not reform, is needed (Brookings)  The traditional class room credits model of college no longer fits society's needs.

  • New York launches probe into speeds at big Internet broadband providers (Reuters)  New York state's attorney general is probing whether three major Internet providers could be shortchanging consumers by charging them for faster broadband speeds and failing to deliver the speeds being advertised, according to documents seen by Reuters.  The letters, sent on Friday to executives at Verizon Communications Inc (VZ.N), Cablevision Systems Corp (CVC.N) and Time Warner Cable Inc (TWC.N), ask each company to provide copies of all disclosures they have made to customers, as well as copies of any testing they may have done of their Internet speeds.

  • A Tower of Molten Salt Will Deliver Solar Power After Sunset (IEEE Spectrum)  Hat tip to Yves Smith, Naked Capitalism.  Photovoltaic solar energy is becoming the low cost producer in many areas and will soon be the lowest everywhere.  Now it is suggested that solar thermal electrical generation will also undercut all competitors in price.  This article says that, for the first time, solar thermal can compete with natural gas during nighttime peak demand. 

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