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What We Read Today 01 November 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


  • Copper Foam Could Revolutionize Battery Storage (  A foam form of copper produces batteries that are a fraction of the weight, charge much faster and hold more charge (thereby operating longer between recharges).  They also are made without including harsh acids or other hazardous materials.  



  • The Latest: Total of 19 dead recovered from Aegean Sea (Associated Press)  Greek authorities confirm that the bodies of four more migrants, all men, have been recovered north of the island of Farmakonissi in the eastern Aegean Sea.  Four others were rescued and seven are missing.  This brings the total number of dead recovered Sunday in the Aegean Sea to 19, in three separate incidents.  The number of smuggling boats crossing over to Greece from the nearby Turkish coast fell Sunday as strong winds raked the eastern Aegean Sea, but some still attempted the dangerous crossing.


  • Turkey election: Ruling AKP regains majority (BBC News)   Turkey's ruling Justice and Development Party (AKP) has won a critical parliamentary election, regaining the majority it lost in June.  With almost all ballots counted, state-run Anadolu Agency said AKP had won 49.4% of the vote, with the main opposition CHP on 25.4%.  Prime Minister Ahmet Davutoglu called the result a "victory for our democracy and our people".  The pro-Kurdish HDP crossed the 10% threshold needed to claim seats. The nationalist MHP will also take seats in Ankara.

  • Kurdish election gains are ‘historic’ boost for inclusion in Turkey (Al Jazeera)  Pro-Kurdish HDP won historic 13 percent of vote in elections by attracting broad spectrum of minority voters.

Saudi Arabia

  • S&P Downgrades Saudi As Low Oil Prices Sucker-Punch Arab Economies (OilPro)  Standard & Poor's cut Saudi Arabia's credit rating on Friday, saying that the fall in oil prices will continue to increase the budget deficit in a nation that depends on oil exports for 80% of its revenue. S&P’s new classification for the Royal Kingdom is the same as Israel, Ireland, Bermuda and Slovakia.


  • Russian Jet Likely Broke Up Midair Over Egypt, Officials Say (Bloomberg)  The cause of the disaster appears to have been  a massive structural failure.  A Russian airliner that crashed in Egypt’s Sinai peninsula killing all 224 people on board appears to have broken up in midair, scattering debris over several kilometers of rugged terrain, according to senior aviation officials who visited the crash site. 


  • Down $4 Trillion, China Faithful Buy Stocks That Hurt Them Most (Bloomberg)  Doubling down on the most volatile equities has become a go-to strategy for China’s 96 million individual investors as the stock market shows early signs of recovery. The ChiNext has rallied 38% from this year’s low in September -- three times as much as the benchmark Shanghai Composite Index -- and volumes on the small-cap bourse surged to an all-time high last month.

Components of GDP 2012 to 2015 (email from RJS - no URL)  The graphic below shows at a glance how personal consumption drives the U.S. economy and how inventory fluctuations are so great quarter-to-quarter as to actually be disruptive of trend analysis.  We also find the volatility in the import data a significant noise factor we had not fully appreciated before. 


Federal Deficit by President (Angry Bear)  Hat tip to RJS.  Angry Bear says that If you look at the federal deficit as a share of GDP by presidential administration that (1) every Republican administration left office with a larger deficit than they inherited and (2) every Democratic administration left office with a smaller deficit than they inherited.  He asks "Why should we pay any attention to anything any Republican says about the deficit?"  Econintersect:  If you give these facts to a Democratic political strategist they will agree with Angry Bear's question.  But if you give the same information to a Republican political strategist they will come up with:  Look how difficult is is for the economy to recover from mismanagement by previous Democratic presidents and how those same presidents freeload on the great governance of the Republicans who preceded them.


Other Economics and Business Items of Note and Miscellanea

  • Direct Purchases of U.S. Treasury Securities by Federal Reserve Banks (Kenneth Garbade, Federal Reserve Bank of New York)  This is an excellent primer on the history of the Fed and its interactions with the U.S. Treasury since the Fed's founding in 1913.  Econintersect:  It is clear from this report that the Federal Reserve Bank was founded with essential features available for it to operate as a public bank, but those features which allowed operation as "the bank of the government' were implemented during the first couple of decades only as an emergency (1) during the First World War and (2) at other times for very short periods to assure short-term continuity of government cash flow.  Reading between the lines we see indications that limitations placed by Congressional actions in the intervening years have been to the benefit of the private banking system, enabling it to create a significant profit center from the management of government credit and debt.  Some of the rationalizations quoted in this report indicate restrictions were put in place with the objective of limiting "excessive government expenditures" (Marriner Eccles, 1942) and with the "mistaken theory that it would help to prevent deficit financing" (Marriner Eccles, 1947).  It appears that ignorance of how banking systems operate is not a new phenomenon as those who read this report will find abundantly demonstrated.  We find it curious that this report mentions only political concerns about "deficits", "balancing budgets" and "excessive government spending" but no one in Congress is quoted expressing concern about private sector profiteering as a surcharge on the legitimate development needs of the public sector (infrastructure, the military, education and health care, for examples).  The following two excerpts are (1) a disclaimer and (2) the abstract of the paper.  We suggest that this paper should be required reading for every high school senior and again for every college freshman,preferably as part of a seminar/discussion format class.

This paper presents preliminary findings and is being distributed to economists and other interested readers solely to stimulate discussion and elicit comments. The views expressed in this paper are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.

Until 1935, Federal Reserve Banks from time to time purchased short-term securities directly from the United States Treasury to facilitate Treasury cash management operations. The authority to undertake such purchases provided a robust safety net that ensured Treasury could meet its obligations even in the event of an unforeseen depletion of its cash balances. Congress prohibited direct purchases in 1935, but subsequently provided a limited wartime exemption in 1942. The exemption was renewed from time to time following the conclusion of the war but ultimately was allowed to expire in 1981. This paper addresses three questions: 1) Why did Congress prohibit direct purchases in 1935 after they had been utilized without incident for eighteen years, 2) why did Congress provide a limited exemption in 1942 instead of simply removing the prohibition, and 3) why did Congress allow the exemption to expire in 1981?

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