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.
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Articles about events, conflicts and disease around the world
Wood MacKenzie: Wave of LNG Supply to Affect Market over Next Five Years (Oil & Gas Financial Journal) With 130 million tonnes per year (MMpta) of additional LNG supply set to reach the market over the next five years, coincident with faltering China demand, Wood Mackenzie asserts that new local floors for spot prices will be tested, unlocking new demand and curtailing supply, with global pricing implications.
Greenspan's Nightmare Chart Spoils Labor Department Data Party (Bloomberg) The former Fed chairman argues that entitlement spending is set to crowd out investment. See graph below. Econintersect: Crowding out is such a tired and flawed concept in a fiat world. Government benefits have been increasing and domestic savings have been decreasing - but we would suggest the two have no direct connection.
Homebuyers are hitting record credit scores (CNBC) Home purchases may still be below bubble levels but they have been growing at a double digit rate year-over-year. About 30% are cash sales and the rest of the growth is being driven largely by borrowers with incredibly high FICO scores, above 700.
'Only in the senile, decrepit, and unbelievably corrupt modern version of the United States would this sickening decadence even be considered possible, let alone doable.'
Turkey election: OSCE says 'serious concerns' over vote (BBC News) European observers have said violence marred the run-up to polls in Turkey in which the Justice and Development Party (AKP) regained its majority. The OSCE said that an increase in violence, particularly in the south-east, "restricted some contestants' ability to campaign freely". It also criticised curbs on media freedom.
Mystery, confusion surround Russian plane crash in Egypt (Associated Press) Mystery and confusion surrounded the final moments of a Russian jetliner that plummeted suddenly from high altitude to the Egyptian desert, killing all 224 people aboard. The airline Monday ruled out pilot error or a technical fault, but Russian aviation officials dismissed those comments as premature.
US may be complicit in war crimes in Yemen (Al Jazeera) Article argues that providing weapons and logistical and intelligence support to Saudi Arabia and its Gulf allies taints Washington’s hands. Econintersect: Is a gun manufacturer responsible for the murders committed with his product?
Can Burma Save Buddhism From the Politicians? (Foreign Policy) An unholy alliance between the government and extremist Buddhist monks is threatening to derail the transition to democracy. A specter of politicized religion is haunting Burma - the target is the country's Muslin minority. See also next article.
When the Superrich Die, Here’s What’s in Their Wallets (The Wall Street Journal) Very few pay any federal estate taxes any more. With the exclusion now larger than all but the very largest estates most can avoid what politicians love to call the "death tax". For an individual who dies in 2015 the exemption is $5.43 million, which amounts to almost $11 million for a married couple who have properly structured their wills or otherwise established appropriate trusts during their lifetimes. This article looks at 2013 estate tax returns (when the exclusion was $5.25 million) and fewer than 6,000 estates paid any tax whatsoever in that year (less than 12,000 estate tax returns were filed). That is 6,000 out of approximately 2.6 million persons who died that year. So what was declared in the estates of the nearly 12,000 estate tax returns filed for 2013? Here are the data for "superrich" (largest 345 estates averaging $171 million) and the "least rich" (6,735 estates between $5 and $10 million):
Shouting in 140 characters or less (Twitter) Twitter is great for sound bites and graphics but not so much for discussing serious disagreements. Here is an exchange between two who have been on the pages of GEI (Philip Pilkington, a weekly regular and Brad DeLong, very occasionally (with an occassional other participant) - if the full exchange does not appear below, click on the title above:
@delong@mucha_carlos Then you're a moron Delong. Half the Treasury would quit if the coin was implemented and there would be lawsuits.
Other Economics and Business Items of Note and Miscellanea
The fossil-fuel free future of mutual funds (CNBC) This article argues that there is a $100 trillion risk behind the move to invest in fossil fuel-free investments. This past summer Citigroup issued a report predicting that $100 trillion of fossil fuel assets are at risk of never being used. That is a calculation based on the stated target for the December Paris climate conference to limit global warming to 2 degrees Celsius. To meet that goal, one-half of global gas and 80% of global coal reserves need to stay in the ground, the Citigroup report stated. Econintersect: What about the risk for fossil fuels that they will simply be priced out of the market? Couldn't that risk be even greater than for the result of meeting climate goals?
Several Republican candidates have proposed tax cuts that largely benefit the wealthy to stimulate the economy. They claim that by closing loopholes the wealthy will pay more tax, even with them receiving a lower tax rate. Trump’s plan does this and then removes the inheritance tax as well. I frankly don’t trust him or the flat tax proponents.
How about trying something completely different and simple for a change. Close all the loopholes, leave the tax rate for the wealthy right where it is, and use all the extra revenue on a tax cut for the middle class. Since “trickle down” economics hasn’t stimulated perceivable economic growth, we could call this “trickle-up” economics. Put the extra money directly into the hands of middle-class workers, who could then buy things that they actually need, rather than yachts, vacation homes and country club memberships.
The wealth disparity between the super-wealthy and the middle class hasn’t been this bad since the Great Depression, 80 years ago. It’s time to stimulate the economy from the middle for a change. It wouldn’t officially be a tax increase on the wealthy, it would just force them to pay what the tax code intended.
Republicans will never let this proposal happen, but it would be nice if they could stop spinning fairy tales about how their tax simplification plans will help the middle class.
They claim to be against redistribution of income. However, over the last couple of decades, they have done exactly that. It’s called “trickle down” economics.
Some Dumb Questions and Some Smart Answers (Megan McCardle, Bloomberg View) This might be subtitled "Fantasy sports vs fantasy economics at the Republican presidential debate". McCardle has long been a supply-sider (of sorts, not blindly), a lower tax advocate (generally) and in favor of smaller government (usually), but in this article she calls "bull crap" on some of the absurdity espoused by Republican candidates in economic discussions. (The "bull crap" term is Econintersect's interpretation, not McCardle's words, and the criticism is buried amidst other lines of praise.)
Bernanke’s Biggest Blunder (Slate) In his just-published memoir, Ben Bernanke repeats his claim that he failed to rescue the Lehman Brothers investment bank in September 2008, while he was chairman of the Federal Reserve, because he believed that he lacked the legal authority to do so. This claim is a convenient excuse for the biggest mistake in the government’s response to the financial crisis. While the Lehman collapse did not cause the crisis, it significantly worsened it. Bernanke, along with Bush administration Treasury Secretary Henry Paulson and Federal Reserve Bank of New York President Timothy Geithner, is responsible for this blunder. He can’t blame the law.
The law in question is section 13(3) of the Federal Reserve Act, which authorizes a Federal Reserve Bank, with the board of governors’ approval, to make loans during a crisis to nonbanks like Lehman if the loan is “secured to the satisfaction of the Federal Reserve bank.” It is this vague bit of language that blocked a loan, according to Bernanke. Because, he says, Lehman was insolvent, the Fed couldn’t lend to it.
Econintersect: The article takes many more words to say what we will say in just 13: Many financial institutions were insolvent under weight of high leverage when liquidity froze.
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