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What We Read Today 08 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

Global

  • Next financial crash is coming – and before we've fixed flaws from last one (The Guardian)  The International Monetary Fund (IMF) global stability report makes for a sobering read, saying sustainable recovery has failed to materialized and cheap money has led to bubbles and debt.  While financial stability has improved in advanced economies since April, risks continue to rotate toward emerging markets. The global financial outlook is clouded by a triad of policy challenges: emerging market vulnerabilities, legacy issues from the crisis in advanced economies, and weak systemic market liquidity.  Read the IMF report:  Vulnerabilities, Legacies, and Policy Challenges:  Risks Rotating to Emerging Markets.

  • Global GDP Worse Than Official Forecasts Show, Maersk CEO Says (Bloomberg)  The world’s economy is growing at a slower pace than the International Monetary Fund and other large forecasters are predicting.  That’s according to Nils Smedegaard Andersen, chief executive officer at A.P. Moeller-Maersk. His company, owner of the world’s biggest shipping line, is a bellwether for global trade, handling about 15 percent of all consumer goods transported by sea.

  • Economic Growth, Climate Change and Environmental Limits (INET)  Debate about the relationship between environmental limits and economic growth has been taking place for several decades. These arguments have re-emerged with greater intensity following advances in the understanding of the economics of climate change, increases in resource and oil prices and the re-emergence of the discussion about peak oil. These issues are addressed here by Cameron Hepburn, He is Professor of environmental economics at the University of Oxford, based at the Smith School and the Institute for New Economic Thinking at the Oxford Martin School, and is also Professorial Research Fellow at the Grantham Research Institute at the London School of Economics and a Fellow of New College, Oxford.  Marshall Auerbach conducts the interview on YouTube.

[iframe width="560" height="315" src="https://www.youtube.com/embed/AQscc1HYjhU" frameborder="0" allowfullscreen][/iframe] 

U.S.

  • Janet Yellen's Quiet Revolution (Politico)  Donald Trump turned his rhetorical bazooka on Janet Yellen this week, accusing the Fed chair of being “highly political” and merely doing President Barack Obama’s bidding by declining to raise interest rates. In this as in so many things he says, Trump was issuing wisdom from his rear end, but the GOP candidate from clowntown did serve one useful purpose. He prompted us to ask yet again: What is Janet Yellen’s game?  Yellen is also taking fire from the left—specifically Ralph Nader, who also urged her to raise rates to help the “savers of America”.   Nader threw in an oddly sexist bit of advice, counseling Yellen to “sit down with your Nobel Prize-winning husband, economist George Akerlof, who is known to be consumer-sensitive.”  But this article says the situation is not "simple and binary":

Yellen’s problem, basically, is this: Unemployment is statistically very low at about 5 percent, more than low enough to justify an increase in rates. In the past, as the labor market tightened (i.e. unemployment went down), wages and inflation began to rise. Today, that just isn’t happening. The Fed and its staff, like any good economists, rely on past patterns as a guide to future outcomes. And now, those patterns are no longer working: Wages are no longer following productivity upwards, and thus even many nominally employed people still feel poorer. At the same time, inflation appears all but nonexistent, despite many warnings to the contrary. So how can you justify raising rates?

Thus Yellen’s challenge—and, in truth, our collective challenge—is that the standards that are supposed to guide monetary policy appear to have collapsed.

Russia

  • Russian soldiers geolocated by photos in multiple Syria locations, bloggers say (Reuters)   Three serving or former Russian soldiers have been geolocated by photographs in Syria, including locations near Hama, Aleppo and Homs, Russian bloggers said on Sunday, suggesting the Kremlin's operation stretches well beyond its air campaign.  Russia first launched air strikes to support President Bashar al-Assad in Syria's four-year civil war on Sept. 30 but has repeatedly said it has no intention of mounting a ground operation.  It has instead said it will limit its help to military trainers, advisers and deliveries of military equipment.  U.S. security officials and independent experts told Reuters last week that Moscow had increased its forces in Syria to 4,000 personnel from an estimated 2,000. A U.S. defense official said multiple rocket-launcher crews and long-range artillery batteries were deployed outside four bases the Russians were using.

India

  • India’s huge need for electricity is a problem for the planet (The Washington Post)   Of the world’s 1.3 billion people who live without access to power, a quarter — about 300 million — live in rural India in states such as Bihar. Nighttime satellite images of the sprawling subcontinent show the story: Vast swaths of the country still lie in darkness.  India, the third-largest emitter of greenhouses gases after China and the United States, has taken steps to address climate change in advance of the global talks in Paris this year — pledging a steep increase in renewable energy by 2030.  But India’s leaders say that the huge challenge of extending electric service to its citizens means a hard reality — that the country must continue to increase its fossil fuel consumption, at least in the near term, on a path that could mean a threefold increase in greenhouse-gas emissions by 2030, according to some estimates.

Other Economics and Business Items of Note and Miscellanea

This year, the main attraction was Yanis Varoufakis, the former Greek finance minister. His appearance highlighted the fact that while the eurozone crisis has disappeared from the headlines, the underlying issues remain unresolved. Greece is being turned from a developed nation to a developing nation.

It was a shame that Varoufakis left before the trial of economics, since he would have been an excellent witness. In the case of Greece, economics is guilty as charged.

The point was made by Heiner Flassbeck, who is unusual in that he is a German economist who thinks his country is the problem rather than an example to be followed by the rest of Europe.

“Germany is to blame,” Flassbeck tells the court. “Germany got it wrong from the beginning of monetary union because it tried to live below its means.”

Asked to explain, Flassbeck says that after the German monetary union deflated domestic demand, wages didn’t keep pace with inflation so living standards fell. Companies couldn’t sell at home and investment was weak, but fortunately there was a safety valve: countries such as China were industrializing fast and wanted the high-quality manufacturing goods that were Germany’s speciality.

Countries in the rest of Europe struggled to match the improvement in Germany’s productivity. The circle could only be squared by Germany reinvesting the profits it was making on its exports. This took the form of capital flows from Germany to the weaker countries of southern Europe, which became heavily indebted and vulnerable to the financial crash that came along in 2007.

  • Days of Desperation (Politico)  There’s a reason Bush, Kasich and other establishment Republicans aren’t gaining traction. Their conservatism no longer makes sense:

The establishment candidates in this year’s Republican primary nomination campaign are out there reciting all the formulas that worked for Ronald Reagan and the two Bushes—supply-side tax cuts and more military spending. Yet the old-time conservative religion doesn’t seem to fire up the congregation, many of whose members have become idol-worshippers of strange new gods like Trump and Carson.

Why isn’t the old-time conservative religion working to fire people up any more? Maybe the reason is that it’s really, really old. So old it’s decrepit. I can testify to this as a refugee from the collapse of movement conservatism a generation ago.

True, the Republican Party itself lives on. Republicans dominates two of the three branches of the federal government, Congress—both House and Senate—and the Supreme Court. Below the federal level, the GOP is enjoying its greatest successes in generations. Today, Republicans enjoy total control of 60 percent of state legislatures and partial control of 76 percent. Only at the presidential level have the Democrats enjoyed a majority in recent electoral cycles.

But no one is quite sure what the Republican Party’s vision is or should be any more—least of all those hapless “establishment” presidential candidates who are flailing away out on the trail. Today, the greatest obstacle to majority status for the Republican Party may not be demography. It may be a superannuated conservative ideology that is increasingly disconnected not only from the values of the larger society but from the values and interests of Republicans themselves.

  • LaChute Portage: The Greatest Adirondack Trail (Adirondack Almanack)  One of the oldest still visible "thoroughfares" in North America is estimated to be many thousands of years old runs parallel to the LaChute River (more like a creek) for four miles as it drops more than 220 feet (Niagara Falls is 167 feet) from Lake George to Lake Champlain.  This now unused but still visible pathway was the portage route used first by native Americans for millenia and then by colonial era armies for a couple of hundred years.  The author describes what he saw when he viewed the scene from the area before the LaChute falls begins, looking upwards toward Lake George:

Just north of the [North Country Community College’s Ticonderoga] campus a grassy hill descends into a bowl-shaped depression before rising again to the main part of town.  Following Tom’s directions, I walked to the low point of the depression and turned to face south. I stood there, eyeing the contour of the bowl as it ascended the hillside in the direction of Lake George, just as he had said to do.

There it was, subtle to be sure, but irresistibly suggested by a sweeping upward curve flanked by an unnatural deformation in the side of the hill, a too-sharp angle of change as though the land had been dented by a heavy weight. It was a path. The grass grew no differently there, nothing of a trail was marked or maintained, but to someone used to scouting paths in the woods it was unmistakable.

And not just any path!  This was in fact the great Indian trail, worn into the ground by Native Americans over thousands of years of as they traveled between the lakes!  Here in the Adirondack Park, abandoned long ago but still visible on the landscape, was a passageway through history spanning human time on a scale I’d never experienced before.


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