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What We Read Today 16 December 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

  • The global impact of the US interest rate rise (BBC News)   It doesn't sound like much - but its significance is mighty.  After nearly a decade of what has been, essentially, a global economic effort - and experiment - to save the world from financial calamity, the Federal Reserve, the central bank to the world's largest economy, has decided, finally, to try a touch of "normalization".  Getting economies "back to normal" was always the hope during that remarkable time when the financial system was in danger of going bust.  Rising US interest rates could mean higher debt repayments for emerging market governments and businesses - as the amount owed is denominated in dollars.  And with higher interest rates in America, investment capital will be encouraged across the Atlantic and away from Asia in the hunt for better returns.  That could affect Europe as well.  On the upside, the stronger dollar which has followed the rise might be good for European and Asian economies as it means exports to America are cheaper.  See also The Latest: Fed statement hints at global worries (Associated Press), as well as Gary's Market Close report and Steve's FOMC announcement report.

U.S.

  • Wall Street rallies on gradual Fed tightening, improving economy (Reuters)  U.S. stocks rallied on Wednesday after the Federal Reserve announced it is raising its key policy rate for the first time in nearly a decade in a sign of confidence in the U.S. economy.  Markets judged the Fed's statement to be dovish, supportive of risk assets including equities. Defensive sectors of the market, recently hit in anticipation of the rate hike, were the best performers.  The Fed made clear that the 25-basis point rate hike was a tentative beginning to a "gradual" tightening cycle, and that in deciding its next move it would put a premium on monitoring inflation, which remains mired below target.  For more details see Gary's Market Close report and Steve's FOMC announcement report.

  • When Does Terrorism Justify Closing the Border?  (Foundation for Economic Education)  Some prominent conservatives like Larry KudlowDavid Bossie, and Ann Coulter have now called for a complete moratorium on immigration because of the threat of Islamic terrorism.  But the author says they all focus on the benefits and neglect the costs of such a policy. He states that an immigration moratorium will cost the US economy about $200 billion annually on net, even if it is successful at significantly reducing terrorism, and gives a couple of research references to support.  He then provides an analysis that gives an annual cost for jihadist activities here in the U.S. at $73 million.  That is a cost/benefit ratio of 2740 - or a benefit/cost ratio of 0.0004.

  • 3 Foreign Women Visited The U.S. To Assess Gender Equality. They Were Horrified (Huffington Post, MSN News)  A delegation of human rights experts from Poland, the United Kingdom and Costa Rica spent 10 days this month touring the United States so they can prepare a report on the nation's overall treatment of women. The three women, who lead a United Nations working group on discrimination against women, visited Alabama, Texas and Oregon to evaluate a wide range of U.S. policies and attitudes, as well as school, health and prison systems.  The delegates were appalled by the lack of gender equality in America. They found the U.S. to be lagging far behind international human rights standards in a number of areas, including its 23 percent gender pay gap, maternity leave, affordable child care and the treatment of female migrants in detention centers.

  • First Baltimore policeman's trial in death of black man ends in hung jury (Reuters)  A mistrial was declared on Wednesday in the case of a Baltimore police officer charged in the death of Freddie Gray, a black man whose killing while in custody sparked riots last April, and the city's mayor appealed for calm.  The judge dismissed the jury in the involuntary manslaughter trial of Officer William Porter - the first of six officers to be tried in Gray's death - after 16 hours of deliberations during which it was unable to reach a verdict on any of the charges against the policeman.  The breakdown of vote among jurors was not revealed - five were men, seven were women and five were white, seven black. 

  • Regulators Try to Crush 300,000 Handmade Cosmetics Makers (Foundation for Economic Eduation)  Legislation that imposes regulation of soap industry produces barriers to entry and to continue operation already started by entrepreneurs and the author asks if there is significant public benefit here or just a deck stacked in favor of the big manufacturers. 

EU

  • EU demands Italy use force to fingerprint all refugees (Al Jazeera)   EU officials will meet in Brussels on Thursday to discuss a proposal from the European Commission, the bloc's executive body, to deploy a new border guard force that could intervene in member countries without their consent. The commission’s proposal says the force could intervene “where deficiencies persist,” or where a country is “under significant migratory pressure putting in peril the Schengen” agreement, the pact that regulates the bloc’s treasured policy of allowing free travel between its 28 members.  One of the EU's demands is that every newcomer be fingerprinted in the country of arrival in accordance with existing EU refugee law. Implementation has slipped in the current crisis, as authorities have become increasingly overwhelmed by the number of arrivals.   Rights organizations deplored the bloc's security strategy, which they say favors repression over securing safe passage.  

Taiwan

  • US to sell arms to Taiwan despite Chinese opposition (BBC News)   The Obama Administration has announced a $1.83 billion (£1.22 billion) arms sale to Taiwan in a deal that has antagonized China.  The US said the deal was consistent with its "long-standing policy on arms sales to Taiwan".  But China has said it is strongly opposed to the sale, and has pledged to sanction the US firms involved in it.  The deal, the first in four years, comes as US-China relations fray over China's construction of artificial islands in the South China sea.

Other Economics and Business Items of Note and Miscellanea

  • Technology, Not Politics, Is the Future of Progress (Foundation for Economic Education)  The argument of the author is that, although the government started the internet, it was companies like Google that created great economic advances using the web.  He then turns to a detailed criticism of regulation as a throttle on radical innovations.  Econintersect:  We have no argument with the first thesis but thinks the author struggles to rationalize how important factors, such as public safety and prevention of monopolistic dominance, can be handled without regulation.  He doesn't really ever get to a bottom line on those problems.  

  • Rising Inflation Could Be Game Changer For Gold In 2016 - Capital Economics (Forbes)  Article is by a gold vendor.

  • Column: Why raising the minimum wage is good economics (PBS News Hour)  This article has about as much value as other articles whic explain why raising the minimum wage is bad economics.

  • Expert: Economics will help fight climate change (Idaho Mountain Express)  Ketchum-based alternative-energy consultant Aimée Christensen is the CEO of Christensen Global Strategies and founder of the Sun Valley Institute for Resilience.  She believes that the economic opportunities associated with the need to reduce greenhouse gases will propel the world into a clean-energy future.

  • “Capitalism” Is the Wrong Word (Foundation for Economic Education)  The author suggests that common political economic terms may not be helpful in understanding the complexities of modern society.  It is written from the perspective of a proponent of "capitalism" rather than "socialism" but would be an effective discussion starter (or  thought provocation for an individual) if one were an avowed communist.  (That last statement assumes that there is some glimmer of intellectualism for either capitalist or communist.)   Here is an excerpt:

In the senior seminar I teach, we recently read a section of the book that deals with how the Soviet planning process actually worked. That section got me thinking about the terms capitalism and socialism again. The term capitalism suggests a system built around capital and its interests, while the word socialism suggests one built around society and its interests. Notice how these connotations beg some questions from the start.

Is it really true, for example, that capitalism is centered around capital and its interests? Is it really capitalists who benefit the most from capitalism? And on the other side: have existing socialist economies ever served the interests of society as a whole? Could socialism, in theory, do so? Do both of these names make assumptions about each of the two types of economies that reflect the biases of capitalism’s critics and socialism’s defenders?


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