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 dayin the early am at GEI News (membership not required for access to "The Early Bird".).
Prospects for the Global Economy in 2016 (Council on Foreign Relations) Five well-known economists offer essays on what might happen in 2016. They are Kenneth S. Rogoff, Barry J. Eichengreen, Varun Sivaram, James Pethokoukis and Robert Kahn.
The Threat Is Already Inside (Foreign Policy) occasional terrorist attacks in the West are virtually inevitable, and odds are, we’ll see more attacks in the coming decades, not fewer. If we want to reduce the long-term risk of terrorism — and reduce its ability to twist Western societies into unrecognizable caricatures of themselves — we need to stop viewing terrorism as shocking and aberrational, and instead recognize it as an ongoing problem to be managed, rather than “defeated.” Politicians don’t like to say any of this. But we’re not politicians, so let’s look at 10 painful truths. (Read article for discussion of each.)
No. 1: We can’t keep the bad guys out. No. 2: Besides, the threat is already inside.
No. 3: More surveillance won’t get rid of terrorism, either.
No. 4: Defeating the Islamic State won’t make terrorism go away.
No. 5: Terrorism still remains a relatively minor threat, statistically speaking.
No. 6: But don’t relax too much, because things will probably get worse before they get better.
No. 7: Meanwhile, poorly planned Western actions can make things still worse.
No. 8: Terrorism is a problem to be managed.<
No. 9: To do this, however, we need to move beyond the political posturing that characterizes most public debates about counterterrorism and instead speak honestly about the costs and benefits of different approaches.
No. 10: We need to stop rewarding terrorism.
Forget Sykes-Picot. It’s the Treaty of Sèvres That Explains the Modern Middle East. (Foreign Policy) Ninety-five years ago, Europe carved up the Ottoman empire. That treaty barely lasted a year, but we're feeling its aftershocks today. The treaty called for a British mandate of "Kurdistan" (not so named at the time). But the Kurds feared a Muslim colonial status under Christian Britain and joined with the Turks to resist. And after a year the Treaty of Sevres was replaced by the Sykes-Picot Agreement, in some ways possibly inferior with respect to establishing ethnically stable geopolitical units. See next article.
ISIS’s Aversion to Sykes-Picot Tells Us Much About the Group’s Future Plans (Muftah) The thoughtless, tribal/ethnic-ignorant map drawn by Mark Sykes, representing the British government, and Francois Georges-Picot, from the French government, in 1916 created many of the problems that have produced turmoil in the Middle East 100 years later. One of the outstanding characteristics of the Sykes-Picot Agreement was its imposition without one iota of input from the people affected. See also next article.
The Middle East That Might Have Been (The Atlantic) There was an alternative to Sykes-Picot based upon input from the residents of the Middle East. In 1919, President Woodrow Wilson dispatched a theologian named Henry King and a plumbing-parts magnate named Charles Crane to sort out the Middle East. Amid the collapse of the Ottoman Empire following World War I, the region’s political future was uncertain, and the two men seemed to provide the necessary combination of business acumen and biblical knowledge. King and Crane’s quest was to find out how the region’s residents wanted to be governed. It would be a major test of Wilson’s belief in national self-determination: the idea that every people should get its own state with clearly defined borders. Below is the King-Crane proposal map (it appears twice, the first is interactive and may not display properly for some readers' systems; the second is a non-interactive version for those who do not see the first version) and below that is the final Sykes-Picot map (from BBC News). The third map below is the current official national boundary layout of the region today. The fourth map is the present territory of the Islamic State (ISIS) as of August 2014 (from The Independent). Econintersect Note: ISIS has been driven from some of the territory occupied back then and has added very little additional territory.
First U.S. Oil Export Leaves Port; Marks End to 40-Year Ban (Bloomberg) The first U.S. shipment of crude oil to an overseas buyer departed a Texas port on Thursday, just weeks after a 40-year ban on most such exports was lifted. The Theo T tanker has left NuStar Energy LP’s dockside facility in Corpus Christi, Texas, along the western shore of the Gulf of Mexico, Mary Rose Brown, a spokeswoman for NuStar, said in an e-mail. The ship is carrying a cargo of oil and condensate to Italy from ConocoPhillips’s wells in south Texas that was sold to Swiss trading house Vitol Group.
Do Juvenile Curfews Increase Crime? (Marginal Revolution) The DC curfew switches from midnight to 11 pm on Sept 1 of every year. In a working paper, Jennifer L. Doleac and Jillian Carr test the effect of DCs juvenile curfew on gun violence by looking at the number of gunshots heard in the 11pm to midnight “switching hour” just before and just after Sept 1. Using data on gunfire incidents from ShotSpotter (acoustic gunshot sensors that cover the most violent neighborhoods in D.C.), it is found that after the curfew switches from midnight to 11:00 p.m., the number of gunshot incidents increases by 150% during the 11:00 p.m. hour.
25 Best Places To Retire (Forbes) Data sifted included housing and living costs, taxes, weather and air quality, crime rates, doctor availability, and active-lifestyle rankings for walkability, bicycling and volunteering. We also looked at economic data with an eye toward a “working” retirement. Nice slide show presentation.
As 2016 dawns, Europe braces for more waves of migrants (Associated Press) Bitter cold, biting winds and rough winter seas have done little to stem the seemingly endless flow of desperate people fleeing war or poverty for what they hope will be a brighter, safer future in Europe. As 2016 dawns, boatloads continue to reach Greek shores and thousands trudge across Balkan fields and country roads heading north. More than a million people reached Europe in 2015 in the continent's largest refugee influx since the end of World War II — a crisis that has tested European unity and threatened the vision of a borderless continent. Nearly 3,800 people are estimated to have drowned in the Mediterranean last year, making the journey to Greece or Italy in unseaworthy vessels packed far beyond capacity.
Iraq Says It Exported More Than 1 Billion Barrels of Oil in 2015 (Bloomberg) Iraq said it exported 1.097 billion barrels of oil in 2015, generating $49.079 billion from sales, according to the oil ministry. It sold 99.7 million barrels of oil in December, generating $2.973 billion, after selling a record 100.9 million barrels in November. The country sold at an average price of $44.74 a barrel in 2015. Iraq, with the world’s fifth-biggest oil reserves, needs to keep increasing crude output because lower oil prices have curbed government revenue.
Why Is Pakistan Such a Mess? Blame India. (Foreign Policy) After a year in office, Modi’s gestures of conciliation toward Islamabad have gone nowhere. That’s because India’s founding fathers set Pakistan up to fail. The nation was born out of paranoia about Hindu dominance. And that paranoia has deep roots in the turmoil of partition of Punjab and Bengal, plus India's continued control of the predominantly Muslim region of Kashmir. See first map below from Rand McNally and second map below from National Geographic, 1984.
China Investment Corp retreats from Canada after mining, energy investments sour (Financial Post) Another casualty of the slowing Chinese economy and the global commodities crash, China has experienced a string of bad investments in Canada. China Investment Corp. (CIC) has shut down its Toronto office and is opening a new one in New York, part of a quiet retreat from Canadian natural resources by China’s state-controlled entities.
This Mad Scientist Will Clone 100,000 Cows (The Daily Beast) This year, a Chinese company plans to open a massive factory to clone 100,000 cows a year. The plan is to expand to 1 million cows a year, to meet the growing Chinese appetite for beef.
Moving Averages: December Month-End Update (Jill Mislinski, Advisor Perspectives dshort.com) This chart displays an all-in or all-out strategy for the S&P 500 with monthly rebalancing over the last 20 years. See also next article.
ETF Moving Average Backtest (ETFreplay.com) This shows a 15-year back-test using the 200-day moving average (closer to 10 months than 12) and the ETF for the Dow Jones Industruial Average (NYSE:DIA). The lesson here? Whipsaws are a bitch - ther were 17 trades in the 15 years and 12 of them lost money.
Other Economics and Business Items of Note and Miscellanea
Why Preventing Cancer Is Not the Priority in Drug Development (The New York Times) Most people would agree that it would be better to prevent cancer, if we could, than to treat it once it developed. Yet economic incentives encourage researchers to focus on treatment rather than prevention. The way the patent system interacts with the Food and Drug Administration’s drug approval process skews what kinds of cancer clinical trials are run. There’s more money to be made investing in drugs that will extend cancer patients’ lives by a few months than in drugs that would prevent cancer in the first place. For more see Do Firms Underinvest in Long-Term Research? Evidence from Cancer Clinical Trials (American Economic Review). Econintersect: Another example that unmasks the myth that "markets are the most efficient process for improving society". People enter markets to maximize the amount of money they can make. See also next article.
Cuba's Had A Lung Cancer Vaccine For Years, And Now It's Coming To The U.S. (The Huffington Post) The vaccine, called CimaVax, has been researched in Cuba for 25 years and became available for free to the Cuban public in 2011. The country's Center for Molecular Immunology signed an agreement last month with Roswell Park Cancer Institute in Buffalo, New York to import CimaVax and begin clinical trials in the United States. Why hasn't the U.S. pharma industry been active in this area? Econintersect suggests it's all about money. See the next article. The vaccine is reported to cost about $1. For every American to receive a vaccination is worth about $320 million. According to Dr. Kelvin Lee, Jacobs Family Chair in Immunology and co-leader of the Tumor Immunology and Immunotherapy Program at Roswell Park:
"We’re still at the very early stages of assessing the promise of this vaccine, but the evidence so far from clinical trials in Cuba and Europe has been striking. We think it may be an effective way to prevent cancer from developing or recurring, so that’s where a lot of our team’s excitement comes in. There’s good reason to believe that this vaccine may be effective in both treating and preventing several types of cancer, including not only lung but breast, colorectal, head-and-neck, prostate and ovarian cancers, so the potential positive impact of this approach could be enormous."
How Much Cancer Costs (DrugWatch) The cost of cancer care in the U.S. is about $125 billion per year. Drug costs are probably less than half but definitely a significant part of that. Econintersect: If you compare $320 million one time (vaccination, previous article) with tens of billions each year for drugs to treat cancer it is clear why a market based economy doesn't want the vaccine. The value to the economy does not compute in the drug company's incentivization. How much money they can make is the incentive. When you consider that the total economic cost of cancer each year, according to this article, is $894 billion, the immense cost of the pharma profit motivation is evident. There are many problems we face for which markets and profits do not make sense.
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