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".).
Flint water crisis: Michigan officials ignored EPA warnings about toxicity (The Guardian) The Environmental Protection Agency warned of an unfolding toxic water crisis in Flint but was “met with resistance” by Michigan authorities, a fiery congressional hearing into the city’s public health disaster has heard. 'We all let the people of Flint down’, Michigan authorities tell Congress in hearing that also highlights flawed water testing practices that persist in other major US cities.
Obama visits US mosque, says impression of Muslims distorted (Associated Press) President Barack Obama sought Wednesday to correct what he called a "hugely distorted impression" of Muslim-Americans as he made his first visit to a U.S. mosque. He said those who demonize all Muslims for the acts of a few are playing into extremists' hands.
The Federal Election Commission has sent a letter to Ted Cruz demanding further explanation of Goldman Sachs’ loan to his 2012 Senate campaign.
Cruz and his wife, Heidi, took out a low-interest loan from Goldman Sachs, and another from Citibank, without the required disclosure to the Federal Election Commission, The New York Timesreported in mid-January. The next day, Cruz’s team sent a letter to the FEC clarifying that the loan, which had been marked as personal funds, should have been reported as from bank loans. The FEC’s response, dated Tuesday, asks Cruz’s staff to further amend their reports to include more details and file an additional document with the exact terms of the loan.
Migrant crisis: EU approves 3 bn-euro fund for Turkey (BBC News) The EU has approved €3 billion ($3.3 billion; £2.2 billion) in funding to help Turkey cope with record numbers of Syrian migrants. The organisation hopes the fund will lower the number of arrivals into EU nations. Under the deal, the EU's executive is contributing €1 billion to the fund, while the 28 member states will contribute the rest. More than a million migrants reached the EU last year by sea, many of them travelling through Turkey. Turkey is home to nearly three million refugees, most of them fleeing the conflict in neighbouring Syria.
UN suspends Syria peace talks until end of February (The Guardian) UN-brokered peace talks with the Syrian government and opposition have been temporarily suspended only three days after they began, highlighting the enormous difficulties of finding a political solution to the war and the world’s worst humanitarian crisis. Mediator Staffan de Mistura says he will not ‘talk for the sake of talking’ as he seems to link move to opposition anger at Syrian government and Russian airstrikes,
Afghanistan is on the brink after US invests $100 billion (CNBC) Afghanistan's economy is worsening and its security deteriorating despite more than a decade of U.S.-led reconstruction efforts and more than $100 billion poured into the country, according to the Special Inspector General for Afghanistan Reconstruction, an independent oversight agency created by Congress in 2008.
Japan puts military on alert to shoot down North Korean rocket (The Guardian) Japan has threatened to shoot down any North Korean missile that threatens its territory and has deployed ballistic missile defence units in preparation for what North Korean officials in Pyongyang say is the imminent launch of a satellite.
Goldman Sachs Says It May Be Forced to Fundamentally Question How Capitalism Is Working (Bloomberg) Goldman analysts have come to the conclusion that the unprecedented longevity of high profit margins will, if continued, raise "broader questions about the efficacy of capitalism". Econintersect: The words are not used in this article but we would say the dilemma raised in this discussion poses that capitalism might have shifted from a competitive marketplace for goods and services to an extractive tool for a new aristocracy. Then the question is whether it can shift back to the marketplace functionality described by Adam Smith, an idea upon which economic thinking has focused for more than 240 years.
Manohar argued that profit margins have expanded, thanks to four key trends: strong commodities prices, emerging market cost arbitrage (companies making things more cheaply in emerging markets), demand growth from emerging markets, and improved corporate efficiency driven by the use of new technology. Continuing one of its major analytical themes of recent months, Goldman also noted that the market has rewarded companies that have undertaken mergers and share buybacks, as opposed to companies that have invested internally, further bolstering margins.
So will profit margins inevitably roll over?
Goldman went through both sides of the argument. On the bull side, the bank said that ongoing consolidation in industries, cost deflation, and tighter purse strings help keep a floor under margins. Ultimately though, it found that the above trends, coupled with weak demand and general industrial overcapacity, mean that margins are likely to come down.
Dismantling the Decadence of the Rentier Recovery (Dan Kervick, Rugged Egalitarianism) DK contributes to GEI. Dan looks at three metrics which reflect the increase of extractive actions in the U.S. economy compared to the distributive characteristics that have been associated with the "golden years" 1950-2000.
Other Economics and Business Items of Note and Miscellanea
Bernie Sanders’s Health-Care Plan Does Not Add Up (New York) The centerpiece of Sanders’s domestic agenda is a plan for single-payer health insurance. Sanders claims his plan would immediately produce trillions of dollars in savings through lower health-care costs — not merely bending the cost curve down, as Obamacare has done, but snapping it sharply in the other direction. Kenneth Thorpe, a respected liberal health economist at Emory University, has estimated that Sanders’s plan is “completely implausible”. The author, Jonathan Chait, says the numbers are telling us is that Sanders is not merely pushing the envelope of policy imagination. His platform is predicated on completely ignoring mainstream economic analysis. Econintersect: The Sanders numbers may be incorrect but it is the lamest of arguments that mainstream economic analysis does not agree with them.
A green process for extracting gold (gizmag) The headline is misleading. The extraction is not from mining but from recycling jewelry and electronics. The process is, nonetheless, very much an improvement:
A research team at the University of Saskatchewan has found what may be an inexpensive and environmentally-friendly way of recycling gold from jewelry and electronics. Using a solution of what is essentially reusable table vinegar, the team has shown that for CAD$66 (about US$47) it can produce one kilogram (2.2 lb) of gold with 100 liters (26 gal) of reusable waste water – this is as compared to current methods that can cost over CAD$1,500 (US$1,070) and create 5,000 liters (1,321 gal) of toxic, non-reusable waste.
According to Stephen Foley, associate professor in the Department of Chemistry and leader of the project, 80 percent of the 50 million tons (4.5 million tonnes) of e-waste produced globally each year ends up in landfills, and seriously impacts the environment and surrounding populations as a result.
How the Other Establishment Candidates Plan to Spoil Rubio’s Surge (New Yorker) Rubio has not spent the time in New Hampshire that Jeb Bush, Chris Christie and John Kasich have and they are painting him as a latecomer to the Granite State. Econintersect: Curious that New Hampshire is called the Granite State when neighbor Vermont quarries far more granite.
Political power follows economic power (The Economist) Political leaders, central bankers and economists are grappling with a whole range of problems at the moment, while simultaneously facing a challenge to their authority from populist parties who feel that the prevailing approach has been mistaken. More than that, they argue that policies have been set more with reference to the interest of the governing classes than to the concerns of the ordinary voters. Certainly, it is possible to look at economic history as a variant on the old saying; he who pays the piper calls the tune. What determines economic policy? Politicians will tack with the prevailing winds to ensure they stay in office. Economic ideas will be adopted when they are useful to that process. To the extent that groups gain economic power, political power will follow. Econintersect: GEI columnist Frank Li has suggested that democracy may not be economically efficient for sveral years now. See Frank's archives.
Here's the Toll That Student Debt Can Take on Retirement (Bloomberg) Student debt levels have have mushroomed, and Americans have saved little for retirement. The relationship between those two things is not obvious. So just how does having a big slug of student debt actually hurt the ability to prepare for a comfortable retirement? To find out, Alicia Munnell, director of the Center for Retirement Research at Boston College (CRR), and her colleagues tweaked a measure developed by CRR to quantify America's retirement prospects. Their National Retirement Risk Index (NRRI) uses data from the Federal Reserve's Survey of Consumer Finances to compare how much income people are on track to replace in retirement with how much income they will need to maintain their standard of living. With current Social Security benefits the average effect is an increase of 4.6% in the number with a retirement shortfall. If Social Security is decreased by 19.6%, the number with a retirement shortfall increases to 10.7%.
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