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What We Read Today 10 March 2016

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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Topics today include:

  • Low Oil Prices Finally Limiting U.S. Production

  • America Needs Its Stripper Wells

  • With No Freeze, Oil Could Drop to $10 a Barrel

  • African Agriculture is Prospering

  • How Central Banks Made Wealth Inequality Worse

  • Houston is a Disaster of Epic Proportions Waiting to Happen

  • ECB Kicks Up the Stimulus

  • Germany Has Key IS Personnel Files

  • Mother Merkel Decries Balkan Route Closure

  • Is IS Established in Jordon?

  • China Developing Offensive Power in South China Sea

  • World's Second Largest Shipbuilder will Reduce Employee Count by 45% 2014-2017

  • Gary Kasparov Writes Great Essay but Ruins it with Embellishments

  • And More

Articles about events, conflicts and disease around the world

Global

  • Oil Could Fall $10/bbl If No Output Freeze Deal, DNB Says (Oil Pro)  Norwegian brokerage DNB Markets forecasts that oil prices could drop by $10/bbl if a February oil production freeze agreement isn't finalized. The preliminary agreement to halt oil production at January levels was made last month in Doha between Saudi Arabia, Russia, Qatar and Venezuela.  DNB Markets analyst Torbjoem Kjus was quoted by Reuters as saying at an energy conference in Oslo Thursday, "If they can agree on a production freeze I think we have seen a bottom. If they fail, I think the oil price will drop $10 per barrel again."  On Wednesday, a top Iraqi oil official told state newspaper Al-Sabah that the world's leading oil producers- both OPEC and non-OPEC- planned to meet in Moscow on March 20 to discuss finalizing the deal, Reuters reported. Russian Energy Minister Alexander Novak, meanwhile, said a date hasn't been set yet.

  • A green evolution (The Economist)  The farms of Africa are prospering at last thanks to persistence, technology and decent government.  Millions of African farmers have become more secure and better-fed as a result of better-managed, better-fertilized crops grown from hybrid seeds. They are demonstrating that small farmers can benefit from improved techniques. Despite some big, much-publicised land sales to foreign investors, almost two-thirds of African farms are less than a hectare in their extent, so this is good news.  And, The Economist says, the resulting prosperity may increase mobility of future generations freed from the chains of sustenance living.

  • How Central Banks Have Made Wealth Inequality Worse (Bloomberg)  Central banks' attempts to kick-start advanced economies following the financial crisis have made the gap between the rich and poor wider, suggests the Bank for International Settlements.  In the BIS' Quarterly Review, analysts Dietrich Domanski, Michela Scatigna, and Anna Zabai studied the evolution of wealth inequality in France, Germany, Italy, Spain, the U.K. and the U.S., finding inequality was influenced by monetary policy since the recession.

Click for larger image.
wealth.inequality.growth.2004.2015.600x600

U.S.

  • Obama approval rating hits three-year high (Politico)  President Obama no longer has more than half the people disapproving the job he is doing.  President Barack Obama's approval rating is the highest it has been since May 2013, according to the results of the latest weekly Gallup tracking poll.  Overall, 50% of those surveyed said they approve of the job the president is doing so far in his final 365 days in office, up from the 46% rating he earned in his penultimate year. The 50% is also higher than the 47% approval average since 2009.  No love from Republicans, though, with only 11% approval of the president.

  • America Needs America's Stripper Wells (Oil Pro)  According to the National Stripper Well Association there are currently 410,000 stripper oil wells in America producing nearly 1,000,000 barrels of oil per day, or approximately 11.5% of America's total daily oil production.  Stripper wells are those pumping from low production wells that have been depleted of their high volume early production.  Currently they average about 2.5 barrels a day each, but totals roughly the same as that currently being produced from the Eagle Ford shale oil trend in South Texas. By December 2016, nine months from now, Eagle Ford production is expected to decline 34 %. To replace that 2016 decline in Eagle Ford production, and maintain it for one full year (at 67% first year decline rates) it will cost Eagle Ford operators, and the capital sources it relies on, approximately 11 billion dollars.  American stripper well production declines in the order of <3 % annually. 

  • ‘We’re Sitting Ducks’ (ProPublica)  The vulnerability of the Port of Houston to a direct hurricane hit is not just a concern for that city and the state of Texas.  Houston, home to millions of people and one of the largest shipping lanes in the world, is unprepared for the hurricane that could bring ecological and economic disaster.  According to many experts, the U.S. is totally unprepared for what would happen.  Quoting Pete Olson, a Republican congressman from Sugar Land, a Houston suburb:  

If a storm hits the region in the right spot, “it’s going to kill America’s economy”. 

EU

  • European Central Bank reveals strong stimulus plan (Al Jazeera)  The ECB has cut its main interest rate to zero (from 0.05%) and unveiled new measures aimed at encouraging banks to increase lending.  The bolder-than-expected stimulus package also included a reduction in the interest rate on deposits held by banks at the ECB to minus 0.4%, from minus 0.3%.  QE (quantitative easing) will expand, with  monthly bond purchases increasing from €60bn to €80bn ($67bn-$89bn), pushing more newly printed money into the economy.

  • A messy but necessary deal (The Economist)  

Throughout the cold war, Turkey was one of Europe’s bastions against Soviet armies. Now it is being turned into Europe’s barrier against the huddled masses of the Middle East. At a summit on March 7th, European leaders and the Turkish prime minister, Ahmet Davutoglu, agreed on the outline of a strikingly ambitious deal. Turkey will take back all the boat-people setting off from its shores to Greece. In return, Europe is promising lots of things: money; the resettlement of many refugees now in Turkey; visa-free travel for Turks; and a revival of negotiations for Turkey to join the European Union.

 Every element of the arrangement is politically, legally or morally problematic.

Germany

  • Germany says it has obtained files on Islamic State members (Associated Press)   Germany's federal criminal police said Thursday they are in possession of files containing personal data on members of the extremist Islamic State group and believe them to be authentic.  The announcement came after Britain's Sky News reported it had obtained 22,000 Islamic State files on the border with Turkey and Syria, files that detail IS fighters' real names, where they were from, telephone numbers, and even names of those who sponsored and recruited the militants.  Though the significance of these files is yet to be gauged, they could be the largest yet treasure trove of documents found on IS and the most significant leak on its past and present fighters and operations across the Mideast.  They could also shape the campaign against the extremist group, which emerged from al-Qaida in Iraq. The cache, exposing its members and their families, could undermine its future ability to recruit and inspire would-be members.

  • Migrant crisis: Merkel condemns closure of Balkan route (BBC News)   German Chancellor Angela Merkel has blamed European nations for "unilaterally" shutting the Balkan route for migrants.  She said this had put Greece in a "very difficult situation" and such decisions should be taken by the whole of the EU.  Austria, Slovenia, Croatia, and non-EU members Serbia and Macedonia have all acted to stem the migrant flow.  The EU and Turkey, from where migrants reach Greece, have set out a plan to ease the crisis.  See article from The Economist under EU, above.

Turkey

  • Does Erdogan believe he's on a mission from God? (Al Monitor)  During his term as prime minister, Erdogan used to make long speeches at weekly AKP parliamentary meetings, which most television channels broadcast live. After he ascended to the presidency, his audience of AKP lawmakers was replaced by mukhtars, elected leaders of villages and neighborhoods, of which there are 53,000 in Turkey. At certain intervals now, he invites several hundred selected mukhtars to the presidential palace for his speeches, again, broadcast live by almost all television channels.  In one of these speeches earlier this year, Erdogan defied his state of besiegement, the result of his own dead-end foreign policy, assuring the mukhtars that help would come from above.  He said:

"This or that country may be against us, opposing us — none of this matters.  What does the commandment say? Allah is sufficient for us, and he is the best disposer of affairs. Without this faith of ours, we could have never confronted the Byzantine army, the world’s greatest military power at the time, in the Battle of Manzikert with a force of 20,000 or 30,000 people. Without this faith of ours, we could have never established the most powerful state in history and kept it alive for 600 years.”

Jordan

  • Has IS established foothold in Jordan? (Al Monitor)  Jordanians are still reeling from the shock of a dramatic security operation undertaken March 2 in the northern city of Irbid. The predawn, hourslong raid on a cell linked to the Islamic State (IS) resulted in special forces killing seven extremists wearing explosive belts. The government's action followed the arrest of 13 suspects earlier in the day. One Jordanian security officer was killed and five others were injured in the operation.  This was the first confrontation in the kingdom with an armed group associated with IS since Jordan joined the international coalition fighting the Salafist jihadist organization in September 2014.

China

  • China able to project 'substantial offensive power' from Spratlys in months: U.S. (Reuters)   China will be able to project "substantial offensive military power" from artificial islands it has built in the South China Sea's disputed Spratly Islands within months, the director of U.S. national intelligence said.  In a Feb. 23 letter to John McCain, chair of the U.S. Senate Armed Services Committee, James Clapper said Chinese land reclamation and construction work in the Spratlys had established infrastructure needed for offensive actions.  Clapper said:

[They] "project military capabilities in the South China Sea beyond that which is required for point defense of its outposts.  Based on the pace and scope of construction at these outposts, China will be able to deploy a range of offensive and defensive military capabilities and support increased PLAN and CCG presence beginning in 2016.  Once these facilities are completed by the end of 2016 or early 2017, China will have significant capacity to quickly project substantial offensive military power to the region." 

South Korea

  • World's 2nd-Biggest Shipbuilder To Layoff 12,000 In 2 Years (Oil Pro)   The world's second-largest shipbuilder, Daewoo Shipbuilding & Marine Engineering (DSME), plans to layoff up to 12,000 employees in the next two years as it continues to restructure its business amid the depressed oil market.  The workforce reduction seeks to reduce DSME's 42,000 workforce to 30,000, the Korea Times reported. The company has already laid off thousands of jobs over the last year.  In 2014, Daewoo had 55,000 workers generating 16 trillion won in sales. It was downsized it to about 42,000 in 2015 and by the end of 2017 expects to employ 55% of its 2014 work force.


U.S. Oil Production has Finally Succumbed to low Prices (Walter Kurtz, The Daily Shot)  As usual, The Daily Shot pictures tell the story:

oil.us.daily.shot.2016.mar.10

oil.us.daily.shot.part.2.2016.mar.10

oil.us.daily.shot.part.3.2016.mar.10

Other Scientific, Health, Political, Economics and Business Items of Note and Miscellanea

  • Garry Kasparov: Hey, Bernie, Don’t Lecture Me About Socialism. I Lived Through It. (The Daily Beast)  Kasparov has gotten the attention of millions with his Facebook post and has written this column to elaborate.  Unfortunately the elaboration, while adding many valid points, has also included some which have denigrated his message.  He has based his conclusions on the idea that regulation of corporate excesses and development of individual initiative are opposing forces.  Is it not possible that they could be mutually reinforcing?  Part of the reason this essay fails to meet its great promise is that it is loaded with a combination of fallacies of construction and non sequiturs which serve to trivialize what could have been a powerful argument.  Examples:

  • "Bernie Sanders cartoon with baseball cap "Make America Greece Again"" - This relationship is as invalid as comparing the federal government to that of a U.S.. state (or a state in any monetarily sovereign country), a non sequitur.

  • "... while inequality is a huge problem, the best way to increase everyone’s share of pie is to make the pie bigger, not to dismantle the bakery."  Fallacious construction because the pie has been growing for decades and has increasingly been eaten by a few "fat people".

  • "Many of the traditional economic numbers say that America is doing fine, and yet polls say that Americans—especially Sanders supporters—are angry about the present and fearful about the future."  Fallacious construction (see previous item about a bigger pie).

  • "... even the most socialist of the European countries only became wealthy enough to embrace redistribution after free market success made them rich."  A non sequitur - production of goods and services other than education and health care is still in private hands in these countries.

  • "What is the problem if American voters are willing to accept higher taxes in exchange for greater security in the embrace of the government?  The answer takes us back to all those inventions America has produced decade after decade. As long as Europe had America taking risks, investing ambitiously, attracting the world’s dreamers and entrepreneurs, and yes, being unequal, it could benefit from the results without making the same sacrifices."  A non sequitur - high taxes do not dictate slow growth and lack of innovation as shown by the U.S. with top tax brackets of 50% - 90% between 1946 and 1980, an age with average economic growth at the highest levels in U.S. history for such an extended period and with the invention of many of the foundations of the digital age such as the transistor, lasers and the like.  

  • "However, Sanders’s socialist policies would replace banks that are too big to fail with a government that is too big to succeed."  Totally arbitrary and unsupported opinion.  Such a statement can only be justified backed with statements like the ones mentioned previously. 

  •  US and Canada promise to lead world to low-carbon economy (The Guardian)   The US and Canada declared they would help lead the transition to a low-carbon global economy on Thursday, in a dramatic role reversal for two countries once derided as climate change villains.  The shared vision unveiled by Barack Obama and Justin Trudeau ahead of a meeting at the White House commits the two countries to a range of actions to shore up the historic climate agreement reached in Paris last December.  The two leaders committed to rally G20 countries behind the accord, promote North American carbon markets, cap emissions from hundreds of thousands of existing oil and gas wells, and protect indigenous communities in a region which is warming beyond the point of no return, according to a statement from the White House.

  • Miniature fuel cell to keep drones aloft for over an hour and phones charged for a week (gizmag)   Researchers at the Pohang University of Science and Technology (Postech) have created a miniature fuel cell they claim not only provides enough energy to keep a drone in the sky for over an hour, but may well find applications in powering everything from smartphones to cars in the not-too-distant future.  The range of ultra lightweight drones has been severely limited to date by the weight of batteries needed to extend their flight times up to an hour.  

  • How the Reagan-Era CIA Predicted Our Drone Dystopia (The Daily Beast)   The drone craze has set off a wave of pundit hand-wringing about the global spread of unmanned technology and its consequences.  But a declassified report from the CIA’s analytical arm shows that the agency was predicting a wave of drone proliferation as far back as the mid-1980s, at a time when the iconic Predator drone was only a glint in Langley’s eye.  The 1986 intelligence assessment, “Remotely Piloted Vehicles in the Third World: A New Military Capability,” prepared by the CIA’s Office of Global Issues, shows that the trickle of unmanned technology into the developing world first began decades ago.

  • Econintersect Staff Tests Market Reversal Software (Confidential file accidentally released by Investing Staff team leader, Gary)

Click to observe test.
BALANCE.BEAM.DISASTER


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