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What We Read Today 07 May 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".).


Every day most of this column ("What We Read Today") is available only to GEI members.

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Topic today include:

  • Will Creating Jobs Hurt the Economy?

  • Great Myths About the Great Depression

  • Prof. Greg Mankiew Has Some Presidential Campaign Myths

  • Bullishness on Stocks Highest in 16 Months

  • Nestle Wants to Sell You Diabetes and then Charge for a Cure

  • Mt. St. Helens Has New Earthquake Swarm

  • Trump Coherent on Monetary Policy

  • Trump Incoherent on Debt

  • Sanders Gains on Clinton But Not Enough

  • Could the 2016 Presidential Election Go To The House of Representatives?

  • Could Universal Basic Income Ever Work?

  • Erdogan Seizes Power in Turkey, Migrant Deal at Risk

  • Exploding Receivables in China

  • The Shine Fades for Turnbull in Australia

  • 'El Chapo' Moved to Prison by U.S. Border

  • Alberta Wildfires Could Engulf Oil Sands

  • And More

Articles about events, conflicts and disease around the world


  • Nestlé Wants to Sell You Both Sugary Snacks and Diabetes Pills (Bloomberg)  The Nestlé food and drink empire, including San Pellegrino water and Stouffer’s frozen dinners, is built on a foundation of sugar. Butterfinger, Cookie Crisp, KitKat, and Oh Henry! are all Nestlé products. So are Drumstick sundae cones, Häagen-Dazs ice cream, and Nesquik chocolate milk. In 1988, Nestlé even bought the life-imitates-art candy brand that makes Laffy Taffy and Nerds: Willy Wonka.  But Nestlé is also working on new drugs and delivery systems to control a major disease that can result from consumption of their sweets: diabetes.  Econintersect:  What is the ethics of creating a problem and then charging the victims to fix it?


  • Swarm of earthquakes strikes Mount St. Helens (CNN)   In the past eight weeks, more than 130 small earthquakes have trembled beneath the surface of Mount St. Helens.  At this point, "there is absolutely no sign that it will erupt anytime soon, but the data we collect tells us that the volcano is still very much alive," the U.S. Geological Survey said.  Seismologists reported that there are no anomalous gases, and no signs that the collection of magma, which is the molten rock beneath the surface of the Earth, is getting inflated in the recent swarm of earthquakes at the volcano.  Although there are no signs of an imminent eruption, the volcano is recharging, scientists say.  Mount St. Helens is in Washington state, 95 miles south of Seattle and about 55 miles northeast of Portland, OR.

  • Donald Trump Is Coherent on Monetary Policy, but Not on Debt (The New York Times)  Neil Irwin takes "The Donald" to task for poorly considered comments about U.S. Treasury Securities wherein he )Trump) suggested that the U.S. might buy back its debt at a discount, much as he would for a troubled casino project.  Irwin:

“I’ve borrowed knowing that you can pay back with discounts,” he [Trump] said. He added, “Now we’re in a different situation with the country, but I would borrow knowing that if the economy crashed, you could make a deal.”

He specified later that he didn’t mean renegotiating bond terms, which countries like Argentina and Greece have done repeatedly. What he says he meant was buying back bonds at discounts after rates have risen, much as a company at risk of bankruptcy might buy its own bonds back at, say, 70 cents on the dollar and thus reduce what it owes. “I don’t want to renegotiate the bonds, but I think you can do discounting,” he said.

But typically the kinds of discounts on bond prices he is talking about occur when a country or company is at high risk of defaulting on its obligations. And to even threaten that would be a rejection of a principle that dates to Alexander Hamilton and the founding of the republic — that the United States’ promise to make good on its obligations is ironclad. Threatening to repudiate American government debts could also arguably violate a provision of the 14th amendment of the Constitution.

It is that reputation for creditworthiness and reliability that has made United States Treasury bonds the bedrock of the global financial system — a crucial difference between American government debt and the likes of Argentina’s, or, for that matter, the kind of debt owed on a failed casino project.

  • Sanders awarded 49 more Washington state delegates (The Hill)   Democratic presidential hopeful Bernie Sanders was awarded 49 more delegates in Washington state, according to district-level breakdown of the state’s primary results done by the Associated Press.   The Vermont senator won the March 26 primary in a landslide, taking 25 of the 34 delegates awarded on election day.  Hillary Clinton won an additional 18 delegates, to bring the total for the state to Sanders 72, Clinton 27.  Clinton has also won the Guam caucus (7 delegates at stake) - see Clinton wins Guam caucus (The Hill).

  • Search is on for a third-party candidate to take down Trump (The Hill)  Conservative activists who want a third-party alternative to Donald Trump face one big obstacle: finding the right candidate.  This artcile finds problems with all the potential suspects.  Econintersect:  If we assume they do find a candidate then this would virtually assure Hillary Clinton's election, much following the formula of the 2012 presidential election that selected Woodrow Wilson over William Howard Taft and Teddy Roosevelt.  But, if Bernie Sanders then ran as a fourth candidate on a new party ticket, what is the most likely outcome?  No candidate gets a majority of the electoral votes and the House of Representatives elects the president from the top three electoral vote getters.  Each state gets one vote so the election would go to the third-party Republican, assuming they could get in the top 3.  If Trump, Clinton and Sanders were the top 3, and the ranking in the electoral college was Trump first, then Sanders and third Clinton, would enough Trump haters vote for Clinton to elect her?  There does not seem a way that Sanders could win, even if he were the top candidate in the electoral college.  This might be a situation which would result in a public outcry that could sweep in a constitutional amendment to establish a new election process.

  • Could Basic Income Really Work? A Video Chat (FiveThirtyEight)  Basic income is a simple but radical idea: The government would regularly write a check to each citizen with no conditions. Rich or poor, employed or not — everyone would get the same amount of money. Basic income has broad ideological support, intriguing progressives, libertarians and Silicon Valley techies. Switzerland will have a national referendum on basic income next month. Finland, Canada, the Netherlands and even the U.S. will be running basic income experiments in the next few years.  See also What Would Happen If We Just Gave People Money? (FiveThirtyEight).



Saudi Arabia

  • Saudi Arabia names Khalid al-Falih energy minister to replace Naimi (Reuters)  Saudi Arabia, the world's largest crude oil exporter, on Saturday appointed Khalid al-Falih, chairman of the state oil giant Saudi Aramco, as its new energy minister, replacing Ali al-Naimi, who had held the post since 1995.  The change is unlikely to mean a shift in Saudi oil policy, which is being crafted to a large degree by Deputy Crown Prince Mohammed bin Salman, who oversees the kingdom's energy and economic policies, and involves building consensus among top royals based on the advice of senior technocrats.  Since 2014, Saudi Arabia has led OPEC through a new survival-of-the-fittest strategy aimed at defending market share rather than reducing production to support oil prices. Riyadh believes that cheap crude alone can balance the market by stimulating demand and shutting down high-cost producers. 




The deeper Australia descends into the chasm of its post-mining boom adjustment, the more extraordinary the political behavior becomes. Like Vernean subterranean explorers on a fantastic journey to the center of the earth, confronted at each new depth with threats and creatures more bizarre and horrific than the last, we are probing the uttermost depths of depravity in our leaders and selves.

The wondrous thing about this job is that you get to peer behind the curtain of power and money to see what’s really driving both. Over the six years that I’ve blogged, I have been progressively more amazed at the bastardry and bloody-mindedness that one finds behind the veneer. It’s been a journey into the darkest reaches of Machiavellian practice that has seen prime ministers and governments successively rolled by huge private interests, by bellicose Oppositions and by rusted-on ideologies that no longer make sense in Australia’s changing world. I thought I had lost the power to be shocked.

But I was wrong.


  • Could Chile be the Saudi Arabia of Wave Power? (informed Comment)  Hat tip to Doomstead Diner.   According to a study commissioned by the Inter-American Development Bank (IDB), this South American country has 164 [GW] in wave energy potential, which makes it unique in the world.  The study stated that even if only 10 percent of the country’s tidal and wave energy were harnessed, it would surpass the existing installed capacity of Chile’s central power grid, SIC, which totals 15,500 MW.   Thanks to wind and solar power plants, the price of electricity in Chile, for years the highest in Latin America, went down to 104 dollars per megawatt-hour – a 34 percent drop since 2013.  According to official projections, the country’s electric power needs will rise by 54 percent over the next decade. In December 2015 the government launched the 2050 Energy Plan, which set a goal for 70 percent of the country’s energy to come from clean sources by that year, seven times today’s proportion.


  • Mexico drug lord 'El Chapo' Guzman moved to Juarez prison (Associated Press)  Convicted drug lord Joaquin "El Chapo" Guzman, who twice pulled off brazen jailbreaks and is fighting to avoid extradition to the United States, was abruptly transferred to a prison in northern Mexico near the Texas border early Saturday.  Lawyers for Guzman, who was recaptured in January, have filed multiple appeals against their client being sent to the U.S., and Mexican officials have said it could take as long as a year to reach a final ruling. There was no immediate indication that the transfer could be a sign that the process is nearing conclusion.  Mexican government officials said the Sinaloa cartel boss was moved from the maximum-security Altiplano lockup near Mexico City to the Cefereso No. 9 prison in Ciudad Juarez, which is across from El Paso, Texas. The Interior Department said the move was due to work being done to reinforce security at Altiplano.


  • Alberta Wildfires May Double as Flames Head Toward Oil Sands (Bloomberg)  Wildfires ravaging the center of Canada’s oil patch in northern Alberta may double in size as warm temperatures and swirling winds push the inferno in the direction of major oil-sands operations.  Disruptions to oil production, the lifeblood of Alberta’s economy, add to a human catastrophe as blazes razed entire neighborhoods in Fort McMurray, the gateway to the world’s third-largest crude reserves. Police and military officials are working to evacuate the remaining 10,000 residents who had gone north to work camps now considered unsafe, escorting them in convoys of 50 vehicles at a time through the smoke and ash.

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

  • "Creating Jobs" Will Hurt the Economy (T. Norman Van Cott, Foundation for Economic Education)  Prof. Van Cort argues that jobs are "costs" not "benefits".  If it took no labor to create something of value efficiently, costs would be lowered and society would benefit.  Econintersect:  This is the ultimate in supply-side thinking.  But the essay totally ignores the question of demand.  If everything could be produced without labor, who would have the income to buy products?  Just the owners of capital?  In the current U.S. what percentage of the population is that? 10%?  20%?  30%?  Let's say it is as high as 50% (which we doubt) then half of those considered consumers today would have no income to buy products and production would decline, prices would drop with excess supply if production were not quickly curtailed, return on capital would decline (and probably return of capital also), resulting in demand from owners of capital declining as well.  What Prof. Van Cort defines is only half of the equation - yes, "jobs are costs" but the other half of the ledger not mentioned in his essay would say "wages are income".  The title of this essay ("Creating Jobs" Will Hurt the Economy) is not wrong but only would be a complete story if accompanied by another essay with a title like:  "Decreasing Income Will Hurt the Economy".

  • Great Myths of the Great Depression (Lawrence W. Reed, Foundation for Economic Education)  Reed, President of FEE (Foundation for Economic Education) has identified what he thinks are myhts of the Great Depression, generally defined to cover the years from (1929-1939).  He describes how he believes monetary and fiscal bungling first created the conditions that led to the 1929 stock market collapse, the subsequent 4 year economic decline to the depths of the Great Depression and the volatile recovery that waxed and waned for another 6 years suffering from continued policy botches.

  • The Economy Is Rigged, and Other Presidential Campaign Myths (The New York Times)  Prof. Greg Mankiew has the following myth list (with discussion of each in the NYT article):

  • American manufacturing has disappeared 

  • Bad trade deals are what ails the economy

  • The economy is rigged  

  • The rich don’t pay much in taxes 

  • Tax cuts will unleash stupendous growth 

  • The next president can quickly fix all of our problems


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