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What We Read Today 06 June 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:

  • Do We Need a Debt Jubilee?

  • Are We Headed for an Economic Crisis Driven be Debt?

  • Bill Gross Used the Word 'Implosion'

  • Must Greenhouse Gas Reduction Result in Less or Slower Growth?

  • If No Universal Basic Income then What?

  • TPP Kangarooo Tribunals

  • Does China Win if TPP Loses?

  • Yellen Signals Two More Hikes this Year Likely

  • Factfinding Donald Trump's Data

  • Why are So Many Americans Voting for Donald Trump and Bernie Sanders?

  • Five Factors that Could Turn America into Another Collapsed Empire

  • UK Labour Party and Basic Universal Income

  • Why We Should Be Worried about the Sink Holes in Siberia

  • Women are Beating Men in Pakistan

  • And More

Articles about events, conflicts and disease around the world

Global

Proponents of the Trans-Pacific Partnership (TPP) know that they have a major problem. Bernie Sanders, Hillary Clinton, and Donald Trump each oppose the deal. CEOs, however, have not given up on their dream of being able to rig the international system through the creation of kangaroo tribunals that can, effectively, destroy effective regulation and the enforcement of rules to protect the public. As I explained in my most recent column on this subject, “trade” is simply the pretext for this assault on the rule of law and national sovereignty. President Obama plans to try to get the TPP approved by the lame duck Senate after the November elections. Outgoing officials no longer must fear (or respect the will of) the voters and they are eager to cash in on the corporate largess that will reward politicians that vote for the international CEO impunity deals.

U.S.

  • Janet Yellen probably just signaled two interest rate hikes for this year (CNBC)  If Fed Chair Janet Yellen has her way, there likely will be two rate hikes this year, contrary to current market expectations.  While Yellen didn't overtly express that desire, there was one key section of the speech she prepared Monday that strongly signaled two hikes on the way:

Next week, concurrent with our policy meeting, the FOMC participants will release a new set of economic projections. Those could, of course, differ from the previous set of such projections in March. But speaking for myself, although the economy recently has been affected by a mix of countervailing forces, I see good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones.

median.net.worth.1998.2003

  • Falling birthrates

  • Globalized trade

  • Rising debt loads (Econintersect:  He specifically singles out federal government debt, which is not the problem)

  • Eroding work ethic

  • The challenge of patriotism in a multicultural country  (Econintersect:  He does not mention that a decline in immigration could also pose a big threat.)

  • Trump will be good for economy, bad for Wall Street: David Rosenberg (John Mauldin, 2016 Strategic Investment Conference)  JM is a GEI contributor.  Conservative economist David Rosenberg says the U.S. needs radical fiscal expansion.  (Econintersect:  So does the EU.)  Rosenberg says that America is at another 1980 moment and the country should be ready to roll the dice again as they did in that election.

UK

  • Labour manifesto could include universal basic income pilot, John McDonnell says (Independent)  Basic income is the idea of remodeling the welfare state around an unconditional flat rate payment to all citizens whether they are in work or out of work.  The original proposal would likely invovle a "pilot program" that would be a “hybrid” basic income which complemented rather than replaced the existing benefits system would cut child poverty by 45%, leave the vast majority of people better off, and cost a relatively affordable £8 billion after concurrent tax rises.  Critics say the basic income is not a wise way of spending money which could be more directly redistributed to the poorest.

Russia

  • Appearance of crater dubbed ‘the Gateway to the Underworld’ in Siberia is a warning to our warming planet (Independent)  As the permafrost melts, the world’s biggest “megaslump” is expanding rapidly. Already about a kilometer long and 90 meters (over 300 feet) deep, it is widening by up to 20 meters a year.  But Batagaika crater, which first appeared about 25 years ago, is also a sign of the rate at which the world is warming – smaller ones have been appearing increasingly across the northern hemisphere. The melting of the permafrost represents one of humanity’s greatest fears for it contains vast amounts of methane, a greenhouse gas much more potent than carbon dioxide.  If it were all to melt – a process that would start on an epic scale after about four degrees of warming – it would likely tip the planet into an extreme scenario the full horror of which is hard to describe.  (Econintersect:  It is not the amount of change that is the biggest threat, but the rapidity.  If the climate of the planet changed over thousands of years, societies would have opportunity to adapt without facing crisis.  But a change occurring over a short period of time, say 100 years, would create economic chaos and human hardships we can only imagine.  Currently densely populated areas would be deeply submerged by rising seas, areas now arable would become deserts and deserts become fertile and the rapid response in changes of floral and fauna (especially insects and microorganisms) could present catastrophic human health challenges.

big.crater.siberia

Pakistan

There is a quiet revolution that is changing Pakistan’s landscape. Women are beating men at a rate we have never seen before. And there are some men who just cannot take this. The beating I am referring to is in the academic arena over the past 30 years.

There has been remarkable growth in girls’ intermediate (11th/12th grade) enrollment as reported in a new study by Tahir Andrabi and Niharika Singh. There were less than half as many girls as boys enrolled in intermediate in 1985. However, by 2013 there were more girls than boys enrolled in intermediate. Similarly, while girls made up only 20% of science students in 1985, they represent close to 50% of science students today. In fields like medicine, girls outnumber boys two to one. 

Girls are also outscoring boys by a wide margin. For example, girls were thirty three percent more likely to receive an “A-plus” in their intermediate exam in 2013 compared to boys.The success of Pakistani women is not limited to exams alone. There are three Pakistanis who have won the coveted Mccarthur “genius award”. All are women: a physicist, a historian and an artist. The most recent Pakistani Nobel laureate is a woman who fought for girls’ education. The only Oscar winner from Pakistan is a woman who has won the award twice.    

The point is that the ascent of women in education represents a tremendous demographic shift for Pakistan. Women are now more educated than ever before and more confident in seeking greater political rights. It is perhaps this demographic shift that convinced the Punjab government to introduce the women’s protection bill recently.

However, the rise of women and calls for greater recognition of their rights has threatened old patriarchal structures. In particular, religious parties stand in unison against any effort to further women’s rights. Their chief weapon in this fight is Maulana Sherani who heads the powerful Council of Islamic Ideology in Pakistan.

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

  • Debate: Is “Degrowth” the Way to Reduce Greenhouse Gases? (Naked Capitalism)  Can GDP growth and greenhouse gas production co-exist?  That is the question debated on the Real News Network (video below) with "cleaned up" transcript provided by Yves Smith (click title link above).  (YS has contributed to GEI.) 

  • We are headed for economic crisis due to debt: Lacy Hunt (John Mauldin, 2016 Strategic Investment Conference)  John Mauldin and Lacy Hunt are both GEI contributors.  In this short video Dr. Hunt describes how excessive debt (private sector debt) creates deflation.  We are used to economic downturns resulting from tightening monetary policy to combat inflation.  The downturns now and for the foreseeable future will come from debt-deflation (term invented by Irving Fisher and not explicitly used by Dr. Hunt).  Dr. Hunt says the downturns come in the debt-deflation cycle because credit grows to the point that income can now longer service and repay the debts, forcing debt to shrink through partial repayments and defaults with lesser amounts of new credit created.  When this contraction is not orderly a crisis occurs.  Econintersect:  We are sure Dr. Hunt would have elaborated on this point in a longer discussion:  There may be an appearance of orderly de-leveraging in the debt-deflation process but that can be temporary because defaults are not willingly accepted and writedowns not willingly negotiated by many lenders which creates a continuing build-up of bad debts on books of account until lenders are no longer solvent.  That is the point of crisis.   See also next two articles.

    

  • A Modern Jubilee (Alan Harvey, IDEA Economics)  AH has contributed to GEI.  Here he discusses the problems of implementing a debt jubilee to create an orderly default of unsustainable debts.  That is to solve the problem verbalized by Michael Hudson:  “Debts that can’t be repaid, won’t be.”  Harvey shows how various QE programs have failed to resolve the over-indebtedness, using data from Steve Keen (below), because it has not created money in the form needed to pay down debt.  (Econintersect:  It has increased the balance sheet assets of the lenders but not the debtors.)  In the article Harvey has written here he describes a process that would retire debt and then goes on to detail "numerous and complex issues" with the process.  Here is a summary of the process Harvey describes:

A Modern Jubilee would cre­ate fiat money in the same way as QE, but would direct that money to the bank accounts of the pub­lic with the require­ment that the first use of this money would be to reduce debtDebtors whose debt exceeded their injec­tion would have their debt reduced but not elim­i­nated, while at the other extreme, recip­i­ents with no debt would receive a cash injec­tion into their deposit accounts.

  • Bill Gross: Smart Investors Know There's Something Wrong (Bloomberg)  Bill Gross, Janus Capital Management fund manager, comments on systemic risk during an interview with Mike McKee on "Bloomberg Markets" 27 April 2016.  (BG has contributed to GEI.)  In this interview Gross refers to the risk of "implosion" of "overpriced" global markets.  He mentions that central banks are buying corporate bonds and, in Japan, also stocks.  With respect to central banks buying bonds, that is the first step of what could become a debt jubilee:  If the bonds are never resold to the private sector and rolled over in perpetuity, then the debt is in fact canceled and the debtees (former bondholders) are made whole with the cash created by the central bank to buy the bonds from them.  The central bank could at any point declare the debt canceled and a jubilee is completed.  The debtors (bond issuers) are made whole because the obligation to repay the bond (and further interest in the case of a completed jubilee) is cancelled. 

  • Editor's note:  We are expecting to run a 2015 lecture on a debt jubilee as Documentary of the Week this week.


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