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".).
Phoenix Europe: How the EU Can Emerge from the Ashes (Der Spiegel) This 2011 article suggests that the EU can survive only if "it is completely reinvented" as a "United States of Europe". The article makes an analogy of the EU formalism with the American colonies' Articles of Confederation which failed so miserably in the first attempt to build a formal geopolitical structure in North America. See next article.
The old European Union didn't work, that much has been made clear by the ongoing debt crisis. But many in Europe think there is now a clear path to a new, more integrated -- and smaller -- bloc. What must happen first? Greater democracy and less nation-state sovereignty.
The European Union and the Articles of Confederation (A Plebe's Site) Hat tips to Sig Silber and M.G. Bralley. This essay was prompted by the preceding article. This author says the correct question is not "can the EU be saved" but rather: "Should it be saved?" This commentary asserts that there are indeed similarities between the EU and the original United States of American 1781 - 1788 in terms of the political structure, but that there are gross dissimilarities between the extant socio-political composition of the two. The 13 colonies cum states shared something that the EU-28 (or even the EU-17 eurozone) do not and that is why the United States of Europe as a progression from the current dysfunctional treaties is simply a non-starter in the author's opinion. Here is the essence of what the colonies shared that European states do not:
"... fundamental similarity of thought, particularly the philosophical view of the relationship of men with government and with each other, of the purposes of society, of government, of an economy, of money—in short, of social and political philosophy."
Brexit Poll Sees 10-Point ‘Leave’ Lead Two Weeks Before Vote (Bloomberg) The campaign for Britain to leave the European Union took a 10 percentage-point lead in a poll published late Friday, less than two weeks before the country votes in a referendum. The survey of 2,000 people by ORB for the Independent newspaper found 55% in favor of a so-called Brexit, up 4 points since a previous poll in April, with 45% for “Remain,” down 4 points. It’s the biggest “Leave” lead recorded by ORB in polls for the newspaper.
Brexit backfire? UK actually has more ‘energy sovereignty’ inside the EU than out (The Conversation) Energy isolation would be more expensive and less secure. For example, the UK imports around 6% of its electricity through undersea cables linking it to the European mainland. These links help Britain deal with the ebbs and flows of renewable energy generation, and give the country a “safety net” in case things go wrong. As more and more wind and solar energy enters the grid being part of an extended European grid will increase the amount of renewable energy Britain can efficiently utilize. Yes, the UK can still trade power with the extended grid outside from outside the EU but will not have input to policy decisions.
The paradox is that inside the EU the UK will be more sovereign, in the sense of having more control over its energy future, and part of a wider democracy, with an energy system that is more secure and delivers energy at lower cost, than if the UK sought to control energy developments by itself. Such paradoxes in today’s globally interconnected world are not uncommon.
Istanbul attack: Kurdish group claims deadly car-bombing (BBC News) A Kurdish militant group has said it carried out a car bomb attack in central Istanbul on Tuesday that killed seven police officers and four civilians. The Kurdistan Freedom Falcons (TAK) said the attack was in revenge for Turkish army operations in the Kurdish-dominated south-east. It has warned foreign tourists that Turkey is no longer safe to visit. The TAK is regarded as a splinter group of the Kurdistan Workers' Party (PKK).
Unmasking Modi (New Republic) This far from flattering review of Prime Minister Narendra Modi, emphasizes India's endemic widespread poverty, dramatically increasing income and wealth inequality and the characteristics of Modi: "Adulation and violence, sanctimoniousness and abuse". The term "anti-Ghandi" is used to describe Modi.
"Some differences can be solved through endeavour and both sides should work harder to solve them. Some differences cannot be solved at the moment and both sides should take each other’s actual situations into consideration and take a constructive approach.
"China and the US have extensive mutual interests in the Asia-Pacific region. [We] should hold regular dialogues, cooperate, cope with various challenges and work hard to cultivate a mutual, instead of exclusive, circle of friends between the two countries."
Well, China just built a farm on a disputed island in the South China Sea (Business Insider) In another show of force, China built a farm on an island in the disputed South China Sea, Defense One reports. What was originally a sparse area, the Fiery Cross Reef, or Yongshu Island, is now a 2.74 square kilometer land mass boasting a farm, lighthouses, a tourist resort, and hospital. Defense One reports that the farm contains a vegetable garden, fish pond, and around 500 livestock to include chicken, pigs and geese. Territorial claims from Vietnam, Malaysia, Brunei, the Philippines, Taiwan, and China make the South China Sea one of the most disputed territories on the planet:
Canada's oil nightmare is entering phase 2 (Business Insider) Oil prices have rebounded in the last few months. As of this writing, WTI and Brent crude are around $50 per barrel. But while one may think that this is great news for Canada, a major oil producer, the country's oil problems are just getting started as "drilling has fallen to the lowest levels on record". As the Capital Economics Canada team opined in a recent note (emphasis added):
Higher oil prices has led to speculation that the worst is over for Canada's economy. The evidence, however, indicates that lower investment in the oil & gas industry will hit the economy hard this year. And it's only a matter of time before lower investment leads to lower production. [...]
The downturn in the oil and gas industry is far from over and will restrain GDP growth this year.
'At the limit,' Mexico buckles under migrant surge to U.S. (Reuters)Mexico is struggling to stem the flow of Central American migrants traveling to the United States ahead of the U.S. presidential election, causing major concern in Washington, which is weighing sending more agents to help. In 2014, Mexico moved to strengthen its southern border when a surge in child migrants from Central America sparked a political crisis in the United States. Last year, Mexico detained over 190,000 migrants, more than double the number in 2012. But official data examined by Reuters shows that fewer migrants have been captured in Mexico this year even as the number caught on the U.S. border has soared.
Other Scientific, Health, Political, Economics and Business Items of Note - plus Miscellanea
Economics Struggles to Cope With Reality (Noah Smith, Bloomberg View) Prof. Smith sees four types of macroeconomists. Three, according to him, try to deal with reality. The fourth, not so much. The three are: (1) “coffee-house macro,” which often revolves around the ideas of dead sages -- Friedrich Hayek, Hyman Minsky and John Maynard Keynes - It doesn’t involve formal models, but it does usually contain a hefty dose of political ideology; (2) finance macro, which involves reading the tea leaves on interest rates, unemployment, inflation and other indicators in order to predict the future of asset prices (usually bond prices) - It mostly uses simple math, though advanced forecasting models are sometimes employed. It always includes a hefty dose of personal guesswork; (3) Fed macro, involving both data and models. - And it inevitably contains a hefty dose of judgment; and (4) academic macro, traditionally involving professors making toy models of the economy -- since the early ’80s, these have almost exclusively been DSGE models (if you must ask, DSGE stands for dynamic stochastic general equilibrium). - These models contain so many unrealistic assumptions that they probably have little chance of capturing reality. - Their forecasting performance is abysmal. Some of their core elements are clearly broken. - Any rigorous statistical tests tend to reject these models instantly, because they always include a hefty dose of fantasy. Smith says that many of the shortcomings of the first three endeavors stem substantially from the failure of the fourth.
Politics And Economics (Seeking Alpha) The author suggests that politics and economics are very similar. And it might be a good debate about which discipline screws up the other more, and our lives as a result. This is a good and very readable essay.
Economics shows why it’s hard to elect a good president (Idaho Statesman) This election year we would all do well to remember an important principle of government: Nobody’s perfect. Government leaders can sometimes improve the market outcomes, reduce the risks we face, and help us resolve differences, but government itself is an imperfect institution. The academic discipline known as political economy shows the limitations of our democratic institutions. Nobel prize-winning economist Kenneth Arrow published a landmark study in the 1950s explaining why no perfect voting system exists. Today it is known as the Impossibility Theorem.
Daily Treasury Yield Curve Rates (U.S. Treasury) Chance of a July rate hike? Not much according to bond traders. Interest rates are still falling like a rock. The 10-year treasury is down 0.21% in yield since 01 June, a decline of more than 11%. That is a huge decline for just ten days. Doug Fabian (ignore his typo "1.35%") says this is a result of foreign investors flooding into treasuries to avoid risk: Watching the Bond Yield Warning.
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