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What We Read Today 17 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:

  • Why Hasn't Apple Pay Taken Hold?

  • America Hates Socialism and Doesn't Even Know Why

  • Have George Ackerman and Robert Shiller Drifted Far from Reality?

  • The Depression in Middle Class Wages:  43 Years and Many More to Go

  • The Republican Who Wants a Compromise on Gun Control

  • Why Doctors Don't Do Research on Gunshot Injuries

  • Fed Forecasting Model is Broken:  Austan Goolsbee

  • No Prosecution for Mozilo

  • HR 5424:  Get Out of Jail Free Card for Financial Fraudsters

  • A New Kind of Housing Crisis in the U.S.

  • Huge Withdrawal from UK Equity Funds

  • U.S. Companies Most Exposed to Brexit

  • Italy Wants to Boost Economic Ties with Russia

  • Iraq Recaptures All of Fallujah

  • Kremlin to Washington:  Don't Attack Assad's Forces

  • Russian Athletes Banned from Rio Olympics

  • China Regulator to Ban iPhone6 and 6 Plus for Patent Infringement

  • And More

Articles about events, conflicts and disease around the world

U.S.

  • Spurred by Orlando Shooting, Senator Offers a Gun Control Compromise (The New York Times, MSN News)  Susan Collins (R, Maine), is developing a compromise measure that would prevent some terrorism suspects from purchasing weapons, while sidestepping partisan flash-points that have doomed similar legislation in the past and threaten to do so again next week.  Senate majority leader, Mitch McConnell (R, Kentucky) has already scheduled votes for Monday on four proposals – two sponsored by Republicans and two by Democrats – but all four are expected to fail in a nearly identical replay of votes last December after the attack in San Bernardino, Calif.

  • House rejects effort to ban illegal immigrants from military service (The Hill)  In a break from previous votes on the issue, the House on Thursday rejected two GOP proposals to prevent the Obama administration from enlisting young illegal immigrants to serve in the military.  Lawmakers voted down two measures offered by immigration hard-liners Reps. Steve King (R-Iowa) and Paul Gosar (R-Ariz.) that would have prohibited the use of federal money to enlist young illegal immigrants who have been granted work permits under President Obama's Deferred Action for Childhood Arrivals (DACA) program.  More than 30 Republicans with more centrist views on immigration joined all Democrats in opposing the two amendments offered to a Defense Department spending bill. The amendments failed narrowly with votes of 207-214 and 210-211, respectively.  Certain young illegal immigrants qualify for DACA if they came to the U.S. as minors and have worked toward at least a high school education, among other requirements.

  • GOP rebuffs doctors on gun research (The Hill)  The American Medical Association’s new push to unfreeze federal funding for gun research is hitting a wall of resistance in the Republican Party.  In the wake of the mass shooting in Orlando, the nation’s leading doctors group announced Tuesday it plans to “actively lobby” against a nearly 20-year-old budget rule that has prevented federal researchers from studying gun-related deaths.  The near-unanimous vote, which took place two days after Orlando shooting early Sunday morning, puts the powerful doctor’s lobby at odds with Second Amendment supporters who have argued that gun-related violence is no different from other violent acts.

  • Fed Forecasting Model Is ‘Broken,’ Austan Goolsbee Charges (ThinkAdvisor)  Former Obama administration official Austan Goolsbee took to the Morningstar Investment Conference main stage in Chicago on Tuesday, making predictions about the economy and suggesting why it is that the Federal Reserve has been “overly optimistic for 30 quarters in a row” on forecasting U.S. economic growth.  The Fed is ‘implicity waiting’ for economy to return to ‘normal,’ which it ‘defines as 2006’, which isn’t happening again, because "it was a bubble. It was not sustainable.”

  • Ex-Countrywide CEO Mozilo to not face US fraud case: Source (CNBC)  Former Countrywide Financial CEO Angelo Mozilo will not face a U.S. Justice Department lawsuit for defrauding investors in mortgage-backed securities issued before the 2008 financial crisis, a person familiar with the matter said on Friday.  Mozilo received a letter from the Justice Department this week informing the Countrywide co-founder of its decision to not move ahead with a civil fraud case against him, the source said.  See this 2012 article describing the bribery corruption of the U.S. government by Mozilo:  Remind Me, Why Is Angelo Mozilo a Free Man? (Huffington Post).

  • HR 5424, “Investment Advisers Modernization Act,” a “Get Out of Madoff and Other Frauds for Free” Bill, Passes Financial Services Committee (Yves Smith, Naked Capitalism)  YS has contributed to GEI.   Econintersect:  Our corrupted Congress wants to continue to issue "Get Out of Jail Free" cards to their donors.  

One of the big downsides of this hotly contested Presidential race is that it’s diverted attention from legislation, allowing noxious bills to move forward. One is HR 5424, which would allow the hedge fund and private equity industry, which are rich enough to pay for the few parking-ticket-level fines the SEC hands out, to escape from virtually all enforcement efforts. Worse, it would considerably weaken protections meant to stop Madoff-type frauds, and leave retail investors exposed.  

This bill was nevertheless approved by the House Financial Services Committee last week, with 12 Democrats voting in favor.  

As readers know, Dodd Frank stipulated that private equity and hedge funds beyond a modest size be regulated as investment advisers. That subjected them to SEC examinations. The initial round exposed widespread misconduct in private equity, including what would normally be called embezzlement.  

Yet the agency has fined remarkably few sanctions, and the fines have been light relative to the extent of the misconduct alleged by the SEC and unearthed by the press. 

  • Why there's a new kind of housing crisis (MarketWatch)  America has a housing crisis, and most Americans want policy action to address it.  That’s the conclusion of an annual survey released Thursday by the MacArthur Foundation. A vast majority of respondents -- 81% -- said housing affordability is a problem, and one-third said they or someone they know has been evicted, foreclosed on, or lost their housing in the past five years.  Over half the respondents, 53%, said they’d had to make sacrifices over the past three years to be able to pay their mortgage or rent.

EU

  • Europe migrant crisis: Charity rejects EU funds over migration policy (BBC News)  Medical aid charity Medecins Sans Frontieres (MSF) says it will no longer take funds from the European Union in protest at its migration policy.  MSF singled out the EU's deal with Turkey under which Turkey agreed to take back any migrants who crossed the sea to Greece in smugglers' boats.  The number of migrants - many from war-torn Syria - to Europe is at its highest level since World War Two.  The charity received $63 million (£44 million) from the EU and its members last year.

UK

  • Suspected killer of British lawmaker had ties to neo-Nazi group, watchdog says (The Washington Post, MSN News)   The man detained by police in connection with the killing of a rising star of British politics had longstanding ties to a U.S.-based neo-Nazi organization and, in the past, had ordered a how-to guide for assembling a homemade gun, according to a watchdog group that tracks extremist behavior.  The revelation came as police on Friday continued to investigate the motive behind the killing of the British lawmaker, Jo Cox, who was stabbed and shot midday Thursday in an attack that stunned the nation and led to a suspension of the European Union referendum campaign just a week before the vote. Cox had been a strong advocate of an inclusive and multicultural Britain amid a wave of hostility toward immigrants that is helping to fuel the anti-E.U. campaign.

  • $1 billion pulled from U.K. equity funds in single week as ‘Brexit’-wary investors vote with feet (MarketWatch)  The $1.1 billion outflow last week was the second largest weekly outflow over the past 10 years, Bank of America Merrill Lynch said in its weekly “Flow Show” note on Friday.

  • US companies and sectors that are most exposed to a Brexit (CNBC)  U.S. financial institutions have traditionally set up shop in Britain as a gateway to the rest of continental Europe. Those moves could be rendered useless if London no longer acts as a bridge to the EU.  For some U.S. companies, it's not just parts of operations but whole headquarters that have moved from the United States to the United Kingdom. The world's largest insurance broker, Aon, moved its corporate headquarters to London from Chicago in 2012. The move was meant to give the company more access to emerging markets through London, "a key international hub of insurance and risk brokerage", the company said in a statement. 

Italy

  • Renzi says Italy wants to boost economic ties with Russia  (Associated Press)  Italy wants to strengthen its economic presence in Russia and hopes ties between Moscow and the European Union will improve, Italian Prime Minister Matteo Renzi said Friday.  Econintersect:  We see this as just another crack in the foundation of the EU structure.

Iraq

  • Iraq says most of Fallujah retaken from IS militants (Associated Press)  Iraqi special forces swept into Fallujah on Friday, recapturing most of the city as the Islamic State group's grip crumbled after weeks of fighting. Thousands of trapped residents took advantage of the militants' retreat to flee, some swimming across the Euphrates River to safety.  Residents described harrowing escapes even after IS fighters abandoned some checkpoints that had them bottled up in the city. On the river, some boats packed with people overturned in the water. Others picked their way down roads laced with hidden bombs that killed several. In some cases, IS allowed people to leave only if they took the jihadis' families with them.  After weeks of heavy battles since the offensive began in late May, it appeared that IS defenses in much of the city collapsed abruptly.

Russia

  • Kremlin warns Washington against striking Assad's forces (Associated Press, MSN News)   The Kremlin has strongly warned Washington against striking Syrian President Bashar Assad's forces, saying it would fuel turmoil across the entire region.  President Vladimir Putin's spokesman Dmitry Peskov said Friday that an attempt to topple Assad's government "wouldn't help a successful fight against terrorism and could plunge the region into total chaos".  Peskov made the statement while asked to comment about an internal document in which dozens of U.S. State Department employees called for military action against Assad's forces.

  • Russian track and field athletes banned from Rio Games (Associated Press)  Russia's track and field athletes will be banned from competing for their country at the Rio de Janeiro Olympics after a landmark decision Friday that punished the sports powerhouse for a systematic doping system that operated "from the top down" and tainted the entire team.  In an unprecedented ruling loaded with geopolitical ramifications, the IAAF upheld its ban on Russia's track and field federation, saying the country had made some progress in cleaning up but failed to meet the requirements for reinstatement and would be barred from sending its athletes to the Rio Games that begin in 50 days.

  • Putin says accepts U.S. is sole superpower, dilutes Trump praise (Reuters)   President Vladimir Putin said on Friday he accepted the United States was probably still the world's sole superpower and he was ready to work with whoever won the presidency, but didn't want to be told how to live by Americans.  Putin's comments follow a rocky period in U.S.-Russia relations, which have been undermined by disagreements over issues such as Ukraine and Syria.  Putin reiterated criticism of what he said was the misguided role of the United States in Ukraine's affairs and said he opposed what he cast as U.S. efforts to prevent Russia repairing its relations with the European Union. 

China

  • Here's the Chinese company claiming Apple ripped off its patent (CNBC)  A Beijing regulator said it would bar Apple from selling its iPhone 6 and 6 Plus models because of "patent infringement" against 100C mobile phones.  Beijing Business Today struggled to find many details about Baili, writing that the company did not seem to be a patent troll, but that it went a long time without introducing new products and did not appear to have an official website.  Apple has said that it is appealing the Beijing ruling.

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

In the US, decisions made during the 2007–10 financial crisis to rescue Wall Street fueled public anger that still resonates with voters of both parties. The aftermath of the crisis—which included erasure of trillions of dollars of housing wealth and continued income stagnation for the working and middle classes while the wealthy benefited from rising asset prices—has provided fertile ground for even more partisanship and polarization. 

  • A Deep Look Inside Apple Pay’s Matchmaker Economics (Harvard Business Review)   Having your iPhone work like a credit card hasn't taken hold.  This review explains why this is just another in a series of technologies that have failed to replace credit cards.  The analysis of these endeavors during their startup phases found that they made two major mistakes:

  1. They didn’t solve an important problem for consumers. In the US it is very easy and efficient to use payment cards at most merchants. There was no powerful reason for consumers or retailers to embrace alternatives—without more.

  2. They didn’t have a sound strategy for creating the density necessary for critical mass. Each of these mobile payment schemes relied on technology that only worked at merchants that had NFC terminals. Most merchants didn’t have those terminals and didn’t want to spend money to get them. Since consumers couldn’t use the mobile payment schemes at most merchants, they didn’t have much incentive to use them anywhere. And since most consumers weren’t pining to use the mobile payment schemes, merchants had no compelling reason to upgrade their terminals.

  • How America Hates Socialism without Knowing Why (Evonomics)  Lixing Sun, a biology professor at Central Washington University asks a question (and then discusses it):

    Is socialism bad? From the sweeping success of many existing social programs (dealing with a wide range of concerns including retirement, healthcare, food, housing, energy, education, childcare, farming, and others), the answer, apparently, is no for most Americans. But why are new social programs unpopular today?

    Prof. Sun finds a fair correlation between social trust (do people think well of fellow citizen's motives) and the level of taxation (which is related to level of socialist programs).  See first graph below.  He also finds a fair correlation between government integrity and social trust - second graph.  He finds the U.S. has one of the four lowest social trust scores relative to the orange median line which he discusses:

    Why, you may ask, does the US score decently in government integrity but quite low in social trust? This is because America is relatively effective in fighting illegal hard corruption such as taking bribes or kickbacks (and thus has an acceptable score in government integrity). Our legal system, however, has little power in combatting soft corruption—corruption that is lawful but unethical—including patronage, investment, lobbying, and campaign financing. A common type of soft corruption is the practice of the “revolving door,” by which politicians get paid later for their favor done to special interests. It is the prevalence of soft corruption that has made many Americans resent political establishments, leading to the rise of such unlikely presidential candidates as Ben Carson and Donald Trump.  

tax.rev.social.trust

integrity.score.social.trust

This book tells its readers a great deal about the inner workings of mainstream economics, particularly behavioral economics. This review details just how far the profession has drifted from reality. My general impression is that the authors are simply putting forth their opinions or perceptions of how the world should be, and then constructing a theory to justify those opinions. The theory is then supported by a selective construction of events.

  • Five Decades of Middle Class Wages: May 2016 Update (Advisor Perspectives dshort.com)  The hypothetical worker earning the inflation adjusted average hourly wage and working the average number of hours per week has seen weekly income rise by16% over the last 20 years.  But the income is the same as in 1980 and would have to rise by 15% to equal the income in 1973.  Let's list these as annual incomes (in today's dollars):

1973 = $43,483

1980 = $37,688

1996 = $32,416

2008 = $34,670

2016 = $37,688


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