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What We Read Today 29 July 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:

  • Oil's Big Move - Down

  • Another Dem Organization Hacked

  • Sanders Backs Wasserman Schultz's Primary Opponent

  • Small Employers Dropping Health Plans

  • France's Terrorist Battle at Home

  • Russia's Manifest Destiny

  • Quality of India's Growth is Improving

  • BoJ is Timid and the Yen is Not

  • China May Let the Yuan Depreciate

  • China Tightens Wealth Management Product Regulation

  • Atmospheres of Earth Like Planets

  • Overt Monetary Financing Would Exposure Falacious Ideology

  • Are We the New Victorians?

  • And More

Articles about events, conflicts and disease around the world



  • House Dem campaign arm says it was hacked (The Hill)  The Democratic Congressional Campaign Committee (DCCC) on Friday confirmed reports that it had been hacked, saying the breach is similar to the one that hit the Democratic National Committee (DNC).  Reuters reported on Thursday that the FBI had opened an investigation into a cyber intrusion at the DCCC.  The attack may have been an effort to steal information on Democratic donors, Reuters reported.

  • Sanders consultants join up with Wasserman Schultz’s primary opponent (The Hill)  The political consulting firm run by top aides to Bernie Sanders' presidential campaign is going to work for Rep. Debbie Wasserman Schultz’s primary challenger.  Sanders has already endorsed the Florida Democrat's opponent, professor Tim Canova, and the exposure helped Canova haul in more than $2 million.  But the move to aid Canova by the communications firm Devine, Mulvey, Longabaugh — first reported by Politico and confirmed by The Hill — is the most direct marshaling of firepower by Sanders allies to knock Wasserman Schultz out of office. 

  • Small employers dropping health benefits (Employee Benefit News)  Employees who work at small organizations historically have been less likely to have employer-sponsored health insurance. But that’s even more the case these days.  According to new research out this week from the Employee Benefit Research Institute, more and more small companies are getting out of the healthcare game in wake of the Affordable Care Act.  The percentage of employers with fewer than 100 workers that offer healthcare benefits to their employees has declined an average of 24%, reaching as high as 36% for companies with fewer than 10 employees. Meanwhile, health insurance offer rates among larger employers have been holding steady.


  • France Should Surrender to the Islamic State (Foreign Policy)  François Hollande has taken France to war against Islamist enemies abroad.  This columnist argues that he should use those resources closer to home.  Radicalization of French youth is a problem bigger than the Islamic States in the Middle East, is the assertion.


  • The Unlikely Origins of Russia’s Manifest Destiny (Foreign Policy)  In 1904 ir Halford Mackinder laid out a geographic essay about the future power distribution in the world, foreseeing two major powers, one centered on the seas (Britain, the U.S. and their allies, arrayed against the second great power, Russia and its allies centered on great land expanse.  This author attributes this view to be the origin of what is now called Russia's "manifest destiny" of controlling the 9-time zone land mass of northern Asia.


  • India's quality of growth improving, says CRISIL (Business Standard)  CRISIL has pegged India’s economic growth at 7.9% in 2016-17, assuming a normal monsoon. Unlike the “rubber-band” recovery that India witnessed after the global financial crisis of 2008, aided largely by fiscal and monetary stimulus, this time  the quality of growth has improved, says CRISIL in a new report.


  • Yen jumps against dollar as Japan keeps rates on hold (BBC News)  The BoJ also kept its target for government bond buying unchanged.  But the central bank said it would double its annual purchase of exchange traded funds to ¥6 trillion ($57 billion; £43 billion) from the current ¥3.3 trillion.  Market watchers had been expecting more from the central bank.  Expectations were raised after Prime Minister Shinzo Abe announced earlier this week a 28tn yen stimulus plan to help boost the flagging economy.  It had been expected that the BoJ would indicate some action to fund that deficit.


  • China's Central Bank Ends Its War With Yuan Bears (Bloomberg) For traders betting on a weaker yuan, the People’s Bank of China is turning from foe to friend.  Six months after the monetary authority intervened to crush short sellers, Bank of America Merrill Lynch, Pacific Investment Management Co. and Societe Generale SA say the PBOC is more likely to guide the currency lower than to prop it up. Despite official pledges of exchange-rate stability last weekend, bears argue that China’s leaders are growing more comfortable with yuan weakness after a 3.3 percent slump since March failed to spark a repeat of January’s market turmoil.

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  • China bank regulator drafts new rules on wealth management products (The Business Times)  China's banking regulator said it was drafting new regulations on commercial banks' wealth management products, to curb risks and promote sustainable development of the industry.  The new rules are being studied internally and feedback is being gathered on them, the China Banking Regulatory Commission (CBRC) told Reuters late on Thursday.  The regulator said it would publicly release new regulations after amending the draft rules, based on the feedback.  Chinese stocks fell sharply on Wednesday and Thursday after the draft rules were widely reported by the media.  See China considers crackdown on risky wealth management products - draft rules (Reuters).

  • The Paradox at the Heart of the South China Sea Ruling (Foreign Policy)  The recent ruling in The Hague in favor of the Philippines and against China may actually have strengthened China's hand in the South China Sea.  This author argues that, because the tribunal’s finding was so sweeping, it is paradoxically less likely to have any real-world impact.  Because China's claims were completely rejected, the government's position against the ruling, the South China Sea claims are strengthened at home. 

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

  • Don’t Make Jokes About Bombs, and No Nude Sunbathing (Foreign Policy)  You may be surprised what foreign governments tell their citizens about the perils of vacationing in the United States.

  • Taking a closer look at new Earth-like planets for the first time (CNN)   For a craft that was launched in 1990, the Hubble Space Telescope continues to provide us with awe-inspiring firsts. This time, researchers pointed its venerable lens in the direction of Earth-size planets beyond our solar system to give us the first glimpse into their atmospheres, according to a new study.  In May, researchers shared the discovery of three Earth-like worlds orbiting an ultracool dwarf star named TRAPPIST-1, 40 light-years away. Ultracool dwarf stars are at the end of the range of what classifies as a star, at half the temperature and a 10th the mass of the sun, so it was a first to find planets orbiting this star. The three exoplanets also appeared to be in the "habitable zone" of the star, meaning liquid water could pool on their surfaces.    So far the only results are that both planets have "compact atmospheres that are comparable to those of Earth, Venus and Mars".  The next step will be to use a telescope like Hubble to further determine whether that compact atmosphere is hot, dense and dominated by carbon dioxide like Venus', depleted like that of Mars or warm, moist and clear like Earth's. 

  • Overt Monetary Financing would flush out the ideological disdain for fiscal policy (billy blog)  Hat tip to Roger Erickson.  This is long but worth the time to read.  Prof. Bill Mitchell discusses in great detail just what is involved in "helicopter money".  Some excerpts:

The constraints that separate central banks from treasuries, or, impose fiscal rules and debt limits etc – are just voluntary. Once we understand the underlying capacities of a currency issuing government we can easily see that these constraints reflect ideology rather than anything intrinsically binding."

When an economy is already operating at full capacity, increases in nominal spending beyond the current growth rate (to reflect population growth etc) will have very large (if not total) price effects – that is, they will be inflationary. This is because firms cannot squeeze any more real output out of the resources in use.

Alternatively, when there are idle resources (such as unemployed labour and machines), an expansion of nominal spending will likely be mostly absorbed by higher production (real output) and firms will be highly reluctant to try to increase prices for fear of losing market share to other firms in the sector.

Most importantly, growth in nominal spending can continue even when the economy is operating at full capacity as long as it matches the growth in that productive capacity and doesn’t strain the capacity of the economy to respond to the extra spending with output growth.

So it is incorrect to assume that a constantly growing ‘money supply’ will, inevitably, be inflationary. It all depends.

The only difference between the treasury ‘borrowing from the central bank’ and issuing debt to the non-government sector is that the central bank has to use different operations to pursue its policy interest rate target.

If it debt is not issued to match the deficit then it has to either pay interest on excess reserves (which most central banks are doing now anyway) or let the target rate fall to zero (the Japanese solution).

There is no difference to the impact of the deficits on net worth in the non-government sector.

But it is totally fallacious to think that private placement of government debt to match a rise in the fiscal deficit reduces the inflation risk. It does not.

In contradistinction to the assertion from the Voxeu authors, it also does not reduce the strength of the economic stimulus arising from the rising deficit.

  • Bacteria in Your Nose Could Produce New Antibiotics (R&D)  The threat of antibiotic-resistant superbugs could be quashed due to a bacteria-fighting compound residing in our noses, called lugdunin.  A team of German scientists from the University of Tuebingen found this substance was produced by Staphylococcus lugdunensis (S. lugdunensis), a bacterium that resides in the nostrils, reported Reuters.  Lead researcher Andreas Peschel told reporters during a phone briefing that his team examined the nasal cavity because it houses a diverse ecosystem of an estimated 50 different species of bacterial, and serves as a focal point for the start of many viral infections.

  • An anthropologist asks if we’ve become the New Victorians (Fabius Maximus)   Anthropologist Maximilian Forte begins a series find a new perspective on our situation by comparing our time with the Victorian era. We need new views now, as campaign 2016 has brought new and disturbing changes to both parties (e.g., the Democrats becoming the darling of Wall Street, favoring the Deep State and foreign wars).  This post contains Part 1 of a four-part discussion "The New Victorianism", from his site "Zero Anthropology". 

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