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What We Read Today 14 August 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:

  • OPEC Makes No Change for Production Limits

  • Deficits No Longer a Major Election Issue

  • There is a Correlation Between Campaign Money Spent and Getting Elected in the U.S.

  • New Farming Techniques Use No Soil, Fertilizer, Pesticides, Sunlight or Water

  • U.S. Hotel Occupancy Holding Up

  • Greece is Ready for Another Crisis

  • Erdogen-Putin Meeting a Dud

  • Citizens Return to Manbij After IS Flees

  • Kurds Join Attack on Mosul

  • Ryan Lochte Robbed at Gunpoint in Rio

  • Mexico's Richest Man Proposes 3-Day Work Week

  • Resistance to Change in Economics is Weakening

  • Repos Have Distorted Finance and Enabled Giant Shadow Banking System

  • Elon Musk's New Solar Roof

  • Capitalism Generates Inequality

  • U.S. Maternity Death Rate Doubled in Last 30 Years

  • And More

Articles about events, conflicts and disease around the world

Global

  • OPEC states that wanted production cuts buckle under the new oil order (CNBC)  Another OPEC meeting has closed with no production limits.  Last year Saudi Arabia engineered OPEC's policy to kill off U.S. shale oil production. The plan was straightforward: Keep pumping oil, maintain market share and outlast the Americans.  But the plan has been a total miscalculation.  The plan is also producing casualties within the cartel itself: Angola, Nigeria and a Venezuela that's on the verge of implosion.  Six months after last OPEC left its high-production policy in place, some of the cartel members who called loudest for output cuts are feeling the most pain. Inflation is soaring and currencies have plummeted in lesser petro states, as top exporter Saudi Arabia continues to dictate policy.

 

U.S.

  • Deficits fade as campaign issue (The Hill)  Debt and deficits are an afterthought in the presidential race after consuming Washington for much of President Obama’s tenure.  Hillary Clinton and Donald Trump delivered their economic plans last week, and both emphasized new spending programs over reducing the $19.3 trillion national debt.  The virtual silence from the candidates on debt and deficits is something few would have predicted in 2010, when Congress and the White House were on the brink of an unprecedented debt default.  Econintersect:  This would be good if it were happening because of enlightenment about monetary systems.  But, quite the contrary, if anything education of the American public about monetary and fiscal policy issues has possibly even taken a step backward.  We see the change occurring because the focus of this campaign has shifted to the secondary issues of trade, illegal immigration and the potential security threat of domestic Muslims.

  • Finally, The Clearest Evidence That Shows How Money Shapes America’s Elections (Evonomics)  Two generations of social scientists have insisted that wallets don’t matter that much in American politics. Elections are really about giving the people what they want. Money, they claim, has negligible impact on elections.  While there are factors besides money that influence elections, the correlation of success to money spent is significant.  The graph below shows the data for the U.S. House of Representatives election of 2012.   See How Money Drives US Congressional Elections (INET).

  • World's largest vertical farm grows without soil, sunlight or water in Newark (The Guardian)  AeroFarms has put $30 million into a green revolution that seeks to produce more crops in less space, but whether it’s economically viable is an open question.  The "farm" will produce two million pounds of leafy greens a year, using a technology called aeroponics, a technique in which crops are grown in vertical stacks of plant beds, without soil, sunlight or water.  The "farm", built in the economically depressed New Jersey city promises new jobs, millions of dollars in public-private investment, and an array of locally grown leafy greens for sale. The company seeks to produce more crops in less space while minimizing environmental damage, even if it means completely divorcing food production from the natural ecosystem.  AeroFarms touts their products as free of pesticides and fertilizer, an attribute that investors think will attract customers who buy organic produce.  But the moist sanitized air that envelops the R&D lab is missing one ingredient: the earthiness that permeates any agricultural operation.

  • Hotels: Occupancy Rate on Track to be 2nd Best Year (Calculated Risk)  The U.S. hotel industry reported mixed results in the three key performance metrics during the week of 31 July through 6 August 2016, according to data from STR.  In year-over-year comparisons, the industry’s occupancy decreased 1.6% to 75.6%. However, average daily rate was up 2.7% to US$127.69, and revenue per available room increased 1.1% to US$96.59.  See STR: US hotel results for week ending 6 August (Hotel News Now).


 

Greece

  • The Greek crisis will flare up again. And why should it not? (The Guardian)  Hat tip to Rob Carter.  There were three obvious problems with the 2015 Greece rescue deal, which secured the third bailout in five years. The first was that the new dose of austerity would make it more difficult for Greece to emerge from a slump just as severe as that which gripped the US in the 1930s. The second was that Greece’s creditors were making unrealistic assumptions for growth and deficit reduction. The third was that sooner or later the Greek crisis would flare up again. It was a case of when, not if.

By last summer, Greece had suffered a five-year slump that was on a par with the damage caused to the US economy in the Great Depression. Yet the country’s creditors thought it was a good idea to suck even more demand out of the economy through spending cuts and tax increases.

The result has been depressingly predictable. Far from there being a resumption of growth, the economy has continued to contract. Greece’s national output was 1.4% lower in the first three months of 2016 than it was a year earlier. Consumer spending was down by 1.3%. Nor, with confidence at rock bottom, is there much prospect of better times. Greece remains deep in recession.

Turkey

Erdogan met Putin in Moscow last week but as Helmer explains, failed to achieve any rapprochement in its relations with Russia, despite widespread media claims to the contrary. Both countries remain completely at odds on Syria policy. Turkey continues to turn a deaf ear to wider Russian security concerns: e.g., guaranteeing free sea passage through the so-called Turkish straits, between the Black Sea, the Aegean Sea, and the Mediterranean, and blocking any expansion of NATO or enemy operations that could hinder such access.

Syria

  • Thousands return to Manbij after IS militants flee city (Reuters)  Thousands of displaced residents streamed back into the northern Syrian town of Manbij on Saturday after U.S.-backed fighters ousted the last Islamic State militants from their former stronghold, residents and U.S. allies said.  The U.S.-backed Syria Democratic Forces (SDF) announced on Friday they had seized full control of the city near the Turkish border after the departure of the last of the militants, who had been using civilians as human shields.  Hundreds of cars and vehicles carrying families and their belongings flocked into the city from makeshift camps and villages in the countryside, where many of the city's residents took shelter during the two-month campaign, according to an SDF official and relatives who were in contact with residents.

Iraq

  • Kurdish forces in fresh push to capture Mosul from Islamic State (Reuters)  Kurdish Peshmerga forces launched a fresh attack on Islamic State (IS) forces early on Sunday as part of a campaign to capture Mosul, the militants' de facto capital in Iraq, Kurdish officials said.  The advance began after heavy shelling and air strikes by a United States-led coalition against IS forces, a Reuters correspondent reported from Wardak, 30 km (19 miles) southeast of Mosul.  The militants fought back, firing mortars at the advancing troops and detonating at least two car bombs.  Clouds of black smoke rose from the area and dozens of civilians fled in the direction of the Peshmerga lines, brandishing white flags.  A Peshmerga commander said 11 villages had been taken from the ultra-hardline Sunni militants as the troops headed to Gwer, the target of the operation, 40 km (25 miles)southeast of Mosul.  The Iraqi army and the Peshmerga forces of the Kurdish self-rule region are gradually taking up positions around Mosul, 400 km (250 miles) north of Baghdad.  It was from Mosul's Grand Mosque in 2014 that Islamic State leader Abu Bakr al-Baghdadi declared a "caliphate" spanning regions of Iraq and Syria.

Brazil

"We got pulled over, in the taxi, and these guys came out with a badge, a police badge, no lights, no nothing just a police badge and they pulled us over. They pulled out their guns, they told the other swimmers to get down on the ground — they got down on the ground. I refused, I was like we didn't do anything wrong, so — I'm not getting down on the ground.

"And then the guy pulled out his gun, he cocked it, put it to my forehead and he said, "Get down," and I put my hands up, I was like 'whatever.' He took our money, he took my wallet — he left my cell phone, he left my credentials."

Mexico

  • Mexico’s Richest Man Wants a Three-Day Workweek (Bloomberg)   Carlos Slim thinks his plan will spur on economies with more tourism, entertainment, and culture.  He says that, for example, three 12-hour work days would provide full operations for six days a week and result in increased employment. 

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

  • The Slowly Changing Resistance Of Economists To Change (Steve Keen, Forbes)  SK has contributed to GEI.  Prof. Keen says we are living through "the 5th great conflict over the nature of economics".  The first conflict arose  when the writing of Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus, and John Stuart Mill sought to organize economic thinking into a "liberal" philosophy of free market operations, what has become known as classical economics.  Over time, this successfully replaced the previous protectionism thinking which had governed economic activity (1).  Classical economics (2) was followed by the period of Keynes (3),quickly followed by the emergence of neoclassical (aka neoliberal) thinking (4) which ignored much of what Keynes had formulated.  Prof. Keen goes on to describe what he calls "heterodox economics" as the focus of the 5th great conflict in economics.  Econintersect suggests a better appellation would be "non-equilibrium economics".  We hope to have a full article from Prof. Keen on this in the near future.

  • The (Impossible) Repo Trinity (Daniela Gabor, INET)  Hat tip to Naked Capitalism.  Gabor (Associate Professor, economics, University of the West of England, Bristol), writes that sovereign debt evolved into the cornerstone of modern financial systems, used as benchmark for pricing private assets, for hedging and as base asset for credit creation via shadow banking. The state’s role as debt issuer, passive and systemic at once, has been reliant, beyond the arithmetic of budget deficits, on the intricate workings of the repo trinity. She says that this has enabled the explosion of shadow banking as traditional lending against traditional collateral was replaced with re-use collateral for a wide range of activities (short-selling, hedging, selling to a third party).  The effect has been, essentially, that leverage was multiplied by the effective use of traditional collateral multiple times.  Prof. Gabor says that this has replaced traditional fiscal policy dominance of economic cycles with:

...  financial dominance, defined as asymmetric support for falling asset prices. While financial dominance should be addressed by direct regulatory interventions, the quest for biting repo rules has so far proved illusive. The precise impact of Basel III liquidity and leverage rules is yet to be determined, whereas the failed attempts to include repos in the European Financial Transactions Tax and the FSB’s watered-down repo proposals suggest that (countercyclical) collateral rules are only possible once states design alternative models of organizing their sovereign debt markets. Paradoxically, new initiatives in Europe suggest that a return to the repo trinity is rather more likely: the Capital Market Union plans to create Simple, Transparent and Standardized (STS) securitization again illustrate the catalyst role that central banks choose to play in market-driven solutions to safe asset shortages.  

  • Elon Musk's New Solar Project: 'It’s Not a Thing on the Roof. It is the Roof' (EcoWatch)  Musk and SolarCity CEO Lyndon Rive say they are working on creating a roof made entirely of solar panels—solar shingles, if you will. Instead of tacking on solar panels onto an existing roof, the whole roof itself will be integrated with photovoltaic material.  This has been in the development stage for many years - see Dow Shingles Heat Up Solar Competition.

  • How Capitalism Actually Generates More Inequality (Evonomics)  Typically in capitalistic societies there is freedom to trade and equality under the law, meaning that most adults – rich or poor – are formally subject to the same legal rules. But with its inequalities of power and wealth, capitalism nurtures economic inequality alongside equality under the law.  And the more complex a society becomes the greater the potential for economic discrimination.

As modern capitalist economies become more knowledge-intensive, access to education to develop skills becomes all the more important. Those deprived of such education suffer a degree of social exclusion, and, unless it is addressed, this problem is likely to get worse. Widespread skill-development policies are needed, alongside integrated measures to deal with job displacement and unemployment.

A key challenge for modern capitalist societies, alongside the needs to protect the natural environment and enhance the quality of life, is to retain the dynamic of innovation and investment while ensuring that the rewards of the global system are not returned largely to the richer owners of capital. As Thomas Paine put it in 1797:

All accumulation, therefore, of personal property, beyond what a man’s own hands produce, is derived to him by living in society; and he owes on every principle of justice, of gratitude, and of civilization, a part of that accumulation from whence the whole came.

  • More and more women are now dying in childbirth, but only in America (Vox.com, MSN News)  More women are dying in childbirth in the US than in any other developed country. And experts say the problem is likely to keep getting worse.  You can see how alarming the issue is in this chart. In other countries, maternal death rates have fallen sharply since 1990. In South Korea, the rate of women dying in childbirth fell from 20.7 deaths per 100,000 live births in 1990 to 12 today. In Germany, it dropped from 18 to 6.5.  But in the United States, the opposite is happening. The rate of women dying in childbirth is going up.  The reason is a rsing incidence of of pre-existing chronic conditions like heart disease or diabetes and other diseases related to obesity

maternal.mortality.dev.countrie

maternity.deaths.us.1986.2016.


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