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What We Read Today 15 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:

  • Somebody Was 'Messing Around' with Early Humans

  • How Joseph Stiglitz Has Changed his Story about the Eurozone

  • Three Bad Reasons to Start Social Security at Age 67

  • The Private Sector Cannot Solve Unemployment

  • Confusion About the Affect of Debt on the Economy

  • Top Marginal Rates and GDP Growth:  A Myth

  • More Hurricanes this Year?

  • Have we just Had a $35 Billion Stock Manipulation?

  • Wage Growth is Improving

  • Elves and Hidden People in Iceland

  • Italy's Great Depression

  • Russia and U.S. May Join Forces in Syria

  • And More

Articles about events, conflicts and disease around the world

U.S.

  • Trump promises to work with NATO in defeating Islamic State (Reuters)  Republican Donald Trump said on Monday he would work closely with NATO allies to defeat Islamic State militants if he wins the White House, reversing an earlier threat that the United States might not meet its NATO obligations.  In his second big policy speech in as many weeks, Trump said he would wage a multi-front "military, cyber and financial" war to defeat Islamic State.

  • Top Marginal Tax Rates and Real Economic Growth, Part 1 (Angry Bear)  Hat tip to Naked Capitalism.  This is a spike in the coffin of the idea that higher taxes have a direct impact on economic growth.  Data below is for two time periods:  1953-2015 and 1929-2015.

  • Scientists say we're facing the strongest hurricane season since the year Sandy hit the East Coast  (Tech Insider, MSN News)  We're moving into the peak of a Hurricane season that could be the strongest since 2012, the year Hurricane Sandy hit the East Coast.  The National Oceanic and Atmospheric Administration now expects a higher likelihood of a near-normal or above-normal hurricane season.  The NOAA reports a 70% chance of 12 to 17 named storms, of which five to eight are expected to become hurricanes, including two to four major hurricanes.  This is an increase from the NOAA's May outlook, which called for 10 to 16 named storms, of which four to eight were expected to become hurricanes, including one to four major hurricanes. 

  • WSJ’s Top Reason to Defeat Hillary: She’s Against Rape (William K. Black, New Economic Perspectives)  WKB contributes to GEI.  This is a very amusing ridicule of a supposedly serious editorial.  Prof. Black starts with:

The Wall Street Journal’s Deputy Editor, Daniel Henninger, wrote an op ed dated August 10, 2016 designed to convince Republicans to hold their noses and vote for Donald Trump.  His means of attempting to convince them was conventional – play on their hate of Hillary Clinton.  Op eds need to be brief, so Henninger picked as his argument the single policy he felt would be most compelling to the paper’s readers.

It is a testament to how bizarre the WSJ editorial writers are and how bizarre they believe their readers are that Henninger chose as his most dreadful policy supported by Hillary that should enrage the paper’s readership – her opposition to rape.  The specific context was that she opposes the rape of coeds.

  • A $35 Billion Stock Was Just Halted on Manipulation Concerns (Bloomberg)  The Securities and Exchange Commission temporarily halted trading of Neuromama Ltd., citing “potentially manipulative transactions” in a stock that soared to $35 billion even though it hasn’t filed financial results in years.  According to a statement Monday, the U.S. stock market’s top regulator halted Neuromama until Aug. 26

“because of concerns regarding the accuracy and adequacy of information in the marketplace about, among other things, the identity of the persons in control of the company’s operations and management, false statements to company shareholders and/or potential investors that the company has an application pending for listing on the NASDAQ Stock Market, and potentially manipulative transactions in the company’s stock.”

Iceland

  • Lessons from the Hidden World: Icelanders believed in elves, but it is probably not what you think (Ancient Origins)  Icelanders believe in elves. They refuse to begin major construction projects unless they consult with elves first. They lobby their politicians on behalf of elf colonies. They run “elf schools” and “elf tours”. Elves in Iceland are everywhere and all around.  There is no doubt, though, that these stories served an important purpose for Icelanders' ancestors. Our old folk tales speak of álfar and huldufólk - two terms that mean, respectively, “elves” and “hidden people”, and are used more or less interchangeably. They refer to the same sort of beings— (hidden) people who lived in a parallel world to the mortals, yet were invisible to them. 

Italy

  • Italy on Verge of Recession: "Renzi-ism" Attacked by Five Star Movement; Renzi's Enormous Gamble (Minyanville)  Italy's prime minister Matteo Renzi came under attack when Italy's GDP unexpectedly slid to 0% vs. an expected gain of 0.2%.  See first graph below.  The five star movement immediately blasted the performance of Renzi, whose constitutional reform package is under pressure.  If the reforms do not pass, Renzi threatened to resign.  Econinteresect:  Italy is entering the 9th year of a great depression.  See second graph below. 

italy.gdp.constant.prices
 

Syria

  • Russia says close to joint military action with U.S. in Aleppo: agencies (Reuters)  Russia and the United States are close to starting joint military action against militants in Syria's Aleppo, Russian news agencies on Monday quoted Defense Minister Sergei Shoigu as saying.  Fighting for control of the divided city of some 2 million people has intensified in recent weeks and there have been some gains for rebel groups battling Syrian government forces.  Russia backs Syrian President Bashar al Assad in the five-year-old Syria conflict, while the United States wants to see Assad step down. But both are participating in talks to try to find a political solution to end the civil war.

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

  • Scientists Say A Mystery Species Bred with Ancient Humans in Distant Past (Ancient Origins)  A new study of the genomes of Australasians has revealed sections of DNA that do not match any known hominin species. The dramatic findings mean that a mystery species bred with ancient humans in the distant past and that our family tree is much more complex than previously believed.  The genomes of living Indigenous Australians, Papuans, people from the Andaman Islands near India, and from mainland India have sections of DNA that do not match any previously identified hominin species.  See Genomic analysis of Andamanese provides insights into ancient human migration into Asia and adaptation (Nature Genetics). 

  • The No-Bailout Principle (Benn Steil, Council on Foreign Relations, The Wall Street Journal) BS contributes to GEI.  Steil is very critical of Joseph Stiglitz for a 180-degree turn on the Greek debt crisis between 2010 (when he advised to "teach the speculators a lesson" and 2016 when he published a book “The Euro: How a Common Currency Threatens the Future of Europe” in which he rails against the currency, the creation of which was one "underlying mistake".  But he also details many areas in which Prof. S was on target in his analysis. 

  • 3 awful reasons to take Social Security at 67 (The Motley Fool, MSN News)  Yes, you can keep on working and collect Social Security without penalty once you turn 67 - but that is not a good enough reason to start at that age.  You should not wait to start then if you have to struggle for basic necessities after you have reached age 62 when early benefits can be started.  You should wait past 67 to maximize benefits with an age 70 start if you cannot invest the money at a return to make up for the 8% larger check at the older age.  You should also not start at age 67 "just because you can" - again the larger check starting at age 70 is a good reason to wait.  After all, what if you live to be 90?  An extra 8% per check over a period of 20 years adds up to more than $25,000 additional income for someone receiving the average benefit check of  $1,348.49 a month..

  • The private sector cannot solve unemployment (Ellis Willingham)

The private sector uses the national government’s currency to affect production and the consumption of that production. Consumer demand comes first, placing pressure on business to increase its production of goods and services from the nation’s finite real resources. The by-product of this interaction is job creation. Business hires more workers to assist it with increased production and to maintain or increase its market share.

If you want the unemployment rate to drop, then the national government must deficit spend for that purpose, introducing more currency into the domestic economy. Doing so relieves the pressure on consumer savings allowing consumers to spend more.

  • The Debt Paradox (Around the Curve)  This author says that economists often lament that too much debt causes financial stress. However in reality, he says, there is no evidence that the indebtedness level of an economy has anything to do with the level of interest rates, the key indicator of financial stress.  Econintersect:  This is a kluge.  The author does make some valid points, such as borrowing to increase consumption isn't such a great idea, and simple judgments based on debt/GDP ratios are not very useful.  But the data used is quite opportunistic and doesn't make a lot of sense.  In the first graph below the author uses total debt as a measure whereas private debt and government debt provide two completely different economic and financial functions.  Also, what is the significance of grouping developing economy currencies with reserve status currencies (IMF special drawing rights basket - U.S. dollar, euro, yen,pound sterling and Chinese yuan renminbi)?  On top of that, why should the euro, which has no fiscal coupling, be plotted with the other reserve status currencies?  In the case of the second chart we see no basis in logic for suggesting that a causative relationship should exist between private sector debt increase producing more aggregate savings.  The exception is, of course, that debt liability for one party creates an asset for another.  If that is the case then Chart 2 is simply showing a tautology.  If there is any causative effect, in our opinion it would be that excessive saving (money hoarding) produces a propensity to increase borrowing by non-savers due to scarcity of money in circultion.  Steve Keen had a much shorter summary on Twitter


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