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What We Read Today 19 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:

  • All About Helicopter Money

  • Money for the People, Not the Financial System

  • The Handwriting was On the Wall Before Oil Prices Crashed

  • Hillary Must Answer Judicial Watch Questions

  • Was Paul Manafort Fired?

  • GOP Congressmen Lay Out Specific Hillary Indictment

  • Army Fudged Accounts by Trillions of Dollars in 2015 Alone

  • Homeland Security Waste

  • U.S. Withdrawing from Saudi Arabia Yemen Counseling

  • NSA Hacked China Cybersecurity Firms

  • And More

Articles about events, conflicts and disease around the world

Global

  • The oil price crash: why didn’t we see it coming and the future? (Oil Pro)  More than 350,000 jobs have been lost globally in the oil and gas industry since the current downturn started in the summer of 2014. By the end of this year, Oil & Gas UK predicts 120,000 jobs in the North Sea will have gone.  There are some people within the industry who claim they saw this downturn coming and were able to make adjustments. However many firms didn’t. Looking back, you’ve got to ask: why not?  All the signs were there, we just never picked up on them.  When the International Energy Agency announced in November 2012 that, thanks to the commercialized development of the fracking process, the US would leapfrog Saudi Arabia and Russia to become the world’s biggest producer in the next five years – and that the US would be self-sufficient in energy by 2035 – did we really consider what that would mean as an industry?

U.S.

  • Eric Trump: Dad Didn’t Want Manafort’s ‘Baggage’ (The Daily Beast)  Hours after Paul Manafort announced his resignation from the Trump presidential campaign Friday, the GOP nominee’s son strongly suggested to Fox News that the former chairman was actually fired.

  • Judge:  Hillary Must Answer Email Questions (The Daily Beast)  A federal judge ruled on Friday that Hillary Clinton must answer questions in writing to conservative group Judicial Watch over her use of a private email server while she was secretary of state. The judge, Emmet Sullivan, said the group did not persuade him to force a sworn deposition because it “failed to demonstrate that it cannot obtain the discovery it seeks through other, less burdensome or intrusive means such as interrogatories.” Judicial Watch, which has filed a Freedom of Information Act lawsuit against the State Department, has until October 14 to send the questions to Clinton, and the Democratic presidential nominee has 30 days to respond.

  • GOP Lays Out Case For Hillary Indictment (The Political Insider)  Two leading House Republicans just put out an incredible letter and video which strongly outlines a case to indict Hillary Clinton on perjury charges.  See GOP lays out case for charging Clinton with perjury (The Hill):

A pair of leading House Republicans on Monday laid out detailed instructions for the Justice Department to file perjury charges against Democratic presidential nominee Hillary Clinton.

More than a month after first requesting the department open a criminal probe into Clinton for alleged misstatements she made under oath, the GOP heads of the House Judiciary and Oversight committees told a federal prosecutor specifically where they believed Clinton had lied to Congress about her email setup at the Department of State.

  • U.S. Army fudged its accounts by trillions of dollars, auditor finds (Reuters)    Econintersect:  That is trillions of dollars per year!  The United States Army’s finances are so jumbled it had to make trillions of dollars of improper accounting adjustments to create an illusion that its books are balanced.  The Defense Department’s Inspector General, in a June report, said the Army made $2.8 trillion in wrongful adjustments to accounting entries in one quarter alone in 2015, and $6.5 trillion for the year. Yet the Army lacked receipts and invoices to support those numbers or simply made them up.  As a result, the Army’s financial statements for 2015 were “materially misstated,” the report concluded. The “forced” adjustments rendered the statements useless because “DoD and Army managers could not rely on the data in their accounting systems when making management and resource decisions.”  Disclosure of the Army’s manipulation of numbers is the latest example of the severe accounting problems plaguing the Defense Department for decades.

  • The Justice Department Used Shaky Statistics to Drop Private Prisons (Bloomberg)  The U.S. Department of Justice made headlines on Thursday byannouncing it’s phasing out contracts with private prison companies. Shares of publicly traded incarceration firms Corrections Corp. of America and GEO Group plunged. Liberal prison-reform advocates applauded.  But there’s a problem: fundamental flaws in the main source of data on which the DOJ based its assessment—that privately operated prisons provide less safety and security than publicly run lockups. That source, an 80-page report released earlier this month by the agency’s own inspector general, compared 14 so-called contract prisons with an equal number of facilities run by the Federal Bureau of Prisons.  Unfortunately, the inspector general compared apples with oranges.

  • Why Are We Still Wasting Billions on Homeland Security Projects That Don’t Make Us Safer? (ProPublica)  Some money spent on homeland security has done some good, but in many areas, not so much.  From this article:

Certainly, some of the government programs created to address vulnerabilities exposed by the 9/11 attacks were long overdue. The U.S. needed a much better system for screening air travelers, one that did not allow people to board airplanes with lethal weapons in hand. And it made sense to harden New York’s underwater subway tunnels to limit the damage a bomb could do to both passengers and the city’s infrastructure.

But for every valid effort, it seems like the terrorism-industrial complex came up with an array of boondoggles that were profitable for the companies involved but added little to the security of ordinary Americans. The upwards of $47 billion spent on FirstNet, the troubled effort to make sure firefighters and police could talk to each other in an emergency, staggers the imagination. Altogether, Brill calculates, the government has spent $100 to $150 billion on equipment and programs that do not work. What might have been accomplished if all of that money had been spent on, say, reducing the cost of a college education for poor and middle-class kids?

Saudi Arabia

Syria

  • Incendiary bombs dropped on hospital, Syrian rebel group says (Reuters)   A Syrian army helicopter dropped incendiary "barrel bombs" on the only hospital in besieged, opposition-held Daraya early on Friday, putting it out of action, rebels and a war monitor said.  Around 25 people who were in the hospital at the time were evacuated and no one was hurt, Issam al-Reis, spokesman for the Free Syrian Army Southern Front groups, said in an emailed statement, but all the hospital's medical equipment was destroyed.  The army has dropped up to 45 barrel bombs on Daraya, launched dozens of rockets at the area and shelled it heavily since midnight, the Syrian Observatory for Human Rights, a U.K.-based war monitoring group, said on Friday.  Barrel bombs are oil drums packed with explosive material and shrapnel that set fires and cause bad burns. Their use was condemned by the United Nations Security Council last year.

China

  • Hacking tools stolen from NSA show Chinese cyberfirms were targeted, experts say (South China Morning Post)  Hacking tools claimed to be pilfered from the US National Security Agency reveal a ­severe security threat to China, mainland experts say, with a leading national provider of network security said to be among the victims of the government hackers.  Some of the data was released online over the weekend by the Shadow Brokers, an anonymous group of hackers which said it took them from the “Equation Group”, an elite espionage team widely believed to be operated by the NSA. An increasing number of security experts have since said the data appeared to be legitimate.

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

  • A primer on helicopter money (Voxeu.org)  (See also Helicopter Money 101 by Derryl Hermanutz which discussed this issue with a similar conclusion on 09 August 2016.  See also following two articles.) This is a good summary using macroscale balance sheets for the government, the central bank and the private banks (collectively).  (Econintersect questions whether a statement made about federal government solvency is a fact or an assumption, but that does not detract from the tutorial on money and banking mechanics when the government is a "partner".)  The authors conclude that helicopter money today is "is expansionary fiscal policy financed by central bank money" rather than by bond issuance.  They offer a few differences between conventional bond-financed fiscal expansion and helicopter money:

  • First, at the effective lower bound, you might think of helicopter money as a combination of: (1) bond-financed fiscal expansion; and (2) QE in which the monetary authority creates central bank money to acquire the bonds.

  • Second, as several commentators have pointed out, helicopter money may strain the relationship between the fiscal and monetary authority. Forcing the central bank to engage in this practice undermines its independence, creating a situation commonly known as ‘fiscal dominance’.

  • Third, so long as its currency has value, a central bank does not face rollover risk, so a fiscal expansion financed by central bank money is more stable than one financed by bond issuance. Put slightly differently, we can think of reserves as floating rate consols or perpetuities. But is rollover risk really a concern for the governments of most advanced economies? We doubt it.

Recessionary and deflationary tendencies are increasingly baked into expectations, making a Japan-like scenario more likely. The negative trends are proving increasingly impervious to conventional and unconventional monetary policy. Fiscal policy could help, but it appears to be tied up in political conundrums, as are many pro-growth structural policies.

As this trend is fostering deep and grievous social and political unrest, minds have been turning to increasingly radical thoughts – including thoughts about what sort of economic policy could reverse the dangerous drift. The leading contender in this ‘radical thoughts’ category is helicopter money; it is a concept that seems to be moving, slowly, from crazy to inevitable.

  • Create money for people, not financial markets - Campaign launch (Positive Money)  Positive Money is launching its campaign for QE to be abandoned in favour of an alternative which doesn’t have the same negative side-effects. It recently coordinated a letter from 35 leading economists calling on the Chancellor to support the creation of new monetary policy tools. Alternatives to QE proposed by Positive Money include creating new money to finance a cash transfer to households, a tax cut, infrastructure spending or house-building.


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