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What We Read Today 31 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".).


Every day most of this column ("What We Read Today") is available only to GEI members.

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Today's topics include:

  • U.S. Private Prisons are not Free-Market Prisons

  • Idiocy at Jackson Hole Exposed by Bill Mitchell

  • QE Does Not Expand the Money Supply

  • Yale Has a Terrible Sexual Assault Policy

  • Demographic Flow:  Another Example of the Failing of Static Modeling

  • Trump Visits Mexico

  • Trump and Nieto Discuss the Wall, Not Who Will Pay for It

  • Clinton Pitches Foreign Policy to the American Legion

  • Declining Corporate Incomes Hitting States' Tax Coffers

  • SCOTUS Denies Stay of Ban on North Carolina's Discriminatory Voting Laws

  • India's Persecuted tribes

  • North Korea Purge Continues

  • China's Mystery Oil Hoards

  • Dilma Rouseff Removed from Office

  • Is Rouseff's Impeachment a 'Vote of No Confidence' Rather than a 'Conviction'?

  • First Scheduled Flights to Cuba in Over 50 Years

  • And More

Articles about events, conflicts and disease around the world


  • Clinton pitches her foreign policy to American Legion (Fox News)  Hillary Clinton pitched her foreign policy to Republican voters in a speech to the American Legion on Wednesday, arguing that she would best uphold American values and protect national security interests.  At the veterans' group annual convention in Cincinnati, the Democratic presidential nominee called the United States an "exceptional nation", and accused Republican rival Donald Trump of thinking that approach is "insulting to the rest of the world".  Clinton said the country has a "unique and unparalleled ability to be a force for peace and progress". She questioned Trump's support for the military and hit him for his last-minute trip to Mexico Wednesday, saying it "takes more than trying to make up for a year of insults and insinuations by dropping in on our neighbors for a few hours".

  • Trump’s Top Fundraiser Eyes the Deal of a Lifetime (Bloomberg)  Steven Mnuchin might have a shot at Treasury secretary, but his Wall Street pedigree makes him the type Donald Trump fans love to hate.

  • Weaker corporate profits cost states millions (The Hill)  Corporate profits have been declining for almost two years. Declining corporate profits are causing states to lower their revenue estimates ahead of the new fiscal year, as federal forecasters predict American corporations will earn even less money next year.  States across the country lowered their original estimates of the corporate tax revenue they expect to generate this year by about 1% for fiscal year 2016, which ended in July.  And states are expecting another 1 percent decline in the current fiscal 2017, according to the National Association of State Budget Officers (NASBO).  The declining profits will hit some states especially hard, including those that depend most on revenue generated by the oil and gas sectors.  

  • Supreme Court Denies North Carolina Request To Enforce Voting Restrictions This Fall (BuzzFeed)  The North Carolina voting restrictions struck down by a federal appeals court earlier this summer will remain off the books for November’s election, following a Supreme Court order on Wednesday.  The justices denied North Carolina Gov. Pat McCrory’s request to halt enforcement of the 4th Circuit Court of Appeals decision striking down five voting restrictions while the state seeks Supreme Court review of the decision.  Among the provisions in the law that the appeals court has ordered the state not to enforce are limits on the type of photo ID required for voting; reductions to the amount of early voting in the state; and elimination of same-day registration, out-of-precinct provisional voting, and preregistration that allowed 16- and 17-year-olds to indicate an intent to register when they turned 18.  The Obama administration and organizations that had sued the state over the law opposed the stay request.  Justice Clarence Thomas would have granted the stay as to all five provisions.  Chief Justice John Roberts and Justices Anthony Kennedy and Samuel Alito would have granted the stay as to all of the provisions except for the preregistration provision.


  • Why India’s persecuted tribes are marking their alternative independence day (The Conversation)  The 150 or so communities labelled as “criminal tribes” by the British colonial government had to wait a further five years after August 14, 1947, India's official independence day, until August 31 1952, for their Vimukti Diwas (liberation day). Only then was the Criminal Tribes Act repealed across India.  Now, 64 years later, on August 31 2016, these communities will come together to commemorate their alternative independence day. One of the largest gatherings will take place at renowned protest site Jantar Mantar in New Delhi – as this will be a day of protest as much of celebration. Although “denotified” as criminal, this colonial stigma continues to afflict them to this day.

North Korea

  • North Korea executes vice premier in latest purge: South (Reuters)  North Korea has executed its vice premier for education and rebuked two high-ranking officials, South Korea said on Wednesday, which, if true, would mark a new series of measures by leader Kim Jong Un to discipline top aides.  Kim took power in 2011 after the death of his father, Kim Jong Il, and his consolidation of power has included purges and executions of top officials, South Korean officials have said.  South Korea's Unification Ministry spokesman Jeong Joon-hee said the government had confirmed the execution of the education official, Kim Yong Jin, "through various channels" but declined to provide details.


  • Mystery of Oil Held on Chinese Islands Puzzles Crude Markets (Bloomberg)  China’s got the world puzzling over its oil hoard.  From underground caverns by the Yellow Sea to a scattering of islands in the Yangtze River delta, the government has been stockpiling crude for emergencies in a network of storage sites dotted around the country. Record purchases this year by the world’s biggest energy consumer have helped oil prices recover from the worst crash in a generation. What the country plans to do next could determine where they go from here.  The difficulty is that nobody outside China really knows for certain. The government won’t say how much it’s holding or when the tanks will be full. Energy Aspects Ltd. says the country will probably keep buying and fill up commercial tanks if it has to, while the likes of JPMorgan Chase & Co. say the purchases may soon stop. The difference in opinion is equivalent to about 1.1 million barrels a day, or more than the Asian country buys from Saudi Arabia.


  • Brazilian Senate Impeaches President Dilma Rousseff, Removing Her From Office (BuzzFeed)   The Brazilian Senate voted 61-20 Wednesday to remove President Dilma Rousseff from office, bringing an end to months-long political turmoil spurred by a corruption scandal.  The current vice president, Michel Temer, officially assumed the role as president at 4 p.m. local time.  But a second vote today leaned in favor of Rousseff, the nation’s first female president. The senate decided 42-36 that she will be able to retain her political rights for the next eight years.

  • Brazil's flawed impeachment of Dilma Rousseff (The Hill)  Brazil's fourth democratically elected president since the end of the military dictatorship was officially removed from office on Wednesday afternoon. Her impeachment has been lauded and derided both within Brazil and abroad, with her supporters denouncing the proceedings as a "judicial coup d'état" and her opponents hailing the process as a victory for Brazilian democracy.  Both theses, however, are deeply flawed.  Instead, this article argues, this impeachment was more like a vote of no confidence than the conviction of criminal activity.  The author says incompetence, yes; crime, no.


  • U.S. resumes scheduled passenger flights to Cuba after more than 50 years (Reuters)  The first scheduled commercial passenger flight from the United States to Cuba in more than half a century landed on Wednesday, opening another chapter in the Obama administration's efforts to improve ties and increase trade and travel with the former Cold War foe.  A JetBlue Airways Corp (JBLU.O) passenger jet arrived from Fort Lauderdale, Florida, in the central Cuban city of Santa Clara. The route may be a commercial challenge, at least initially, but it is the first of a plethora of new flights by various U.S. airlines to destinations on the Communist-ruled island.


  • Stopping what Trump called the "humanitarian disaster" of illegal immigration

  • Securing the shared American-Mexican border

  • Stopping drug cartels that operate in both countries

  • Improving trade relations

  • Boosting North American manufacturing


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

Earlier this month, the Justice Department announced that it plans to stop using privately run prisons after a report found that they were often less safe for inmates than federally run facilities. While it is admirable for the federal government to finally start taking an interest in the well-being of its incarcerated population, referring to these facilities as “private” can be grossly misleading.

A truly private organization is characterized by competition in a free marketplace. A private organization does not enjoy any monopoly powers conferred by the state. Nor are the taxpayers forced to pay for the services of any private organization through their tax dollars. “Private” prisons, on the other hand, are nothing like a truly private organization.  

Specifically, these privately run prisons contract with the federal government to act as agents for the state, paid to create more space for our already massive prison population.

  • Indexed bank reserve support schemes will not expand credit (Bill Mitchell, billy blog)  The title includes an idea floated in a paper at Jackson Hole last week, Funding Quantitative Easing to Target Inflation (Ricardo Reis).  Prof. Mitchell takes to task the flawed thinking of the powers-that-be in economics.  Specifically he points out that the widely taught (and believed) view that the FOMC (Fed Open Market Committee) controls the money supply through buying and selling (nominally treasury securities) is not only flawed, but is denied by published statements by the New York Fed itself.  The size of the Fed balance sheet has no impact on the money supply (money in the hands of the public).  The size of the Fed balance sheet is reflected in the excess reserves of the banking system. (Econintersect: Banks do not lend against their reserves - reserves are normally adjusted to match bank lending.  The entire fallacy entertained by most of the mainstream economists (and reflected in papers presented in Jackson Hole last week) is based on thinking that the false loanable funds theory of banking, something that should be totally discredited but is still entrenched in the rotting brains of the profession.)  This is from the Mitchell blog:

In reality, in a credit money system, this ability to control the stock of “money” is undermined by the demand for credit. The overall broad money aggregate (‘the money supply’) is determined as the outcomes that follow after market participants respond to their own market prospects and central bank policy settings and make decisions about the liquid assets they will hold (deposits) and new liquid assets they will seek (loans).

The essential idea is that the “money supply” in an “entrepreneurial economy” is demand-determined – as the demand for credit expands so does the money supply. As credit is repaid the money supply shrinks. These flows are going on all the time and the stock measure we choose to call the money supply, say M3 is just an arbitrary reflection of the credit circuit. Please read my blog – Understanding central bank operations – for more discussion on this point.

Further expanding the monetary base (bank reserves) as I argued in these blogs – Building bank reserves will not expand credit and Building bank reserves is not inflationary – does not lead to an expansion of credit.

  • Yale’s latest sexual-assault report suggests school is more dangerous than Detroit (The College Fix)  Hat tip to Mark J. Perry. Yale University continues to impose sanctions on students and faculty even when they are not found responsible for sexual misconduct, according to its latest half-year report on sexual misconduct.  Issued by Deputy Provost Stephanie Spangler, who is tasked with universitywide Title IX compliance, the so-called Spangler report covers reports of misconduct from Jan. 1 through June 30.  It reveals harsh punishment following complaints about seemingly minor infractions, as well as minor or no punishments for alleged attempted assaults – suggesting that assaults aren’t being taken seriously, many people are making evidence-thin complaints, or both.  Many complaints are tallied but result in no investigation.  See also More on the Sex Panic at Yale (Minding the Campus):  

If all 26 undergraduates who filed sexual-assault complaints from January through June were female, “it would mean an annual violent crime rate for Yale undergraduate women of 1.9 percent, without taking into account any attempted murder or felony assault claims,” he [K.C. Johnson] wrote.

That would be just under the annual violent crime rate for the city FBI stats deem the most dangerous in the country, Detroit.

  • The Economics of the Grim Reaper (Roger E.A. Farmer)  The author explains the difference between two kinds of macroeconomic models, representative agent (RA) and overlapping generations (OG) models. He explains why OG models provide an explanation of why central banks should intervene in asset markets that is different, and in his view stronger, than any argument that might be leveled using the RA model as an organizing principle. The OG model assumes that people die and new people are born, while the RA model is demographically constant.  Econintersect:  This is just another demonstration of the weakness of static economic models commonly employed by economists when compare to dynamic models with time variation of economic functions.  This is definitely a very worthwhile read.  It attacks the principle that government intervention in the business cycle is bad.

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