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What We Read Today 04 September 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:

  • How Money and Banking Work On a Gold Standard

  • Public Banks in Capitalism

  • Heterodox Economics - An Explanation Attempted without a Definition

  • How NASA Thinks Society Will Collapse

  • Currency Markets are Shrinking

  • Golden Age of Growth Moves to Asia

  • Presidential Debate Moderators Announced

  • Trump Still Hasn't Said He Will Debate

  • A Primer on Clinton Scandals

  • More on Apple's Tax Dispute with the EU

  • Merkel Defeated in Her Home District

  • China Disrespects U.S. with Tarmac Protocol

  • China Getting Serious About Bad Debt

  • And More

Articles about events, conflicts and disease around the world

Global

In unequal societies, researchers said, "collapse is difficult to avoid.... Elites grow and consume too much, resulting in a famine among Commoners that eventually causes the collapse of society."

As limited resources plague the working class, the wealthy, insulated from the problem, "continue consuming unequally" and exacerbate the issue, the study said.

  • The currency markets are shrinking as the 'golden age of growth' moves East (CNBC)  Volumes in global currency markets shrunk in the last three years, according to the Bank of International Settlements (BIS), who noted a tilt away from London towards financial districts in Asia.  The latest survey by the Basel-based institution – known as the central bank of central banks - showed that overall trading in foreign exchange markets averaged $5.1 trillion per day in April 2016. This is down from $5.4 trillion in April 2013, "a month which had seen heightened activity in Japanese yen against the background of monetary policy developments at that time," the BIS noted.

U.S.

  • Donald Trump wanted to ‘see who the moderators are.’ Now that he has, will he debate? (The Washington Post, MSN News)  Hillary Clinton committed weeks ago to the general-election presidential debates. Donald Trump has yet to officially sign on.  One reason for the holdout: "I'll have to see who the moderators are," the Republican nominee told Time magazine last month. "Yeah, I would say that certain moderators would be unacceptable, absolutely".  As of Friday, the lineup was out: NBC's Lester Holt will moderate the first debate Sept. 26 at Hofstra University in Hempstead, N.Y., ABC's Martha Raddatz and CNN's Anderson Cooper will lead a town-hall-style forum at Washington University in St. Louis on Oct. 9, and Fox News Channel's Chris Wallace will handle the questioning at the final debate Oct. 19 at the University of Nevada in Las Vegas.  So, are these journalists acceptable? Will Trump debate?

  • From Whitewater to Benghazi: A Clinton-Scandal Primer (The Atlantic)  If you want a very long review of Hillary Clinton's email fiasco, this is a good candidate.

  • Five states where Obama could help Clinton (The Hill)  President Obama is ready to make an aggressive push for Hillary Clinton’s presidential campaign between now and Election Day.  Ensuring that Clinton becomes his successor is a top goal for Obama, who is eager to protect his legacy.  The president is expected stump for the Democratic nominee at least a dozen times during the final stretch of the campaign, according to The New York Times.  Here are the five states where the president can help Clinton most:

  • North Carolina

  • Iowa

  • Florida

  • Pennsylvania

  • Nevada

  • Apple’s EU tax dispute explained (Financial Times)  The $187 billion it held outside the US in 2015 accounts for a significant (15.6%) share of the $1.2 trillion that US multinationals have parked offshore, in the hope that US tax reform will eventually cut the cost of repatriating the profits.  So far, Apple’s foreign profits have been lightly taxed (rate about 4%).

Germany

  • German anti-immigrant party beats Merkel in her home district (Reuters)  German Chancellor Angela Merkel's Christian Democrats were beaten into third place by the anti-immigrant and anti-Islam Alternative for Germany (AfD) party in a north-eastern state election on Sunday, TV exit polls showed.  In a stinging defeat for Merkel in her home district that could weaken her chances of a fourth term in next year's federal elections, the upstart AfD took 21.9% of the vote behind the center-left Social Democrats (SPD) in their first election in Mecklenburg-Vorpommern by campaigning hard against the chancellor's policies on refugees, according to a projection by ARD TV at 1.15 p.m. ET.  Merkel's approval rating has plunged to a five-year low of 45%, down from 67% a year ago, due to spreading disenchantment with her open-door policies on refugees.

Syria

  • Syrian forces besiege rebel-held Aleppo as Turkish-backed fighters drive Islamic State from border (Reuters)  Syrian government forces and their allies again laid siege to rebel-held eastern Aleppo on Sunday, while Turkish-backed fighters drove Islamic State from all the areas along its border, in two significant but separate developments in the multi-sided conflict.  The fighting - two potential turning points in the conflict if the gains can be sustained - complicated efforts by the United States and Russia to reach a ceasefire deal for Syria, whose civil war is in its sixth year.

Saudi Arabia

  • Trump made millions from Saudi government: report (The Hill)  A New York Daily News investigation found that in June 2001, the GOP nominee sold the 45th floor of Trump World Tower to the Kingdom of Saudi Arabia for $4.5 million.  The apartments became part of the Saudi Mission to the United Nations in 2008, according to the report.  At the time of the sale, the five apartment that were sold had yearly common charges of $85,585 for building amenities, meaning Trump has been paid at least $5.7 million by the Saudi government since 2001 — if those rates stayed the same.  The Daily News investigation also found Osama Bin Laden's half-brother, Shafiq Bin Laden, lived in an apartment in Trump Tower for four months in 1986. He paid an $8,500 security deposit for the apartment.

China

  • Row on tarmac an awkward G20 start for U.S., China (Reuters)  A Chinese official confronted U.S. President Barack Obama's national security adviser on the tarmac on Saturday prompting the Secret Service to intervene, an unusual altercation as China implements strict controls ahead of a big summit.  The stakes are high for China to pull off a trouble-free G20 summit of the world's top economies, its highest profile event of the year, as it looks to cement its global standing and avoid acrimony over a long list of tensions with Washington.  Shortly after Obama's plane landed in the eastern city of Hangzhou, a Chinese official attempted to prevent his national security adviser Susan Rice from walking to the motorcade as she crossed a media rope line, speaking angrily to her before a Secret Service agent stepped between the two.  See also next article.

  • Obama Downplays Tensions After Skirmishes During China Visit (Bloomberg)  See also preceding article.   President Barack Obama downplayed dust-ups involving the U.S. delegation and Chinese security officials during the opening hours of his trip to Hangzhou for the G-20 summit, but said Sunday the U.S. would not apologize for its efforts to expand media access in the country.  The early hours of Obama’s trip were marred by confrontations involving Chinese security officials, overshadowing his final visit to Asia as leader ahead of the November presidential election. They highlighted the continued differences between the world’s two largest economies that have sparked tensions over trade, cybersecurity and maritime security.

  • China's Xi at G20 says world economy at risk, warns against protectionism (Reuters)  The global economy is being threatened by rising protectionism and risks from highly leveraged financial markets, Chinese President Xi Jinping said at the open of a two-day summit of leaders from G20 nations.  His warning on Sunday followed bilateral talks with Barack Obama that the U.S. president described as "extremely productive", but which failed to bring both sides closer on thornier topics such as tensions in the South China Sea.

  • China Is About to Get Serious With Bad Debt (Bloomberg)  China’s banks, which dialed down fundraising efforts this year even as bad debts swelled, are making up for lost time.  Both lenders and the companies set up to acquire their delinquent assets are bolstering their finances. China Citic Bank Corp. last month announced plans to raise as much as 40 billion yuan ($6 billion), while Agricultural Bank of China Ltd., Industrial Bank Co. and China Zheshang Bank Co. are also boosting capital. China Cinda Asset Management Co. and China Huarong Asset Management Co. are poised to tap investors.

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

How Money and Banking Work On a Gold Standard (Philosophical Economics)

Contrary to the usual assumptions, the fiat monetary system that we currently use is not that different from the gold-based system in use in the early 20th century.  All one has to do to get from such a system, to our current system, is (1) make everything electronic, and (2) delete the gold.  Just get rid of it, let the central bank create as much base money as it wants, against nothing, or against gold that, by law, cannot be redeemed (the setup from 1933 to 1971).

The reason not to use monetary systems based on gold is that they are obsolete and unnecessary, with no real benefits over fiat systems, but with many inconveniences and disadvantages. In a fiat system, the central bank can create base money in whatever amount would be economically appropriate to create.  But on a gold-based system, the central bank is forced to create whatever amount of base money the mining industry can mine, and to destroy whatever amount of base money a panicky public wants destroyed.  There’s no reason to accept a system that imposes those constraints, even if they aren’t much of a threat in the majority of economic environments.  If the goal is to constrain the central bank, then constrain it directly, with laws.  Put a legal limit on how much money it can issue, or on what it can purchase.  Alternatively, if you are a developing country that does not enjoy the confidence of the market, peg your currency to the currency of a country that does enjoy that confidence.  There is no need for gold.

Public Banks Are Essential to Capitalism (Ellen Brown, The New York Times)  Ellen Brown is a frequent contributor to GEI.  To ask whether public banks would interfere with free markets assumes that we have free markets, which we don’t. Banking is heavily subsidized and is monopolized by Wall Street, which has effectively “bought” Congress. Banks have been bailed out by the government, when in a free market they would have gone bankrupt. The Federal Reserve blatantly manipulates interest rates in a way that serves Wall Street, lending trillions at near-zero interest and pushing rates so artificially low that local governments have lost billions in interest-rate swaps.  This article,written in 2013, makes some assertions which are arguable today (re: Germany and Taiwan):

State and municipal governments already have public lending programs, which are generally not seen as distortions of the free market. They exist because private banks are not lending in some sectors that need financing. Montana finances first-time ranchers and farmers; Sonoma County has its Energy Independence Program; and San Francisco has half a dozen mortgage lending and small business programs. Globally, public banks lend countercyclically, providing credit when and where other banks won’t. This does not crowd out private banks. Germany and Taiwan, which have strong public banking sectors, are among the most competitive banking markets in the world. 

Heterodox economics, mainstream macro and the financial crisis (Mainly Macro)  This blog post byOxford professor Simon Wren-Lewis is partly a criticism of mainstream economic thinking and partly a defense.  The details are developed further ia a very active exchange in the comments thread.


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