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.
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Topics today include:
Merit Has Little to Do with Inequality
'Rent Seeking', Cronyism and Luck Drive Wealth Inequality
500 Million Yahoo Accounts Stolen 2 Years Ago
Analysis of Classic Pump and Dump Schemes for Penny Stocks
Why We Believe What We Read on the Internet
Clinton IT Aide in Contempt of Congress
A Fed Lie: “Household spending has been growing strongly."
Fed Rate Hike Expectation for 2016 Remains at 60%
How About 20 Years with Below 'Normal' Interest Rates?
Bill Black Gives the Details on Wells Fargo Criminality
Inequality Begins in the Womb
Aleppo Hit With Heavy Government and Russian Bombing
Iraqi Army Moves Closer to Mosul
Details about the New India GST
Articles about events, conflicts and disease around the world
Oversight Committee votes to hold Clinton IT aide in contempt of Congress (The Hill) The House Oversight Committee on Thursday morning voted on party lines to recommend that the House hold former State Department IT technician Bryan Pagliano in contempt of Congress. Pagliano was responsible for setting up Clinton’s private email server during her tenure as secretary of State. The former State Department employee declined to appear at an Oversight hearing on Clinton's server last week, in spite of a subpoena demanding his presence. The committee held a follow-up hearing on the same subject on Thursday morning, which Pagliano also declined to attend. When Pagliano didn’t show, Republicans immediately adjourned the hearing and held a business meeting to vote on the contempt of Congress resolution.
Expectation for Fed Rate Hike this Year (Twitter) Expectations for a rate hike by December are the same this year as last, after being lower for most of the last two months. There was a rate hike last December (in case you have forgotten). Econintersect: If there were to be a 25 bps hike every December the Fed Funds rate would reach 1% by New Years Eve for 2019 and 3% by 2027. And such a sequence could only happen in the unlikely event that no recessions occurred for a total of 18 years in a row.
Bill Black Interview of Wells Fargo Criminality (KPFT Houston) Hat tip to Roger Erickson. Bill Black contributes to GEI. Prof. Black explains the operational details of the Wells Fargo fraudulent account scheme. It was clearly a corporate criminality which has been abetted by those who should have prosecuted the criminals. The inaction by supposed judicial and regulatory agencies should be a widely recognized scandal. You don't hear any of that elsewhere. (Notes: There are musical and sound effects intervals, the first for a couple of minutes at the beginning. Also there is an excellent interview following Prof. Black on the geopolitics of the mess in Syria.)
You Can’t Justify Inequality That Begins in the Womb (Evonomics) Being born to poor parents greatly increases the probability of being poor in the U.S. Also increased is infant mortality (close to third world rates) and medical issues related maternal drug abuse and poor nutrition are also much higher. See also next article.
Life in Freddie Gray’s childhood neighborhood by the numbers (PBS News Hour) This is an analysis of the neighborhood where Freddie Gray grew up and was arrested 12 April 2015. Gray sustained a spinal injury while in police custody, and eventually succumbed to his injuries a week later. Police involved have been acquitted of homicide charges after jury trials.
The poverty rate in Sandtown is over 30 percent, according to the most recent statistics available. Credit: Lisa Overton/NewsHour Weekend
The unemployment rate in Sandtown is over three times the national average, according to the most recent statistics available. Credit: Lisa Overton/NewsHour Weekend
The incarceration rate in Sandtown is significantly higher than the national average, according to recent statistics. Credit: Lisa Overton/NewsHour Weekend
The juvenile arrest rate in Sandtown is much higher than the national average. Credit: Lisa Overton/NewsHour Weekend
Life expectancy at birth in Sandtown is more than a decade less than the national average, according to recent statistics. Credit: Lisa Overton/NewsHour Weekend
The teen birth rate in Sandtown is over 100 births per 1,000 people, compared to the national rate of just over 26. Credit: Lisa Overton/NewsHour Weekend
The infant mortality rate in Sandtown is more than three times the national average. Credit: Lisa Overton/NewsHour Weekend
Guardian columnist calls for ‘crowdfunded assassination’ of Jeremy Corbyn (The Canary) As the Labour leadership battle comes to its inevitable conclusion this week, Owen Smith supporters in the media have been less than dignified in their response to almost certain defeat. One Guardian columnist has launched a foul-mouthed Facebook rant in which he ‘jokes’ about having Labour leader Jeremy Corbyn assassinated in order to replace him with someone more amenable. Nicholas Lezard is an everyman of the middle-class, liberal media. A literary critic with a weekly column in The Guardian, and known to frequent the pages of The Independent and New Statesman routinely. The following is just one of long sequence of foul-mouthed Facebook exchanges:
Aleppo hit by worst strikes for months as Putin, Assad ignore U.S. plea (Reuters) Warplanes mounted the heaviest air strikes in months against rebel-held districts of the city of Aleppo overnight, as Russia and the Syrian government spurned a U.S. plea to halt flights, burying any hope for the revival of a doomed ceasefire. Rebel officials and rescue workers said incendiary bombs were among the weapons that rained from the sky on the city. Hamza al-Khatib, the director of a hospital in the rebel-held east, told Reuters the death toll was 45.
Iraqi army says it recaptured key town south of Mosul (Reuters) Iraqi forces backed by air strikes from the U.S.-led coalition gained complete control of the northern district of Shirqat on Thursday, bringing the military a step closer to a main push on Mosul later this year. Brigadier-General Yahya Rasool, spokesman for the military's joint operations command, said in a statement broadcast on state television that the district had been liberated from "the desecration of terrorism". Shirqat, on the Tigris river 100 km (60 miles) south of Mosul, has been surrounded for months by Iraqi troops and Iranian-backed Shi'ite Muslim militias allied to the government. But the army, backed by local police and Sunni Muslim tribal fighters, conducted the fighting this week and the militias did not appear to take part. Iraqi forces advanced swiftly through the area after Prime Minister Haider al-Abadi announced the operation on Tuesday morning.
India, a federal country with 29 states and seven union territories and a population of about 1.3 billion, has embarked on an ambitious reform of its domestic taxes on goods and services. This reform is appropriately called the GST (Goods and Services Tax).
It is dual sales tax, levied by the Union Government (CGST), the states and union territories (SGST), and on interstate sales (IGST). There will be a single GST rate for all states (instead of each state currently defining its own sales tax rate and base). For inter-state transactions, IGST will be levied at the combined union and state GST rates, with revenue shared among the different parties. The current origin-based sales tax (i.e. where production takes place) is therefore set to be replaced by a more-common internationally adopted destination basis. This requires levying of GST on all international transactions in merchandise and services, with appropriate input credit mechanisms.
Implementation of GST is likely to be used as an excuse to initially raise prices of basic commodities.
Other Scientific, Health, Political, Economics and Business Items of Note - plus Miscellanea
Extreme Inequality Is Not Driven by Merit, but by Rent-Seeking and Luck (Evonomics) See next article. Back in 2010, Oxfam’s new stats showed, the world’s 62 richest billionaires collectively held $1.1 trillion in wealth, far less than the $2.6 trillion that then belonged to humanity’s least affluent half. Now the numbers have reversed. The world’s top 62 billionaires last year held $1.76 trillion in wealth, the bottom half of the world only $1.75 trillion. Oxfam concludes:
“Far from trickling down, income and wealth are instead being sucked upwards at an alarming rate.”
Extreme Wealth is Not Merited (Oxfam.org) Much extreme wealth is not earned but derived largely from 'rent seeking'. This paper contains detailed analysis of the various means by which extreme wealth is accumulated. In the table below more than one driver contributes to wealth for many:
Author’s calculations based on Forbes data. Total is greater than 100 percent as some billionaire wealth fits more than one row.
Estimated; see previous sections of this paper.
Lower bound: High presumption of cronyism. Higher bound: High and moderate presumption of cronyism.
Presumption of monopoly power: Finance, health care, legal, and information technology industries, plus hired CEOs.
Yahoo Says Information on at Least 500 Million User Accounts Is Stolen (The Wall Street Journal) Yahoo Inc. on Thursday disclosed a massive security breach affecting at least 500 million users as the beaten-down internet company works through the sale of its core business. Yahoo said a copy of certain user account information—including names, email addresses, telephone numbers, dates of birth, hashed passwords and, in some cases, encrypted or unencrypted security questions and answers—was stolen from the company’s network in late 2014 by what it believes was a ‘state-sponsored actor’. Yahoo said it is notifying potentially affected users and has taken steps to secure their accounts. The company, which is working with law enforcement, said the ongoing investigation indicates that stolen information didn't include unprotected passwords, payment card data, or bank account information. Econintersect: Thanks for informing us in a timely manner. After all, 2 years is much less than the usual lifetime.
The Money is Gone (The Intercept) A classic story of a pump and dump scheme for a penny stock. This is Part 1, Part 2 is coming shortly.
Why we believe what we read on the internet (PBS News Hour) In the digital age, we have access to all the information that we could ever want. But that means there’s also a lot of misinformation out there. How do we know what’s true and what isn’t? That’s what Daniel Levitin attempts to teach readers of his new book, “A Field Guide to Lies”. Jeffrey Brown sits down with Levitin to learn how we can sift through the digital field of information.
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