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What We Read Today 29 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:

  • Deutsche Bank's Global Interconnections

  • Time to Buy Deutsche Bank?

  • Will Germany Rescue Its Largest Bank?

  • U.S. Demographics are Driving Wages Lower

  • End of the Line for Monetary Policy?

  • IRS Hires Private Tax Collectors

  • Fraudulent Tax Bills for Obamacare Penalty Payments

  • Age Demographics of U.S. Voting

  • Why Don't U.S. Under 40s Vote as Often as their Elders?

  • Is the Government Trying to Collect Student Debts that Are Not Owed?

  • Fox Video Shows Trump's Opposition to Iraq War in 2003, Maybe

  • London Mayor Launches Inquiry into London Property Price Distortions from Foreign Money

  • Thousands of Foreign Fighters Amassed to Invade Aleppo

  • Iran Recruits Shias from Afghanistan to Fight in Syria

  • India Raids Militants on Pakistan Side of LOC in Kashmir

  • The Chinese Money Flood into Foreign Real Estate is Just Beginning

  • And More

Articles about events, conflicts and disease around the world

U.S.

  • IRS Warns of Obamacare ‘Tax Bill’ Fraud; Names Private Tax Collectors (ThinkAdvisor)  Last week, the Internal Revenue Service and its Security Summit partners issued an alert warning of “fake tax bills” for tax year 2015 that some taxpayers and tax preparers have received in the form of emails seeking additional tax payments related to the Affordable Care Act.  The agency also released the names of four outside contractors that, beginning in 2017, will serve as private collectors of “certain overdue federal tax debts” called for by 2015’s Fixing America’s Surface Transportation Act, or FAST Act.  The fraudulent emails reported around the country include a fake CP2000 notice with an Austin, Texas address as an attachment. CP2000 notices, sent when income on a taxpayer’s tax return does not match income reported to the IRS by third parties like employers, are sent by the IRS’ Automated Underreporter Program through the U.S. Postal Service; not by email, the warning states.  The agency said the fraudulent emails include a ‘payment’ link within the email, seeking the payment of taxes and information about the taxpayer’s 2014 Affordable Care Act coverage.

  • Overturning Obama, Congress Puts the U.S. in Danger (Bloomberg) This is a Bloomberg editorial:

It took nearly eight years for Congress to override a veto by President Barack Obama. It could hardly have chosen a worse measure on which to do so -- or a more stark way of exposing its most craven impulses.

Obama was right to reject the Justice Against Sponsors of Terrorism Act, which would allow U.S. citizens to sue foreign nations for abetting terrorist acts, even if they are not included on the State Department's official list of sponsor states. Whilethe law names no names, it is obviously intended to allow the families of those killed in the Sept. 11 attacks to sue Saudi Arabia for its alleged involvement.

voting.rates.demographics.1964.2012

The U.S. Department of Education’s debt collectors may be violating the law by collecting on defaulted federal student loan debt that’s likely invalid yet owed by "vast numbers" of defrauded for-profit college students, Senator Elizabeth Warren (D-Mass.) charged Thursday.

The issue concerns nearly 80,000 Americans in default on loans they collectively took out to attend more than 100 schools from 2010 to 2014 owned by defunct for-profit giant Corinthian Colleges Inc. The schools—which went by the Everest, Heald, and WyoTech brand names and were spread across more than 20 states—allegedly duped students into enrolling in dozens ofprograms by marketing false job-placement statistics, the Education Department has concluded.

UK

“It’s clear we need to better understand the different roles that overseas money plays in London’s housing market, the scale of what’s going on, and what action we can take to support development and help Londoners find a home.”

Germany

Syria

Iran

  • Iran covertly recruits Afghan Shias to fight in Syria (The Guardian)  Iran is covertly recruiting hundreds of Afghan Shias in Afghanistan to fight for Syrian president Bashar al-Assad, drawing them out of their own conflict-ridden country and into another war in which Afghanistan plays no official part.  The Afghan fighters are often impoverished, religiously devout or ostracized from society, looking for money, social acceptance and a sense of purpose that they are unable to find at home.

India

  • India says troops cross Kashmir border to attack as crisis escalates (The Guardian)  Elite troops have launched “surgical strikes” on Pakistan-based terrorists in the contested territory of Kashmir, India said on Thursday, in a major escalation of a deepening crisis between the nuclear-armed rivals.  The Indian army said troops conducted multiple nighttime raids across the line of control (LOC), the ceasefire line agreed in 1972 that divides the Himalayan region, to attack militants preparing to cross into Indian-controlled territory.  Pakistan says two of its soldiers are killed and an Indian soldier captured on its side of contested territory’s border.

China

  • 'This is just the start': China's passion for foreign property (The Guardian)  "China is so big”, marvels Victor Li, using his fingers to count all the cities he has flown to over the last 12 months to meet with cash-rich Chinese buyers interested in buying into a real-life game of London Monopoly.  Li, a director of international project marketing for the US real estate giant CBRE, is predicting a surge of eastern investment in British homes over the next decade, as increasingly affluent Chinese investors acquire a taste for international property.  Econintersect:  The demand for overseas real estate is coming from the wealthiest Chinese:  the top 1% of China equals a population of 14 million.  That represents a tremendous demand potential for western real estate markets, at least 10X what came from Japan 25-30 years ago.

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

  • Demographics are driving wages lower, which is negative for investment returns (Edward Harrison, Credit Writedowns)  EH has contributed to GEI and Econintersect Editor JL has contributed to Credit Writedowns.  The slowdown in wage growth, interspersed with periods of wage contraction during GDP contractions and times of low economic growth, have structural causes based significantly on a population with increasing numbers approaching retirement and retiring.  Late career employees often have little wage growth and sometimes take lower pay and retirees are replaced with lower wage young employees.  EH also discusses how pensions and other retirement income sources are squeezed by the resulting low interest rates and poor investment returns, which adds to the general economic malaise depressing economic health further.  He points out the case of Japan as a (basket) case study.  (Econintersect:  We interjected the word "basket" using a macabre sense of humor.)   

  • The Deutsche Bank crisis: How we got here, and where we are (CNBC)  Shares of Deutsche Bank have hit record lows this week on mounting worries about the struggling German lender, and they were dropping again on Thursday.  On Thursday, a Bloomberg report raised concerns that a handful of funds are less willing to do business with the struggling firm. The report, citing a source and review of an internal document, said that a small number of the hedge funds that do derivatives business with the German bank have cut their exposure.  This is affecting bank shares globally because BD is a major global player.  See also next item.

  • Will Deutsche Bank Survive? (GEI Investing)   Is it time to buy Deutsche Bank (NYSE:DB) stock?  This piece points out that the stock is at the bottom of an 18-year channel with a support line at 11.23.  Today the stock has traded as low as 11.19 before closing at 11.47.  The author suggests targets for a bounce of 5%, 10% and 20%, the latter being 13.47.  See also preceding article and item under German section, earlier, above.

db.18.year.channel.600x400 

  • Monetary policy is at the end of the line (Edward Harrison, Credit Writedowns)  EH has contributed to GEI and Econintersect Editor JL has contributed to Credit Writedowns.  Here is EH's bottom line:

  • Forward guidance and explicit long-term interest rate targets flatten the yield curve and reduce bank net interest margins. That’s anti-stimulus. Moreover, lower interest rates reduce savings interest. And since the private sector in every advanced economy is a net receiver of interest, in a normal, growing, non-distressed economic situation, this factor swamps the benefits from relieving financial distress. When the economy is not distressed, net-net lower rates are not stimulative since the private sector is a net receiver of interest. They make it harder to save and could induce more savings and less spending.

  • Quantitative easing is based on quantity target thinking. And we already know that quantity targets don’t work.

  • Negative interest rate policy is based on the flawed assumption that banks are reserve constrained when they’re not. Nowhere where they have been implemented have negative interest rates resulted in increased lending. They are a tax. And as time goes on, this tax is likely to be passed on to bank customers, reducing aggregate demand.

  • Finally, there’s the higher inflation target the Bank of Japan has just set. This won’t work either. Just because the Bank of Japan says it is willing to accept higher inflation doesn’t mean they will get higher inflation. And higher inflation doesn’t mean higher real GDP growth, it could just mean an erosion of purchasing power, which would cause people to retrench.


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