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What We Read Today 26 October 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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The rest of this post is available only the GEI Members.  Membership is FREE -  click here

Topics today include:

  • Nomi Prins Summarizes Deutsche Bank's Problems

  • Can America Go Bankrupt?

  • Is Laurence Kotlikoff Correct - The U.S. has $210 Trillion on a "Credit Card"?

  • New Book from Dean Baker

  • Do Market Rules Create Extreme Inequality?

  • 116 Years of Inflation-Adjusted Dow Jones Industrial Average

  • The Last Time Temperature Changes Were This Rapid Was 55 Million Years Ago

  • A Comet, Rather than Volcanoes, Could Have Produced Climate Change 55 Million Years Ago

  • Pentagon Stops Bonus Clawbacks

  • GDP Could Reach 3% for 3rd Quarter

  • Trump Calls for New Glass-Steagall

  • Polls are Tightening for Trump and Clinton

  • Clinton Shows Early Voting Strength

  • Surprisingly Strong Eurozone Manufacturing Report

  • France Clears Calais Refugee Camp but Refugees Still Not Processed

  • IS Grabbing Human Shields for Mosul

  • Russia Drops Request for Docking at Spanish Port

  • Learning from the Cold War for Today's Russian Challenges

  • Duterte Faces Opposition Among Citizens to American "Divorce"

  • And More

Articles about events, conflicts and disease around the world


  • Comet Collision Could Have Caused Rapid Carbon Rise (Scientific American)   Evidence collected along the New Jersey coastline suggests that the collision of a comet or other extraterrestrial body 55 million years ago coincided with an intense warming period that is the closest comparison to today’s climate change.  The period of warmth, called the Paleocene-Eocene Thermal Maximum (PETM), was preceded by a rapid release of carbon into the atmosphere, with effects lasting for about 200,000 years. The increase in carbon raised the Earth’s temperature by up to 16 degrees Fahrenheit. As a result, the planet was almost ice-free and sea levels rose significantly higher than they are now. It caused a mass extinction for single-cell creatures in the ocean, but animals on land, especially primates, thrived and rapidly evolved by moving toward the poles, where temperatures are lower.  There is still disagreement among scientists as to what triggered the carbon release during that era. Current theory posits that this mysterious release of carbon dioxide came from volcanoes and suggests that the warming may have been abetted by a sudden release of methane from the ocean floor.  But the new study, published yesterday in the journal Science, connects the warming to the impact of the extraterrestrial object.


  • Pentagon chief suspends National Guard bonus clawbacks (The Hill)  The Pentagon will suspend efforts to recoup bonuses overpaid to troops more than a decade ago, Defense Secretary Ash Carter announced Wednesday.  Carter said the suspension would begin "as soon as is practical", according to a Pentagon statement.  The issue has sparked widespread outcry from members of Congress, who called on the Pentagon to halt the recoupment efforts.  The Los Angeles Times reported Saturday that the Pentagon was trying to recoup more than $20 million from thousands of National Guard service members and veterans paid over a decade ago for re-enlisting at the height of the Iraq and Afghanistan wars.  The National Guard Bureau chief on Wednesday said that of 13,500 cases where bonuses or student loan payments were distributed, about 11,000 were found to have been given erroneously, due to ineligibility or due to not having the proper paperwork.

  • The U.S. economy could have best growth in 2 years (CNBC)   There's a chance the sluggish U.S. economy actually grew at a 3% pace or better in the third quarter — the best rate in two years.  Friday's third-quarter GDP report could be the first in eight quarters where growth has topped 2.6%. The last time was the third quarter of 2014, when it came in at 5%.  According to the CNBC/Moody's Analytics Rapid Update, economists now see third-quarter GDP growth tracking at a median rate of 3%.  Their actual forecasts (the average) are slightly lower at 2.9%.

  • Trump calls for '21st century' Glass-Steagall banking law (Reuters)  U.S. Republican presidential candidate Donald Trump on Wednesday called for a "21st century" version of the 1933 Glass-Steagall law that required the separation of commercial and investment banking, a change the Republican Party also supported in its 2016 policy platform.  Trump gave no details about his banking plan other than to say he would prioritize "helping African American businesses get the credit they need".  Democrat Hillary Clinton's husband, former president Bill Clinton, signed legislation in 1999 that repealed Glass-Steagall.

  • Polls tighten for Trump, Clinton (The Hill)   Polls are tightening in the presidential race with less than two weeks to go before Election Day.  Some new surveys show Democrat Hillary Clinton’s national polling edge narrowing and Republican Donald Trump performing more strongly in the swing state of Florida.

  • Early voting numbers show Clinton's strength in Arizona, other battlegrounds (CNN)  Hillary Clinton's campaign has reason for optimism in several swing states -- and appears to have turned Arizona into a battleground -- as millions of Americans vote early.  More than 7.3 million Americans have already voted. Democrats have improved their positions in North Carolina, Nevada and Arizona compared to this point in 2012, according to a CNN analysis of the latest early voting statistics.  Republicans, meanwhile, have good news in Iowa. Republicans have improved their position there over 2012 -- backing up the polls which suggest it could be the easiest state won by President Barack Obama for Trump to flip this year.  And in Florida, where the latest comparable data comes from 2008, Democrats -- buoyed by an increasingly diverse electorate -- have cut deeply into the traditional Republican advantage in early ballots cast so far. 


  • Manufacturing Activity in Europe Surprises to the Upside (Frank Holmes, U.S. Global Advisors)  FH has contributed to GEI.  Manufacturing activity in the eurozone strengthened sharply in October, beating expectations, according to “flash,” or preliminary, purchasing manager’s index (PMI) data. The region is growing at its fastest pace so far this year, having climbed to its highest reading since April 2014.



  • Calais 'Jungle' cleared of migrants, French prefect says (BBC News)  France says that it has completed an operation to move thousands of migrants out of the "Jungle" camp in Calais.  Fabienne Buccio, the prefect of Pas-de-Calais, said it was "mission accomplished" for the operation, which began on Monday.  But charities said many unaccompanied minors had not been processed and BBC reporters at the camp said groups of adults remained.  Fires burned at the camp overnight and during the day amid the clearance work.  The camp has become a key symbol of Europe's migration crisis, with its residents desperate to reach the UK.


  • IS driving hundreds into Mosul, using them as human shields (Associated Press)  Iraqi special forces have moved more than 1,000 people from villages near the front lines of the battle to retake the Islamic State-held city of Mosul.  Special forces Maj. Gen. Haider Fadhil says the residents of Tob Zawa and other nearby villages have been taken to a camp in the nearby Khazer region for their safety. The International Organization for Migration says at least 8,940 people have been displaced since the operation to retake Mosul began on Oct. 17.


  • Russia Drops Bid to Dock Ships at Spanish Port as NATO Adds Pressure (The New York Times)  Russia abruptly withdrew its application on Wednesday to dock three warships for refueling at a Spanish port, shortly after Spain’s partners in NATO urged Spain to turn away the vessels. The ships are heading to the eastern Mediterranean Sea to support Russian military operations in Syria.  Russia’s intention to dock the three warships, including its only aircraft carrier, the Soviet-era Admiral Kuznetsov, at Ceuta, a Spanish enclave on the north coast of Africa, was first reported in the Spanish news media on Tuesday evening.  The development set off alarm bells among the alliance defense ministers, who gathered in Brussels on Wednesday for a two-day meeting and warned Spain not to let the Russian ships dock.

  • Learning from the Cold War to prevent war with Russia today (Fabius Maximus)  FM has contributed to GEI.  Summary:

Clinton has stocked her foreign policy team with advisors belligerent and reckless, eager for conflict with Russia – continuing Team Obama’s work. The military-industrial complex’s propaganda mills work to arouse fear and hatred of Russia, as  they did during the Cold War. Let’s learn from that history before we starting risk a terrible war. We were told mostly false stories about the Soviet Union. How accurate are those about Russia? {This updates my post from Oct 2009.}


  • Rodrigo Duterte, Pushing Split with U.S., Counters Philippines’ Deep Ties (The New York Times)  President Rodrigo Duterte of the Philippines, who nurses a longtime grudge against the United States, has declared he wants “a separation” and on Wednesday added that he wants American troops out of his country in two years.  Speaking in Tokyo, Mr. Duterte said that he was willing to revoke the 2014 agreement letting the Pentagon use five Philippine military bases, a critical component of the Obama administration’s plan to bolster American influence in Asia.  While his threats have tapped a deep strain of resentment among Filipinos who feel as if they are treated like a second-class ally, the country’s deep cultural, economic and military ties to the United States make it unlikely that they will follow him on the path to divorce.  Especially not, as Mr. Duterte suggested in Beijing last week, all the way to China. Roilo Golez, who served as national security adviser to former President Gloria Macapagal Arroyo, said:

“Practically every family here has a relative in the U.S.  They don’t dream of going to China and living there.”

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

  • Nomi Prins: Deutsche Bank in the Dumps (Daily Reckoning)  Nomi Prins and Edward Harrison have both contributed GEI.  Nomi Prins spoke with Edward Harrison at RT (interview starts at 6:30) on the current new out from Deutsche Bank, the troubled German bank that is facing a $14 billion fine by the U.S Department of Justice.

“The problem is, Deutsche Bank does not have $14 billion dollars set aside. Its market cap is around $17 or $18 billion. It really does not have the funds… And now it is negotiating to get a better deal on its deal.”

  • America the Beautiful Bankrupt (Michael David White, The Right Track)  MDW has contributed to GEI.  In this piece he has used the “total government indebtedness” as calculated by Laurence Kotlikoff:  America’s Hidden Credit Card Bill (The New York Times).  Econintersect:  This treatment shows no recognition that the "credit card bill" determined for the federal government has no relationship whatsoever to the credit card debt accumulated by individuals.  It is a logical fallacy to infer that there is any connection.  Under the current financial system, the only way that Federal debt can reach $210 trillion is if private sector savings dollars also reach the same amount.  Prof. Kolikoff clearly knows numbers and clearly doesn't understand money creation.


  • New Book -- Rigged: How Globalization and the Rules of the Market Economy Were Structured to Make the Rich Richer (E-mail from Dean Baker)

In the past I haven’t harassed the people I know by e-mailing them about my books. I am this time because I think it’s important.

The book argues that the upward redistribution of the last four decades has been the result of deliberate policies, not the workings of the market and the process of globalization. The book is available as a free e-book at  or can be purchased in hard copy for the cost of printing and shipping. I am also happy to send a hard copy to anyone interested in a review copy.

The book discusses five major areas:

1)      Macroeconomic policy – a variety of policies, including fixation on low budget deficits and low inflation, along with an over-valued dollar have kept the economy below full employment for most of the last four decades. This both needlessly wastes output and disproportionately hurts workers at the middle and bottom by undermining their bargaining power in the labor market. 

2)      Financial sector – the selective regulation of the financial sector has created a framework where a small number of people can get incredibly rich at the expense of the rest of us. This includes a proliferation of wasteful trading, but also sweetheart deals for private equity and hedge fund managers with state pension funds, university endowments, and foundations.

3)      Intellectual property – policies have consistently worked to make patent and copyright protections longer and stronger. We have also used trade policy to impose these protections on other countries. As a result we pay hundreds of billions of dollars more each year than necessary for items like prescription drugs and medical equipment. There are more efficient ways to finance innovation and creative work.

4)      Corporate governance – we have an incredible corrupt corporate governance structure in which directors are effectively paid off to look the other way as CEOs and other top management rip-off shareholders. This is a problem not only from the standpoint of handing huge amounts of money to people who don’t deserve it, the high pay for CEOs also sets a pattern of pay for other sectors of the economy, inflating pay for the top executives in in universities, foundations, and private charities.

5)      Protection for highly paid professionals – the average pay of doctors in the United States is twice that of other wealthy countries. This amounts to roughly $100 billion a year in higher health care costs for the rest of us. This is largely due to the fact that doctors and many other highly paid professionals are largely protected from both foreign and domestic competition. There is little rationale for this protectionism other than to maintain the income of these people at the very top end of the wage distribution.  

I argue that if these sources of upward redistribution are reversed we could have much greater equality and a much stronger economy.

  • 116 Years of the Dow Jones Industrials, Inflation Adjusted (Chart of the Day)

    For some long-term stock market perspective, today's chart illustrates the inflation-adjusted Dow since 1900 -- there are several points of interest. Take for example an unlucky buy-and-hold investor that invested in the Dow right at the dot-com peak of December 1999. A decade and a half later, the inflation-adjusted Dow is up a mere 11%. That is not altogether an impressive performance considering that over 16 years have passed. On the other hand, take the investor who bought right at the end of the financial crisis. The inflation-adjusted Dow is up a significant 127% from its financial crisis lows -- not bad for a for a seven year investment. More recently, the inflation-adjusted Dow has rallied and is now only 2% away from a new all-time record high.

     The first chart below is as posted by The Chart of the Day.  The green support line is defined by 2 extraordinary economic events:  The bottom of The Great Depression in 1932 and the extraordinary high inflation and interest rate peak of the early 1980s.  The second chart below has an alternative support line (purple) defined by other minima, excluding the two extraordinary events.  The alternative support line is defined by the following market lows:  1921, 1943, 1949, 1974, 1983 and 1987.  The market low in 2009 did not come close to the alternative support level - so that puts us at 29 years since the market was last at support, exceeding the previous record of 11 years (1921-1932 and 1932-1943).  The current support is at approximately 7,000; in 2020 it will be about 8,000 provided there is very low inflation until then.


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