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What We Read Today 31 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".).

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Topics today include:

  • The Tragedy of the Commons

  • The Only Woman to Win the Nobel Prize in Economics Solved the Commons Dilemma

  • Collective Action without Regulation

  • There is No "Natural Rate of Interest" if You Look at the Data

  • Loanable Funds Theory of Banking - Why It Is Both Logical and Wrong

  • FBI's James Comey's Selective Observation of Established policy

  • Latest on Clinton's E-mails

  • Trump Has Illegally Deleted Thousands of E-Mails and Documents - Cases Still Drag On

  • Other Trump Legal Problems Awaiting Trial

  • Donna Brazile Sent Hillary Debate Questions in Advance

  • Italy Risk Premium Hits New High

  • Iraqi Forces Approach Mosul

  • Yuan Devaluation Triggers Massive Capital Flight from China

  • And More

Articles about events, conflicts and disease around the world

U.S.

  • FBI's Comey opposed naming Russians, citing election timing: Source (CNBC)   FBI Director James Comey argued privately that it was too close to Election Day for the United States government to name Russia as meddling in the U.S. election and ultimately ensured that the FBI's name was not on the document that the U.S. government put out, a former FBI official tells CNBC.  The official said some government insiders are perplexed as to why Comey would have election timing concerns with the Russian disclosure but not with the Huma Abedin email discovery disclosure he made Friday.  In the end, the Department of Homeland Security and The Office of the Director of National Intelligence issued the statement on Oct. 7, saying:

"The U.S. intelligence community is confident that the Russian Government directed the recent compromises of emails from US persons and institutions, including from US political organizations…These thefts and disclosures are intended to interfere with the US election process."

Current and former FBI officials have launched a media counter-offensive to engage head to head with the Clinton media machine and to throw off the shackles the Loretta Lynch Justice Department has used to stymie their multiple investigations into the Clinton pay-to-play network.

Over the past weekend, former FBI Assistant Director and current CNN Senior Law Enforcement Analyst Tom Fuentes told viewers that “the FBI has an intensive investigation ongoing into the Clinton Foundation.” He said he had received this information from “senior officials” at the FBI, “several of them, in and out of the Bureau.” 

  • Trump's Missing Emails (Newsweek)  Over the course of decades, Donald Trump’s companies have systematically destroyed or hidden thousands of emails, digital records and paper documents demanded in official proceedings, often in defiance of court orders. These tactics—exposed by a Newsweek review of thousands of pages of court filings, judicial orders and affidavits from an array of court cases—have enraged judges, prosecutors, opposing lawyers and the many ordinary citizens entangled in litigation with Trump. In each instance, Trump and entities he controlled also erected numerous hurdles that made lawsuits drag on for years, forcing courtroom opponents to spend huge sums of money in legal fees as they struggled—sometimes in vain—to obtain records.

  • Federal Judge Orders Status Conference in Trump Rape Lawsuit (Snopes)  A similar suit by this plaintiff was thrown out in California earlier this year.  This case might be thrown out on statute of limitations grounds.

Judge Status Conference Order Jane Doe. V Trump by LawNewz on Scribd

  • Donald Trump and Kids Named in $250M Tax Scam (The Daily Beast)  Donald Trump is described as a “material witness” in the evasion of taxes on as much as $250 million in income. According to the court papers, that includes $100 million in profits and $65 million in real-estate transfer taxes from a Manhattan high rise project bearing his familiar name.Trump received tens of millions of dollars in fees and partnership interests in one of the four projects, the Trump Soho New York, a luxury high rise in lower Manhattan. His son Donald Junior and his daughter Ivanka also were paid in fees and partnership interests, the lawyers said, and are also material witnesses in the case.

  • Trump Can’t Delay November Fraud Trial Against Ex-Students (Bloomberg)  In September, Donald Trump failed to persuade a federal judge to postpone a Nov. 28 trial in which he’ll face former enrollees in his real-estate seminars who claim they were cheated.  U.S. District Judge Gonzalo Curiel in San Diego on Thursday rejected the request by the Republican presidential candidate’s lead lawyer to put off the trial until January. Trump’s lawyer, Dan Petrocelli, had asked for the delay because he has another case going to trial less than two weeks before the Trump University dispute and argued he wouldn’t be able to prepare adequately.

  • The Many Scandals of Donald Trump: A Cheat Sheet (The Atlantic)  The Republican nominee faces a series of allegations of sexual assault, an embarrassing tape in which he boasts about committing sexual assault, a series of old comments, and a civil suit accusing him of rape.  Here is some deeper history,

  • WikiLeaks release shows Brazile passed along question ahead of CNN debate (USA Today)  Donna Brazile warned Hillary Clinton’s campaign that she would be asked about lead poisoning in Flint, Mich., ahead of a primary debate, according to an email released by WikiLeaks Monday.  Another email revealed earlier this month showed Brazile passing along a question about the death penalty ahead of a town hall that she said “worries me about HRC”.  Wikileaks has been posting hacked emails from Clinton's campaign chairman, John Podesta.   Brazile, who is now the interim chair of the Democratic National Committee, worked as a CNN contributor and vice-chair of the DNC in March 2016. 

Italy

Iraq

  • In dawn assault, Iraqi special forces near Mosul from east (Associated Press)   Iraqi special forces advanced on the Islamic State-held city of Mosul from the east on Monday, taking heavy fire but inching closer to the city's limits.  Car bombers are trying to stop the advance, but the troops, just 2 miles (3 kilometers) from Mosul's eastern outskirts, aim to enter it later in the day, Brig. Gen. Haider Fadhil said.  The dawn assault saw armored vehicles, including Abrams tanks, move on the village of Bazwaya as allied artillery and airstrikes hit IS positions, drawing mortar and small arms fire.  For two weeks, Iraqi forces and their Kurdish allies, Sunni tribesmen and Shiite militias have been converging on Mosul from all directions to drive IS from Iraq's second largest city. The operation is expected to take weeks, if not months.

China

60% of high net-worth individuals (HNWI) in China are planning to buy real estate in other countries over the next three years, with the target of moving one-third of their wealth overseas, according to an annual survey, conducted by Hurun Research Institute and Visas Consulting Group.

In terms of countries, the top eight:

  1. US

  2. UK, “which held onto second place despite Brexit”

  3. Canada

  4. Australia

  5. Singapore

  6. Ireland, which “broke into the Top 10 for the first time, shooting straight into sixth place”

  7. Germany

  8. Spain

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

  • The Tragedy of the Commons (Garrett Hardin, Science, 1968)  This epic essay outlines the dilemma of destruction of the greater good by the actions of self-interest-seeking individuals.  This is a convincing argument against the philosophy that a society of self-interest maximizing individuals results in an optimized society through efficient competition.  The basis of the argument is that the flaw in the libertarian thinking is the assumption of perfect competition - someone or some group will almost always gain the upper hand and dominate the vast majority of the remainder, destroying "the commons".  Garrett asserts that the solution involves "mutually agreed mutual coercion" to some extent, ie., regulation.

  • The Tragedy of the Commons: How Elinor Ostrom Solved One of Life’s Greatest Dilemmas (Evonomics)  The only woman to receive a Nobel Prize in economics was not an economist, but a political scientist named Elinor Ostrom.  Starting with her thesis research on how a group of stakeholders in southern California cobbled together a system for managing their water table, and culminating in her worldwide study of common-pool resource (CPR) groups, the message of her work was that groups are capable of avoiding the tragedy of the commons without requiring top-down regulation, at least if certain conditions are met (Ostrom 1990, 2010). She summarized the conditions in the form of eight core design principles:

  1. Clearly defined boundaries;

  2. Proportional equivalence between benefits and costs;

  3. Collective choice arrangements;

  4. Monitoring;

  5. Graduated sanctions;

  6. Fast and fair conflict resolution;

  7. Local autonomy;

  8. Appropriate relations with other tiers of rule-making authority (polycentric governance). 

  • Governing the Commons:  The Evolution of Institutions for Collective Action (Elinor Ostram, Cambridge University Press, 1990)  This is perhaps the best book-length summary written by Ostram on her seminal life work.

  • The “Natural” Interest Rate and Secular Stagnation: Loanable Funds Macro Models Don’t Fit the Data  (Lance Taylor, INET)  Mostly because saving is a residual quantity in ways discussed by Taylor in this paper, loanable funds theory is not consistent with data on the composition of gross domestic product (GDP).  Yet this is the theoretical underpinning of central bank actions with interest rates in the aftermath of the Great Financial Crisis.  This paper reveals that there is a reason zero interest rate policies (ZIRP) and negative interest rate policies (NIRP) have been ineffective:  they cannot work as envisioned because credit markets do not work as described by loanable funds theories.

  • The Loanable Funds Theory of Interest (With Criticisms) (Micro Economics Notes)  One of the most egregious failings of the loanable funds theory is that it asserts that government, businesses, and consumers compete for loans from existing savings.  In fact, the government does not compete with the other two for money in any way; the government is constitutionally the issuer of money and the two private sector macro entities are users of money.  Here is an excerpt from this article:

    Demand for Loanable Funds:

    The demand for loanable funds has primarily three sources i.e., government, businessmen and consumers who need them for purposes of investment, hoarding and consumption. The government borrows funds for constructing public works or for war preparations.

    The businessmen borrow for the purchase of capital goods and for starting investment projects. Such borrowings are interest elastic and depend mostly on the expected rate of profit as compared with the rate of interest.

    The demand for loanable funds on the part of consumers is for the purchase of durable consumer goods like scooters, houses, etc. Individual borrowings are also interest elastic. The tendency to borrow is more at a lower rate of interest than at a higher rate in order to enjoy their consumption soon. Since this demand for funds is mostly met out of past savings or through dis-saving, it is represented by the curve Ds in Figure 2.

    Lonable Funds and Rate of Interest

    The demand curve for investment funds, both for the government and the businessmen is shown as curve I. It slopes downward showing that less funds are borrowed at a higher rate and more at a lower rate of interest.

    Lastly, funds are demanded for the purpose of hoarding them in liquid form or as idle cash. They are also interest elastic and are shown by the curve H. The lateral summation of these curves H, Ds and 1 gives us the aggregate demand curve for loanable funds SD.

    Supply of Loanable Funds:

    The supply of loanable funds comes from savings, dis-hoardings and bank credit. Private, individual and g corporate savings are the main source of savings. Though personal savings depend upon the income level, yet taking the level of income as given they are regarded as interest elastic.

    The higher the rate of interest, the greater will be the inducement to save and vice versa. Corporate savings are the undistributed profits of a firm which also depend on the current rate of interest to some extent. If the interest rate is high, it will act as a deterrent to borrowing and thus encourage savings. Savings are indicated as curve S in the Figure 2.

    The second source is the volume of funds coming out of hoards or being added to them. Dishoarding may represent not only purchase of old assets or securities from others out of idle cash balances of one’s own funds for net investment or for consumption in purchases in excess of net disposable income. Such funds are directly related to the rate of interest.

    The higher the interest rate the larger the funds that will be coming out of hoards and vice versa. These funds are represented by the curve Dh. Lastly, there is the bank credit as an important source of the supply of loanable funds.

    Bank credit or money is also interest elastic to some extent. More funds are lent at a higher than at a lower rate of interest. Bank credit is shown as the curve M. If these curves DH, M and S are laterally added up, we have the aggregate supply curve SS of loanable funds.

    The total demand curve for loanable funds SD and the total supply curve of loanable funds SS intersect at E and give OR rate of interest. At this rate OQ amount of funds are borrowed and lent.

    Econintersect:  The problem with this theory, which does include bank credit as a source of loanable funds, is that it fails to recognize that bank credit is the overwhelming source of loans and that existing savings and money hoarding are entirely negligible in the lending process. 


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