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What We Read Today 27 December 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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Topics today include:

  • The Father of Economics is Charles Darwin, Not Adam Smith

  • Could a Union Bank Address the Student Loan Debt Problem?

  • Student Loan Defaults are 10-20% and 43% are Not Current on Payments

  • Why Is It So Hard to Get Rid of Student Debt?

  • For Some Anything They Don't Agree With is Fake News

  • Tesla and Panasonic Start Soar Panel Production in Buffalo

  • Only One Leading Candidate for President Had Positive Net Favorability Ratings in 2016

  • Chinese Hackers Use Stolen Law Firm Data for 'Insider' Trading

  • Italy is Now a Bigger Threat for a Eurocrisis than Greece

  • Italy's Stock Market Yawns after Monte Paschi Bank Failure

  • The First Alleged Coup Conspirators Go On Trial in Turkey

  • First Flight Recorder Recovered from the Black Sea

  • Three Trading Companies in India Have More Gold than Many Nations

  • Old Notes Selling at 10% Premium in India Bazaars

  • Penalty Will Soon Be Imposed By the Indian Government for Holding Old Notes

  • Abe Visits Pearl Harbor as Japan Ends 70 Years as "Peace State"

  • Former President Cristina Fernandez Indicted  in Argentine Corruption Case

  • And More

Articles about events, conflicts and disease around the world


The C.I.A., the F.B.I. and the White House may all agree that Russia was behind the hacking that interfered with the election. But that was of no import to the website Breitbart News, which dismissed reports on the intelligence assessment as “left-wing fake news.”

Rush Limbaugh has diagnosed a more fundamental problem. “The fake news is the everyday news” in the mainstream media, he said on his radio show recently. “They just make it up.”

Some supporters of President-elect Donald J. Trump have also taken up the call. As reporters were walking out of a Trump rally this month in Orlando, Fla., a man heckled them with shouts of “Fake news!”

Click for large image.favorability.ratings.2016.dec

  • Chinese Hackers Charged With Trading on Stolen Law Firm Data (Bloomberg)   Three Chinese hackers made more than $4 million in illicit profits after breaking into the servers of top deals law firms in New York, the U.S. said in announcing charges and the arrest of one of the men.  They bought shares in at least five companies before deals were announced, based on information obtained from the e-mail accounts of lawyers involved in those transactions, the U.S. said in a statement on Tuesday.  Some of the transactions involved the drug maker Intermune, chipmaker Intel Corp. and business services company Pitney Bowes Inc., the U.S. said. The U.S. Securities and Exchange Commission filed a parallel civil complaint and is seeking to freeze their assets.  Iat Hong and Chin Hung of Macau, and Bo Zheng, of China were charged. Hong was arrested in Hong Kong on Christmas Day and is awaiting extradition.


Click for large image.italy.greece.eurocrisis.odds.2016.dec.27


  • How JPMorgan could not save Italy's problem bank (Reuters)  JPMorgan's plan to clear out €28 billion ($29 billion) in bad debts and raise €5 billion in equity ended in failure in the early hours last Friday when the Tuscan lender said it could not find enough investors and asked the government to bail it out.  In the first day trading since Friday the Italian bank index has been a little soft, but the broader stcok index has been moving up smartly.  (Twitter)

Click for large image.


  • Turkish police in court for first Istanbul trial over coup plot (BBC News)  Twenty-nine police officers have gone on trial in a Turkish prison accused of trying to overthrow the government in the failed July coup.  It is the first trial of alleged plotters to take place in Istanbul since the abortive coup.  Turkey has arrested some 40,000 people and sacked even more after parts of the army and police tried to oust President Recep Tayyip Erdogan.  The coup was blamed on US-based Islamic cleric Fetullah Gulen.  He has denied the allegations but the Turkish president has warned that the Gulenist movement is still active within Turkey.  The murder of Russian ambassador Andrei Karlov by an off-duty policeman has also been linked to Gulenists, although the gunman shouted slogans about the Syrian city of Aleppo before he was shot dead.


  • Russian plane crash: Experts begin examining flight recorder (BBC News)  Russian air experts have begun examining one of the flight recorders from a plane that crashed into the Black Sea on Sunday, killing 92 people.  The flight data recorder was found underwater about a mile from the shore, and the authorities say it is in "satisfactory condition".  At least 12 bodies have been also been recovered so far, along with numerous fragments of the plane.  No cause has been established but terrorism is considered unlikely.  On board the Tu-154 jet when it crashed were 64 members of the famed Alexandrov military music ensemble, as well as one of Russia's best-known humanitarian figures, Yelizaveta Glinka.  It was heading to Russia's air force base in Syria where the ensemble were due to perform at a New Year's concert.


  • Gold holding of 3 Kerala companies more than Australia's (The Times of India)  The gold holdings of the three largest gold loan companies in Kerala have grown from 195 tonnes two years ago to nearly 263 tonnes towards the end of September 2016. Between them, they have more precious metal in their vaults than the gold reserves of some of the richest nations.  Muthoot Finance, Manappuram Finance and Muthoot Fincorp jointly hold nearly 263 tonnes of gold jewellery, which is higher than the gold reserves of Belgium, Singapore, Sweden or Australia.  India accounts for approximately 30% of the global demand for gold and tops the list of countries consuming gold jewellery, with a consumption of 107.6 tonnes during Q3 of calendar year 2016. Compared to this, Europe and North America together consumed only 67.1 tonnes in the same period. China, the second-largest gold jewellery buyer in the world, consumed 98.1 tonnes over the same period.

  • Old notes selling at a premium in Kolkata market (The Times of India)  At a time when people across the country are queuing up outside banks to get rid of old Rs 500 and Rs 1000 notes, the scrapped currencies are selling at a 10% premium in the serpentine bylanes of trading hub Burrabazar.   But see the next article.

  • Ordinance soon to impose penalty for holding old notes (The Times of India)  I: The government will soon issue an ordinance imposing a penalty for possession of scrapped Rs 500 and Rs 1,000 notes after the 50-day window for depositing old notes in banks ends on December 30.  Possession of the old notes will only be permitted for the purpose of research and numismatics and the measure is intended to end any prospect of a "parallel currency" continuing after the deadline.   The ordinance will, however, have a clause allowing people to deposit scrapped notes at RBI branches as promised by the government, after giving reasons for doing so.


  • Abe to Answer Obama’s Hiroshima Visit With Trip to Pearl Harbor (Bloomberg)  Japanese Prime Minister Shinzo Abe will visit Pearl Harbor on Tuesday, the first Japanese leader in decades to tour the site of the surprise attack that drew the U.S. into World War II.  Abe is not expected to apologize for Japan’s 1941 attack, which killed more than 2,000 Americans and temporarily crippled the U.S. Pacific fleet. But his visit was cast as a gesture of reconciliation matching President Barack Obama’s trip to Hiroshima earlier in the year, when the American president likewise stopped short of apologizing for the use of an atomic bomb on the city.

  • Japan’s change in military outlook marks the end of a ‘Peace State’ (The Conversation)  Combat could be on the cards for the first time in over 70 years.  

Thanks to the constitution imposed on its citizens by the US after the end of World War II, Japan has long been thought of by pacifists as a “Peace State”. Article 9 of the constitution states that:

The Japanese people forever renounce […] the threat or use of force as means of settling international disputes.

It goes on to state that “land, sea, and air forces, as well as other war potential, will never be maintained. The right of belligerency of the state will not be recognized”.

[But] as of March 2016, the Japanese Self Defence Forces are allowed to engage in “collective self defence” and to come to the aid of an ally under attack.


  • Judge Indicts Former Argentine President in Corruption Case (Bloomberg)  Former Argentine President Cristina Fernandez was indicted Tuesday in a corruption case involving public works.  Federal Judge Julian Ercolini approved charges of illicit association and fraudulent administration against Fernandez, and two former aides: ex-Planning Minister Julio de Vido and former Public Works Secretary Jose Lopez.  Also named was businessman Lazaro Baez, whose Austral Construcciones company allegedly benefited from irregular contracts.  The judge's order froze the equivalent of up to $633 million of each defendant's assets, though it was not clear they have that much.  The ruling published by official Center of Judicial Information said the defendants are accused of associating to illegally take public funds meant for public works between May 2003 and December 2015.

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

Amidst the gloom that envelopes both Left and Right, evidence grows that another discontinuity in history approaches — a singularity. If so, it will evaporate many of today’s problems and create new ones. Only aware eyes and open minds can prepare for what is coming. 

  • A Construction Union Bank Could Lower Student Debt and Benfit American Workers (John Leonard, The New People)  Hat tip to Roger Erickson.  Many student loans are now being charged 11%. With a $100,000 loan @ 11% for 25 years, the student now pays $960 per month.  The author proposes that a union bank be formed with $100 million of union funds for the purpose of funding student loans.  He calculates that the student who was paying $960 a month would pay $550 with the new loan.  The author points out that with $100 million of reserve, the bank is able to fund 10X that ($1 billion) in student loans which will pay nearly $40 million (after operating expenses are deducted) in interest @ 4%.  The bank thus sees the original reserve replaced with interest received in less than 3 years and then is operating with "self-funded" reserves and returning a profit to be used for union projects every year thereafter.  Econintersect:  What the author's hypothetical ignores is that student loans have a high default rate (see following articles).  Now the leverage ratio of 10:1 (loans:reserves) bites the other way.  If there is a permanent default rate of 10% then the entire reserve is lost in principle defaults and the interest payments are 10% less.  Thus it takes three years or more to replenish (rather than replace) reserves and the ongoing income is reduced.  An additional operating expense is added for recovery to the extent possible from defaulted loans.  How much operating expenses are increased to seek these recoveries is not known to us, but they are likely to be substantial and greatly reduce operating margins.  If default rates were to be 20%, the entire enterprise will need to be carefully recalculated. 

  • Default Rates for Cohort Years 2007-2011 (

  • Why Seven Million Student Loan Defaulters Are In A Standoff With Uncle Sam (Zero Hedge)  To put the student loan issue into perspective, there is roughly $1.3 trillion of student loans outstanding to 43mm Americans, an average balance of $30k per student.  Roughly 16% of borrowers are currently in long-term default with outstanding balances totaling $125 billion, or an average balance of $18k per student.

  • More Than 40% of Student Borrowers Aren’t Making Payments (The Wall Street Journal)  More than 40% of Americans who borrowed from the government’s main student-loan program aren’t making payments or are behind on more than $200 billion owed, raising worries that millions of them may never repay.

  • Why It's So Hard to Get Rid of Student Debt (Bloomberg)  Student debt is almost impossible to write off.  If one defaults, the default stays with them forever - it cannot be resolved via bankruptcy, except for very unusual circumstances.  So a student debt default is, in effect, only a temporary cessation of repayment.  Repayment will restart at any time the debtor is able to make payments, through wage garnishment, for example.

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