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What We Read Today 12 January 2017

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:

  • Department of Justice to Investigate Comey's Handling of Clinton's E-mails

  • Tillerson Called Out for Exxon Mobil Lying about Climate Change

  • Will Trump Drive High Economic Growth?

  • Outrage Expressed after BBC Claims there is Second Dirty Dossier on Trump

  • Is there a Demand for Incompetence in Government Inherent in Populism?

  • Geopolitical Recession Risk in 2017

  • Technology Drives Geopolitical Risk in the Middle East

  • Stock and Bond Divergence is Fickle

  • What China Needs to Get Right in 2017:  Trade

  • Mexican Drug Cartels have a $1 Billion Sideline:  Gasoline and Petroleum Theft

  • Mexico Inflation Spike May be Temporary

  • Political Correctness Explained in One Cartoon

  • And More

Articles about events, conflicts and disease around the world

Global

  • OPEC Hints at Further Production Cuts in May (Investopedia)  Oil production might fall further in 2017.  After reaching an agreement between member states and non-member states alike, the Organization of the Petroleum Exporting Countries (OPEC) is mulling an additional agreement to cut oil output once again.  OPEC's Secretary General Mohammad Barkindo told reporters on Thursday that the group was considering accelerating a timetable for lower oil production, which would lower oil reserves around the world and prop up commodity prices.

  • Martin Wolf on global economy in 2017 (YouTube)  The Financial Times presents an opinion video on the outlool for the global economy in 2017.

U.S.

  • Trump to Drive High Economic Growth (Investopedia)  In a new assessment of the economic outlook for the world, Fidelity Investments says economic growth and inflation are "likely to rise," which will create opportunities in international markets.  At the same time, Fidelity believes America's economy is in a healthy position. Fidelity Director of Asset Allocation Lisa Emsbo-Mattingly said in an interview that she believes American growth will remain strong but not surge. "I expect growth to continue at a steady clip," she said.  Part of this strength will result from the Trump administration's focus on deregulation and tax cuts, according to Emsbo-Mattingly:

"It would likely be positive for growth, but also inflationary ... Corporate leaders seem to be very enthusiastic with many anticipating a rollback in some regulations and a cut in taxes." 

  • Department of Justice to Probe Comey Letter (The Daily Beast)  The Department of Justice announced on Thursday that it will investigate allegations that the FBI and its chief, James Comey, did not follow proper procedures when Comey announced last July that the agency would not recommend charges for Hillary Clinton; and when Comey sent letters to members of Congress just days before the presidential election, re-igniting the former secretary of state’s email controversy. According to the Justice Department, the inspector general’s office will probe “allegations that Department or FBI policies or procedures were not followed in connection with, or in actions leading up to or related to” the aforementioned actions, which may have been taken based on “improper considerations”.  The department also said it would investigate whether a top FBI official with ties to Virginia’s Democratic Gov. Terry McAuliffe should have recused himself.

  • Tillerson Called Out for 'Lying About Climate' During Confirmation Hearing (Common Dreams, EcoWatch)  At his senate confirmation hearing on Wednesday, U.S. Secretary of State nominee Rex Tillerson dodged questions about ExxonMobil's long history of denying climate science, lending credence to claims his tenure would be a disaster for the planet.  When pressed by Sen. Tim Kaine (D-Va.) about the major charges unearthed by the ongoing ExxonKnew investigation—namely, that the oil company hid evidence going back to the 1970s of how the burning of fossil fuels impacts the climate, and funded misinformation campaigns to spread skepticism about growing scientific consensus—former Exxon CEO Tillerson "essentially pled the fifth," said Oil Change International executive director Stephen Kretzmann.  Tillerson, who recently separated from the company after 42 years, said:

"Since I'm no longer with ExxonMobil, I'm in no position to speak on their behalf.  The question would have to be put to them."

  • Outrage at BBC claims of SECOND Russian 'dirty dossier' on Trump amid claims they are trying to derail his presidency before it starts (Daily Mail)  The BBC was under fire today after it claimed a second 'dirty dossier' on Donald Trump exists and was accused of attaching too much credibility to the first one.  Foreign correspondent Paul Wood said last night that former British spy Christopher Steele is not the only person to say the Kremlin has covert footage related to his sex life.  He said a security source told him of 'more than one tape' on 'more than one date'.  Buzzfeed has been widely castigated - including by Trump himself - over publishing the salacious claims even though they have been unverified.  Yesterday Mr Trump "barracked" BBC International Correspondent Ian Pannell,telling the reporter to stand up when he tried to ask a question and then said: 'BBC News - there's another beauty'.

Russia

  • US tanks and troops in Poland a threat, Russia says (BBC News)  Russia says it views the arrival of more than 3,000 US soldiers in Poland as a threat to its own security.  The troops are part of President Barack Obama's response to reassure NATO allies concerned about a more aggressive Russia.  It is the largest US military reinforcement of Europe in decades.  President Vladimir Putin's spokesman Dmitry Peskov told the BBC that the move "threatens our interests and our security".

China

Click for larger image.
china.trade.1996.2016

Mexico

  • Drug Cartels Are Looting Mexican Gas Pipelines (Bloomberg)  The drug cartels have a lucrative sideline:  Stealing gasoline and other fuels.  Fuel theft creates a vicious cycle: The theft increases costs for Pemex and makes the official gasoline supply more scarce, contributing to higher prices for legal consumers. Theft amounts to about $1 billion a year, says Luis Miguel Labardini, an energy consultant at Marcos y Asociados and senior adviser to Pemex’s chief financial officer in the 1990s.  He says:

“If Pemex were a public company, they would be in financial trouble just because of the theft of fuel.  It’s that bad.”

  • Mexico cenbanker says recent price rises do not augur lasting inflation (Reuters, Yahoo Finance)  Mexico's central bank chief Agustin Carstens said on Thursday that a recent increase in prices does not reflect a sustained quickening in the pace of inflation and that the slide in the peso currency was exaggerated.  He also said the impact on prices from a recent government-led hike in gasoline costs will be transitory, adding that the central bank could hurt the economy if it overreacts.  A double-digit hike in gasoline prices this month that has spurred protests, looting and road blocks, is seen fanning inflation higher according to some analysts.  Mexico's annual inflation rate accelerated to its highest level in two years in December, as the peso plumbed record lows over market fears about the incoming U.S. administration of President-elect Donald Trump.  Econintersect:  The trend to devaluation of the peso star5ted long before Donald Trump even locked up the nomination, although if has accelerated since his election.  Chart below is from FXStreet.

Click for larger image.

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

We present a simple model of populism as the rejection of “disloyal” leaders. We show that adding the assumption that people are worse off when they experience low income as a result of leader betrayal (than when it is the result of bad luck) to a simple voter choice model yields a preference for incompetent leaders. These deliver worse material outcomes in general, but they reduce the feelings of betrayal during bad times. We find some evidence consistent with our model in a survey carried out on the eve of the recent U.S. presidential election. Priming survey participants with questions about the importance of competence in policymaking usually reduced their support for the candidate who was perceived as less competent; this effect was reversed for rural, and less educated white, survey participants.

  • Risk 5: Technology and the Middle East (Eurasia Group)  Middle Eastern governments have been weak for decades.  Most of the region's borders were created by Europeans and were never fit for purpose.  Legitimacy largely came from the outside, and then from energy money. The US and its allies ensured security.  Today, all of those things are in short supply.  Technology, a force for economic growth and efficiency, also exacerbates political instability. In the Middle East, the latter outcome is proving dominant for several reasons.

internet.penetration.middle.east

  • Forget 30 Years of Stock and Bond Divergence, Bernstein Says (Bloomberg)  Three decades of divergence between stocks and bonds may be about to end, according to Sanford C. Bernstein & Co., necessitating a total shift in investor assumptions. The new era, marked by rising or more volatile inflation, will see equities and bonds return to the correlation they’ve displayed since 1763, analysts led by Inigo Fraser Jenkins wrote in a recent note to clients.  Despite positive returns from both asset classes in recent years, brokerage and research firm Bernstein says that correlations have been in fact negative, an unusual occurrence historically. They attribute this to the decline in the level of inflation.  Now, not only will investors find it harder to diversify, they’ll also have to contend with rising volatility and a “markedly lower” return outlook for both asset classes.  The analysts say:

“A 60:40 allocation to passive long-only equities and bonds has been a great proposition for the last 35 years.  We are profoundly worried that this could be a risky allocation over the next 10.”

Click for large image.

political.correctness.tweet


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