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What We Read Today 31 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:

  • The stock market has boomed under Trump. What happens next might scare you.

  • The IMF Smashes Austerity Economics

  • Austerity Slows Economic Growth at the Expense of the Poor

  • How Does Unemployment Affect Consumer Spending

  • Another Milton Friedman Legacy Bites the Dust

  • The U.S. Still has Hold-over Prohibition Laws

  • China's Global Homebuyers Now Having Problems with Cash

  • Dems Boycotting Confirmation Meetings

  • Tech Has Problems with Trump's Immigration Moves

  • San Fransisco is Suing Trump

  • Is Populism Anti-Business?

  • Neil Gorsuch Likely SCOTUS Nominee

  • Trumps Challenge:  The Iran Nuclear Deal

  • Europe's Abandoned Youth

  • Measuring Brexit Success or Failure

  • UK will Still Trade with Europe after Brexit

  • Netanyahu will Seek renewed Iran Sanctions when Meeting with Trump

  • Russia Sold 19.5% of Rossneft, But To Whom is Not Known

  • Trump Seeks Quick Progress on Japan Trade Deals

  • And More

Articles about events, conflicts and disease around the world

Global

  • China’s Army of Global Homebuyers Is Suddenly Short on Cash (Bloomberg)   China’s escalating crackdown on capital outflows is sending shudders through property markets around the world.  In London, Chinese citizens who clamored to purchase flats at the city’s tallest apartment tower three months ago are now struggling to transfer their down payments. In Silicon Valley, Keller Williams Realty says inquiries from China have slumped since the start of the year. And in Sydney, developers are facing “big problems” as Chinese buyers pull back, according to consultancy firm Basis Point.  There have been reductions in off-shore insurance purchases and M&A activity.

U.S.

  • Dems boycott confirmation votes for Trump nominees (The Hill)  Senate Democrats on Tuesday refused to attend a committee vote on two of President Trump’s more controversial nominees, effectively delaying their consideration.  Democrats on the Senate Finance Committee boycotted votes to advance Rep. Tom Price (R-Ga.), Trump’s pick to head the Department of Health and Human Services, and Steven Mnuchin, his selection to head the Treasury Department. The pair had been among some of the more contentious selections to join Trump’s Cabinet.  Republicans expressed outrage at the move, while Democrats gathered outside the Senate Finance Committee hearing room to outline their gripes with the selections.

  • Trump’s Next Immigration Move to Hit Closer to Home for Tech (Bloomberg)   President Donald Trump’s clash with Silicon Valley over immigration is about to become even more contentious.  After the new president banned refugees and travelers from seven predominantly Muslim countries, Google, Facebook, Salesforce, Microsoft and others railed against the move, saying it violated the country’s principles and risked disrupting its engine of innovation. Trump’s next steps could strike even closer to home: His administration has drafted an executive order aimed at overhauling the work-visa programs technology companies depend on to hire tens of thousands of employees each year.  If implemented, the reforms could shift the way American companies like Microsoft Corp., Amazon.com Inc. and Apple Inc. recruit talent and force wholesale changes at Indian companies such as Infosys Ltd. and Wipro Ltd. Businesses would have to try to hire American first and if they recruit foreign workers, priority would be given to the most highly paid.  The draft proposal reads, according to a copy reviewed by Bloomberg:

 “Our country’s immigration policies should be designed and implemented to serve, first and foremost, the U.S. national interest.  Visa programs for foreign workers … should be administered in a manner that protects the civil rights of American workers and current lawful residents, and that prioritizes the protection of American workers -- our forgotten working people -- and the jobs they hold.”

  • San Francisco sues Trump over sanctuary city order (Reuters)  San Francisco is the first city to sue over the president's executive order withdrawing funding for local governments with sanctuary policies toward undocumented immigrants.

  • Ray Dalio Says Trump’s Populism May Overpower Pro-Business Policies (Bloomberg)  Ray Dalio, the billionaire who runs the world’s largest hedge fund, said he’s becoming more concerned that the damaging effects of President Donald Trump’s populist policies may overwhelm the benefits of his pro-business agenda.  Dalio, who initially was bullish on Trump’s ability to stimulate the economy, is turning sour on the new leader following his ban on visitors from seven mostly Muslim countries and his proposed border tax on Mexican goods. 

  • Gorsuch told he is likely Trump's Supreme Court pick: CNN (Reuters)  Conservative U.S. appeals court judge Neil Gorsuch has been told he is likely President Donald Trump's pick to fill a seat on the U.S. Supreme Court that has been vacant for almost a year, CNN reported on Tuesday, citing an unnamed source.  Gorsuch, 49, who would replace the late Antonin Scalia, is a judge on the Denver-based 10th U.S. Circuit Court of Appeals. He was appointed by President George W. Bush in 2006. Some Democrats in the U.S. Senate, which votes on whether to confirm judicial nominees, have already said they would seek to block whoever Trump nominates.

  • 9 foreign policy issues the Trump administration will have to face (The Washington Post)  Issue #7 is the Iran Nuclear Deal:

The Iran nuclear deal reached in 2015 will come under intense strain during the Donald Trump presidency. Trump has at times said he wants to “rip it up,” which would be highly unpopular with the European allies who also negotiated the deal. Other times, Trump has said he would try to renegotiate, which the Iranians have shown no inclination to do.

Iran nuclear deal is in the crosshairs and may not survive a Trump administration ]

At the very least, the Trump administration is likely to be more confrontational with the Islamic republic than the Obama administration, whose priority was keeping the agreement alive. Trump has been urged to adopt a zero tolerance policy toward even temporary breaches of agreed-upon limits on heavy water or uranium.

Up to now, the United States has not made a big deal of violations when they were deemed minor, accidental and quickly rectified. Congress could pass new sanctions on non-nuclear issues such as human rights abuses, missile testing and terrorism support. Tehran will make the case that the United States, not Iran, is to blame if the nuclear deal collapses.

From the archives: 'Iran deal: What they said. What they got.' ]

The showdown could escalate and impact efforts to end the war against the Islamic State in Syria, where Russia and Iran support the government, and create fissures with allies who think engagement with Iran will help undercut radical elements in Iran.

EU

youth.abandoned.europe

UK

  • Can Brexit's success or failure be objectively measured? This think tank hopes so. (City A.M.)   A think tank is trying to draw the sting out of Brexit debates by laying out a framework to judge the success of the UK's departure from the EU.  A new report, published today by UK in Changing Europe, proposes four economic tests for an assessment of Brexit, just days before MPs will first vote on granting Prime Minister Theresa May the right to launch divorce proceedings.  Revealing its findings, it argued that both and Leave and Remain campaigners acknowledged the importance of economic growth and social cohesion, as well as the need for the UK to hold control over its economy.

  • Brexit won't break Britain's trading relationships with Europe, study shows (City A.M.)   British businesses will continue to have a strong trading relationship with European customers and suppliers despite the Brexit vote, research to be released today suggests.  Of 1,500 business people surveyed, around 75% currently sell and source goods and services in the EU market, and UK companies will continue to see Europe as a vital trading partner after the UK leaves the European Union, the survey by the British Chambers of Commerce (BCC) shows.  More than a third of businesses (36%) plan on funnelling more resources into exporting to the European market over the next five years, and 18% plan to allocate more resources to sourcing products and services from Europe.

Iran

  • Netanyahu to Discuss Renewed Sanctions on Iran With Trump (Bloomberg)  Israeli Prime Minister Benjamin Netanyahu said he will bring up renewed sanctions on Iran when he meets with U.S. President Donald Trump at the White House next month, citing a reported testing of a ballistic missile by the Islamic Republic.

Russia

  • How Russia sold its oil jewel: without saying who bought it (Reuters)   More than a month after Russia announced one of its biggest privatizations since the 1990s, selling a 19.5% stake in its giant oil company Rosneft, it still isn't possible to determine from public records the full identities of those who bought it.  The stake was sold for €10.2 billion ($11.0 billion) to a Singapore investment vehicle that Rosneft said was a 50/50 joint venture between Qatar and the Swiss oil trading firm Glencore.  Unveiling the deal at a televised meeting with Rosneft's boss Igor Sechin on Dec. 7, President Vladimir Putin called it a sign of international faith in Russia, despite U.S. and EU financial sanctions on Russian firms including Rosneft.  But the money declared invested by the announced buyers is a tiny fraction of the indicating that most of the deal is backed by 'silent partners'. 

Japan

  • Trump to seek quick progress with Japan's Abe on replacement trade deal (Reuters)  President Donald Trump will seek quick progress toward a bilateral trade agreement with Japan in place of a broader Asia-Pacific deal he abandoned this week, when Japanese Prime Minister Shinzo Abe visits the White House next month, an official in the Trump administration said last Thursday.

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

New governments with authoritarian tendencies have historically brought about bull markets even before they led to disaster. Governments with much stronger authoritarian tendencies than anything plausible in the U.S. — like those of Hitler or Mussolini — nonetheless saw strong markets in their early years.

I am not sure which is more difficult: predicting what Trump will do next or timing the market. Either way after the events of the last week, it is much easier to imagine downside than upside scenarios.

A powerful new report finally kills off any remaining intellectual veil for a broken economics that is breaking society.

Sometimes an ideology is so brilliantly propagated that observers might not even notice it’s an ideology. In the corridors of power and in mainstream discussion, it ceases to be questioned. Then it goes catastrophically wrong. And it begins to seen again for the ideology it is. It becomes questioned again. And, if they are smart, leaders hear this and start to self-correct. This is where we’ve got to with neoliberalism, austerity, and rising inequality. Except for the self-correct part. Right now, instead of self-correction, we’re seeing many mainstream politicians unable to shift away from dead economics, and what seems in too many countries like the start of social breakdown. Change is well overdue. Who can prompt leaders to drop the old economic nostrums that are causing so much harm?

The overall intent of the literature they developed was to force governments to abandon so-called fiscal activism (the discretionary use of government spending and taxation policy to fine-tune total spending so as to achieve full employment), and, instead, empower central banks to disregard mass unemployment and fight inflation first. Several strands of their work – the Monetarist claim that aggregate policy should be reduced to a focus on the central bank controlling the money supply to control inflation (the market would deliver the rest (high employment and economic growth, etc); the promotion of a ‘natural rate of unemployment’ such that governments who tried to reduce the unemployment rate would only accelerate inflation; and the so-called Permanent Income Hypothesis (households ignored short-term movements in income when determining consumption spending), and others – were woven together to form a anti-government phalanx. Later, absurd notions such as rational expectations and real business cycles were added to the litany of Monetarist myths, which indoctrinated graduate students (who became policy makers) even further in the cause. Over time, his damaging legacy has been eroded by researchers and empirical facts but like all tight Groupthink communities the inner sanctum remain faithful and so the research findings haven’t permeated into major shifts in the academy. It will come – but these paradigm shifts take time.

unemployed.spending

  1. Bans on Supermarket Alcohol Sales

  2. Government Alcohol Monopolies

  3. Regulations on Shipping

  4. Mandatory “Franchises”

  5. Restricted Sunday Sales


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