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What We Read Today 10 February 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:

  • Trump Promises New Security Steps After Court Setback

  • Trump Vows Level Playing Field for Currencies

  • Why Trump is Poorly Informed on China's Currency Valuation Moves

  • The 'Top Cop' for Banking Regulation Enforcement on The Fed Board Resigns

  • The Trump Order on Regulations will Help Large Corporations, Not Small Business

  • Trump Needs an Afghanistan Plan

  • China's Foreign Reserves Sink Below Important Level

  • Should China Worry about its Falling Foreign Exchange Reserves?

  • Trump Accedes to Beijing's One-China Policy

  • Vancouver’s Empty Mansions Highlight Middle-Class Housing Woes

  • Shootouts in Mexico Show Trump's Drug Cartel Fight will be Tough

  • Trump's Rejection of Science

  • A Socialist Strategy to Defeat Trump

  • Nominal Wage Growth Show U.S. Economy is not Overheating

  • Twitter Stock 'Freefall'

  • Immanuel Kant and the Philosophy of Freedom 

  • And More

Articles about events, conflicts and disease around the world

U.S.

  • Trump promises new security steps after travel ban court setback (Reuters)   U.S. President Donald Trump promised on Friday to introduce additional national security steps, a day after an appeals court refused to reinstate his travel ban on refugees and citizens from seven Muslim-majority countries, and he expressed confidence his order would ultimately be upheld by the courts.  The White House is not ruling out the possibility of rewriting Trump's Jan. 27 order in light of the actions by a federal judge in Seattle and an appeals court in San Francisco that put the directive on hold, an administration official said.  Trump's order, which he has called a national security measure to head off attacks by Islamist militants, barred people from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen from entering for 90 days and all refugees for 120 days, except refugees from Syria, who are banned indefinitely.  See also Trump on Immigration Power: I Can Do Whatever I Want (Bloomberg).

  • Trump Vows ‘Level Playing Field’ for U.S., Japan, China Currency (Bloomberg)  President Donald Trump vowed Friday that the currencies of the U.S., China and Japan would soon be on "a level playing field" a day after a phone call with China’s president, Xi Jinping.  See Econintersect comment, next item, below.  Trump said in a news conference with Japanese Prime Minister Shinzo Abe that the two leaders:

" ... discussed a lot of subjects. It was a long talk.   As far as the currency devaluations, I have been complaining about that for a very long time."

  • Econintersect Comments on China's Currency  President Trump insists that China is manipulating its currency to maintain an artificially low exchange rate to protect and build its exports.  That was true several years ago but the exact opposite is the case overthe last couple of years.  China has been (almost desperately) trying to slow and control the devaluation of the yuan renminbi.  They have instituted currency controls to reduce capital flight that reinforces devaluation,  spent almost 30% of their foreign currency reserves to support the yuan, and have been stockpiling commodities while the costs are low and the yuan is still high.  See China Jan FX reserves fall more than expected to $2.998 trillion, near 6-year low (Reuters) and China sustains red-hot commodities imports at near-record pace (Reuters).  President Trump:  You apparently do not have the facts!  See also article under China, later, below.

  • Top Federal Reserve official resigns as bank deregulation looms (Reuters)  The 'top cop' in the banking world has resigned from the Federal Reserve.   This will give President Donald Trump the ability to reshape the powerful board governing the U.S. financial system just as he begins revamping and undoing reforms put in place after the 2007-09 financial crisis.  Daniel Tarullo, at the Fed since 2009, said in his brief resignation letter to Trump that he would leave the central bank "on or around April 5".

Much of Tarullo's legacy involves erecting safeguards after the crisis and accompanying recession, where big banks crumbled or were driven by the Fed and U.S. Treasury into shotgun mergers intended to make them stronger. With the goal of never needing taxpayer bailouts of failed banks, Tarullo has been strict about carrying out the 2010 Dodd-Frank Wall Street reform law. He has also pushed for bigger capital buffers and other checks on potential risks the largest banks may pose to the world's financial system.

  • Executive Order on Regulations Will Benefit Large Corporations, Not Small Businesses (The Real News NetworkYouTube)  When President Trump announced his executive order requiring that any new regulation implemented requires the repeal of two existing regulations, he said it was to make it easier for small businesses to operate.  GEI contributor William K. Black (Associuate Professor Law and Economics, University of Missouri Kansas City) says that the mass of federal regulations contain many unnecessarily complex and cumbersome documents that should be rewritten.  But Prof. Black asserts that improving regulations is not the Trump objective; rather, he says, the goal is simply to remove regulations.  He says this primnarily benefits very large corporations and not most small businesses.

 

Afghanistan

The news from Afghanistan is as relentless as it depressing: six aid workers murdered by Islamic State, at least 20 dead from a suicide bombing at the Supreme Court, more territory lost to the Taliban, more opium growing in the fields. Maybe that explains Donald Trump’s silence on the war since becoming president. But it does not excuse it.

The Trump administration has yet to set out a strategy for fighting America’s longest conflict, which has already claimed more than 2,300 American lives and close to a trillion taxpayer dollars. Trump’s previous statements on the war -- calling it a “total disaster” that the U.S. should abandon altogether -- make his reticence now particularly corrosive and dangerous.

China

  • Chinese FX reserve crosses risky line in sand (Reuters)  China's forex reserves have fallen below $3 trillion for the first time in nearly six years in January. The rate of contraction has slowed as China closes up its capital account, but for a country obsessed with symbolic numbers, targets, quotas and index levels, a worrying line in the sand has been crossed.

The ongoing shrinkage in China's foreign cash stash is partly due to attempts to defend another line in the sand, namely keeping the exchange rate above 7 yuan per dollar. Having intervened heavily offshore to hold this line in January, the People's Bank of China is now compelled to defend it whether it makes sense or not. In the background is a U.S. Treasury report due April in which China could be labelled a currency manipulator.

Much depends on the dollar itself. If the long-running dollar rally is nearing its peak, Beijing can relax. Losing less than $13 billion a month from foreign reserves isn't threatening; China has almost $400 billion to burn through before it closes on the critical $2.6 trillion level – roughly the minimum China would require under International Monetary Fund guidelines.

  • Should China worry about its falling foreign exchange reserves? (South China Morning Post)   The question of what level of reserves China really needs prompts different answers depending on what method is used to calculate the figure.  If measured by totalling half the year’s imports and sufficient cash to repay foreign debts, China’s US$3 trillion stockpile of foreign currencies are more than enough.  If calculated, however, by using yardsticks adopted by the International Monetary Fund to assess the adequacy of reserves, then China is close to levels required to defend the yuan’s exchange rate.

  • Trump Drops Taiwan Gambit, a Relief for China’s Xi—and Asia (Bloomberg)   In interviews after his election win, Donald Trump wondered why he shouldn’t use the One-China policy as a bargaining chip with Beijing to get better trade terms.  Three weeks into his presidency, the threat to upend U.S. policy on Taiwan -- a breakaway province in China’s eyes -- is off the table. The White House said Trump agreed in a phone call Thursday with China’s President Xi Jinping to respect the policy, which has been the basis of ties since the 1970s.  The move instantly reduces tensions for a simple reason: Taiwan is the biggest flash point that could spark a military conflict between the world’s largest economies, and suck in U.S. allies in the region. Now, the focus turns to avoiding a trade war that could deal a blow to global growth.

Canada

Vacant or temporarily occupied dwellings have more than doubled since 2001 to 66,719 last year as neighborhoods are hollowing out, said Andy Yan, director of Simon Fraser University’s City Program, who analyzed census data for Metro Vancouver released Wednesday. Observers worry the trend will undermine Canada’s fastest-growing regional economy.

Public scrutiny has focused on landlords, particularly from abroad, who park their cash in investment properties where windows remain dark throughout the year. Vancouver introduced a new tax on empty homes last month aimed at boosting the supply of rentals in a city facing a near-zero vacancy rate. The province also imposed a 15 percent tax on foreign buyers last August after discovering more than C$1 billion ($761 million) of global cash had flowed into local properties over a five-week period.

Mexico

  • Shootouts in Mexico show Trump's drug cartel fight will be tough (Reuters)   Since Mexico's top drug kingpin Joaquin "El Chapo" Guzman was extradited to a U.S. jail, gunfights in broad daylight have rocked his home state of Sinaloa in a power struggle that is a reminder of how hard it is to crush the country's drug cartels.  U.S. President Donald Trump on Thursday signed an executive order aimed at dismantling the cartels his spokesman called "a clear and present danger".  To succeed, history suggests, Trump will have to go further then capturing or killing gang leaders.  When leaders such as Guzman are taken out, others replace them or the cartels splinter. Either way, the flow of drugs to lucrative U.S. markets is rarely interrupted for long.

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

One of the Trump Administration’s most dramatic departures from preceding administrations is an open hostility to commonly agreed up facts and scientific findings, a stance culminating in new notions of “alternative facts.” While far from the first administration to lie--this is part of the office’s skillset—what’s new is the open attack on science itself, or more specifically on basing public policy on the findings of physics, biology, chemistry, and climate science. Trump is remarkably frank about what he doesn’t want to know; he intends to limit the impact of independent science on informing the policies of his administration.

  • Immanuel Kant and the Philosophy of Freedom (Foundation for Economic Freedom)  If you want to understand the moral basis of a free society, there might be no better place to start than the thought of Immanuel Kant. He is the most significant and widely discussed moral philosopher in history. And he was self-consciously an Enlightenment liberal who believed in limited government and maximum freedom.  The author, a Dartmouth College lecturer in Government, reviews the elements of Kant's moral and political argument for freedom:

  • The Good Will and the Moral Law

  • The Categorical Imperative

  • Rights and Freedoms

  • Kantian Liberalism

twitter.chart.1.year.2017.feb.10

  • A Socialist Strategy to Defeat Trump (CounterPunch)  The author suggests that President Trump may do what Bernie Sanders did not achieve:  build an organized and numerically dominant socialist political movement in the U.S.:

Trump has no mandate and heads a weak government. He entered office with historically low approval ratings, which have fallen further since inauguration day. No president in modern American history has seen majority disapproval levels in the first year in office, yet Trump managed it within 8 days.

But Trump and the Billionaire Class only understand one thing: power. It is already clear this administration plans to brutally attack one section of the 99% after another, and will not be easily deterred from its bigoted, misogynist, and anti-worker assault.

  • Nominal wage growth shows economy is not overheating (Economic Policy Institute)   The Fed should raise rates only when it fears the economy is growing too fast and pushing unemployment low enough that workers are empowered to demand (and get) raises above what their productivity justifies. Data on nominal wage growth show that the economy is not getting overheated and thus a rate increase is not justified.  The pace of economic growth should be considered unsustainable only when increases in labor costs force firms to raise prices enough to accelerate inflation above the Federal Reserve’s stated goal of 2%  inflation. An absolutely crucial link in this chain is wage growth. 

us.wage.growth.2007.2017.jan


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