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What We Read Today 23 May 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".).


Every day most of this column ("What We Read Today") is available only to GEI members.

To become a GEI Member simply subscribe to our FREE daily newsletter.

The rest of this post is available only the GEI Members.  Membership is FREE -  click here

Topics today include:

  • Microsoft Slams NSA For Letting Its Hacking Tools Cause Global Malware Epidemic

  • Here are the 66 programs eliminated in Trump's budget

  • Poll: Comey was deeply unpopular at time of firing

  • UK's Homeless Teachers

  • How Labour plans to keep Corbynism alive – even without Corbyn

  • Latest News on Manchester Bombing

  • German business confidence at the highest level on record

  • Erdogan Watched Guards Beat Protesters 

  • Mount Everest's Hillary Step is still there, say Nepalese climbers 

  • GEORGE FRIEDMAN: A US attack on North Korea is imminent

  • U.S.: Military solution to North Korea would be 'tragic on an unbelievable scale'

  • Too fast, too soon: how China's growth led to the Tianjin disaster

  • Brazil woman got longer jail term for Easter egg theft than corruption culprits

  • Subprime 2.0: Lending a $1 Trillion to People With No Proof of Job or Income

  • Where Health Care Won’t Go

  • Job Market for the Class of 2017

  • The New Normal

  • Demand, Secular Stagnation and the Vanishing Middle-Class

  • The Benefits of Active Municipal Bond Management

  • True crime: why the Irish counterfeiting wave of the late 18th century was a myth

  • And More

Articles about events, conflicts and disease around the world


 In early April, when we reported that the hacker group known as the Shadow Brokers had released the password to NSA's "Top Secret Arsenal" of tools that allowed anyone to "back door" into virtually any computer system (in what it claimed was a protest of Trump's betrayal), few people noticed. On Friday, however, the entire world did notice when an unknown group of hackers reportedly used the same set of NSA-created tools to launch a global malware cyberattack using the WannaCry ransomware virus, holding at least 200,000 computer systems around the globe hostage, and demanding a payment of $300 in bitcoin to unlock infected computers, or else threatening to wipe out the contents of the host machine.


  • Here are the 66 programs eliminated in Trump's budget (The Hill)  President Trump's fiscal 2018 budget proposal would completely eliminate 66 federal programs, for a savings of $26.7 billion.  Some of the programs would receive funding for 2018 as part of a phasing-out plan.  Go to the article to see the itemized list.  Econintersect:  These savings reduce federal sending by 0.65%.

  • Poll: Comey was deeply unpopular at time of firing (The Hill)  The public was deeply unsatisfied with former FBI Director James Comey at the time of President Trump’s surprise decision to fire him.

According to the latest Harvard-Harris poll, provided exclusively to The Hill, only 40 percent of Americans approved of the job Comey did as FBI director, compared to 60 percent who said they disapproved.

Trump’s job approval rating is 10 points better at 45 positive and 55 negative in the same poll.

Comey had displeased members of both parties with his handling of the investigation into Hillary Clinton’s use of a private email server as secretary of State.

  • Where Health Care Won’t Go (Harper's Magazine)  Hat tip to R.J. Sigmund.  This article details the absolute corruption of health care administration (rather, lack of administration) in vast expanses of the U.S.

  • Subprime 2.0: Lending a $1 Trillion to People With No Proof of Job or Income (Zero Hedge)  This article says that the auto-loan industry is Subprime 2.0: the riskiest, worst area in a massive debt bubble, much as subprime mortgage lending was the riskiest worst part of the housing bubble.  In both instances, these lending industries were rife with fraud, terrible due diligence, and the like. So when the debt bomb blew up, they were the first to implode.  However, it would appear now that the Subprime 2.0 was even worse than Subprime 1.0 in terms of verifying income.   From Bloomberg:

Santander Consumer USA Holdings Inc., one of the biggest subprime auto finance companies, verified income on just 8 percent of borrowers whose loans it recently bundled into $1 billion of bonds, according to Moody’s Investors Service.

The low level of due diligence on applicants compares with 64 percent for loans in a recent securitization sold by General Motors Financial Co.’s AmeriCredit unit. The lack of checks may be one factor in explaining higher loan losses experienced by Santander Consumer in bond deals that it has sold in recent years…


  • Homeless teachers: ‘I wouldn’t talk about it, I was so ashamed’ (The Guardian)  Hat tip to Steve Keen.  Some UK teachers are finding that rents have risen to consume most of their take-home income.  One example from Bath reveals a teacher, single mother of two teenagers, a boy and a girl, with £28,000 gross salary (£19,500 take home) could not find a rental with 3 bedrooms for less than £1,300 a month (£15,600 a year).  At the last minute "the council offered her a three-bed home in poor condition on a rundown estate, for £489 a month". “It had no heating, no flooring and the toilet didn’t flush but I am hugely grateful. I feel like I’ve escaped a bullet.”  A charity awarded her £2,000 to put towards her removal costs and her deposit.  The article recounts other teachers with children living in homeless shelters.  Econintersect:  Has the UK come full circle back to Victorian England?

  • How Labour plans to keep Corbynism alive – even without Corbyn (The Conversation)  The author asserts that the expected defeat of the Labour Party in the coming elections will strengthen the party going forward:

Sacrificing the leader will be necessary to protect the left-wing policies that Labour has finally adopted. And those policies will be Corbyn’s real legacy.

Click for large image.


Click for larger image.


  • Erdogan Watched Guards Beat Protesters (Ein News)  Hat tip to R.J. Sigmund.  Recep Tayyip Erdogan’s bodyguards attacked and beat peaceful protesters in Washington as their leader watched. Back in Turkey, however, that hard-line approach is welcomed by many of the president’s nationalist supporters.  The clash Tuesday began when Erdogan’s motorcade pulled up in front of the Turkish ambassador’s residence, returning from a visit to the White House and a meeting with President Donald Trump.  Erdogan, emerging from his limousine, stood and watched as his guards and supporters began punching and kicking their way through a group of mostly Kurdish protesters across the street. Eleven people were injured.  Two U.S. senators (John McCain - R, AZ - and Diane Feinstein - D, CA) protested to Erdogan Thursday about his guards’ behavior.



North Korea

  • GEORGE FRIEDMAN: A US attack on North Korea is imminent (Business Insider)  GF has contributed to GEI.  George Friedman—setting the stage for a difficult, messy war with potentially catastrophic consequences.  Speaking Monday to a rapt audience at the 2017 Strategic Investment Conference in Orlando, Friedman said that while it is unlikely the US will take action before President Trump returns home at the weekend, North Korea’s actions appear to have “offered the US no alternative” to a clash.  According to Geopolitical Futures analysis, evidence is mounting that the enmity between the two is escalating to a point where war is inevitable.

Friedman revealed that on May 20, the USS Carl Vinson supercarrier and USS Ronald Reagan were both within striking distance of North Korea.

Additionally, more than 100 F16 aircraft are conducting daily exercises in the area, a tactic which foreshadowed the beginning of Desert Storm in 1991.

  • U.S.: Military solution to North Korea would be 'tragic on an unbelievable scale' (Reuters)  U.S. Defense Secretary Jim Mattis said on Friday that any military solution to the North Korea crisis would be "tragic on an unbelievable scale" and Washington was working internationally to find a diplomatic solution.  North Korea has defied all calls to rein in its nuclear and missile programs, even from China, its lone major ally, calling them legitimate self-defense.  It has been working to develop a nuclear-tipped missile capable of striking the U.S. mainland, and experts say its test on Sunday of a new missile was another important step toward that aim.  Mattis told a Pentagon news conference:

"We are going to continue to work the issue.  If this goes to a military solution, it's going to be tragic on an unbelievable scale. So our effort is to work with the U.N., work with China, work with Japan, work with South Korea to try to find a way out of this situation."


Chinese workplace safety laws encourage a culture of damage control over prevention, says Mimi Zou, an expert in Chinese employment law. “The regulatory approach has been to just respond when there’s been an accident, but obviously that doesn’t address all the risks involved … prioritising damage control over preventive [measures] just means that you’re not really addressing the root of the problem. 


The case is far from unusual, but it has drawn public attention because of an appeal by a legal ombudsman and a newspaper article that drew damning comparisons with the laxer punishments handed down to those convicted of far greater crimes in the Lava Jato (Car Wash) case, a sprawling corruption investigation which has implicated a string of major figures in Brazilian politics and business.

The ombudsman, Maíra Cora Diniz, said the penalty for Maria was “absurdly” disproportionate to the crime, which did not involve violence, damage or social disturbance. The public defender also noted that the sentence would also punish the baby, which would be wrenched from its mother at a point when it still needed breastfeeding.

Commenting on this case in the the Folha de Sao Paulo newspaper, columnist Mônica Bergamo contrasted this to the penalties given to those convicted in the Lava Jato investigation, which uncovered a vast network of bribes and kickbacks from public contracts that were channelled through major corporations, including Petrobras and Odebrecht, to the major political parties and secret accounts held by dozens of senior politicians.

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

  • True crime: why the Irish counterfeiting wave of the late 18th century was a myth (The Conversation)  London experienced a massive crime wave between 1797 and 1821, linked almost entirely to counterfeiting and forgery. The problem got so bad that people began to worry if the cash in their pocket was real – aware that they could be executed for knowingly spending bad money.  The Irish were blamed and many were convicted.  Research has found that two factors led to this "justice", neither of which reflected on who was doing the counterfeiting and passing bad money.

  • The Benefits of Active Municipal Bond Management (Robert Huebscher, Advisor Perspectives)  RH has contributed to GEI.  The new environment for munis is discussed including the prospect of lower federal tax rates.  The use of generalized rules for munis in portfolios is of limited value; muni bond portfolio management is a highly individualized activity.

  • The New Normal (Institute for New Economic Thinking)  Hat tip to Yves Smith, Naked Capitalism.  See also next article.

The U.S. economy is suffering from two interrelated diseases: the secular stagnation of its potential growth, and the polarization of jobs and incomes. The two disorders have a common root in the demand shortfall, originating from the ‘unbalanced’ growth between technologically ‘dynamic’ and ‘stagnant’ sectors, which—crucially—is bringing down potential growth. To understand how the short-run demand shortfall carries over into the long run, we must first rethink the Solow residual, which economic textbooks define as the best available measure of the underlying pace of exogenous innovation and Hicks-neutral technological change (Furman 2015). But it can be shown, using national-income accounting, that there is no such thing as a Solow residual, because it must equal—as a matter of accounting identity—either ‘weighted-factor-payments’ growth or ‘weighted-factor-productivities’ growth. My empirical analysis using BEA data for the period 1948-2015 shows that this is the case, bringing out that the secular decline in aggregate U.S. TFP growth is due primarily to secular declines in aggregate real wage growth and aggregate labor productivity growth.

The stagnation has devastated all that low-wage and middle-wage workers demand, as George Orwell (1943) insightfully wrote: “… the indispensable minimum without which human life cannot be lived at all. Enough to eat, freedom from the haunting terror of unemployment, the knowledge that your children will get a fair chance.” Big parts of the U.S.A. are hit by elevated rates of depression (Temin 2015, 2017), drug addiction and ‘deaths of despair’ (Case and Deaton 2017), as ‘good jobs’ (often in factories and including pension benefits and health care coverage), ones that could be turned into a career, were destroyed and replaced by insecure, often temporary on-call, freelance and precarious jobs— euphemistically called “alternative work arrangements’ or the “gig economy” (Weil 2014; Katz and Krueger 2016).

This paper argues that the secular stagnation of U.S. economic growth and the vanishing of the American middle class have common roots—in the deliberate creation after 1980, through economic policies, of a structurally low-wage-growth economy that not only polarized jobs, incomes and wealth, but also slowed down capital deepening, the division of labor, and laborsaving technical progress in the dynamic segment of the economy (Storm and Naastepad 2012). My ‘demand-side’ diagnosis of America’s current plight is fundamentally at odds with dominant ‘supply-side’ narratives on secular stagnation in the macroeconomics literature. 

[The] influence of wage growth on productivity growth can be alternatively explained as ‘induced technical change’, ‘Marx-biased technical change’, or ‘directed technical change’—but the key mechanism is just this: rising real wages, as during the period 1948-1972, provide an incentive for firms to invest in labor-saving machinery and productivity growth will surge as a result; but when labor is cheap, as during most of the period 1972-2015, businesses have little incentive to invest in the modernization of their capital stock and productivity growth falters as a consequence (Storm and Naastepad 2012). Globalization enabled the establishment of this low-wage-growth regime, in combination with domestic labor market deregulation and de-unionization. Financial globalization, in addition, enabled the rich to have their cake (profits) and eat it (by channeling them to offshore tax havens or into derivative financial instruments). In this way, trade and financial globalization have been essential building blocks of the dual economy (Temin 2017).


  • The Class of 2017 (The New York Times)   It has taken 10 years, but the job market for young college graduates has largely recovered to where it was in 2007, before the Great Recession. The recent unemployment rate for college graduates ages 21 to 24 was 5.6%, basically the same as in 2007. The wages of young college graduates have also recovered, to $19.18 an hour.  For the college Class of 2017, those improvements offer a better starting point than was true for those who graduated in earlier post-recession classes. What they don’t guarantee, however, is prosperity. While the labor market for young college graduates has improved from its recession-era lows, it is still not showing robust signs of full employment, in which everyone who wants a job has one, prices are stable and wages are rising.  To take one example of labor market weakness, underemployment among young college graduates is still elevated, with 9.9% “idled” or “sidelined,” compared with 8.4% in 2007, according to research by the Economic Policy Institute. These graduates are not counted as unemployed because they are neither working nor looking for work.

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