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What We Read Today 05 June 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:

  • Oil prices move lower after Middle East countries cut ties with Qatar

  • Markets Face Three Big Geopolitical Risks This Week

  • Trump Backs Air-Traffic Control Spinoff to Fix ‘Broken’ System

  • The New Normal: Demand, Secular Stagnation and the Vanishing Middle-Class

  • Ray Dalio Has Growing Concerns About Donald Trump

  • 70 Years Since the Marshall Plan

  • The New Normal: Demand, Secular Stagnation and the Vanishing Middle-Class

  • Trump tweets create new outrage

  • Trump: I am calling it a ‘TRAVEL BAN!’

  • Schumer blasts ‘Trump tolls’ as president spotlights infrastructure plans 

  • Supreme Court strikes down NC legislative districts

  • Confrimation of Trump Nominees

  • Deutsche Bank asks for more time on Trump, Russia info

  • Why House leaders aren’t giving up on a border tax

  • For Arab Gulf States, Israel Is Emerging as an Ally

  • Qatar Airways says suspends all flights to Saudi Arabia

  • India’s NSG bid has become ‘more complicated,’ says China

  • Ban on sale of cattle for slaughter will adversely impact state: Goa Congress

  • Trump unwittingly turns ‘America first’ into ‘China first’

  • Canada beats U.S. in pork sales to China - feet, elbows and all

  • And More

Articles about events, conflicts and disease around the world

Global

On the New York Mercantile Exchange, July West Texas Intermediate crudeCLN7, -0.52%  fell 71 cents, or 1.5%, to $46.95 a barrel. August Brent crudeLCOQ7, -0.84%  on London's ICE Futures exchange slipped 80 cents, or 1.6%, to $49.15 a barrel. Settlements around these levels would be the lowest since May 9 for both benchmark crudes.

  • Qatar Quarrel

  • U.K. Election

  • Comey Testimony

U.S.

It is difficult to interpret the rationale for all of Trump’s tweets, which may have caught even some of his advisers off guard.

  • Schumer blasts ‘Trump tolls’ as president spotlights infrastructure plans (MarketWatch)  Senate Minority Leader Charles Schumer is ripping President Donald Trump’s infrastructure plans, as the White House kicks off a week-long focus on rebuilding roads, airports and waterways.  New York Democrat Schumer said in a statement that the president’s overall infrastructure plan would benefit financiers and stick average citizens with the bill for projects.  Schumer said:

The proposal “means Trump tolls from one end of America to the other, and huge profits for financiers who, when they put up the money, want to be repaid by the average driver, worker and citizen.” 

  • Supreme Court strikes down NC legislative districts (The Hill)  A blow has been struck against egregious gerrymandering.   The Supreme Court upheld on Monday a lower court’s decision to throw out state legislative district lines, the latest ruling against districts drawn while considering race.

The unsigned order, issued without any dissent, affirms a three-judge panel’s ruling last year that 28 state legislative districts were drawn improperly because legislators considered race in the crafting of new lines in 2011. 

The high court did, however, side with Republican state legislators who sought to block the part of the lower court decision that ordered new district lines and special elections be held this year.

  •  Confrimation of Trump Nominees (Twitter)  (Econintersect: Slow roll-out of nominees is nothing new for a first term president.  But the president's public statements regarding this are unsual.)

senate.confirms.2017.june.05

  • Deutsche Bank asks for more time on Trump, Russia info (The Hill)  Germany’s largest bank has asked House Democrats for more time before it provides information on President Trump’s possible financial ties to Russia.  Deutsche Bank’s external counsel made the request in a letter dated June 2 to Democrats on the House Financial Services Committee, Reuters reported Monday. A person familiar with the matter declined to specify to Reuters how much more time Deutsche Bank asked for.

  • Why House leaders aren’t giving up on a border tax (Peter Morici, MarketWatch)   Prof. Morici argues that a border tax would be a key ingredient in a reform package lowering corporate income taxes to globally competitive levels:

House leaders are clinging tenaciously to the idea of including border tax adjustments as part of corporate tax reform, despite significant opposition among Republicans in both chambers of Congress. They have good reason — BTAs would provide the resources necessary to overcome political opposition to a revenue-neutral package and put the United States closer to tax parity with other industrialized countries.

At about 35%, the United States has the highest marginal corporate tax rate among large industrialized economies. Although credits and deductions — such as R&D credits and the oil depletion allowance — permit some firms to pay much less, many businesses still pay taxes near the statutory maximum.

Israel

  • For Arab Gulf States, Israel Is Emerging as an Ally (The Wall Street Journal)  Hat tip to Roger Erickson.  For decades, rejection of Israel—sometimes mixed with outright anti-Semitism—has been a defining theme of Arab politics, uniting bickering countries against a common foe.  That appears to be changng with an emerging Sunni-Jewish rapprochement.

Qatar

  • Qatar Airways says suspends all flights to Saudi Arabia (Reuters)  Qatar Airways said on its official website on Monday that it had suspended all flights to Saudi Arabia.  The move came after Saudi Arabia, Egypt, the United Arab Emirates and Bahrain severed their ties with Qatar on Monday, accusing it of supporting terrorism and opening up the worst rift in years among some of the most powerful states in the Arab world.

India

  • India’s NSG bid has become ‘more complicated,’ says China (Times Now)  India’s membership bid in the Nuclear Suppliers Group or NSG has become ‘more complicated’ under the ‘new circumstances,’ China suggested on Monday.  It appears to have ruled out supporting New Delhi's entry in the grouping – and also explained the aforementioned by stating that there should be non-discriminatory solution applicable to all non-NPT signatory countries.  China has been blocking India's membership in the 48 - nation grouping which controls the nuclear commerce even though India is supported by a majority of the members. The group admits new members on the basis of consensus.

  • Ban on sale of cattle for slaughter will adversely impact state: Goa Congress (Times Now)  The Cnational government recently banned the sale and purchase of cattle from animal markets for slaughter. The environment ministry notified the stringent 'Prevention of Cruelty to Animals (Regulation of Livestock Markets) Rules, 2017' under the Prevention of Cruelty to Animals Act.  (Econintersect:  The meat ban is a Hindu religion-motivated law.  Goa is 30% Christian with 5% other non-Hindu religions.)

Noting the ban of sale of cattle for slaughter would have an adverse impact on the state, Goa Congress said the state has a sizeable beef eating population. 

Congress party has therefore urged the Goa government to take up the issue with the Centre, as it "cannot impose eating habits on other people or cannot dictate terms to the people on their food".

China

  • Trump unwittingly turns ‘America first’ into ‘China first’ (MarketWatch)  Trump’s decision to pull out of the Paris climate accord weakens overall momentum behind lowering carbon emissions and quelling global warming. But the U.S.’s move to retreat from leadership in this and other spheres, such as trade, may end up reinforcing China’s ability, through a variety of “soft power” measures, to move forward. While advocating “America first,” Trump may become instrumental in promoting China to a more effective position on the world stage.

One big problem for Trump in Asia is now starting to emerge, across a variety of fields including defense cooperation — dealing with the many political and security hotspots throughout the region. By apparently ditching long-held American principles in favor of a case-by-case “transactional approach” in trying to resolve policy dilemmas, Trump may be responding to U.S. domestic pressure for a more hard-nosed attitude toward “free-riding” allies and partners. But he is opening himself to the charge that America cannot be trusted over the longer term — and giving China a gigantic opportunity to move across Asia into a leadership role from which it will not easily be supplanted.

Canada

  • Canada beats U.S. in pork sales to China - feet, elbows and all (Reuters)  Canada has overtaken the United States as the top North American supplier of pork to China as farmers and meat packers in both nations battle for lucrative shares of the biggest global market.  Canada's pork sales to China, after a sharp rise last year, exceeded those of the United States in the first quarter of 2017. That's only happened a handful of times in two decades, according to U.S. and Canadian government data.

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

  • Ray Dalio Has Growing Concerns About Donald Trump (Bloomberg)   Billionaire hedge fund manager Ray Dalio, who was initially bullish on Donald Trump’s ability to stimulate the economy, is growing increasingly concerned about the potential consequences of his presidency.   Dalio said in a LinkedIn post Monday:

“When faced with the choices between what’s good for the whole and what’s good for the part, and between harmony and conflict, he has a strong tendency to choose the part and conflict.  The more I see Donald Trump moving toward conflict rather than cooperation, the more I worry about him harming his presidency and its effects on most of us.”

  • 70 Years Since the Marshall Plan (Mauldin Economics)  (Econintersect:  The Marshall Plan was the exact opposite of a transactional process.  It begs the question:  Are there some geopolitical strategies that are best served by non-transactional thinking?)  Seventy years ago on June 5, US Secretary of State George Marshall gave a speech at Harvard University. Few speeches in modern times have had as much geopolitical consequence. In just eight paragraphs, Marshall made the case for significant US involvement in Europe’s economic reconstruction after World War II.  Within 10 months, the United States passed the Foreign Assistance Act of 1948. Better known as the Marshall Plan, it provided over $13 billion to 16 European countries (approximately $150 billion in 2017 dollars). According to the Congressional Research Service, the annual appropriation in 1949 alone accounted for 12% of the entire US federal budget.

The Marshall Plan became a significant instrument of American power. It represented a substantial sacrifice for the US, but one that paid dividends long after the US stopped providing funds to Marshall Plan recipients.

At a time when the world is divided on the merits of nationalism versus internationalism, it’s worth reflecting on why the Marshall Plan worked.

  • Trump Backs Air-Traffic Control Spinoff to Fix ‘Broken’ System (Bloomberg)   Donald Trump on Monday unveiled his proposal to hand over control of the U.S. air-traffic control system to a non-profit corporation, calling the current system an antiquated mess that doesn’t work and wastes money.  The proposal, part of a week-long push for his infrastructure plan, is designed to lower costs and improve efficiency of the system that oversees flights. It would transfer about 15,000 controllers and thousands of other managers and technical workers to a new government-sanctioned corporation, according to a plan Trump sent to Congress.  Trump used blunt language to attack his own Federal Aviation Administration, saying it wasted billions of dollars in technology and accusing it -- without offering proof -- of using equipment that dated back decades.

The recognition that real wage growth is a major driver of labor productivity growth also holds an important insight for macroeconomic policy, as Gordon (1987, pp. 154-155) explains: “… a stimulus to aggregate demand provides not only the direct benefit of raising output and employment, but also the indirect benefit of raising the real wage and creating substitution away from labor that boosts productivity [….] With this dual benefit obtainable from demand expansion, the case against demand stimulation must rest on convincing evidence that such policies would create an unacceptable acceleration of inflation.” There may be less inflation than expected, in other words, because the rate of potential growth would go up.

unions.wage.growth.1950.2016 


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