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What We Read Today 07 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:

  • US oil output poised to hit 10 million barrels a day next year, breaking 1970 record, EIA says

  • Wall Street has been dead wrong on one of its biggest calls of the year

  • Bonds Should Rally In 2017

  • Comey Says Trump Asked Him to End FBI Probe Into Flynn

  • Read Comey's opening statement to Senate Intelligence Committee

  • Trump says Obamacare in 'death spiral,' urges Congress to act

  • Trump’s America Is Facing a $13 Trillion Consumer Debt Hangover

  • Why Draghi’s ECB can take only ‘baby steps’ toward ending ultraloose monetary policy

  • Draghi May Look Backward to Chart ECB Communication on Future

  • At last: The Trump Doctrine, revealed

  • From landslide for May to upset defeat - scenarios for UK election

  • The $110 billion arms deal to Saudi Arabia is fake news

  • Irani forces vow to revenge attack on Parliament; claims US, Saudi Arabia's 'involved'

  • And More

Articles about events, conflicts and disease around the world

U.S.

  • Comey Says Trump Asked Him to End FBI Probe Into Flynn (Bloomberg)   Fired FBI Director James Comey said President Donald Trump asked him in February to put an end into an investigation into former National Security Adviser Michael Flynn, requesting that he see his “way clear to letting this go”.  Trump went on to say that Flynn, who was ousted from his post for a misleading account of his contacts with the Russian ambassador, is “a good guy”.  Comey said he responded only that “he is a good guy” but never told Trump he would cut off the inquiry, according to testimony prepared for his highly anticipated appearance Thursday before the Senate Intelligence Committee.

Comey also said Trump told him “I need loyalty” when the two dined alone in the White House on Jan. 27 and said he thought the encounter was designed to “create some sort of patronage relationship.” The testimony was posted on the committee’s website Wednesday.

  • Read Comey's opening statement to Senate Intelligence Committee (The Hill)  The Senate Intelligence Committee on Wednesday released the opening statement former FBI Director James Comey is expected to deliver during a highly anticipated appearance on Thursday.  Full text is included in this article.

  • Trump says Obamacare in 'death spiral,' urges Congress to act (Reuters)  U.S. President Donald Trump said on Wednesday that the Obamacare healthcare system is in a "death spiral" and must be reformed soon, a day after insurer Anthem Inc announced it would withdraw from the Ohio healthcare insurance exchange next year.  Trump has struggled to get a healthcare package passed by the U.S. Congress even though his Republican Party controls both the House of Representatives and the Senate. A House plan was approved on May 4, and the Senate is trying to pass a version this summer.

  • Trump’s America Is Facing a $13 Trillion Consumer Debt Hangover (Bloomberg)  Americans faced with lackluster income growth have been financing more of their spending with debt instead. There are early signs that loan burdens are growing unsustainably large for borrowers with lower incomes. Household borrowings have surged to a record $12.73 trillion, and the percentage of debt that is overdue has risen for two consecutive quarters. And with economic optimism having lifted borrowing rates since the election and the Federal Reserve expected to hike further, it’s getting more expensive for borrowers to refinance.

EU

ecb.inflation.2017.jun.07

  • At last: The Trump Doctrine, revealed (Brookings Institute)  The president is not only turning away from  Europe, he is actually antagonistic toward it.  That is the result of the "Trump Doctrine" revealed last week by National Security Adviser General H.R. McMaster and Gary D. Cohn, the president of the National Economic Council, purporting to explain the strategic rationale of the inaugural presidential trip to Saudi Arabia, Israel, and Europe.  The doctrine is simply that the global "community" is "an arena where nations … engage and compete".  In this transactional world view, cooperation is a commodity rather than a shared value.  Win-win objectives are replaced by "deals" where one party wins and the other loses - relationships in the world are viewed through a zero-sum lens.  Econintersect: This is antagonostic the the very idea of a European Union as a cooperative federation.  Whether the European response is to crumble into 28 individual countries or to move from a monetary and trade union to a full fiscal union like the U.S. remains to be seen.  One thing is clear:  The Trump Doctrine is a direct challenge to the EU status quo.

UK

  • From landslide for May to upset defeat - scenarios for UK election (Reuters)  British Prime Minister Theresa May's narrowing lead in opinion polls ahead of the June 8 election has weakened sterling and raised questions over whether she will win the landslide predicted just over a month ago.  The vote will decide whether May or her Labour Party rival Jeremy Corbyn takes control of Britain's exit from the European Union - a two-year negotiation which will plot a new course for the $2.6 trillion economy.

The prime minister called the snap election in a bid to strengthen her hand in Brexit negotiations, to win more time to deal with the impact of the divorce and to strengthen her grip on the Conservative Party.

While she is still expected to win, with a lead of between one percentage point and 12 points in polls released over recent days, financial markets are now digesting a bigger range of outcomes than they previously had considered.

Saudi Arabia

  • The $110 billion arms deal to Saudi Arabia is fake news (Brookings Institute)  Last month, President Trump visited Saudi Arabia and his administration announced that he had concluded a $110 billion arms deal with the kingdom. Only problem is that there is no deal. It’s fake news, according to this article.  None of the deals identified so far are new, all began in the Obama administration.

Iran

  • Irani forces vow to revenge attack on Parliament; claims US, Saudi Arabia's 'involved' (Times Now)  Iran's supreme leader on Wednesday shrugged off attacks by gunmen and suicide bombers in Tehran that killed 13 people and were the first in Iran by the Islamic State group.  "These firecrackers that happened today will not have the slightest effect on the will of the people," Ayatollah Ali Khamenei said after the twin attacks, which also left dozens injured.  The attackers struck at Iran's most potent symbols: its parliament complex in central Tehran and the mausoleum of Ayatollah Ruhollah Khomeini who led the 1979 Islamic revolution.  President Hassan Rouhani called for global unity against violent extremism.  The country's powerful Revolutionary Guards vowed revenge and claimed the United States and Saudi Arabia were "involved".

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

  • US oil output poised to hit 10 million barrels a day next year, breaking 1970 record, EIA says (CNBC)  The U.S. Department of Energy on Tuesday signaled it is now more confident that U.S. oil production will rise to 10 million barrels a day next year, the highest average annual level on the books.  The department's Energy Information Administration forecast output would surge to the historic level in 2018 after last month projecting the country would produce just shy of 10 million barrels a day next year. The previous record average was 9.6 million barrels a day in 1970.

us.oil.production.1960.2018

Strategists and traders were betting that Trump's protectionist trade policy, tax cuts, deregulation, and massive infrastructure spending would spur growth and push prices higher.  But see also next article.

  • Bonds Should Rally In 2017 (GEI)  Van Hoisington and Lacy Hunt did not "buy the bridge" Wall Street was selling in this article written at the beginning of January just as interest rates peaked.  They wrote:

Our economic view for 2017 suggests lower long-term Treasury yields. Considering the actions of the Federal Reserve to curtail the monetary base and excess reserves, M2 growth should moderate to 6% in 2017, down from 6.9% in 2016. In the fourth quarter, on a 3-month annualized basis, M2 growth already decelerated below the 6% pace anticipated for 2017. This is unsurprising given the fall in excess reserves and the monetary base.

Velocity fell an estimated 4% in 2016 on a year ending basis. We assume there will be a similar decline for 2017, although in view of the huge debt increase and other considerations, velocity could be even weaker.

On this basis, nominal GDP should rise 2% this year, which means inflation and real growth will both be very low. A 2% nominal GDP gain for 2017 points to a similar yield on the 30-year in time, meaning that the secular downward trend in Treasury bond yields is still intact.


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