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What We Read Today 05 August 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:

  • Apple Plans to Release a Cellular-Capable Watch to Break iPhone Ties

  • Tesla lowers price of Model X, saying margins improved

  • Why ‘Pharma Bro’ Martin Shkreli Is Swaggering Into Jail

  • The Memo: GOP questions Trump's Mueller strategy 

  • Puerto Rico oversight board orders furloughs, governor defiant

  • One chart reveals everything that's wrong with Trump's anti-immigrant outcry

  • The Economic and Social Outcomes of Refugees in the United States: Evidence from the ACS 

  • Tillerson may find Russia talks an uphill climb

  • U.S. Vice President Pence's hawkish tone on Russia contrasts with Trump approach

  • Factbox: What do the new U.S. sanctions on Russia target?

  • Our generals reveal why we lost in Afghanistan, and will continue to lose

  • Japan Buries Our Most-Cherished Economic Ideas

  • China calls for halt to U.S. THAAD deployment in South Korea

  • Affordable housing shortfall leaves 1.3m Australian households in need and rising – study

  • Australia Slams the Brakes on Property Investment

  • Toyota plans truck, possibly SUV production in Mexico after Trump threat

  • And More

Articles about events, conflicts and disease around the world

U.S.

  • The Memo: GOP questions Trump's Mueller strategy (The Hill)  President Trump and his allies are pushing back against the deepening probe into allegations of collusion with Russia, but the effectiveness of that strategy is in serious question even among Republicans.  Team Trump has repeatedly suggested that the Russia investigation is a witch hunt, and that special counsel Robert Mueller has conflicts of interest or is exceeding the original bounds of his investigation.  But Republican strategist Ryan Williams argued that Trump’s time would be better spent focusing on his policy agenda rather than voicing his resentment over the purported unfairness of the investigation.

  • Puerto Rico oversight board orders furloughs, governor defiant (Reuters)  Puerto Rico's federally appointed financial oversight board said on Friday it will institute a two-day per month work furlough for government employees, but a defiant Governor Ricardo Rossello rejected the measure out of hand.  The plan, which originally envisioned a four-day per month furlough, is set to begin on Sept. 1 and last throughout the 2018 fiscal year in an effort to achieve $218 million in savings. It excludes frontline law enforcement personnel.

Rossello openly challenged the board's authority to impose the belt-tightening measure on the bankrupt U.S. territory, however.

The furloughs are part of the board's efforts to implement fiscal changes and achieve $880 million in savings for "right-sizing" the government this fiscal year and ensuring the island's long-term economic viability.

On Wednesday, Trump said he backed new legislation that would give preference to visa applicants with higher education or job skills. It has the potential to seriously restrict the flow of legal immigrants into the US, ostensibly in the name of protecting unskilled American workers.

It would be bad news for the economy.

Migration is a key ingredient to economic development, and it has been central to America's economic success since the country's inception. Many economists believe the potential rate of US economic growth has slowed to 2% from about 3% in recent years in part because of demographic changes such as the aging of the US population, a pattern seen in other rich economies.

Using data from the 2010-2014 American Community Survey, we use a procedure suggested by Capps et al. (2015) to identify refugees from the larger group of immigrants to examine the outcomes of refugees relocated to the U.S. Among young adults, we show that refugees that enter the U.S. before age 14 graduate high school and enter college at the same rate as natives. Refugees that enter as older teenagers have lower attainment with much of the difference attributable to language barriers and because many in this group are not accompanied by a parent to the U.S. Among refugees that entered the U.S. at ages 18-45, we follow respondents’ outcomes over a 20-year period in a synthetic cohort. Refugees have much lower levels of education and poorer language skills than natives and outcomes are initially poor with low employment, high welfare use and low earnings. Outcomes improve considerably as refugees age. After 6 years in the country, these refugees work at higher rates than natives but they never attain the earning levels of U.S.-born respondents. Using the NBER TAXSIM program, we estimate that refugees pay $21,000 more in taxes than they receive in benefits over their first 20 years in the U.S.

Russia

  • Tillerson may find Russia talks an uphill climb (Reuters)  U.S. Secretary of State Rex Tillerson has the unenviable task of exploring U.S.-Russian cooperation following Washington's latest sanctions on Russia and Moscow's expulsion of U.S. diplomats.  Tillerson and Russian Foreign Minister Sergei Lavrov are meeting this weekend at a regional forum in Manila, their first face-to-face talks since President Donald Trump reluctantly signed into law sanctions that Russia said amounted to a full-scale trade war and ended hopes for better ties.

  • U.S. Vice President Pence's hawkish tone on Russia contrasts with Trump approach (Reuters)  When President Donald Trump scolded U.S. lawmakers on Thursday for clamping down on Moscow with new sanctions, his message clashed with the one that Vice President Mike Pence pushed during a four-day trip this week to Eastern Europe.  As he toured Estonia, Georgia and Montenegro, Pence said the sanctions passed overwhelmingly by Congress would send a unified message to Russia that it must change its behavior.  Trump, by contrast, took to Twitter to complain that the sanctions legislation, which he grudgingly signed, would send U.S.-Russia relations to "an all-time & very dangerous low".

  • Factbox: What do the new U.S. sanctions on Russia target? (Reuters)  The new law targets Russian businesses, any entitiies doing business with them, and the president of the U.S.

Afghanistan

Japan

  • Japan Buries Our Most-Cherished Economic Ideas (Bloomberg)  Japan is the graveyard of economic theories. The country has had ultralow interest rates and run huge government deficits for decades, with no sign of the inflation that many economists assume would be the natural result. Now, after years of trying almost every trick in the book to reflate the economy, the Bank of Japan is finally bowing to the inevitable. The BOJ’s “dot plot” shows that almost none of the central bank’s nine board members believe that the country will reach its 2% inflation target.  See first graph below.  Despite a near-total lack of inflation, Japan has managed to grow and increase employment. That means Japan is in the midst of that rarest of situations -- a disinflationary boom.  See second graph below.

japan.gdp.2000.2016

South Korea

  • China calls for halt to U.S. THAAD deployment in South Korea (Reuters)  China on Saturday called for a halt to the deployment of the THAAD U.S. anti-missile defense system in South Korea and for relevant equipment to be dismantled, China's U.N. Ambassador Liu Jieyi told the U.N. Security Council.  He also urged North Korea to "cease taking actions that might further escalate tensions."  Liu told the council after it imposed new sanctions on North Korea over two long-range missile launches:

"The deployment of the THAAD system will not bring a solution to the issue of (North Korea's) nuclear testing and missile launches." 

Australia

australia.housing.distress

  • Australia Slams the Brakes on Property Investment (Bloomberg)   [Econintersect  Note:  This is repeated from Early Bird Headlines this morning.]  One of the key engines of Australia’s five-year housing boom is losing steam. Property investors, who have helped stoke soaring home prices in Australia, are being squeezed as regulators impose restrictions to rein in lending. The nation’s biggest banks have this year raised minimum deposits, tightened eligibility requirements and increased rates on interest-only mortgages -- a form of financing favored by people buying homes to rent out or hold as an investment. The reason for the action is the lack of affordability in Australia's two largest markets.

Mexico

Toyota initially planned to produce Corolla sedans at the plant it is building in the central state of Guanajuato but will now switch production of the small cars and a new Mazda SUV crossover to a new assembly plant planned for the United States.

Trump threatened in January to impose a hefty fee on the world's largest automaker if it built Corollas for the U.S. market in Mexico.

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

  • Apple Plans to Release a Cellular-Capable Watch to Break iPhone Ties (Bloomberg)  Apple Inc. is planning to release a version of its smartwatch later this year that can connect directly to cellular networks, a move designed to reduce the device’s reliance on the iPhone, people familiar with the matter said.  Currently, Apple requires its smartwatch to be connected wirelessly to an iPhone to stream music, download directions in maps, and send messages while on the go. Equipped with LTE chips, at least some new Apple Watch models, planned for release by the end of the year, will be able to conduct many tasks without an iPhone in range, the people said. For example, a user would be able to download new songs and use apps and leave their smartphone at home.  Intel Corp. will supply the LTE modems for the new Watch.

  • Tesla lowers price of Model X, saying margins improved (Reuters)  Tesla Inc on Friday lowered the base price of its Model X SUV to $79,500 and said improving margins were behind the move, which came as the automaker is ramping up production of its new lower-priced Model 3.  Some analysts have been concerned that the launch of the Model 3, whose base price is $35,000, would steer some potential buyers away from the Model X SUV to that lower-priced sedan.  But Chief Executive Elon Musk said earlier this week that demand had not waned for the luxury electric sport-utility vehicle.  (The most expensive version of the Model X, the P100D, with fastest acceleration and longer range, costs $145,000.)   Tesla in a statement on Friday announcing it had lowered the previous $82,500 starting price of the vehicle by $3,000.

"When we launched Model X 75D, it had a low gross margin. As we've achieved efficiencies, we are able to lower the price and pass along more value to our customers."

  • Why ‘Pharma Bro’ Martin Shkreli Is Swaggering Into Jail (Bloomberg)   Long before jurors reached their verdict, Martin Shkreli was guilty on at least one count: gall in the first degree.  During the last week of his securities-fraud trial, federal prosecutors nailed the former biotech chief executive for one of his many lies. Shkreli liked to brag he was a Columbia University alum. On the stand, an administrator said he most certainly wasn’t.  Most would shrink into their seats. Not Shkreli. Later that day, he took to his popular Facebook Live Stream and hurled obscenities at critics.   A smiling Shkreli, flanked by his lawyers, told reporters outside court after the verdict was read:

“This was a witch hunt of epic proportions.   “Maybe they found one or two broomsticks but at the end of the day we’ve been acquitted of the most important charges in this case.”


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