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What We Read Today 10 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:

  • It’s the Payouts, Stupid!  Why Banks Don't Lend.

  • The death of the internal combustion engine

  • Whatever Happened To Trumpian Reflation?

  • Economic Slow Lane

  • Manufacturing Wages in Selected Countries

  • Judge Orders New Searches for Clinton Benghazi Emails

  • Poll: Half of Republicans would back postponing 2020 election if Trump proposed it 

  • Trump's mixed signals on healthcare send premiums rising, study finds

  • An Early Look at 2018 Premium Changes and Insurer Participation on ACA Exchanges

  • Report: Feds Wanted Manafort’s Son-in-Law to Cooperate With Probe

  • US can boost gas exports, cut global emissions in one fell swoop

  • U.S. Unit Labor Costs

  • First Venice and Barcelona: now anti-tourism marches spread across Europe

  • Surging Euro Hits Stocks

  • SDF destroys ISIS explosives factory in Raqqa

  • Senior Kurdish official says Iraq’s failure created ISIS

  • Senior Kurdish official says Kurdistan independence referendum going ahead despite opposition.

  • The Memo: Could Trump’s hard line work on North Korea?

  • And More

Articles about events, conflicts and disease around the world

Global

U.S.

  • Judge Orders New Searches for Clinton Benghazi Emails (Daily Beast)  A federal judge ordered the State Department keep looking for emails Hillary Clinton wrote about the 2012 attack on the U.S. diplomatic compound in Benghazi, Libya, Politico reported. The State Department found 348 Benghazi-related messages or documents after searching through roughly 30,000 messages Clinton had sent on a personal email account during her her four-year tenure as secretary. U.S. District Court Judge Amit Mehta, however, ruled that, since the department had not searched its own official systems, it had not done enough to try to track down messages regarding the attack, which killed four Americans, including the U.S. ambassador to Libya.

  • Poll: Half of Republicans would back postponing 2020 election if Trump proposed it (The Hill)  Econintersect:  We are flabbergasted by this: 

Slightly more than half of Republicans say they would support postponing the 2020 presidential election if President Trump proposed it to make sure only eligible American citizens can vote, according to a new survey.

According to a poll conducted by two academic authors and published by The Washington Post, 52 percent of Republicans said they would back a postponement of the next election if Trump called for it.

If Trump and congressional Republicans proposed postponing the election to ensure only eligible citizens could vote, support from Republicans rises to 56 percent.

Pollsters found 47 percent of Republicans think Trump won the popular vote.

A majority of Republicans, 68 percent, also thinks millions of illegal immigrants voted in the presidential election and 73 percent think voter fraud happens somewhat or very often

  • Trump's mixed signals on healthcare send premiums rising, study finds (The Guardian)  Kaiser Family Foundation finds administration has created uncertainty ‘far outside the norm’, leading insurers to seek higher premium increases.  The Trump administration’s own actions are triggering double-digit premium increases on individual health insurance policies purchased by many consumers, a nonpartisan study has found.  Econintersect:  One of the big problems with Obamacare is the current president.  See An Early Look at 2018 Premium Changes and Insurer Participation on ACA Exchanges (Kaiser Family Foundation).

  • Report: Feds Wanted Manafort’s Son-in-Law to Cooperate With Probe (Daily Beast)  Federal investigators have zeroed in on Paul Manafort’s son-in-law to attempt to get leverage over Trump’s former campaign chairman as the probe into his real-estate deals and ties to Russia gains momentum, Politico reports. Three sources familiar with the investigation said Jeffrey Yohai, who has previously faced scrutiny for his business deals with Manafort, was approached by investigators this summer.

Manafort has not been accused of any wrongdoing; he and Yohai have yet to comment on the report.

  • US can boost gas exports, cut global emissions in one fell swoop (The Hill)  This author says that if the Trump administration truly cares about expanding U.S. gas exports, as they claim, they should maximize the competitive advantage that lower-emitting U.S. natural gas has over not only coal, but also over higher-emitting Russian gas.

This means the administration should stop the Environmental Protection Agency’s (EPA) attempt to rollback domestic regulations of methane emissions from gas development, and perhaps use the threat of sanctions against Russian gas pipelines (as allowed under the new Russia sanctions law) to expand U.S. markets.

This means the administration should stop the Environmental Protection Agency’s (EPA) attempt to rollback domestic regulations of methane emissions from gas development, and perhaps use the threat of sanctions against Russian gas pipelines (as allowed under the new Russia sanctions law) to expand U.S. markets.

In addition, different sources of gas have higher and lower methane leakage rates. The good news for the U.S. is that American gas has much lower methane emissions than other sources, especially Russian gas. The EPA under the Obama administration estimated that U.S. shale gas production involves methane leaks of about 1.5 percent, the lowest emissions rate of any major producer in the world. Russian gas, in contrast, comes from the notoriously leaky Gazprom production system, with leaks or “fugitive emissions” rates of at least 5-7 percent.

  • U.S. Unit Labor Costs (The Daily Shot)  Unit labor costs in the US came in below consensus, suggesting that inflation should remain benign. The chart below shows the quarterly changes in labor costs (4-quarter moving average) trending lower.

EU

  • First Venice and Barcelona: now anti-tourism marches spread across Europe (The Guardian)  With the continent sweltering under a heatwave nicknamed Lucifer, tempers have been boiling over, too, as a wave of anti-tourism protests take place in some of Europe’s most popular destinations. Yet, as “tourism-phobia” becomes a feature of the summer, the World Tourism Organisation (UNWTO) has defended the sector, calling on local authorities to do more to manage growth in a sustainable manner.  The focal point for much of this has been Spain, which had a record 75.6 million tourists last year, including 17.8 million from the UK. In Barcelona, where tensions have been rising for years over the unchecked surge in visitors and impact of sites such as Airbnb on the local housing market, Arran, the youth wing of the radical CUP (Popular Unity Candidacy), have been filmed slashing the tyres of rental bicycles and a tour bus.  An Arran spokesperson told the BBC:

“Today’s model of tourism expels people from their neighbourhoods and harms the environment.”

  • Surging Euro Hits Stocks (The Daily Shot)   European shares have underperformed recently because of the strengthening euro.  Since April EUR is up about 8%;  the Euro STOXX 50 is down about 5.4%.

Syria

  • SDF destroys ISIS explosives factory in Raqqa (ARA News)  The Syrian Democratic Forces (SDF) destroyed an ISIS factory for mortars and mines in the al-Bayatra neighbourhood of Raqqa, killing 29 ISIS fighters, the SDF reported on Thursday.  Wednesday night clashes continued in the Hisham Abdul Malik neighborhood – south of Raqqa, in which 19 ISIS fighters were killed.

Iraq

North Korea

  • The Memo: Could Trump’s hard line work on North Korea? (The Hill)  President Trump’s allies are robustly defending his rhetoric on North Korea, despite the criticism his words have drawn from other quarters.  The administration’s view is that Trump’s hard line had paid dividends even before he threatened Pyongyang with “fire and fury” on Tuesday. Supporters argue it may continue to do so, in part by ratcheting up pressure on China to rein in its ally.

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

  • It’s the Payouts, Stupid! (Richard Bowen, Whistleblower)  Some banks are claiming that current capital requirements are preventing them from lending to consumers and businesses. Mr. Hoenig, Vice Chair FDIC, in essence, says that’s nonsense!  Bowen says that it is not regulation limiting banks from doing what we expect them to do (lend money), it is the fact that they are sucking approximately all of their net income out of banking in the form of payouts to their executives and shareholders.  See Hoenig letter, which includes the table below.  Hoenig says that if earnings were retained as capital an additonal $1 trillion in loans could be made under current capital requirements from the 10 largest banks.   From this article:

Mr. Hoenig advised the Senators to not listen to bankers telling them they need to lower capital requirements in order to increase lending. He said that the increased lending can be supported by retaining earnings, rather than paying dividends and huge share buybacks to shareholders. According to Mr. Hoenig, the 10 biggest banks could boost lending by $1 trillion annually simply by holding onto these earnings.

Mr. Hoenig advises, “I can only caution against relaxing current capital requirements and allowing the largest banks to increase their already highly leveraged positions,” he said.  “The real economy has little to gain, and much to lose, by doing so.”

bank.payouts.hoenig

  • The death of the internal combustion engine (The Economist)  UBS, a bank, reckons the “total cost of ownership” of an electric car will reach parity with a petrol one next year—albeit at a loss to its manufacturer. It optimistically predicts electric vehicles will make up 14% of global car sales by 2025, up from 1% today. Others have more modest forecasts, but are hurriedly revising them upwards as batteries get cheaper and better—the cost per kilowatt-hour has fallen from $1,000 in 2010 to $130-200 today. Regulations are tightening, too. Last month Britain joined a lengthening list of electric-only countries, saying that all new cars must be zero-emission by 2050.  The shift from fuel and pistons to batteries and electric motors is unlikely to take that long. The first death rattles of the internal combustion engine are already reverberating around the world—and many of the consequences will be welcome.

  • U.S. Retail Credit (The Daily Shot)  The number of distressed retail firms is at the levels last seen during the Great Recession.

I’ve written previously about the benefits of increased population and reduced debt; regardless, all those trends affecting Japan affect the U.S. and the most of the developed economies, and it seems to me that Japan is indeed the relevant model. They’re ahead of us and we should learn from their experience. The Japanese have been decades and trillions trying to reflate their economy, as a means of arresting a dangerous deflationary cycle. All their efforts have left little noticeable mark on low-yielding Japanese bonds, although they have depressed the value of the yen. You can’t just order up reflation.

  • Economic Slow Lane (Seeking Alpha)  The bond market has spent a decade showing up the ineptitude of economists to forecast interest rates (see graphic below).  The author points out that  the current Fed tightening cycle, which is now 18 months old, has only increased the futility of the forecasters.  This article quotes Jenna Barnard, Co-Head of Strategic Fixed Income and Portfolio Manager at Janus Henderson Investors:

Conflicting economic data is causing a dilemma for policy makers as to when or whether to end their Quantitative Easing (QE) market support programs and start increasing interest rates. The decision is particularly acute in the U.S., which has already started to raise interest rates and is now considering how much further to progress on the path to normalization.

Ms. Barnard points out that moves so far have been given the "thumbs down" by the bond market; while short-dated securities did sell off, longer maturities were relatively unmoved:

"The bond market is effectively saying, be careful [to the Federal Reserve]. If you over-tighten, growth and inflation could end up being much lower. I do not think the economy will take much more tightening - there is a danger that it will cool too much."


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