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What We Read Today 31 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:

  • House flippers triggered the US housing market crash, not poor subprime borrowers

  • Report: Short Supplies Pummel Home Sales

  • July 2017 Pending Home Sales Seasonally Adjusted Index Significantly Declines

  • The Fake News Fallacy

  • Nearly Half of Trump’s Proposed Tax Cuts Go to People Making More than $1 Million Annually

  • What Hurricane Harvey Taught Donald Trump in Texas

  • Why we don't yet know Harvey's true toll

  • Hurricane Harvey could push forward U.S. debt ceiling deadline: Mnuchin

  • Rick Perry releases 500,000 barrels of crude oil to prevent spike in gas prices

  • Steven Mnuchin on Harriet Tubman's $20 bill: 'We will be looking at this issue'

  • Harvey Will Greatly Complicate Census Data Collection Programs

  • Taxes on Corporations in Europe

  • U.S. will shutter Russian consulate in San Francisco in retaliation against diplomatic cuts in Moscow

  • Trump's Real Estate Ambitions in Russia

  • Mattis signs orders to send additional troops to Afghanistan

  • Note ban: Modi's hunt for black money yielded a piddly Rs 16,000 crore, shaved 1% off GDP in the process

  • Bodies wash up on Bangladesh shore as Rohingya flee Myanmar

  • Brazil consumers drive recovery as investment lags

  • And More

Articles about events, conflicts and disease around the world


  • What Hurricane Harvey Taught Donald Trump in Texas (The New Yorker)  The author declares: It will be hard to persuade Trump and the Republicans that Hurricane Harvey involves major policy issues that reach beyond the borders of the storm. She continues:

The problem is not that President Trump does not realize that Harvey is huge; a number of his tweets on the storm have contained the word “Wow,” and he called it “epic” and “historic,” adding that “Texas can handle anything!” But the enormity of the situation does not seem to have organized his thoughts beyond declarations of how it will be matched by the greatness of his Administration and its allies. 

  • Why we don't yet know Harvey's true toll (CNN)  The area involved is just too big.  In all, 53 Texas counties issued emergency declarations -- an area that's home to around 11.4 million people. How many people successfully fled their homes ahead of the storm? How many are still waiting to be rescued?  FEMA director Brock Long said Thursday:

"At this time, we don't know." 

  • Hurricane Harvey could push forward U.S. debt ceiling deadline: Mnuchin (Reuters)   U.S. Treasury Secretary Steven Mnuchin said on Thursday that Hurricane Harvey could bring forward the deadline by which the nation’s debt ceiling needs to be raised and that he is open to the borrowing cap being dealt with as part of a wider bill.  Mnuchin said in a interview with broadcaster CNBC that storm could affect the debt ceiling deadline by a couple of days:

“We obviously have now the hurricane spending, which is an issue. So that’s going to have some impact on our September spending.” 

  • Rick Perry releases 500,000 barrels of crude oil to prevent spike in gas prices (PBS NewshourEconintersect:  We nominate this as the 'WTF of the month'.  Gasoline prices are spiking because of lost refining capacity while crude inventories pile up unused.

  • Steven Mnuchin on Harriet Tubman's $20 bill: 'We will be looking at this issue' (CNN)   Maybe putting Harriet Tubman on the new $20 bill isn't a done deal after all.  Back in in April 2016, Obama Treasury Secretary Jack Lew, said that the black abolitionist hero would appear on a new version of the bill. It would be the first time a woman has appeared on U.S. paper currency in over 100 years -- and the first time ever for a black woman.  In a CNBC interview that aired Thursday, however, current Treasury leader Steven Mnuchin was asked whether he supports putting Tubman on the $20 bill.  He responded,

"Ultimately we will be looking at this issue, [but] It's not something that I'm focused on at the moment."

The Census Bureau conducts nationally representative household surveys used to generate important statistics such as the monthly unemployment rate, housing characteristics, consumer expenditures, etc.  All of these surveys are based on samples of housing unit addresses.  Persons that have been displaced by Hurricane Harvey will no longer be at those addresses when the Census interviewers arrive or call, resulting in these households being listed as vacant.  Without going into great detail these statistical series based on these surveys may be significantly affected even as the Census Bureau will make every effort to account for this disruption.

For the monthly Current Population Survey (CPS) used to measure employment and unemployment the monthly interviews are normally scheduled for the week of the month containing the 19th day and the questions refer to the previous week containing the 12th day.


Taxes on Corporations in Europe (Twitter)

Click for larger image.


  • U.S. will shutter Russian consulate in San Francisco in retaliation against diplomatic cuts in Moscow (PBS Newshour)  In an escalating tit-for-tat, the United States forced Russia on Thursday to shutter its consulate in San Francisco and scale back its diplomatic presence in Washington and New York, as relations between the two former Cold War foes continued to unravel.  The Trump administration said the move constituted its response to the Kremlin’s “unwarranted and detrimental” decision to force the U.S. to cut its diplomatic staff in Russia. The U.S. gave Russia a mere 48 hours to close its San Francisco consulate, along with smaller Russian posts in Washington and New York.

  • Trump's Real Estate Ambitions in Russia (The New Yorker)  Trump’s pursuit of a deal in Russia while he was campaigning is scandalous, even without any other context. But newly discovered details compound the scandal.  These revelations present two obvious problems for the President:

First, Trump was taking a policy position—one deeply at odds with his own party—that would benefit him personally. It’s a startling conflict of interest. Second, his statements and actions, and those of his subordinates and their associates pursuing the deal, may fuel the obstruction-of-justice inquiry against Trump that the special counsel, Robert Mueller, began pursuing this spring, after the firing of the F.B.I. director, James Comey. The more it looks like Trump had something to cover up, the stronger an obstruction charge would be.


  • Mattis signs orders to send additional troops to Afghanistan (Reuters)  U.S. Defense Secretary Jim Mattis said on Thursday he had signed orders to send additional troops to Afghanistan, the most concrete step yet by President Donald Trump’s administration in tackling America’s longest war.  Mattis did not specify the size of the force, which will help combat Taliban insurgents and other armed Islamists.  About 11,000 U.S. troops are already serving in Afghanistan, the Pentagon said on Wednesday, thousands more than it has previously stated.


  • Note ban: Modi's hunt for black money yielded a piddly Rs 16,000 crore, shaved 1% off GDP in the process (The Economic Times)  Hat tip to Sanjeev Kulkarni.  Finally, the RBI has deigned to release the cold hard facts on Demonetisation. Of Rs 15.44 lakh crore ($2.3 trillion) worth of currency denotified, almost all came back, save currency worth Rs 16,000 crore ($2.4 billion). The Central Statistics Office estimates India’s 2016-17 GDP to be Rs 151.84 lakh crore. That means black money worth 0.1% of GDP was extinguished. To achieve that, 1% of GDP was sacrificed, if we go by the Economic Survey’s estimate of the impact of Demonetisation on economic growth. Demonetisation has been a flop, as far as tackling black money is concerned. 

But Demonetisation has been a big political success for the Prime Minister. People give him full credit for trying to rein in the illicit rich. And were willing to suffer some pain, if that would serve the larger public interest. Of course, those with black money held as cash, a tiny fraction of unaccounted wealth, ended up with somewhat less black money: you had to part with some of the cash to get it laundered through the accounts of those with nothing to hide. At some point, this cost was something like 30%. 


  • Bodies wash up on Bangladesh shore as Rohingya flee Myanmar (Reuters)  Bangladeshi border guards have recovered two dozen bodies from the country’s shore in the last two days, as tens of thousands of Rohingya Muslims make desperate attempts to flee the worst violence involving the Myanmar minority in at least five years.  At the United Nations, the U.S. ambassador to the world body, Nikki Haley, urged Myanmar’s security forces to avoid attacking innocent civilians.  Haley condemned recent attacks by the Arakan Rohingya Salvation Army but added

“as Burmese security forces act to prevent further violence, they have a responsibility to adhere to international humanitarian law, which includes refraining from attacking innocent civilians and humanitarian workers.”


  • Brazil consumers drive recovery as investment lags (Reuters)  Brazilian policymakers and economists have for years promised that a surge in corporate investment would lift Latin America’s largest economy out of its worst recession. Investors are not buying it.  While consumers are loosening their purse strings, Brazilian companies must deal with heavy debt loads and employ idle capacity before they boost investment in new machines or facilities, economic data shows.

Instead the economic recovery has some investors betting that consumer-facing firms - such as retailers, healthcare companies and apparel makers - are better positioned to benefit from Brazil’s first economic growth in three years, outperforming heavy industry.

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

  • House flippers triggered the US housing market crash, not poor subprime borrowers (Quartz)   The grim tale of America’s “subprime mortgage crisis” delivers one of those stinging moral slaps that Americans seem to favor in their histories. Poor people were reckless and stupid, banks got greedy. Layer in some Wall Street dark arts, and there you have it: a global financial crisis.  Dark arts notwithstanding, that’s not what really happened, though.  Mounting evidence suggests that the notion that the 2007 crash happened because people with shoddy credit borrowed to buy houses they couldn’t afford is just plain wrong. The latest comes in a new NBER working paper arguing that it was wealthy or middle-class house-flipping speculators who blew up the bubble to cataclysmic proportions, and then wrecked local housing markets when they defaulted en masse.

In early 2004, a little more than 10% of borrowers in the top three quartiles of the credit score distribution had two or more mortgages. By 2007, that had leapt to around 16% for borrowers in the middle half of the credit-score distribution, and around 13% among that top quartile. However, for the lowest quartile (i.e. subprime), only around 6% had more than one mortgage, rising to around 8% by 2007.

Click for large image.

  • Report: Short Supplies Pummel Home Sales (Realtor Mag)  Contract signing mostly stalled last month as housing shortages across the country continued to hamper home sales, the National Association of REALTORS® reported Thursday. The West was the only major region of the U.S. to see an uptick in pending July home sales.  Overall, NAR’s Pending Home Sales Index—a forward-looking indicator based on contract signings—dropped 0.8% to a reading of 109.1 in July. The index is now 1.3% lower than a year ago. It has fallen on an annual basis in three of the past four months.  For detailed data analysis see July 2017 Pending Home Sales Seasonally Adjusted Index Significantly Declines.

  • The Fake News Fallacy (The New Yorker)  The author suggests: "Radio, in its early days, was seen as a means for spreading hysteria and hatred, just as the Internet is today."  He points out that censorship to control fake news abuses is problematic:

Yet today, with a powerful, well-funded propaganda machine dedicated to publicizing any hint of liberal bias, conservatives aren’t the ones who have the most to fear. As Facebook has become an increasingly important venue for activists documenting police abuse, many of them have complained that overzealous censors routinely block their posts. A recent report by the investigative nonprofit ProPublica shows how anti-racist activism can often fall afoul of Facebook rules against offensive material, while a post by the Louisiana representative Clay Higgins calling for the slaughter of “radicalized” Muslims was deemed acceptable. In 2016, a group of civil-rights activists wrote Facebook to demand that steps be taken to insure that the platform could be used by marginalized people and social movements organizing for change. There was no high-profile meeting with Zuckerberg, only a form letter outlining Facebook’s moderation practices. The wishful story about how the Internet was creating a hyper-democratic “participatory culture” obscures the ways in which it is biased in favor of power.

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