Written by Econintersect
Early Bird Headlines 18 January 2015
Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.
Global
Asian shares drop to 2011 levels as oil slump intensifies (Reuters) Asian shares slid to their lowest levels since 2011 on Monday after weak U.S. economic data and a massive fall in oil prices stoked further worries about a global economic downturn. Spreadbetters expected a subdued open for European shares, forecasting London’s FTSE .FTSE to open modestly higher while seeing Germany’s DAX .GDAXI and France’s CAC .FCHI to start flat-to-slightly-weaker.
62 people have as much wealth as half the world (CBS Money Watch) Hat tip to Roger Erickson. Global economic inequality is deepening, with only 62 individuals owning as much wealth as the 3.5 billion people in the bottom half of the world’s distribution of wealth. That calculation is from the charity Oxfam, which will present its report at the World Economic Forum’s annual summit, which kicks off Jan. 20 in Davos, Switzerland. The gap between rich and poor is widening even faster than the organization had predicted last year, when it forecast that the top 1% would own most of the world’s wealth by 2016. In fact, that benchmark was reached long before 2015 ended, according to Oxfam. See also next article.
Wealth of richest 1% ‘equal to other 99%’ (BBC News) The richest 1% now has as much wealth as the rest of the world combined, according to Oxfam. It uses data from Credit Suisse from October for the report, which urges leaders meeting in Davos this week to take action on inequality.
U.S.
Why This Market Meltdown Isn’t a Repeat of 2008 (The Wall Street Journal) This writer (Justin Lahart) says the economy and financial state of the world (and especially the U.S.) is far different now than in 2008.
The Koch brothers’ impact on the American political system (The Washington Post) Hat tip to Roger Erickson. In a controversial new book, The New Yorker writer Jane Mayer reviews the lives of the four Koch brothers, Frederick, Charles, David and Bill, focusing on the involvement of Charles and David in political activism. While other billionaire political activists are also discussed in the book, Charles and David Koch garner the most attention. Koch industries has issued a statement regarding the book, Dark Money:
“We expect to have deep disagreements and strong objections with [Mayer’s] interpretation of the facts and their sourcing. Of the many false and inaccurate claims that have leaked out so far, the implication that Fred Koch sympathized with one of the most tyrannical regimes in history is reprehensible and represents the lowest form of journalism.”
Are we actually headed toward a recession? (The Week) Hat tip to Rob Carter. Jeff Spross quotes work by economist Tim Duy which indicates a recession is at least 2-3 years away for the U.S. See also Opinion: Are we in a recession already? Not yet (MarketWatch) and next article.
A recession worse than 2008 is coming (CNBC) Hat tip to Rob Carter. Michael Pento is negative on the economy in this article but we couldn’t words to match the extreme headline.
Americans are spending $153 billion a year to subsidize McDonald’s and Wal-Mart’s low wage workers (The Washington Post) The low wages paid by businesses, including some of the largest and most profitable companies in the U.S. – like McDonald’s and Wal-Mart – are costing taxpayers nearly $153 billion a year. After decades of wage cuts and health benefit rollbacks, more than half of all state and federal spending on public assistance programs goes to working families who need food stamps, Medicaid, or other support to meet basic needs. Let that sink in – American taxpayers are subsidizing people who work – most of them full-time (in some case more than full-time) because businesses do not pay a living wage.
This is the single most stunning poll number on Donald Trump I have seen (The Washington Post) Two graphs, the first is the “most stunning” mentioned in the headline and the second Econintersect calls the “Bush death cross“.
UK
Time to give challenger banks a fair chance (City A.M.) The City’s top regulator is being urged by Treasury Select Committee chairman Andrew Tyrie to “do whatever is required” to increase competition in the banking sector by reducing entry barriers for challenger banks. Challenger banks have long argued that they unfairly face steeper capital requirements than larger lenders, in part because they do not have enough capacity or resources to use the so-called internal ratings-based (IRB) approach to calculating credit risk.
Six energy records Britain broke last year (The Conversation) Not only was December 2015 the UK’s wettest month on record, but it was also exceptionally stormy. Bad news for many, but great news for the country’s wind power and hydro generators. In fact, storms Desmond, Eva and Frank meant that throughout December, more than 19% of Great Britain’s (not the UK’s – as Northern Ireland is not included in the underlying data) electrical energy came from wind, solar and hydro combined. That’s the highest ever figure for a calendar month. It was an exceptional end to an unusual year that saw several new records set within Britain’s power sector as the transition from dirty to clean energy continued.
Lack of finance keeps smaller housebuilders trailing behind their bigger rivals (City A.M.) Profits at the top UK housebuilders may have hit a pre-crisis high but their smaller rivals are still struggling to recover as funding for larger projects remains scarce, new research suggests. A construction boom has helped profit margins at larger housebuilders reach an average of 11.7% for 2015 compared to their 2007 peak of 11.2%. However that contrasts with average profit margins of 7% for small to medium-sized builders.
Saudi Arabia
The terminal flaw at the heart of Saudi’s low oil strategy (City A.M.) Saudi Arabia has been pursuing the John D Rockefeller energy strategy: forcing up oil production to drive their competitors (especially American shale) out of business and thereby boosting market share. It has yet to work. The self-inflicted wounds of such a policy are driving the Saudis to economic extremes unthought-of in recent years. In 2015, the Saudi budget deficit amounted to $98bn, or a whopping 15% of its GDP. While Riyadh has mountainous reserves, it needs the price of oil – the sole motor of its economy – to fetch around $85 a barrel to adequately finance public spending, a figure absolutely no one sees as remotely being on the horizon.
Iran
US imposes new Iran sanctions for ballistic missile testing (Fox News) The United States has imposed sanctions against 11 individuals and entities involved in Iran’s ballistic missile program as a result of Tehran’s firing of a medium-range ballistic missile. U.N. experts said in a report in December that the missile test in October violated sanctions banning Iran from launches capable of delivering nuclear weapons. U.S. Treasury official says Iran’s ballistic missile program poses “a significant threat to regional and global security.” The U.S. also believes there was a November missile test.
Russia
Putin’s self-destructing economy (The Washington Post) This Op Ed (by Vladislav Inozemtsev, a visiting fellow at the Center for Strategic and International Studies in Washington and director of the Center for Post-Industrial Studies in Moscow) cites many dismal numbers regarding the Russian economy:
I would argue that Russia’s economy is doing much worse than it was even in 2009. Real disposable incomes are down significantly, and nominal wages – recalculated in dollars at current exchange rates – are below where they were in 2005. Retail sales have dipped twice as deeply as they did in 2009. Federal budget receipts, also in dollars, are at 2006 levels. The average price for a new apartment in Moscow has fallen 16 percent below 2014 levels in rubles, and by more than by half in dollars. Office rents in Moscow and St. Petersburg have been pushed back to 2002 rates. The Russian economy suffers from both the effects of diminishing oil revenue and growing bureaucratic pressure, not to mention the country’s paranoid foreign policy.
