Written by Econintersect
Early Bird Headlines 23 May 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
Asia markets close mixed; Japanese shares under pressure from stronger yen, falling exports (CNBC) Asia markets closed mixed on Monday, with Japan’s shares dropping amid renewed strength in yen as fresh data showed the country’s exports continued to fall.
Renewable Energy Survey (Doomstead Diner) What is the future of energy for the planet earth? Give your opinions by clicking on the link. Econintersect: We have already inputted out 2 1/2 cents.
Bayer announces $62 billion cash offer for Monsanto (Reuters) German drugs and chemicals group Bayer AG said it had made an offer to buy U.S. seeds company Monsanto Co for $122 per share in cash, or a total value of $62 billion, to create the world’s biggest agricultural supplier. Bayer said on Monday that the offer represented a 37% premium over the closing price of Monsanto shares on May 9, before rumors of a planned bid emerged. Monsanto had disclosed last week that Bayer had made an unsolicited takeover offer for the group, triggering an investor backlash in which one of the German pesticides and drugs company’s major shareholders called the move “arrogant empire-building“.
Column: The world economy is running on monetary fumes (Ben Steil and Emma Smith, PBS News Hour) Ben Steil and Emma Smith have contributed to GEI.
With global growth stalling, the International Monetary Fund has repeatedly revised down its forecasts and is now calling for more assertive policy action to boost demand. In normal times, central banks cutting short-term interest rates is – even for liberal Keynesians like Paul Krugman – sufficient to address deficient demand. But these are most surely not normal times.
As our new Council on Foreign Relations Global Monetary Policy Tracker shows, a record 23 countries – accounting for a quarter of world GDP – now have central-bank policy rates of zero or less. A further six – including the United States – have policy rates of 1 percent or less. This means that the scope for monetary stimulus using conventional tools, such as policy-rate cuts towards zero, is – as the graphic below shows – nonexistent or limited in nations accounting for 60 percent of the global economy.
U.S.
To keep an American-dominated world order intact, the US has to make the grand geostrategic choice confronting Beijing starker and clearer, making the rewards for working within the present system greater, and the penalties for trying to upend it far more onerous.
The true centrepiece of American policy in Asia is the Trans-Pacific Partnership (TPP), the region-wide free trade deal which is both a gigantic carrot and a gargantuan stick. With TPP, the US pivot to Asia, though still difficult, has a sporting chance of blunting or redirecting Chinese ambitions. However, without TPP, the whole strategy collapses, destroying American credibility in the region. This makes the battle over TPP’s congressional ratification easily the most consequential foreign policy task remaining for Barack Obama’s presidency.
Patriots at the gate: The Americans preparing for battle against their own government (The Washington Post) Those in the movement call themselves patriots, demanding that the federal government adhere to the Constitution and stop what they see as systematic abuse of land rights, gun rights, freedom of speech and other liberties. Law enforcement officials call them dangerous, delusional and sometimes violent, and they say that their numbers are growing amid a wave of anger at the government that has been gaining strength since 2008, a surge that coincided with the election of the first black U.S. president and a crippling economic recession.
UK
Finance Chiefs Unanimous in Denouncing Brexit as Wrong Choice (Bloomberg) Global finance chiefs agreed that Britons should not vote to leave the European Union next month as they warned that Brexit may have negative economic consequences. German Finance Minister Wolfgang Schaeuble said in a briefing at the conclusion of the Group of Seven finance ministers’ meeting in Sendai, northern Japan, on Saturday that all G-7 members agreed on the consequences of Brexit, and shared the hope that Britain would vote to remain in the bloc on June 23.
How democratic is the European Union? (The Conversation) The author suggests the EU is actually more democratic than the UK (blunting an argument for Brexit):
Clearly the EU structure has defects when assessed by the normal standards of Western democracy – but I would argue that the British parliament, with its unelected House of Lords and an unrepresentative House of Commons (in terms of the balance of political parties to votes cast), is even less democratic.
Eurosceptics have for a long time questioned the legitimacy of the EU – but that charge is difficult to sustain. Of course national parliaments have all agreed to pool sovereignty in the EU institutions, but they are entitled to do that and have done so with their eyes wide open. Many even asked their citizens to vote on the decision in a referendum.
Greece
Greek parliament approves bailout reforms (City A.M.) Greece’s parliament just approved a controversial bill of bailout reforms, ahead of a vital Europgroup meeting on Tuesday. The bill is likely to include the last chunk of a €5.4 billion ($6.06 billion) austerity package which Greece will implement by 2018. The much-needed bill increases tax, creates a new privatisation fund and frees up the sale of non-performing loans in exchange for bailout loans and to qualify for debt relief. Athens expects the vote to unlock new funds that the country needs to pay IMF loans and ECB bonds maturing in July. Econintersect: Greece continues to increase debt to pay for older debt while cutting down their economy. Insane!
Iraq
Iraq announces start of Falluja operation, some residents flee (Reuters) Iraqi Prime Minister Haider al-Abadi announced the launching of an offensive to retake the Islamic State stronghold of Falluja after the military told residents on Sunday to get ready to leave before fighting started. He said the offensive would be conducted by the army, police, counterterrorism forces, local tribal fighters and a coalition of mostly Shi’ite Muslim militias. A U.S.-led coalition that has bombed Islamic State in Iraq and neighboring Syria for nearly two years was expected to provide air support.
Iran
Latest updates: Modi receives ceremonial welcome in Iran (The Hindu) Prime Minister Narendra Modi was on Monday accorded a ceremonial welcome as he met Iranian President Hassan Rouhani for talks to deepen trade, investment and energy ties. Mr. Modi, the first Prime Minister to visit Iran on a bilateral visit in 15 years, was received by Mr. Rouhani on the forecourts of Saadabad Palace – the seat of executive in Iran. In addition to seeking more oil imports from Iran fro India, Modi also hopes to get increased Indian access to the port of Chabahar to enable India to bypass Pakistan and open up a route to land-locked Afghanistan.
India
ISRO successfully test launches India’s first-ever indigenous space shuttle (The Times of India) Hat tip to Sanjeev Kulkarni. The Indian Space Research Organization (ISRO) successfully test launched the first ‘Made in India’ space shuttle – called the Reusable Launch Vehicle (RLV) – early on Monday morning from Sriharikota in Andhra Pradesh. The test launch is considered a significant step in India’s space endeavor. It’s especially important because in 2011, the U.S.’s NASA abandoned its reusable space shuttle project. The test launch of the 6.5 meter long and 1.75 ton reusable launch vehicle ( RLV-TD ) occurred at 7 am on Monday from the Satish Dhawan Space Centre. See also Indian Space Research Organization to Test its Reusable RLV Spacecraft (Spaceflight Insider) ISRO hopes that RLV will cut satellite launch costs from $5,000 to $500 per every 2 lbs (1 kg).
Indian state elections give Modi a boost – but the country is fracturing (The Conversation) The elections bode ill for the future of Indian politics. More and more people are apparently buying into the idea that the BJP is the rightful sole party of national government. The fragmentation of the political landscape along caste, religious and ideological lines is only helping the BJP consolidate its position, despite some of the disastrous events that have unfolded on its watch over the last two years. There’s still plenty of disenchantment with the government, and many voters view Modi as anything but the superman of Indian politics. But nonetheless, he and the BJP continue to gain ground.
With India’s Gandhis at rock bottom, opposition comeback a daunting task (Reuters) Prashant Kishor, the election campaign manager brought in by India’s opposition Congress party to reverse its declining fortunes, knew his real work would begin when the party hit rock bottom. It looks like that moment has come. The party run by the fabled Gandhi dynasty, which has led the world’s largest democracy for most of its existence, suffered humiliation last week when it lost Assam to the ruling Bharatiya Janata Party (BJP) in a state election.
Japan
Japan April exports suffer biggest drop in three months, bode ill for growth (Reuters) Japan’s exports fell in April at the fastest pace in three months as a stronger yen and weakness in China and other emerging markets take their toll on the country’s shipments, boding ill for growth prospects for the current quarter. Exports declined 10.1% year-on-year in April, Ministry of Finance data showed on Monday, in line with a 10.0% annual drop expected by economists in a Reuters poll and worse than a 6.8% drop in March. It marked the seventh straight month of declines and was the biggest drop since 12.9% in January, when Japanese shipments to Asia slowed sharply ahead of the Lunar New Year holidays.
U.S., Japan disagreement on yen moves overshadows G7 meeting (Reuters) The United States issued a fresh warning to Japan against intervening in currency markets on Saturday as the two countries’ differences over foreign exchange overshadowed a Group of 7 finance leaders’ gathering in the Asian nation. Japan and the United States are at logger-heads over currency policy with Washington saying Tokyo has no justification to intervene in the market to stem yen gains, given the currency’s moves remain “orderly“.
