Early Bird Headlines 19 June 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
- A Rule of Law for Sovereign Debt (Joseph Stiglitz and Martin Guzman) There is nothing for sovereign debt like bankruptcy law for private debt. What is needed is a definition of rules of law for restructuring sovereign debt. The crisis in Europe is just the latest example of the high costs – for creditors and debtors alike – entailed by the absence of an international rule of law for resolving sovereign-debt crises.
- The failure of the TPP matters, but not for economic reasons (China Spectator) There is little need for the Trans pacific Partnership (TPP) to promote free trade – tariffs are already very low. It’s purpose, as far as the U.S. is concerned, is a political tool against China’s expanding influence in the region.
U.S.
- House Republicans rebuff D.C. on budget; reproductive law under threat (The Washington Post) House Republicans inserted language into the next federal budget Wednesday that would bar the District from enforcing a local law prohibiting discrimination on the basis of whether employees have abortions or use contraception. The law has been prized by women’s rights groups and denounced by religious organizations that have argued it could prevent churches or other groups who oppose abortion from firing an employee who seeks the procedure.
- Offshore Wind Power May Finally Blow into U.S. Waters (Scientific American) Econintersect: Not mentioned in this article are costs – we have read that offshore wind electricity is not cost competitive with onshore wind and photovoltaic solar.
Denmark
- Populist party’s success sets Denmark on course for new government (Financial Times) Right-wing parties have dominated the election. Denmark is set for a change of government as parliamentary elections brought a surge of support for a populist, anti-immigration party. The center-right opposition won by one seat over the ruling Social Democrat coalition, leading to Helle Thorning-Schmidt’s resignation as both prime minister and party leader. But the center-right candidate for premier, Lars Løkke Rasmussen, led his Liberal party to their worst result in a quarter of a century. Instead, the big winners on the right were the Danish People’s party, who beat the Liberals to become Denmark’s second-biggest party behind Ms Thorning-Schmidt’s Social Democrats.
Greece
- Geopolitics will trump economics in Greece (Macro Business)
The unacceptable specter lurking behind the EU negotiators is that, if Greece is shown the door by the EU, Russia or even China might step in to provide financing to Greece in return for a strategic foothold in Western Europe and gateway to the Eastern Mediterranean. This is a possibility that Europe cannot abide. In short, international political ramifications will trump any economic or financial issues.
- The IMF’s “Tough Choices” on Greece (James K. Galbraith, Project Syndicate) JKG has contributed to GEI. Galbraith says the IMF knows that Greek debt is not sustainable and it is time they acted on that knowledge and write it down. See also GEI Analysis: A Program for Greece: Follow the IMF’s Research.
China
- Chinese business sentiment ticks up in June (China Spectator) The latest MNI China Business Sentiment Survey increased 7.6 per cent on the month to 53.5 in June, meaning confidence now stands at the highest since the start of the year. A significant contributor to the increased positive sentiment is the three interest rate cuts since November. But those are likely ending soon – see China Nears End of the Rate-Cutting Cycle (Yichao Wang, GEI Feature).
- The Truth About China’s South China Sea Land Reclamation Announcement (The Diplomat) China has declared that some of its land reclamation work in the South China Sea will be completed soon. Considering the feverish pace of Chinese activity in this respect over the past few months, one might be tempted to heave a sigh of relief. That would be a tragic mistake. A closer look suggests that the announcement does not tell us anything new about what China is doing or ease our doubts about what it is going to do in the South China Sea.
Australia
- More evidence Australia’s financial sector is killing growth (Macro Business) Just as insufficient financial development holds back an economy by providing too little access to capital, a high level of financial development hinders economic growth because financial operations occupy too much of capital, depriving production of goods and services of access to capital. Econintersect: We would offer that once the purpose of money becomes the creation of financial instruments to make more money, a seemingly easy process, there is diminished interest in the extra effort needed to be successful in using capital to finance production. The following graphic is from an IMF report.
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