Early Headlines: Louisiana Gun Purchased Legally, Argentina’s Unpaid Debt, India Financial Reform, China’s Real-Time Stress Test and More

Early Bird Headlines 25 July 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

• Unlucky Emerging Markets Don’t Get Lift From Weak Currency (The Wall Street Journal) The bright side of a currency decline is supposed to be rising exports. But in key emerging markets around the world, that isn’t happening. Currencies in some countries are hitting new lows, down as much as 30% in the past 2½ years. Meanwhile, emerging-market export growth has fallen to its lowest levels in more than half a decade. Exports themselves fell 14.3% year over year in the three months through May, the biggest decline since 2009, according to Capital Economics.

  Econintersect: In a version of the ‘race to the bottom’ meme, if everybody is losing exchange value of their currencies then devaluation offers no export advantage – everybody is adjusting together. Look at it this way: If there are no customers cutting prices cannot increase sales. In a world thinking with supply-side logic, the idea of insufficient demand does not come to mind. And that is the kind of world we are in right now.

U.S.

• Gun used in theater shooting purchased legally at pawnshop, police say (Al Jazeera) Police say the 59-year-old lone gunman was a ‘drifter’ who praised Hitler and the Westboro Baptist Church.
• They had ‘a vision … a future’ (CNN) One of the victims killed in the Louisiana theatre shooting co-owned a gift and toy shop. Another was a college student who also worked at a women’s clothing store and planned to start radiology school in the coming days.
  
• This Wall Street Veteran Is Whipping Google Into Shape (Bloomberg) Ruth Porat brings Wall Street discipline to the freewheeling search giant. Now she must prove she can create efficiency without crimping the creative culture that’s helped Google dominate the online advertising market.
• Hillary Clinton proposes sharp increase in short-term capital gains taxes (CNBC) Presidential contender Hillary Clinton announced a proposal Friday afternoon to raise capital gains taxes for assets that are held for less than six years by top-bracket payers as a way to try and encourage long-term investing, and grow the economy.
  

Germany

• Merkel ‘gambling away’ Germany’s reputation over Greece, says Habermas (The Guardian) Jürgen Habermas, one of the intellectual figureheads of European integration, has launched a withering attack on the German chancellor, Angela Merkel, accusing her of “gambling away” the efforts of previous generations to rebuild the country’s postwar reputation with her hardline stance on Greece.

Russia

• Russia nationalist leader jailed for life over hate crimes (BBC News) A Moscow court has sentenced a Russian nationalist leader to life in jail for his role in a series of hate crimes, including the murders of a prominent human rights lawyer and a journalist. Ilya Goryachev, 33, was earlier found guilty of ordering five killings, motivated on ideological grounds, setting up an ultra-nationalist group and illegally possessing weapons.

India

• India moves to reduce central bank powers on interest rates (Financial Times) The finance ministry proposal to remove control of interest rates from the RBI (Reserve Bank of India) is the latest salvo in a long struggle between successive governments and central bank chiefs over the need to boost economic growth on the one hand and the urgency of curbing India’s consistently high inflation on the other. The government’s proposal envisages a seven-person monetary policy committee, with four members appointed by the central government and three from the RBI. This proposal is in the latest draft of the revisions for Indian Financial Code. A summary review of where this stands and where it is going has been posted by Indian economist Ajay Shah at GEI Opinion.
  

China

• China’s Live Stress Test (Project Syndicate) Two Chinese professors comment on the Chinese stock market collapse:

The plunge in China’s stock markets, which has sent shockwaves reverberating around the world, has amounted to a real-time stress test for the country. The bears, who have been predicting the Chinese economy’s downfall, are now consumed with schadenfreude. The bulls hold that, no matter how violent the stock-market gyrations may be, China’s economic success story remains intact. But, at this point, no outcome is certain.

….

China’s economy has succeeded through trial and error, and the lessons of its current stress test should be viewed as part of that process, to be used to drive the next phase of economic reform. One key lesson is that Chinese stock markets remain structurally biased toward state ownership and guidance, even as the country builds a more entrepreneurial economy. This is fundamentally problematic, because it is the market (not the state) that will identify and support the unicorns.

Argentina

• Why Argentina Consistently, and Unapologetically, Refuses to Pay Its Debts (Bloomberg Business)

Argentina’s fight with foreign banks and bondholders is more than just business. It’s part of the national psyche, enshrined in a special museum at the business school at the University of Buenos Aires. The Museum of Foreign Debt is nothing fancy. There are a few flimsy panels plastered with grainy photos, dates, text, and graphs.

Oh, but the saga portrayed on those panels! Banks, bond investors, and the International Monetary Fund flood crooked regimes with overpriced credit. The Argentine economy collapses, and the people suffer. International markets are roiled. It happens time and time again. The story has all the emotions of a good tango.

Argentina has reneged on foreign debt obligations at least seven times, starting in 1827. The latest was in July 2014, when Argentina defaulted rather than give in to pressure from Paul Singer of Elliott Management. The fight with Singer has been going on for a dozen years, and the term vulture investor—rather esoteric in much of the world—is now pretty much universally known in Argentina.

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