Early Headlines: Super Typhoon Soudelor, Russian Gasoline Shortages, China’s Regulation Disaster, Problem Child Portugal and More

Early Bird Headlines 08 August 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

• “Global warming is a total, and very expensive, hoax!” (Menzie Chinn, Econbrowser) MC has contributed to GEI. Source: Donald J. Trump, 6 December 2013. MC provides the data from NOAA.

U.S.

• James Holmes sentenced to life in prison for Colorado movie theater murders (CNN) One juror held out to prevent the death penalty for the Aurora, Colorado movie theater killer.
• Capitalists, Arise: We Need to Deal With Income Inequality (The New York Times) Some of America’s top executives are “scared” according to this column. The are concerned that the relatively extreme income inequality in the country is an unsustainable condition. There are ideas being discussed about what can be done. One specific idea is to incentivize higher pay through the tax system. Econintersect: Or bring back Henry Ford who said he had to pay high wages to his factory workers so they would have money to buy his cars. See The Middle Class Took Off 100 Years Ago … Thanks To Henry Ford? (NPR) – It was actually the productivity improvement that came with higher wages that was the real breakthrough.
  

Portugal

• Indebted Portugal is still the problem child of the eurozone (The Telegraph) Asphyxiating debt levels, falling job creation and bad loans still plague the economy, a year after it exited its bail-out program, warns the IMF. The country has always been the “weakest sister”:

Russia

• Russia is facing a fuel shortage (CNN) The world’s second biggest oil producer is expected to soon have gasoline shortages. The expected shortfall is a result of many factors, including new tax rules, a weakening economy and Western sanctions that are hurting Russia’s oil refining businesses. This is pushing fuel prices up, even as oil prices have plunged.
  

China

• Beijing may question the yuan peg as the Fed prepares for liftoff (Walter Kurtz, Sober Look) As the dollar continues to strengthen, especially if the Fed starts raising interest rates, the yuan peg to the dollar creates significant drag on China’s manufacturing sector and exports. Article contains several good graphs which we have had in recent days in Early Bird and What We Read Today.
• China’s Stock Crash Is Spurring a Shakeout in Shadow Banks (Bloomberg) One aspect of the stock market crash has had a beneficial side effect: Some of the highest flying shadow banking operations have suffered serious losses. This will help the government in efforts to rein them in.
  
• China’s Malfunctioning Financial Regulation (Project Syndicate) A Chinese professor details how the government nourished and cheered on a stock market bubble and then strong-armed the resultant collapse to end the tumult. But he is hopeful leaders have learned their lesson:

The fear is that the recent stock-market crash may have spooked the government, causing it to slow the pace of reform, including efforts to open up China’s capital account. Whether reform momentum is maintained will depend largely on whether the government recognizes that the crash was the result of a regulatory failure, or remains adamant that it was the work of some nefarious foreign force, determined to destroy the Chinese economy.

While the latter scenario is possible, it seems unlikely. Judging by China’s reform progress in recent years, and the current government’s repeated promises to deepen those efforts, I am confident that the country’s leaders will respond to the recent crash by reaffirming the financial-reform agenda. Ignoring the lessons of the recent crash would be a serious mistake – one that China’s pragmatic and tenacious authorities will be determined to avoid.

Taiwan

• Powerful Typhoon Soudelor slams into Taiwan (CNN) Hat tip to Typhoon Soudelor made landfall Saturday morning just north of the Taiwanese city of Hualien on the east coast of the island, bringing fierce winds and torrential rain. The storm was expected to have sustained winds at landfall of about 125 mph (200 kph), the equivalent of a Category 3 hurricane.

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