Written by Econintersect
Early Bird Headlines 07 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
Asia shares slump as China sets yuan lower, triggers circuit breaker (Reuters) Asian stocks slid across the board on Thursday after China again guided the yuan sharply lower while Shanghai shares .SSEC tanked more than 7 percent and triggered a stock market circuit breaker for the second time this week. Share trade was suspended for the rest of the day. See more on China later below. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped 2%, hitting its lowest level since late September. Australian shares lost 2.2% and South Korea’s KOSPI .KS11 fell 0.8%. Japan’s Nikkei .N225 shed 2.2%. With risk sentiment in tatters, spreadbetters forecast a significantly lower open for Britain’s FTSE .FTSE, Germany’s DAX .GDAXI and France’s CAC .FCHI.
Oil price needed to balance budget (The International Spectator, Twitter) Many countries are in deep trouble.
Oil price needed to balance budgetIran: $138Venezuela: $120Iraq: $114Russia: $100Saudi: $92Current: $32.7 pic.twitter.com/ecdm91RxRz
– The Int’l Spectator (@intlspectator) January 7, 2016
​U.S.
Davidowitz: Retail Is Doing Terrible Because Americans Don’t Have Any Money (Financial Sense) The article is very logical and provides a chart to support (chart below). But there is a problem: the data only goes through November. December saw a sharp jump in retail sales according to Mastercard with a year-over-year change of +7.9%. See U.S. holiday retail sales grow a ‘solid’ 7.9 percent: MasterCard (Reuters).
Clinton and Summers are wrong on Sanders’s Glass-Steagall proposal (The Hill) Hat tip to Dan Kervick. See also next article. Econintersect: Important to know what is meant by “shadow banking” in reading the excerpt below. This refers to risk-taking financial institutions that are less regulated than banks. Some of the risky functions involve “carry trade” activities: borrowing short-term and investing long-tern to take advantage of interest rate (or other return) differentials. This all works as long as the short-term loans can be rolled over into new loans at similar low interest rates. The scheme blows up when there is an increase in short-term rates above the return from the long-term investments.
Sen. Bernie Sanders (I-Vt.), along with Sens. Elizabeth Warren (D-Mass.), John McCain (R-Ariz.) and others, has called for the passage of an updated version of the Glass-Steagall Act in our nation’s next round of financial reforms. Sanders’s rival for the Democratic nomination, former Secretary of State Hillary Clinton, joined by her husband’s former Treasury secretary, Larry Summers, objects to this proposal (although both make constructive proposals of their own). Her professed ground is that the original Glass-Steagall Act wouldn’t have prevented our most recent crisis, which was caused mainly by shadow banking. This is a bit like objecting to the iPhone 6s because your flip phone had inadequate functionality. It suggests incomprehension of Sanders’s, Warren’s and McCain’s proposals, for the whole point of these proposals is to regulate 21st-century shadow banking just as the original Glass-Steagall regulated 20th-century shadow banking.
Elizabeth Warren endorses Hillary Clinton’s proposed new Wall Street regulations (Salon) “She and I agree,” Warren wrote while sharing Clinton’s new NYT op-ed, “How I’d rein in Wall Street“. In her op-ed, Clinton outlined how she would “fight for tough new rules, stronger enforcement and more accountability that go well beyond” Dodd-Frank. Although Clinton does not support the reinstatement of Glass-Stegall, she wrote that her
“plan goes beyond the biggest banks to include the whole financial sector. We need to tackle excessive risk wherever it lurks, not just in the banks.”
Econintersect: Supporting reinstatement of Glass-Steagall would put Hillary Clinton in a difficult position since the repeal of the banking act was signed by Bill Clinton.
Trooper Who Arrested Sandra Bland Indicted And Fired For Lying In Police Report (The Huffington Post) Trooper Brian Encinia claimed in an affidavit that Bland was “combative and uncooperative” after he pulled her over and ordered her out of her car. Below is the dashcam video of the event.
Controlled by shadow government: Mike Lofgren reveals how top U.S. officials are at the mercy of the “deep state” (Salon) Yet despite the widespread agreement that something is seriously wrong with democracy in the U.S., there’s much less of a consensus as to what that something is – and, crucially, how to fix it. The answers Bernie Sanders offers, for example, are not exactly the same as those proffered by Donald Trump. Is the problem too much government? Not enough government? Too much immigration? Not enough immigration? Too much taxing and regulating? Not enough taxing and regulating? This article contains an interview with Mike Lofgren, ex-GOP staffer and best-selling author, who says “a corrupt network of wealthy elites has hijacked our government“.
WATCH: Fox News’ Megyn Kelly slaps down seditious Ammon Bundy’s feeble ‘gotcha’ question (Raw Story) This article suggests that Megyn Kelly “slapped down” Ammon Bundy. Another article suggests that she “reduced Bundy to a silly, blathering fool“. But a third article says that “Ammon Bundy Schools FOX News’ Megyn Kelly“. Econintersect: What is that thing called objectivity? It would appear to be missing in some (all?) of this reporting.
EU
Survey suggests eurozone economy set for robust year (Associated Press) The 19-country eurozone economy is poised for a year of “robust expansion” following its best quarterly performance in 4-1/2 years, a closely watched survey indicated Wednesday. Financial information company Markit said its purchasing managers’ index – a broad gauge of activity across the manufacturing and services sectors – rose to a four-month high of 54.3 points in December from 54.2 the previous month. That, according to Markit, monthly growth rounded off the best quarterly performance since the middle of 2011. In 2015 eurozone GDP is expected to grow 1.5% and some are hoping that it will increase from that level in 2016.
Germany
Germany is the world’s strongest economy (Quartz) Germany’s remarkable economic run continues, with the number of jobless Germans falling to a post-unification low of 2.757 million in December. And GDP per capita growth outshines other developed economies (first graph below). But there is a dark cloud on the horizon: Germany’s population is declining (second graph below). Now Andrea Merkel’s open door to migrants is making sense.
​Japan
The World is On Edge, and Japan is Looking Very Vulnerable (Daily FX) The dramatic swings in the USD/JPY exchange rate as the story (and follow-up) was breaking about a possible H-bomb test in North Korea reveals just how vulnerable the yen.
China
China lets yuan fall faster, share trading suspended as prices tumble (Reuters)​ For the second time this week Chinese stock markets were closed after going limit down (- 7%), Thursday morning it only took a half hour to plunge that amount. For more data details see The Great Wall of Shanghai Is No Longer Visible from Space (GEI News).
North Korea
Real or not, North Korea’s ‘h-bomb’ is part of a well-planned agenda (The Conversation) This observer says this is all about Kim Jong-un posturing in advance of the Seventh Workers Party Congress to be held later this year, the first such meeting in 26 years.
