Written by Econintersect
Early Bird Headlines 10 April 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.
U.S.
Cruz wins big in Colorado shutout (The Hill) has swept the Colorado GOP convention, winning all 13 of the state’s at large delegates. And after also winning all 21 delegates awarded at the congressional district conventions throughout the week, Cruz leaves Colorado with a complete shutout of his opponents.
Bernie Sanders takes Wyoming caucus but Hillary Clinton picks up delegates (The Guardian) Bernie Sanders won the smallest state in the Democratic nomination race by a smaller-than-expected margin on Saturday, as he celebrated a seven-election winning streak that has more psychological than mathematical impact. The Vermont senator finished 12 points ahead of former secretary of state Hillary Clinton with 56%-44% of the vote in Wyoming, after a caucus that underlined his continued challenge to her among white voters drawn to his more radical economic platform. But Hillary ended up with 11 delegates from Wyoming and Sanders only 7. The reason? Four super delegates were previously pledged to Clinton and that was not changed by the vote.
Why the Banks Should Be Broken Up (Matt Taibbi, Rolling Stone) Hat tip to Rob Carter. Here is Matt’s summary of the development of the mortgage crisis:
The root problem of the ’08 crisis lay in a broad criminal fraud scheme in the mortgage markets. Real-estate agents fanned out into middle- and low-income neighborhoods in huge numbers and coaxed as many people as possible into loans, whether they could afford them or not.
Those loans in turn were bought up by giant financial companies on Wall Street, who chopped them up into a kind of mortgage hamburger. Out of this hamburger, they made securities. These securities were then sold to institutional investors like pension funds, unions, insurance companies and hedge funds.
In the typical scenario, the investors buying these toxic mortgage securities weren’t told how risky the merchandise was. Many thought they were investing in AAA-rated real estate, when in fact they were buying up the flimsy home loans of part-time janitors, manicurists, strawberry pickers, people without ID or immigration status, and so on.
Taibbi wrote this in response to Paul Krugman’s column in The New York Times which maintained the big banks were not “at the heart of the crisis“. Taibbi points out that without the securitization provided by the big banks there would not have been a huge bubble and collapse. No one would have made bad loans if there were no market to soak them up. See Prof. Krugman’s column: Sanders Over the Edge (The New York Times).
The Federal Government’s $128 Trillion Stockpile: The Answer to Our Debt Problems? (Time) Hat tip tio John O’Donnell. This 2013 article gives an asset value for the U.S. at more than $128 trillion. This is nearly 7 times the national debt of $19 trillion and more than double the debt plus estimated “unfunded liabilities“. The U.S. has a net worth that is at least $60 trillion (probably more) which is more than $200,000 for every man, woman and child in the country. The U.S.is a very wealthy country.
Most of Decline in Labor Force Participation is Retirement and Disability (Sober Look, Twitter)
EU
Bringing The IMF Into The Eurozone Crisis Was Political Bankruptcy (Social Europe) The easily identifiable error from the start was political in nature: By drawing in the IMF as an equal partner the EU admitted de facto that it saw itself as unable to solve the Eurozone crisis on its own. This sent a signal of political bankruptcy. Finally, this conceded a clear right to co-determination in solving an intra-European problem to other IMF members, especially the influential USA or emerging countries such as Brazil and India. This weakened Europe’s political weight.
Draghi’s Big Bazooka Is Misfiring (Bloomberg) Mario Draghi’s unorthodox policies have driven yields on government bonds and corporate debt to record lows. But so far they’ve had little impact on the cost of equity, which has stayed stubbornly high since the financial crisis. That may explain why the ECB’s attempt to kickstart investment has stalled. The cost of equity is the return investors demand in terms of dividends and capital gains to hold a company’s shares. Low interest rates have supported share prices but not enough to prevent a widening gap between the cost of equity and debt.
Greece
SYRIZA, The IMF And The EU: Gambling With The Future Of Greece (Social Europe) The latest flare up regarding Greece has followed publication by Wikileaks of illegally taped discussions among IMF officials. To analyze the significance of this event it is vital to bear one point in mind: Greece cannot meet the terms of the bailout agreement struck on July 2015 by Prime Minister, Alexis Tsipras. The agreement is effectively dead and all parties involved are aware of that, even if they are not openly admitting it. In the worst position is the Greek government, which signed up to the bailout in direct contravention of everything that it had promised to do in 2015. As the reality of its deception and the harshness of the squeeze have begun to sink in, electoral support for Tsipras has vanished. All competent polls show the opposition New Democracy – with a new leader – comfortably ahead. The outlook has become even worse for SYRIZA via the refugee wave, which has turned Greece into a kind of EU repository for refugees and migrants. For the time being the country has avoided a major crisis, but the situation remains extremely fraught as the deportation of migrants to Turkey has just started. See also Conclusion Of Greek Bailout Review To Be Coupled With Investments.
Sweden
I’m an American living in Sweden. Here’s why I came to embrace the higher taxes. (Vox) This American finds inefficiencies in the American system. In fact he finds all sorts of thing are provided by the government in Sweden that are not in the U.S. and “Swedish income taxes are not much higher than the U.S.“.
Iraq
90,000 people are trapped in the ISIS-held city of Fallujah – and they’re running out of food (Vox) The population of Fallujah is facing danger of starvation. The Iraqi government and its militia allies, not yet able to take Fallujah, have set up a siege around the city, attempting to starve out ISIS. While it’s not illegal under international law to besiege enemy forces, it is illegal to lay siege to a populated area. And it seems like that’s what’s happening: Two Iraqi officials told Human Rights Watch that Iraqi forces “are keeping shipments of food and other goods from reaching the city“. The Iraqi government, to its credit, has attempted to open humanitarian corridors through which aid could be distributed directly to Fallujah residents without going through ISIS. But ISIS wouldn’t allow it, and the Iraqi government has let the siege continue.
India
Drought hits 90 lakh farmers in Maharashtra (Rural India On Line) Hat tip to Sanjeev Kulkarni. Nearly 90 lakh farmers in Maharashtra have been impacted by the drought that has devastated the kharif crop, official data shows. The figure is almost on a par with the population of Sweden. Maharashtra is already known for its farm crisis and reports the highest number of farmer’s suicides in the country. The drought – brought on by a delayed and inadequate monsoon – is set to deepen the distress for its cultivators. It comes close on the heels of the crop distress wreaked by the hailstorms last year which hit cultivators hard. Other areas of India are similarly affected, as well.
Australia
Barack Obama praises Australia’s mandatory voting rules (The Guardian) President Barack Obama says if the US followed Australia and introduced mandatory voting at elections it would have a transformative impact on America. The president, speaking to students at the University of Chicago Law School, said the US has some of the lowest voting rates of any advanced democracy in the world. He suggested that turnout would increase to 70-80%.
Canada
Canada Wage Growth Exceeds U.S. (Sober Look, Twitter)
