Written by Econintersect
Early Bird Headlines 22 May 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
G-7 finance leaders reject coordinated action to revitalize global economy (The Japan Times) Finance leaders from the Group of Seven industrial nations failed to find ways to take coordinated action to revitalize the global economy as they wrapped up a two-day meeting in Sendai on Saturday. Japan, which hosted the meeting this year, is looking to hammer out a new fiscal package in the coming months, but its push for joint fiscal action was rejected by its more cautious peers, who concluded that the group approach the downside risks of the economy with all kinds of options, including monetary policy and structural reforms (code speak for austerity).
Anticipating the Great Depression? Gustav Cassel’s Analysis of the Interwar Gold Standard (Douglas Irwin, dartmouth.edu) DI has contributed to GEI. No one saw it coming in 1929? Doug Irwin’s paper finds that not only did Swedish economist Gustav Cassel, the world renowned expert on international monetary affairs, do exactly that, but also made his prediction based on what is now widely understood to be the underlying cause: the international gold standard.
Global Bear Markets (Twitter)
U.S.
It’s expensive to be poor (The Economist) Income inequality is actually worse than estimated in the U.S., in effect, because the poor have fewer and very expensive financial services. Instead of paying for something with a check, credit card or debit card, many of the poor use money orders or other expensive means to make payments; and they pay fees to check cashing services not paid by those with bank accounts. This article goes through a number of other financial services born by the poor not paid by the better off.
Sanders Won’t Be Fooled Again by Democracy (Bloomberg) As surprising as Sanders’ success on the campaign trail has been, this column points out that the Democratic Socialist has been beaten by democracy – Clinton has gotten more votes.
Vote all you want. The secret government won’t change. (Boston Globe) Hat tip to Roger Erickson. In a new book, “National Security and Double Government“, Tufts University political scientist Michael J. Glennon catalogs the ways that the defense and national security apparatus is effectively self-governing, with virtually no accountability, transparency, or checks and balances of any kind. He uses the term “double government“: There’s the one we elect, and then there’s the one behind it, steering huge swaths of policy almost unchecked. Elected officials end up serving as mere cover for the real decisions made by the bureaucracy. This is no ivory tower assessment: Glennon has been legal counsel to the Senate Foreign Relations Committee and a consultant to various other congressional committees, as well as to the State Department.
Behind the Veil of the Government’s Plan to Wind Down Fannie and Freddie (The Wall Street Journal) It does not appear that the government and/or Fannie and Freddie executives were trying to be devious. But they do not appear to have been too bright. So dumb and honest? From this column:
Newly unsealed court documents show that White House officials were worried that the change would be seen as stepping back from winding them down. In emails, the officials assured outsiders that the change meant that Fannie and Freddie “can’t repay their debt and escape.”
The documents also include projections by Fannie executives that the company would continue to need bailout money through 2013 but would be profitable for the following decade. The Fannie executives in the summer of 2012 didn’t foresee the giant profits that the company would post the next year.
There is almost nothing in the documents, which were produced as part of a lawsuit filed against the government by hedge funds and other investors in Fannie and Freddie, that was not already in the public record. This suggests that the efforts of plaintiffs to uncover evidence of wrongdoing or that undermines the government’s position have been largely frustrated.
Most Americans Feel Like Their Side Loses in Politics (Twitter) So a very few win? I wonder who they are. (Sarcasm.)
EU
Manipulating Markets in Everything: Social Media, China, Europe (Constantin Gurdgiev, true economics) CG contributes to GEI.
As the story notes: “stopping an argument is best done by distraction and changing the subject rather than more argument”.
So now, consider what the EU and European Governments (including Irish Government) have been doing since the start of the Global Financial Crisis.
They have hired scores of (mostly) mid-educated economists to write, what effectively amounts to repetitive reports on the state of economy . All endlessly cheering the state of ‘recovery’.
In several cases, we now have statistics agencies publishing data that was previously available in a singular release across two separate releases, providing opportunity to up-talk the figures for the media. Example: Irish CSO release of the Live Register stats. In another example, the same data previously available in 3 files – Irish Exchequer results – is being reported and released through numerous channels and replicated across a number of official agencies.
The result: any critical opinion is now drowned in scores of officially sanctioned presentations, statements, releases, claims and, accompanied by complicit media and professional analysts (e.g. sell-side analysts and bonds placing desks) puff pieces.
Denmark
Something’s Being Forgotten in the State of Denmark (Bloomberg) Danish central bank Governor Lars Rohde cautions against reading too much into his country’s anemic gross domestic product data. He joins a debate on whether GDP is the best way of measuring a nation’s progress. Economists in Denmark have been scratching their heads as growth has slowed even amid falling unemployment and sustained levels of private spending. People are living better while producing less GDP growth. So maybe we are not measuring the right things.
Greece
Greece Braces for More Austerity Amid EU-IMF Quarrel About Debt (Bloomberg) Oh, c’mon – there must be another drop of blood in that stone!
China
China Fakes 488 Million Social Media Posts a Year: Study (Bloomberg) China’s government fabricates about 488 million social media comments a year — nearly the same as one day of Twitter’s total global volume — in a massive effort to distract its citizens from bad news and sensitive political debates, according to a study. Three scholars led by Gary King, a political scientist at Harvard University who specializes in using quantitative data to analyze public policy, ran the first systematic study of China’s online propaganda workers, known as the Fifty Cent Party because they are popularly believed to be paid by the government 50 Chinese cents for every social media post.
Vietnam
Obama, bound for Vietnam, seeks to turn old foe into new partner (Reuters) U.S. President Barack Obama on Sunday headed for his first visit to Vietnam, a trip aimed at sealing the transformation of an old enemy into a new partner to help counter China’s growing assertiveness in the region. Four decades after the Vietnam War, Obama – the first U.S. leader to come of age after a conflict that bitterly divided America – will seek to deepen defense and economic ties with the country’s communist government while also prodding them on human rights. Pressure has mounted for Obama to use his landmark visit, which begins on Monday, to roll back a 32-year-old arms embargo on Hanoi, one of the last vestiges of wartime animosity.
