Sunday, May 5, 2019

Week-end Wrap - Political Economy - May 4, 2019

Week-end Wrap - Political Economy - May 4, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

China’s population could peak in 2023, here’s why that matters
[CNBC, via Naked Capitalism 5-2-19]
China’s population is likely to peak in 2023, according to a study by online database company Global Demographics and analytics firm Complete Intelligence. The Chinese government had previously estimated that the country would hit its maximum population size in 2029.... The decline in births is driven by a “maternity cliff,” according to the report. The number of women of childbearing age in China — defined as aged 15 to 49 by the publishers — is set to fall from 346 million in 2018 to 318 million in 2023.
With fewer women of childbearing age and fewer births per 1,000 women, the total number of newborns will drop as well. The study predicts that 13.3 million babies will be born in 2023, down from 15.2 million last year.

The New Silk Roads reach the next level 
Asia Times, via Naked Capitalism 4-30-19]
....the West, as usual, ignored what was the absolutely key takeaway of the BRI forum: the deepening, on all fronts, of the Russia-China strategic partnership. It’s all here, in President Putin’s speech
Putin emphasized “harmonious and sustainable economic development and economic growth throughout the Eurasian space.” He noted how BRI “rhymes with Russia’s idea to establish a Greater Eurasian Partnership, a project designed to ‘integrate integration frameworks’, and therefore to promote a closer alignment of various bilateral and multilateral integration processes that are currently underway in Eurasia.”
Putin could not have been more specific. “The Eurasian Union…has already signed a free-trade agreement with Vietnam and a provisional agreement with Iran, paving the way to the creation of a free-trade area. The preparation of similar instruments with Singapore and Serbia is nearing completion, and talks are underway with Israel, Egypt and India. We cooperate actively with the Shanghai Cooperation Organization and the Association of Southeast Asian Nations.”

Addressing the forum, Putin added another enticing dimension, with the China-driven Maritime Silk Road possibly joining the Russia-driven Northern Sea Route, “a global and competitive route connecting northeastern, eastern and southeastern Asia with Europe” will emerge.

Disrupting mainstream economics

Economists Are Learning to Love the Minimum Wage
[City Lab, via The Big Picture 4-29-19]
....two new papers provide powerful evidence that higher minimum wages in fact boost the conditions of workers—especially the least skilled and lowest paid among them—without doing broad economic harm. 
The first paper is forthcoming in the prestigious Quarterly Journal of Economics and is currently available as a NBER working paper. (There is also a shorter, more reader-friendly research brief available.) It tracks the economic effects of more than 100 minimum-wage hikes across the country between 1979 and 2016.
Want to decrease suicide? Raise the minimum wage, researchers suggest 
[CBS News, via Naked Capitalism 5-1-19]

Predatory Finance

Fed’s Powell Says Financial Risks Are “Moderate”; These Charts Don’t Agree
Pam Martens and Russ Martens, May 3, 2019 [Wall Street on Parade]
The OFR’s Financial System Vulnerabilities Monitor uses a color-coded system to warn of risks, with green being low vulnerability, yellow and orange being moderate and red signaling high risk. Above is OFR’s current chart on Market Risks. That looks like an awful lot of things in the red zone. The full Monitor (be sure to click on the “show all” button) has plenty of things in the green zone but we wouldn’t get too comfortable about just how much clarity the OFR has on some key issues. For example, under Financial Institution Leverage, OFR shows both median and aggregate U.S. commercial bank leverage in the cozy green zone. That’s far from the full picture, however. 
Compare that green zone to what another Federal bank regulator, the Office of the Comptroller of the Currency (OCC), which has oversight of national banks, shows in its derivatives data. (See Table 4 in the Appendix here.) That table shows that Goldman Sachs Bank USA, a taxpayer backstopped bank that is Federally-insured by the Federal Deposit Insurance Corporation (FDIC), has 354 percent total credit exposure to capital. The bank has $32.5 billion in risk-based capital versus $40.3 trillion in notional (face amount) in derivatives. JPMorgan Chase and Citigroup’s Citibank show 167 percent and 132 percent, respectively, in the same category.
The Labor Market for Financial Misconduct
Gregor Matvos and Amit Seru, National Bureau of Economic Research, via Naked Capitalism 4-29-19]
We start by describing how we measure misconduct among all registered financial advisers in the U.S. We then turn to the role of labor markets in constraining misconduct, documenting that while some firms penalize misconduct through a sharp increase in job separations, other firms are willing to hire these advisers, recycling the bad apples in the industry. We then discuss evidence that suggests this phenomenon arises because of "matching on misconduct," in which advisers with misconduct records match with firms which specialize in misconduct, and that the presence of uninformed consumers may be critical to maintaining this equilibrium. We find that similar forces may also explain gender discrimination in the labor market of financial advisers, leading to a "gender punishment gap."
The 2019 Election That Should Have Hedge Funds And Wall Street Worried 
[Huffington Post, via Naked Capitalism 4-30-19]

[Guardian, via Naked Capitalism 5-1-19]
The 2017 Tax and Jobs Act – the Trump administration’s one major piece of enacted legislation – did deliver the biggest corporate tax cut in US history, but ultimately workers benefited almost not at all. 
This is one of the conclusions of a six-month investigation into the process that led to the tax cut by the Center for Public Integrity, a not-for-profit news agency based in Washington DC. The full findings, based on interviews with three dozen key players and independent tax experts, and analysis of hundreds of pages of government documents, are published today in an in-depth piece.
How financial markets are responding to the Medicare-for-all push
[The Week, via Naked Capitalism 4-28-19]
"Health-care stocks have a Washington, D.C., problem that is likely to linger," said Charley Grant at The Wall Street Journal. Companies across the health-services industry, from insurance giant UnitedHealth Group to Johnson & Johnson and pharma firm Abbott Laboratories, have been getting hammered in the stock market in recent weeks even though they've posted strong earnings. The reason is that investors are panicking about a future threat to those earnings: Medicare-for-all. Pushed by Sen. Bernie Sanders and other leading contenders for the Democratic Party's presidential nomination, the policy would broaden government-run insurance to cover all Americans. It might be a death sentence for private health insurance companies, and — by giving the government the power to negotiate more favorable terms with providers — would likely slash profits "for hospitals and manufacturers of drugs and devices." The sell-off is "reviving memories of the 2008 financial crisis," said Cristin Flanagan and Tatiana Darie at Bloomberg​. Insurance and hospital stocks lost $28 billion in market value in one day last week. While this kind of volatility is not unprecedented ahead of a presidential election, a full recovery could "hinge on whether it appears a single-payer policy would truly ban private health insurance policies."

No patient left behind

Medicare For All’s Moment Is Here. Don’t Back Down. 
Senator Bernie Sanders
[Think Progress, via Naked Capitalism 5-1-19] 
“Barkan repeatedly made the moral argument for Medicare for All: if there’s agreement that health care is a human right and the status quo doesn’t treat it as such, let’s do something now. When faced with questions about costs, Barkan asked why politicians don’t ask where the money comes from when it’s about funding war. When asked about employer-sponsored insurance, he asked why other rights like education aren’t tethered to jobs…. rejecting the political realities of Medicare for All, Barkan called on lawmakers to act now.”
[, via Naked Capitalism 4-29-19] 
“The back-to-back cyclones that have ravaged Mozambique are unprecedented in recorded history, the UN said Friday, as it planned to examine the country’s defences against extreme weather in the light of climate change…. The UN weather agency added that a fact-finding mission currently in Mozambique will in part look at the ‘impact of climate change and sea-level rise on Mozambique’s resilience’ to extreme weather. Climate change has made cyclones more damaging, as rising sea levels have increased the strength of storm surges, WMO spokeswoman Clare Nullis told AFP.”
“Permafrost collapse is accelerating carbon release” 
[Nature, via Naked Capitalism 4-30-19] 
“Current models of greenhouse-gas release and climate assume that permafrost thaws gradually from the surface downwards. Deeper layers of organic matter are exposed over decades or even centuries, and some models are beginning to track these slow changes. But models are ignoring an even more troubling problem. Frozen soil doesn’t just lock up carbon — it physically holds the landscape together. Across the Arctic and Boreal regions, permafrost is collapsing suddenly as pockets of ice within it melt. Instead of a few centimetres of soil thawing each year, several metres of soil can become destabilized within days or weeks. The land can sink and be inundated by swelling lakes and wetlands. In short, permafrost is thawing much more quickly than models have predicted, with unknown consequences for greenhouse-gas release. Researchers urgently need to learn more about it. Here we outline how.”
Maine First U.S. State to Ban Styrofoam Containers
[Ecowatch 5-1-19]

Starbucks, Dunkin Race Against Bans, Taxes on Disposable Cups
Emily Chasan  and Hema Parmar, April 28, 2019 [Bloomberg, via The Big Picture 4-30-19]
Overwhelmed by trash, jurisdictions around the world are banning single-use plastic takeaway containers and cups. Europe says plastic beverage cups have to go by 2021. Indiawants them out by 2022. Taiwan set a deadline of 2030. Surcharges like Berkeley’s are likely to get more common in an attempt to quickly change consumer behavior before more outright bans.

For chains like Starbucks Corp., which goes through about 6 billion cups a year, this represents no less than an existential dilemma. Dunkin’ recently renamed itself to de-emphasize its donut origins and now makes close to 70 percent of its revenue from coffee drinks.... Disposable cups are a relatively modern invention. About 100 years ago, public health advocates were eager to ban a different kind of cup—the public drinking vessel, a shared tin or glass cup left near drinking fountains. When Lawrence Luellen patented a wax-lined throwaway cup, he billed it as an innovation in hygiene, a prophylactic measure to counter diseases like pneumonia and tuberculosis. 
To-go coffee culture didn’t emerge until much later. McDonald’s rolled out breakfast nationwide in the late 1970s. A little more than a decade later, Starbucks opened its 50th store. Together with Dunkin’, the three now sell close to $20 billion in coffee annually, according to an estimate from BTIG LLC analyst Peter Saleh. Meanwhile, companies like Georgia-Pacific LLC and International Paper Co. have grown along with the market for disposable cups, which hit $12 billion in 2016. By 2026, it’s expected to be closer to $20 billion.

The U.S. accounts for about 120 billion paper, plastic and foam coffee cups each year, or about one-fifth of the global total. Almost every last one of them—99.75 percent—ends up as trash, where even paper cups can take more than 20 years to decompose.
Facebook’s newest ‘fact checkers’ are Koch-funded climate deniers 
[ThinkProgress, via Naked Capitalism 4-30-19]

What’s the deal with the Green New Deal?
[Monthly Review, via Naked Capitalism 4-28-19]
Does the Green New Deal, despite its laudable ambition, depend on magical thinking about technology and capitalism? Are the legislative tools it looks to adequate? Is it internationalist, or can it be? Does it risk further commodifying the natural world?
Mathematician's breakthrough on non-toxic pest control that doesn't harm bees
[Phys.Org, via Naked Capitalism 5-3-19]
There are naturally occurring bacteria contained in soil which can help protect plants against harmful nematodes, but until now there has not been an effective way to harness the power of these bacteria to protect crops on a large scale.... The team has developed a method to 'silence' the harmful nematode's genes by using biostimulants derived from naturally occurring soil bacteria. The biostimulants also 'switch off' the plant's own genes that are affected by the nematodes, making it much harder for the parasite to harm the crop. 
The gene silencing process is triggered when biostimulants, which are metabolites of bacteria occurring naturally in the soil, are applied to wheat. The biostimulants can be applied either by soaking the seeds or roots in a solution containing the biostimulants, or by adding the solution to the soil in which the plants are growing.... The biostimulants only affect specific nematode and plant genes, and do not harm other species of insects. And because they are naturally occurring, rather than made of chemicals, they could potentially be used by organic farmers to make organic food more affordable in future....
The team's experiments show that soaking the seeds of the plants in the biostimulant solution increases the chances of the plants surviving by between 57 to 92%. The technique also reduces the level of nematode infestation by 73 to 83% compared to plants grown without biostimulants.

Economics in the real world

The Manufacturer’s Dilemma 
[Foreign Policy, via Naked Capitalism 4-28-19]
Using Chinese suppliers seems to make good economic sense for Western firms. After all, Chinese labor remains very cheap: Such work accounts for just $10 of the total cost of an iPhone today (top models of which go for more than $1,000). That’s why, according to a recent tally by the Economist, “of the production facilities operated by Apple’s top 200 suppliers, 357 are in China,” while just 63 are in the United States. (One of the reasons Steve Jobs originally hired Apple’s now CEO, Tim Cook, was because he was expert in managing such supply chains.) 
But clever financial arrangements don’t always make for smart politics—or secure systems. Globalizing the supply chain may make business sense, but it has turned Western companies into vulnerable geopolitical targets. In 2017, Maersk, the world’s largest shipping company, was hit by the NotPetya virus. The ransomware, developed by hackers working for Russian military intelligence and originally directed against Ukraine, rendered Maersk essentially nonoperational for two weeks. In ports around the world, including Elizabeth, New Jersey, trailers soon piled up, unable to deliver or receive cargo. Theorists call attacks like this “hybrid warfare,” where irregular methods are mixed into conventional war-making to target social and political weak points. In an age of these asymmetric threats, firms like Maersk are now on the front line. “[T]his problem was of a magnitude never seen before in global transport,” a Maersk customer told Wired....
Tinkering with economic supply chains for intelligence- and other national security-related reasons is not a new idea; indeed, Western countries have long done just that. In the 1980s, the CIA, according to former Air Force Secretary Thomas Reed, inserted sabotaged software into a Soviet oil pipeline, causing it to explode. Five years ago, Edward Snowden revealed that the U.S. National Security Agency had inserted backdoor espionage tools into U.S.-made internet routers being exported to Syria. And in February, the New York Times reported that the United States was accelerating a George W. Bush-era practice of inserting faulty parts into Iran’s aerospace supply chains, which appears to have caused some of the country’s test rocket launches to fail. Such disruption and sabotage are unlikely to affect large parts of any product’s supply chain, but the psychological and consumer damage caused by even a minor mishap can be immense. Just as parents are scared away from baby food by the report of a single piece of glass, so the damage done by sabotage could cause permanent distrust in a given product or manufacturer.
How California’s faltering high-speed rail project was ‘captured’ by costly consultants
[Los Angeles Times, via Naked Capitalism 4-28-19]

Information Age Dystopia

What Amazon knows about you
[Axios, via Flipboard 5-2-19]

Disrupting mainstream politics

There was a quiet war during the Obama era between Wall Street boosters and populists. @ewarren and Sheila Bair led the populists. Geithner and Obama led the boosters. @ewarren won’t say this but there we go.
[Business Insider, via Naked Capitalism 5-4-19] 

Why Universal Health Care, Higher Wages, and Free Public Education Are Crucial Issues for Black Women 
[Vogue, via Naked Capitalism 5-4-19]

“Wall Street Democrats Are Absolutely Freaking Out About Their 2020 Candidates” 
Gabriel Debenedetti [New York Magazine, via Naked Capitalism 4-29-19]
“It’s kind of stunning how a bunch of these people running for president haven’t gotten ahold of [a list of top past contributors] and said, ‘What can I do to get this person?’ ” fumed a hedge-fund honcho out of the loop for the first time in two decades. “It’s sort of basic political IQ.” 
“Everyone wants to seem relevant,” one prominent investor told me. But for the first time he or any of his friends could remember, “we’re just not fucking relevant. We’re not that big of a deal anymore. None of us!” 
“A lot of the donor community is worried about losing their presidential perks and ambassadorial gigs to baristas,” said veteran New York Democratic fund-raiser Robert Zimmerman....
“[Warren] would torture them,” one banker told me. “Warren strikes fear in their hearts,” explained a New York executive close to banking leaders from both parties — so much fear that such investors often speak of the U.S. senator from Massachusetts, a former law professor and consumer advocate, as a co-front-runner with Sanders. “How do we come up with an alternative?” asked one person at the dinner.
“Joe Biden wants us to forget his past. We won’t” 
Adolph Reed and Cornel West [Guardian, via Naked Capitalism 5-1-19]   
“An unrecognized irony of the South Carolina primary’s current importance as a gauge of African American support is that it and other southern primaries figured prominently in the late 1980s and 1990s strategy of the conservative, pro-business Democratic Leadership Council – of which Biden was a member – to pull the party to the right by appealing to conservative white southern men, in part through stigmatizing and scapegoating poor African Americans. Biden was one of the lustiest practitioners of that tactic. In fact, that’s what often underlies Biden’s boasts about his talent for “reaching across the aisle”. In 1984, he joined with South Carolina’s arch-racist Strom Thurmond to sponsor the Comprehensive Crime Control Act, which eliminated parole for federal prisoners and limited the amount of time sentences could be reduced for good behavior. He and Thurmond joined hands to push 1986 and 1988 drug enforcement legislation that created the nefarious sentencing disparity between crack and powder cocaine as well as other draconian measures that implicate him as one of the initiators of what became mass incarceration.”

“Joe Biden is the Best Republican in the Race” 
[Medium, via Naked Capitalism 5-1-19]  
“If at a time when the cops steal more from Americans via Civil Asset Forfeiture than robbers do, we choose a man who introduced Comprehensive Forfeiture Act, and continues to support it even without an arrest or conviction, are we really concerned about a police state?”
[below, via Naked Capitalism 5-1-19]

“Clinton-era politics refuses to die. Joe Biden is its zombie that staggers on”
[Hamilton Nolan, Guardian, via Naked Capitalism 5-2-19]
“[T]here are a significant number of people who genuinely believe that Joe Biden is the best possible presidential nominee. Their belief is not cynical, or at least not wholly cynical. His constituency is real. It is not illuminating to think of them just as centrists, arguing for the gentlest sprinkling of sugar over the top of America’s poison. It’s better to think of them as zombies: the product of three decades of self-serving, triangulating brainwashing. They are the Democrats who had their eyelids propped open and were forced to watch the Clinton era, year after year after year. It is not so much that they do not, deep down, harbor a vague wish for a better world; it is that, like stray dogs dining exclusively on garbage, life has taught them that this is the best that they will ever get.”

[Common Dreams, via Naked Capitalism 5-2-19]

....paying for America’s desperately underfunded highway infrastructure needs by eliminating all federal funding for public transportation. From Winnemucca, Nevada to New York City, simply dump the 7 million commuters who count on buses, rail, and subways every single day to get to and from work. That will somehow fix our problems, the American workforce be damned. 
Never mind the myriad benefits transit provides to the American economy. Yes, every dollar invested in public transportation generates $4 in economic returns. Yes, every $10 million made in capital investments generates $30 million in increased sales for American businesses. Yes, home values perform better when they are located near good public transportation. Yes, it saves American families thousands of dollars every year. Yes, that is 11 billion trips annually that would otherwise contribute even more traffic to already soul crushingly congested highways around the country. 
Yet, eliminating funding for public transportation is exactly what the fine people at Americans for Prosperity* have proposed.
Conservatives want to rewrite the Constitution, and they’re dangerously close to doing it
[Scalawag, via Naked Capitalism 4-28-19]

[The Hill, via Naked Capitalism 5-2-19]
Yeah, putting a wrong-wing ideologue on the board will really help solve Boeing's 737 screw up. 

“Federal court strikes down Michigan districts drawn by GOP” 
[Roll Call, via Naked Capitalism 4-29-19] 
“A three-judge panel on Thursday ruled that Michigan must use new congressional and legislative maps in 2020, potentially setting up a more favorable battlefield for House Democrats, who flipped two seats in the state last fall. The federal court invalidated portions of the existing maps, drawn by the GOP-controlled legislature in 2011, pointing to an unconstitutional partisan gerrymander that violates the First and Fourteenth Amendment rights of voters.”

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