Turning the Tide Against Cholera
[Note: This isn’t about finances, but isn’t it nice to start the year with news that everyone can agree is good?]
Two hundred years ago, the first cholera pandemic emerged from Bangladesh…. Since that first escape, it has circled the world in seven pandemic cycles that have killed tens of millions.… Today cholera garners panicky headlines when it strikes unexpectedly in places like Ethiopia or Haiti. But it is a continuing threat in nearly 70 countries, where more than one billion people are at risk.
Now, thanks largely to efforts that began in cholera’s birthplace, a way to finally conquer the long-dreaded plague is in sight. A treatment protocol so effective that it saves 99.9 percent of all victims was pioneered here. The World Health Organization estimates that it has saved about 50 million lives in the past four decades.
Just as important, after 35 years of work, researchers in Bangladesh and elsewhere have developed an effective cholera vaccine. It has been accepted by the W.H.O. and stockpiled for epidemics like the one that struck Haiti in 2010. Soon, there may be enough to begin routine vaccination in countries where the disease has a permanent foothold.…
Because cholera is a constant threat to hundreds of millions of people lacking safe drinking water in China, India, Nigeria and many other countries, scientists have long sought a more powerful weapon: a cheap, effective vaccine.
Now they have one.
— By Donald G. McNeil Jr., a science and health reporter covering the world’s poor for The New York Times. Read Full Article
How Bitcoin Could Crash the Markets
Asset bubbles usually only hurt the buyers who overpay, but that changes when you add leverage to the equation. Leverage means “buying with borrowed money.” So when you buy something with borrowed money and can’t repay it, then the lender loses too. The problem spreads further when lenders themselves are leveraged. For bitcoin mania to infect the entire financial system, like securitized mortgages did in 2008, buyers would have to use leverage. The bad news is that a growing number do just that.
This month commodity regulators allowed two different US exchanges to launch bitcoin futures contracts. Oddly, instead of griping about slow regulatory approval, futures industry leaders think the government moved too fast. To get why, you need to understand how futures exchanges work.
One key difference between a regulated futures exchange and a private bet between two parties is that the exchange absorbs counterparty risk. When you buy, say, gold futures, you don’t have to worry that whoever sold you the contract will disappear and not pay up. If you close your trade at a profit, the exchange clearinghouse guarantees payment.
The clearinghouse consists of the exchange’s member brokerage firms. They all pledge their own capital as a backstop to keep the exchange running. So, when the Commodity Futures Trading Commission (CFTC) gave exchanges the green light to launch bitcoin futures, member firms collectively said (I’ll paraphrase here): “What are you thinking?”…
So as of now the very same capital that backs up stock index, Treasury bond, and foreign currency futures also stands behind bitcoin futures. To me, that seems extremely unwise.
Bitcoin futures volume has been light so far, so it’s not a big risk yet. But I expect that will change as the whole world (including people who have never before invested in anything) falls prey to the bitcoin cult.
Leveraging bitcoin won’t necessarily cause a systemic crisis—but it could. At least one transmission channel is open now via the futures exchanges, and more will probably follow.
That makes it your problem, whether you like bitcoin or not, and whether you own bitcoin or not. Like other historic bubbles—few of which ended well—bitcoin has:
Large numbers of people,
Trading a speculative, highly volatile asset
With borrowed money and
Systemic risk exposure
A dangerous combination. We may look back at December 2017 as the month bitcoin broke the firewall. Now it’s loose in the theoretically safer, “regulated” financial markets. The regulators responsible for financial stability think this is fine. They’d better be right.
— By Patrick Watson, editor of Mauldin Economics’ Connecting the Dots newsletter. Read Full Article
Washington Watch: Why it’s OK That Tax Cuts Will First Finance Share Buybacks
The Republican plan to slash the corporate tax rate permanently to 21% is a long-term reform that will improve growth prospects and increase wages across the economy. But it’s crucial that its advocates do not go wobbly in the face of stories about companies reacting to the lower tax rate in different ways.
Already, corporate-rate-cut skeptics have pounced on declarations from Pfizer, Coca-Cola and Cisco Systems, who say they intend to use after-tax gains from rate cuts to increase dividends to shareholders or buy back more of their own shares. Rather than creating jobs or increasing wages, critics say, this shows it will be wealthy shareholders who will overwhelmingly benefit from a lower statutory corporate rate. This is exactly what we’d expect to happen in the very short term; indeed, the key benefits to workers arise because of the incentive for new investment that will take time to filter through.
When the corporate rate falls dramatically, the first effect is that it provides an immediate windfall to “old capital.” Existing investments that have already been made receive a higher after-tax return than envisaged. This is a big reason why the stock market has surged as tax-reform prospects improved. It takes time for a fall in the tax rate to attract new capital to the corporate sector, so the key beneficiaries in the first instance are existing capitalists.
The really important consequence of a lower corporate tax rate though is that, in time, it will bring more capital into the corporate sector as domestic companies face an increased incentive to invest, foreign companies are more likely to expand investments or shift operations to the U.S., and U.S. companies are more likely to repatriate profits from foreign subsidiaries. Coupled with the introduction of immediate expensing of equipment, greater capital per worker stemming from this extra investment should in turn raise productivity and wages.
The immediate benefit of reducing the corporate tax burden may well go overwhelmingly to owners of capital, but economic insights suggest in the longer term, workers will reap the rewards too.
— By Ryan Bourne, the R. Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute. Read Full Article
