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What We Read Today 10 January 2014

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number accepted.

  • Monetary versus Fiscal: an odd debate (Simon-Wren Lewis, mainly macro) Oxford economics professor is mystified by the tendency to "downgrade the usefullness of fiscal policy at the ZLB " (zero lower bound). He says that the total dependency on monetary policy "does not come from the theory" that he knows.

Labor-force-participation-past-future-testosterone-pit-2014-jan-08

  • Is Life a Ponzi Scheme? (Mark Johnston, Boston Review) Does life have a lasting meaning or should we just live in the moment?
Perhaps the human future is a kind of Ponzi scheme where the value of our own lives is always dependent on the well-being of future generations.
  • We Cannot Predict the Many Ways Freedom Will Improve Our Lives (Gary Galles, austriancenter.com) Hat tip to John O'Donnell. Originally appeared at mises.org. Interesting that the argument could have cited Keynes whose greatest (arguably) contribution to economics was the proposition that the future is entirely uncertain in an economic sense, a proposition that has been largely ignored by many main stream economists since Keynes' time.
"Economists have conducted hundreds of studies of the employment impact of the minimum wage. Summarizing those studies is a daunting task, but two recent meta-studies analyzing the research conducted since the early 1990s concludes that the minimum wage has little or no discernible effect on the employment prospects of low-wage workers."
  • States Moving Beyond U.S. Minimum Wage as Congress Stalls (William Selway and Jim Efstathiou Jr., 12 November 2013) While Congress is stalled on considering an increase in the minimum wage, some states and cities have raised it on their own. Some are in excess of $10 an hour and one locale in Washington State has a $15 minimum wage in a zone including the Seattle-Tacoma International Airport.

Click on graph to view info graphic at Bloomberg.com.
min-wage-bloomberg-2013-nov-06

  • Bank of America Merrill Lynch slashes gold call to $1,150 and warns it could get uglier (Barbara Kollmeyer, MarketWatch, The Wall Street Journal) Bank of America has cut its gold price estimate for 2014 by 11%. Other estimates mentioned by Kollmeyer are are for gold to end ther year at $1,050 and $960. But those cuts are nothing compared to BoA estimates for silver which has been cut from the late November estimate by more than 30%. Ouch!
  • A Silver Opportunity? (Chris Kimble, Advisor Perspectives dshort.com) It takes opposing views to make a market. Chris Kimble has a couple of fancy charts that explain why silver could be on the verge of a break-out (rally) or ready to break down through support (sell off).

The world's biggest economies will need to refinance $7.43 trillion of sovereign debt in 2014 as bond yields begin to climb from record lows, threatening to raise borrowing costs while nations struggle to bring down elevated budget deficits.

The amount of bills, notes and bonds coming due for the Group of Seven nations plus Brazil, Russia, India and China is little changed from 2013 after dropping from $7.6 trillion in 2012, according to data compiled by Bloomberg. At $3.1 trillion, representing a 6% increase, the U.S. faces the largest tab. Russia, Japan and Germany will see refinancing needs drop, while those of Italy, France, Britain, China and India increase.

  • Why inflation threat could lead to a 'panic taper' (Jeff Cox, CNBC) Cox says that market talk "is intensifying that inflation will arrive in earnest in 2014". Well that sounds like 2009, 2010, 2011, 2012 and 2013. One of these years this "market talk" may be correct. The point of the article is that inflation isn't necessary - inflation expectations may cause a change in Fed policy. An early indication of a change will be in commodity prices which have been falling for several years. Commodities is also an area that investors may do well in an era of increasing inflation or inflation expectations.


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