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What We Read Today 14 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.

  • Stanley Fischer saved Israel from the Great Recession. Now Janet Yellen wants him to help save the U.S. (Dylan Matthews, The Washington Post) But Fisher is no outsider to the U.S. and global monetary scene. At MIT professor he was the Ph.D. thesis advisor to several who have become top economists including Ben Bernanke and Mario Draghi, the head of the European Central bank (ECB). He was also second in command at the IMF (International Monetary Fund) during the Asian financial crisis of 1998. His private sector experience includes a stint as vice chairman at Citigroup. The nominee for vice chair of the U.S. Federal Reserve is arguably one of the very top bankers in the world.
  • A Deconstruction Of Global Stock Market Returns In 2013 (Sam Ro, Business Insider) Many messages here. (1) Only Japan stock market was largely driven by earnings growth; (2) Europe was almost all driven by P/E expansion, but also had the highest dividends; (3) an annual rebalancing would involve selling some Japan and U.S. while buying some Asia ex Japan and emerging markets.

equity-returns-global-2013

  • Forecast 2014: The Killer D's (John Mauldin, Thoughts from the Frontline) John Mauldin has contributed to Global Economic Intersection. The killer d's are demographics, debt, deficits, deleveraging and deflation. Here's the graphic for deleveraging. It's still going on.

household-leverage-following-recessions-John-Mauldin

The collective debt of local governments increased 3.9 trillion yuan ($720 billion) to 10.6 trillion yuan within a short space of less than three years. The debt has grown about 20 per cent every year for the last three years, far outpacing the country's GDP growth.

  • Will Commercial Space Travel Blast Off in 2014? (Leonard David, Space.com) Virgin Galactica's sub-orbital manned vehicle completed its highest flight ever last Friday (10 January 2014) reaching an elevation of 71,000 feet. Richard Branson's company plans to make "tourist" flights with paying passengers ($250k each) later this year. See Video of the Day. Yesterday (12 January 2014) an unmanned commercial space vehicle (Orbital Sciences Corporation) made a delivery to the International Space Station.
...common sense says [according to the crowding out hypothesis] that the government and the private sector are in competition for scarce resources. Except if we look at the euro zone, where some countries were forced into severe austerity while others weren't, we see this:

Crowding-out-Krugman-2014-jan-12

See also GEI Opinion: 'Crowding Out' is Coming to Get You; and The Picture That Quashes 50 Years of Economic Malarky.

  • Is Debt Dangerous? (John Aziz, Pieria) "Debt is more risky than no debt." ... "...crossing the road is also more risky than not crossing the road." What is to be gained by crossing the road? That is the important question, Aziz says.


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