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What We Read Today 17 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.

Today we have a four article section focused on banks and especially the "big four".

  • Modern Money Theory and New Currency Theory (Joseph Huber, Real-World Economics Review, No. 66, January 2014) At the core of this excellent lengthy paper is a call for the separation of public banking and private banking, with public banking responsible for the creation of money and private banking the user. This is similar to discussion in two recent GEI Opinion articles, here and here. Huber represents NCT (New Currency Theory) as a bridge for and and an extension of the MMT and Austrian economics schools.
  • Everything You Need to Know About the Healthcare Slowdown (Matthew O'Brien, The Atlantic) A recent reading list had two articles that presented very political arguments about why healthcare cost growth has been declining. Here is an article which looks at the question without that bias. Some of the cause is slower economic growth (see first graph below for the weak correlation) but other factors include changes in Medicare reimbursment formulas to reward effectiveness of treatments* and increasing deductibles for private insurance, which forces more of the cost benefit decisions onto the consumer.

gdp-healthcare-spending

*One of the changes in Medicare in 2011 was to increase payment for lower hospital readmission rates by way of payment for coordinating care after hospital release. It appears to be working.

hospital-medicare-readmission-rates

.

  • Helping Inflation Reflect Housing Bubbles (Adam Ozimek, Modeled Behavior, Forbes) It is suggested that CPI should include housing prices rather than imputing housing costs from rents (owner-equivalent rent). Rent is very late in tracking the cost of housing.

Rent-cpi-housing-cost-ozimek-forbes-2014-jan-02

The last four articles are focused on the banking sector.

  • How Washington beat Wall Street (Ben White, Politico) "Major banks are shells of what they were." What a joke. The four largest banks are "shells" with 43% more assets than 9/30/08 and 46% more than 9/30/09. See here and here for data. (Note: The four largest were actually five in the earlier years before the merger of Wachovia and Wells Fargo was completed.) JPMorgan Chase and Bank of America combined control 1/3 of U.S. banking assets, up from 1/4 on 9/30/08. See the articles below for more on how Wall Street banks are beating Washington like a drum and doing less and less for Main Street.
  • Growth in loans at US banks continues to weaken (Walter Kurtz, Sober Look) Loans are decreasing and M2 growth is collapsing. What will happen with tapering? Will this be a case of anticipatory over-reaction? Or will the fragile monetary system collapse?

banks-loans-leases-sober-look-2014-jan

M2-2014-jan-sober-look


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