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What We Read Today 13 February 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.

Passing years make it ever more clear that Bush Jr was one of the few transformative Presidents in US history, decisively changing the course of both domestic and foreign policy.

Click on picture for larger image at Fabius Maximus.
bush-mt-rushmore-380px

  • Economist Jason Furman is the wonkiest wonk in the White House (Zachary A. Goldfarb, The Washington Post) A former master juggler, unicycle rider and even an occasional fire-eater performance plus Matt Damon for a college roommate and an acquaintance with Ben Affleck as a teenager, what other credentials does one need to become a leading economist? Well maybe he doesn't play the saxophone or clarinet as well as Alan Greenspan or have studied in the same Julliard class as Stan Getz, which might leave Furman deficient in the credentials department.

Today we have 13 articles listed and discussed 'behind the wall'.

scary-parallel-mark-hulbert-2014-feb-11


scary-parallel-matt-levinet-2014-feb-12

The difference? Levine chart uses the same relative vertical axis scale for both data sets. Something every analyst needs to do when determining what correlations might mean is to look not only at the correlation coefficient but also the relative magnitudes in the correlation. The Levine chart emphasizes the difference in the magnitudes by using the same vertical scale for both plots. Matthew Boesler and Andy Kierisz point out at Business Insider that they calculate a corresponding drop to 1929 occurring in 2014 would be only 24%, which comes in the category of a major correction. In 1929 the decline was 44%, a crash.

  • 1994 Lillenhammer, Norway: $1.2 billion (highest estimate)
  • 1988 Nagano, Japan: $11 billion ($10 billion in new infrastructure)
  • 2002 Salt lake City, Utah, USA: $1.26 billion
  • 2006 Turin, Italy: $4.1 billion (Massive corruption has been alleged)
  • 2010 Vancouver, BC, Canada: $9.2 billion (highest estimate)
  • 2014 Soshi, Russia: $50 billion (and counting)

Good slide show at WealthManagement.com.

  • The Fed is not to blame for turmoil in emerging markets (Eswar Prasad, Financial Times) See also the following article. Cornell professor Prasad argues that emerging market countries have done it to themselves by failing to let their currencies adjust freely. He says we shouldn't blame the high liquidity currencies Japan, China and the U.S.
The Federal Reserve is causing heartburn for central bankers in emerging markets. Since 2008 the US central bank has been flooding capital markets with cheap money, forcing down yields on safe assets. Many investors scurried into places such as India and China in the hope of earning higher returns. Now that the Fed is reversing course, credit booms in emerging markets are turning to bust. This is especially painful for countries with current account deficits, which are reliant on foreign finance.
  • A World Unprepared, Again, for Rising Interest Rates (Eduardo Porter, The New York Times) Porter reviews a number of pronouncements from leading economists about the emerging market turmoil and ends up suggesting that the world still needs to learn to wear swim wear when going swimming. Econintersect would add... particularity at high tide. Read also immediately prior article.
  • $GOOG Google (Last:1186.15) (Rick Ackerman, Rick's Picks) Rick Ackerman has contributed to Global Economic Intersection. Ackerman is looking for marginal new highs before prices collapse significantly.

Click on chart for larger image.
GOOG-ricks-picks2014-feb-12-600px

  • Cost cutting on personnel numbers, pay and hours;
  • Perverse management bonus incentives.

But you should read the entire article to understand the context.

  • Falling Property Values Hint at Trouble on the Farm (Jesse Newman and Jacob Bunge, The Wall Street Journal) Falling corn prices are resulting in failed farm auctions as no bids are reaching minimum. Farmers' balance sheets could suffer; financing of operations could dry up as questions of solvency arise. The start of a farm industry deflationary spiral? Maybe a premature worry but not something that can be dismissed out of hand.
  • Japan's current account firmly in the red (Walter Kurtz, Sober Look) The adjusted current account for Japan has produced four months in a row with a negative current account balance , something that has never happened before. The entire year year 2013 has the lowest current account balance surplus on record. Econintersect note: We attribute this to the loss of the domestic nuclear power industry (jacking up energy imports) combined with the dramatic decline in the value of the yen.

japan-current-account-sober-look-2014-jan

wile-coyote-moment

  • How Dodd-Frank Doubles Down on 'Too Big to Fail' (Charles W. Calomoris and Allan H. Meltzer, The Wall Street Journal) In January Elizabeth Warren asked a bipartisan panel of four economists (including one of the authors here) if the Dodd-Frank Act would end TBTF. All answered 'No'.
Dodd-Frankinstitutionalizes too-big-to-fail protection by explicitly permitting bailouts via a "resolution authority" provision at the discretion of government authorities, financed by taxes on surviving banks-and by taxpayers should these bank taxes be insufficient. That provision should be repealed and replaced by clear rules that can't be gamed by bank managers.
  • The Best Government Money Can Buy (Franklin C. Spinney, CounterPunch) Hat tip to Roger Erickson. If you have missed Chuck Spinney when we had him on the "reading list" before don't miss him this time. If you read him previously, read again. This is well documented investigative journalism.

micc-iron-triangle-chuck-spinney

TGA-overdraft-stephanie


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