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What We Read Today 25 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 included.

  • Robert Welch's 1974 Grim Predictions: One for Ten (Gary North, Specific Answers) Gary North has contributed to Global Economic Intersection. Conservative economist and political economy commentator Gary North revisits the predictions made by Robert Welch in 1974. Welch was the founder of the John Birch Society. North says that there are many attributions of the predictions to 1958, but he has been unable to find direct proof of that. North review the ten predictions made by Welch and finds that nine missed the mark, some by a moderate margin and some completely. North identifies only one prediction that hit the mark: "An increasingly unbalanced budget despite the higher taxes." This is only partially correct (the higher taxes part is wrong) but North had already declared that the higher tax prediction missed.

  • Emerging Market Crisis Not Likely … (Larry Edelson, Money and Markets) Edelson says the current situation has no comparison to past emerging market breakdowns and therefor nothing like a crash should occur.
  • Japan opens door to restart of nuclear programme (Jonathan Soble, Financial Times) According to the draft of a report released Tuesday (25 February 2014), the Abe government appears to be ready to reverse the abandonment of nuclear power, a decision made by the previous government in 2012 following the Fukushima nuclear plant disaster. The cost of importing fossil fuels is a serious headwind for the economy of the country.

Today there are 14 articles discussed 'Behind the Wall'.

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existing-home-sales-cr-2014-feb

As is readily apparent, the correlation is fairly weak over the entire timeframe. And, despite the volatility in gasoline prices since the onset of the Great Recession, the correlation since December 2007 has been even weaker. There are profound behavioral issues apart from gasoline prices that are influencing miles driven. These would include the demographics of an aging population in which older people drive less, continuing high unemployment, the ever-growing ability to work remote in the era of the Internet and the use of ever-growing communication technologies as a partial substitute for face-to-face interaction.

Click on graph for larger image at Advisor Perspectives dshort.com.
miles-driven-gas-prices-dshort-2014-feb

  • Economist Sees Global Deflation Fears as Overblown (Gil Weinreich, ThinkAdvisor) Aside from the fact that the article identifies Levy's employer as Bank of America (he left 11 months ago) this is a good article. Levy says that considering the deflation prospects for Europe, Japan and the U.S. in the same analysis misses the very different situations and policy needs of the three.
  • Have we been living in an age of austerity? (Zachary Goldfarb, The Washngton Post) Goldfarb says he has been criticized for characterizing the recent years as a period of austerity. Here he offers proof: The government has been subtracting from GDP growth by fiscal restraint rather than adding to growth with fiscal stimulus.

austerity-US-goldfarb-2014-feb-21

  • ‘GDP: A Brief But Affectionate History’ by Diane Coyle and ‘The Leading Indicators: A Short History of the Numbers That Rule Our World’ by Zachary Karabell (Tyler Cowen, The Washington Post) Cowen reviews of two books that look at the questions about what does GDP really mean and (is) are there better measure(s) to follow the progression of the economy.
  • Economic Expansion, Recession or Depression? (Ted Kavadas, Advisor Perspectives dshort.com) Ted Kavadas has contributed to Global Economic Intersection. In this article he discusses continued weakness in the U.S. economy and why "the underlying dynamics bode very poorly for the future economic situation".

Click on graphic for larger images at Advisor Perspectives dshort.com.
depression-kavadas-ap-2014-feb-25

  • Libor: The Spider Network (The Wall Street Journal) Hat tip to Barry Ritholtz, The Big Picture. Go to The Wall Street Journal for an interactive version of the graphic below. It shows all the connections alleged so far in the LIBOR (London Interbank Offered Rate) interest rate fixing scheme.

Click on graphic for interactive version with legend at The Wall Street Journal.
libor-fix-network-wsj-2014-feb-24

  • Minimum Wage Shocks, Employment Flows and Labor Market Frictions (Arindrajit Dube, T. William Lester and Michael Reich, Working Paper [pdf], berkeley.edu) Comprehensive study of the restaurant industry across state borders when minimum wage changes are made asymmetrically. No job losses from higher wage states across border to lower wage states were found. No changes in number or hours of restaurant employees were found. One change that did occur was an improvement in job stability (lower turn-over)for border counties in states that raised minimum wage. Map below shows the cross border counties that were studied.

Click on map for larger image.
restaurant-employment-study-min.wage

  • Japanese inflation isn't as high as you think (Noah Smith, Noahpinion) Japan includes energy in their "core" inflation number (excluding only fresh food) so the CPI numbers they report are high compared to what the U.S. reports. Smith maintains that Japan is far less successful in breaking the grip of deflation than reported because of an energy "price shock". See next article.
  • Risks of Abenomics "stalling out" (Walter Kurtz, Sober Look) The cost of expensive energy imports is pushing up the CPI for Japan. Core CPI for Japan excludes only fresh food. Energy costs are distributed through other components and not identified separately.

Japan-import-price-shock-inflation-sober-look-2014-feb-24

  • A hard-hitting anti-Obamacare ad makes a claim that doesn’t add up (Glenn Kessler, The Washington Post) Has anyone been hurt by Obamacare? Econintersect expects that there are people hurt. But why do cases keep turning up of propaganda stories that turn out not to be true? Are the people worse off so hard to find? Here is what the WaPo found out about one person hurt by Obamacare: That person has little or no information about whether they are hurt by Obamacare or not. Read the WaPo fact checker article after watching the video below. It sounds like Julie Boomstra (from the video) may well be paying less for her cancer treatments under Obamacare without any government subsidy if she does not have an income qualification, and much less if she does so qualify. And it seems that she also still has the same doctor.


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