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What We Read Today 20 March 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.

  • Pay it forward: Plan would allow Michigan students to attend college for 'free' (David Jesse, Detroit Free Press) Pending legislation in Michigan would allow students to receive tuition-free college education by signing a pledge to pay 2% of their income for five years for each year they attend junior college on the program. For a university education the payment is 4% for five years for each year of tuition under the program.

productivity-income-sam-ro-2014-mar-19

  • Every Viking ‘Fact’ Is Wrong (Nico Hines, The Daily Beast) Vikings were more traders than raiders. Their fearsome atrocities derive from their occasional victims' written records rather than their own - the Vikings were illiterate. The 'northmen' wee no more violent than any other people of their era, but they were more wide ranging and founded settlements over almost half the globe, from Russia (name comes from a Norse word) and Ukraine on the east to North America on the west. Climate change (cooling) chased them back from the western North Atlantic but their eastern settlements developed into modern countries.
  • 10 Big Estate Planning Mistakes of the Rich & Famous (Dan Berman, ThinkAdvisor) No one wants to think about dying, but it is important to do that at least once to draw up a will and usually more than once to update when life circumstances change. And a will is not a good do-it-yourself project. Get a competent estate lawyer!

Today there are 13 articles discussed 'behind the wall'.

  • The Most Important Economic Chart (Atif Mian and Amir Sufi, House of Debt) Something happened in the 1980s. Some call it an increase in return to capital at the expense of return to labor. See GEI Analysis. Some call it excessive rentier extraction from the economy. But, whatever it is, such divergence is unsustainable, for economic, social and political stability reasons.

productivity-wages-house-of-debt-2014-mar-18

  • Minsky’s Theory of Asset Prices: Why Minsky Was NOT a Neo-Monetarist (Philip Pilkington, Fixing the Economists) Philip Pilkington has contributed to Global Economic Intersection and has agreed to contribute regularly in the future. In Minsky's Keynesian view debt is not the cause of anything, but merely a form of endogenous money that follows the from the decisions made by the progenitors of the debt. Debt is therefore a residual, according to Pilkington - a residual that has positive or negative impact based on the efficacy of action of the creators and users of the debt. The theme here is that debt is not good or bad, but the uses of debt can be good or bad. Unfortunately this precept, which seems to Econintersect to be a fundamental truth, is not included in the thinking of the political class and, unfortunately, not by many in the economist class either.
  • Schiff: 2/3 of America to Lose Everything Because of This Crisis (Money Morning Staff Report) Peter Schiff says that profligate spending will debase the U.S dollar and rampant inflation will wipe out the wealth of Americans. This should be compared to the predictions of Harry Dent discussed in yesterday's WWRT. Dent thinks that a major period of debt-deflation will ensue for the next decade creating a depression wherein a dollar will buy ten times as much oil as today by 2020. (How a Massive Decline in Oil Prices Could Impact Alternative Energy) What will it be? Massive inflation or massive deflation? Could be neither but can't be both at the same time. So one of these two economists must be wrong. Let's hope they both miss.

sp500-2014-mar-19.

  • Connecticut private retirement bill sails through committee (Michael Giardina, Employee Benefit News) Mandatory retirement savings via payroll deduction is already a law in California and is under active legislative consideration in Connecticut, as well as Maryland and Wisconsin. The California law requires employer contribution while the proposed law in Connecticut does not.
  • Gavekal on Russia and Japan (John Mauldin, Outside the Box) Free subscription required. Among other important perspectives presented in this article, the decline of mercantile Japan is discussed. In 20 years Japan's share of world trade has been cut by more than half. Considering the explosion of world trade over that time and the meteoric rise of China, perhaps it is an accomplishment that Japan has not lost more than it has.

japan-market-share-gavekal-2014-mar

... what globalization did achieve was to greatly improve the lot of hundreds of millions of people in China and other corners of Asia. The lopsided results have opened a rift between the experience of global capitalism between the developed world and many poor countries.
  • Morgan Stanley: China’s Minksy moment is here (Houses and Holes, Macro Business) According to Morgan Stanley analysts, the rebalancing in China has started and it won't be pretty. There are several good graphics in the article. Two are shared here.

china-minsky-morgan-stan-mb-2014-mar-20

china-excessive-debt-morgan-stan-mb-2014-mar-20

  • Squaring The Circle: A QE For The ECB (Marc Chandler, Seeking Alpha) Hat tip to Michael Hartig at Global Economic Intersection Discussion (LinkedIn). Chandler says that the ECB (European Central bank) is running out of options to fight deflation and prevent liquidity contraction. He suggests they might even resort to negative interest rates (i.e. charge a fee for "storing" excess reserves). Chandler thinks that would have all sorts of negative consequences. He does not discuss the suggestion made by Jeffrey Frankel last week that the ECB should start buying U.S. Treasuries to bolster liquidity, which was discussed here yesterday: Why the ECB Should Buy American (Jeffrey Frankel, Project Syndicate).
  • Nearly half of employers considering private exchanges (Melissa A. Winn, Employee Benefit News) 45% of employers have implemented or plan to consider using a private exchange for their full-time active employees before 2018, according to a new employer survey conducted by the Private Exchange Evaluation Collaborative (PEEC). An additional 15% of employers surveyed are encouraging or will consider encouraging their full-time employees to obtain coverage in the public exchange before 2018. That 15% jumps to 58% for considering public exchanges if the ACA were changed to allow employer contribution toward premiums. What is the key advantage of using insurance exchanges? Each employee can tailor his or her individual insurance coverage package instead of all conforming to a single group plan for each company with a small number of options.
  • When Living Wage Is Minimum Wage (Ben Casselman, FiveThirtyEight) Today there are more than 25% more minimum wage earners who are supporting themselves than 15 years ago when a majority of minimum wage workers were teenagers living at home.

workers-self-support-min-wage-fivethirteight-2014-mar-18


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