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What We Read Today 25 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.

  • How Obama Crippled a Russian Bank with a Stroke of a Pen (Rob Garver, The Fiscal Times) It was not a big bank, more like a credit union which was the banker for 20 members of Putin's inner circle who have been sanctioned by the U.S. government. But because all U.S. banks are prohibited from doing business with Bank Rossiya, that shuts the Russian institution out of global banking interactions because virtually every bank in the world does business with one or more U.S. banks. It becomes a question of doing business with Bank Rossiya or doing business with everyone else.

  • Wanted: crime-fighting academics to catch corporate criminals (Mike Marinetto, The Conversation) "Behind every fortune lies a great crime." Attributed to Honore de Balzac (1799-1850). Thus starts this article which immediately commits a faux pas by identifying Balzac as an 18th century man of letters. But the essay overcomes that error to carry out an effective short discussion of ethics, business and criminality.
  • Obama’s aim to shift U.S. foreign policy runs up against an old Cold War rival (Scott Wilson, The Washington Post) Econintersect opinion: Just as France made the mistake of punishing Germany for losing WW I, The U.S. made the mistake of "punishing" Russia for losing the Cold War. A little reaching out from Bush 1 or Bill Clinton might have changed history. A little coaching from Nelson Mandella would have gone a long way.
  • Time to turn back the tide of drug-resistant tuberculosis (Justin Denholm, Ben Marais, Jo Chandler and Suman Majumdar, The Conversation) A drug resistant form of tuberculosis is reviving a 19th century scourge of consumption in the 21st century. The disease has the strongest foothold in Asia.
  • 5 Former Madoff Aides Found Guilty of Fraud (Rachel Abrams, DealBook, The New York Times) Hat tip to John O'Donnell. A federal jury on Monday found five associates of the convicted swindler Bernard L. Madoff guilty on 31 counts of aiding one of the largest Ponzi schemes in history. The convictions came on charges that the five knowingly conspired to carry out fraud against Madoff clients. Nine other Madoff employees had previously plead guilty to charges of fraud.

There are 12 more articles discussed 'behind the wall' today.

This framework of thinking is important because it changes the nature of some economic debates. For example, most of the debates surrounding social security and Medicare are framed in terms of insolvency. Once one accepts that solvency is not an issue-government can always pay-one can reframe the debate in another way (Eisner 1998; Wray 2006). There is a problem with social security; it is a demographic problem, and not a financial problem. Payments can be made at the time they are due just by crediting bank accounts in a matter of seconds, but the goods and services that are needed may not be available.

tygmoine-2014-work-paper

  • Hobby Lobby Is a Company. Is It a Person, Too? (Susan Berfield, BloombergBusinessweek) Today (25 March) the Supreme Court will hear arguments in the case: Hobby Lobby vs. Kathleen Sibelius. The suit has been brought by the Christian Fundamentalist owners of the 16,000 employee company. They object to having to comply with Obamacare birth control provisions because of their religious beliefs. HHS (U.S. Dept. of Health and Human Services) denied their request for exemption from provisions of ACA (Affordable Care Act), leading to the suit. In essence, the company is asking the court to grant corporations the same religious freedoms as individuals. The case will be seen in relation to the Citizens United case which had the effect of declaring corporations had the same rights to free speech as individuals.
  • The Most Important Point of All Was Ignored (Joe Firestone, New Economic Perspectives) Joe Firestone has contributed to Global Economic Intersection. This is a discussion of Social Security bankruptcy prompted by a statement by Abby Huntsman on MSNBC (The Cycle) two weeks ago.

  • Big Bang Discovery Opens Doors to the "Multiverse" (Dan Vergano, National Geographic) The new gravitational wave discoveries now open the theoretical possibility that the universe, of which we cannot even see all, may be only one of an infinite number of universes. Some of these other universes may be similar to ours, some may have more than three spatial dimensions, have other building blocks for matter than the atoms with which we are familiar, and all sorts of weird possibilities. Econintersect wonders if there is a two dimensional universe which would explain the origin of "Flat Stanley".
  • My generation (Ajay Shah, Economic Times) Ajay Shah contributes to Global Economic Intersection. Ajay looks at how India has changed since his childhood and looks ahead another 40 years. He sees very favorable demographics for India, rising literacy (soon to be 100%) and improving education. An important factor for India will come from women who are becoming more important in the economy. The most important factor for India will not be the growth in numbers in the labor force, according to Ajay, but in the quality of the workers.
  • How A Few Poorly-Timed Trades Can Torpedo Two Decades Of Healthy Returns (Sam Ro, Business Insider) If you were invested for the 20 years 1994-2013 for 99.17% of all the days (missing the 40 best days) what would have been a 588% gain turns into a 19% loss. This is the counterpoint to the market timing service sales pitch that points out you could double your return over 20 years by avoiding a small number of days which had the biggest declines. Econintersect is holding out for the service that guarantees identifying the top 40 days in advance so we can buy at market close the day before with borrowed money on maximum margin and make millions (hundreds of millions - or a few billion?) with our $10,000 seed money. Then, of course, we want the same advance notice on the 40 worst days so we can short with leveraged money just for those days. We could give the Fed balance sheet a run for it's money, for sure. :-)

Of course, the serious message is stay invested, don't risk missing the best days through unlucky market timing moves.

Click on graphic for larger image.
investing-missing-best-days-600px
JP Morgan Asset Management

30-day-rates-sober-2014-mar-19

  • ‘Special’ medical market could be big (Allison Bell, Life Health Pro) Obamacare open enrollment ends March 31. But that is not the end of enrollment. Industry sources say that enrollments outside the open periods may be as many as half of the number within those periods. The ACA (Affordable Care Act) allows for changes in insurance any time there are major life changes (change of employer, loss of job, marriage, death of a covered family member, birth of a child, or any financial change that could qualify for a hardship exemption. If the assessment is correct Obamacare may only have 2/3 of 2014 enrollments on the books when the enrollment period closes at the end of this month.
  • Everything is Getting Better (Charles Kenny, YouTube) Kenny explains to Ezra Klein why everything is getting better in the world. Except for the things that Ezra brings up. :-)


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