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What We Read Today 04 April 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.

  • Euro-Zone Economy Slows as ECB Meets (Paul Hannon, The Wall Street Journal) Manufacturing and Services PMI (Purchasing Managers' Indexes) both declined narrowly in March, but remained well above the 50 reading corresponding to the division between expansion and contraction. Inflation also backed down from February (0.7% annualized) to 0.5% growth for March (annualized rate). For possible policy moves by the ECB see Drastic Stimulus On Table In Europe (Brian Blackstone and Todd Buell, The Wall Street Journal). Also see more 'beyond the wall'.

  • NASA Cassini spacecraft finds sign of subsurface sea on Saturn’s moon Enceladus (Joel Achenbach, The Washington Post) An ice encapsulated moon of Saturn has been found to have a liquid water lake with content equal in volume to that of Lake Superior. The lake is near the moon's south pole, has a rocky bottom and covered by a 20-mile thick layer of ice. The lake is the source of water plumes that have been observed to project from the surface of the moon, Enceladus. This behavior is similar to another outer solar system moon, Europa, orbiting Jupiter, which appears to have a sub-surface ocean and also with ejected water plumes. These moons and the presence of subsurface water on Mars have excited scientists looking for possible life forms (past or present) on other bodies in the solar system. See also New study suggests frozen water hidden below Mars surface (NDTV).
  • ‘We’re All Cheneyites Now’ (Todd E. Pierce, Hat tips to Chuck Spinney and Roger Erickson. A retired military Judge Advocate General discusses his view that the Obama administration is carrying out the views of former vice president Dick Cheney on national defense policy.

There are 17 more articles discussed 'behind the wall'.

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  • Why Surging Profits Aren't Leading To CapEx And Jobs (Lance Roberts of Streettalk Live, Advisor Perspectives Lance Roberts will be contributing a weekly article for Global; Economic Intersection starting Monday 07 April. The strong growth in PCE (personal consumption spending) since 1979 was driven by surging household credit which rose from $1.3 trillion in 1980 to $5.6 trillion in 2000 and to $13.7 trillion in 2013. The growth of household debt to compensate for lack of income growth is discussed in Steve Hansen's weekly summary article out tomorrow. The same discussion appeared here 'behind the wall' a few days ago.


  • Employees getting back on the 401(k) bandwagon (Andy Stonehouse, Employee Benefit News) The article suggests that a half-decade of retirement savings doldrums may be over. Large numbers of employees have increases in contributions or restarted contributions (76% of accounts) and changes in accounts other than "draining funds" occurred in approximately 7 of 8 accounts with activity (83%). While this is presented as a positive occurrence, we will repeat an discussion article from yesterday [From Ignorance Comes Certainty (Dave Gonigam, 5 Min. Forecast)] which shows the public has a very poor record when timing when to invest. See also next article.


  • ECBs deflation paralysis drives Italy, France and Spain into debt traps (Ambrose Evans-Pritchard, The Telegraph) Frankfurt could force down the euro at any time by signalling a determination to do something about its predicament. It has chosen not to do so. In other words, Germany is in the driver's seat and prefers to play the role of Wylie Coyote rather than the Road Runner.


  • Europe’s dangerous addiction to Russian gas needs radical cure (Guy Chazan and Ed Crooks, The Financial Times) About 31% of European natural gas consumption is supplied by Russia's Gazprom. The possibility of developing natural gas sources in Qatar and Nigeria are mentioned, along with shale gas in Great Britain (and possibly other European sources). About 75% of added energy production in Europe last year was in renewables, but that has a long way to go to displace significant amounts of natural gas. And Gazprom holds many European contracts that extend beyond 2020. See also previous article.


  • China Outlines Measures to Support Growth as Goal Recedes (William Bi and Xin Zhou, Bloomberg) China will try a little mini-stimulus ($24 billion in rail bonds) plus tax relief to try to keep the economy above stall speed. Question: Who will buy the bonds? Unless it is the financial sector creating more money it may not be stimulative at all. If it removes cash savings that could otherwise have been spent then the effort could be a wash. Unless of course, the multiplier for yuan spent on building railroads is greater than the previous multiplier.
  1. Real interest rates now close to zero; set to rise only moderately
  2. Factors influencing rates in past unlikely to reverse
  3. Continued low rates mean cheaper debt but also constrain policy
  • Is college worth it? (The Economist) We keep returning to this topic and The Economist version of the story is the best yet, They say:
Too many degrees are a waste of money. The return on higher education would be much better if college were cheaper.

But cost is not the only factor. Some of the low-cost schools appear at the bottom of the list as well as at the top. More important factors include quality of the education and what field is the major. The Economist says engineering is a good bet wherever one studies. "Hard subjects pay off."


The following is the full 2-hour session of the hearing.

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