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What We Read Today 30 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.

  • China’s Income Inequality Surpasses U.S., Posing Risk for Xi (Lorraine Woellert and Sharon Chen, Bloomberg) The gap between rich and poor incomes in China is now one of the highest in the world, exceeding even the U.S. Researchers at the University of Michigan say that the GINI coefficient for China has nearly doubled over a 30-year period from 1980-2010. This article quotes analysts who say social unrest is a real risk for China if the trend is not reversed.

"Senior Officers of Goldman Sachs and Morgan Stanley Aided and Abetted Tax Fraud by Wealthiest Americans, Failed to Make Required Criminal Referrals, and Demanded Immunity from Prosecution for Themselves and the Banks before Complying with the U.S. Subpoenas: U.S. Department of Justice Caves in to Banker's Demands Continuing its Practice of Effectively Immunizing Fraud by Most Financial Elites."

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

The first three articles are about Mario Draghi's equivocation regarding QE operations for the ECB.

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  • The ECB betting on "creditless" recovery (Walter Kurtz, Sober Look) Monetary conditions in Europe continue to tighten. The ECB balance sheet has contracted by 30% since the middle of 2012, LTRO (long term refinancing operations) balance sheets of banks has declined by 50% and credit is not growing. Kurtz points out that "creditless" recoveries do happen (about one in five) But he also points out that
Japan too had a "creditless" recovery - until it didn't. But let's not make such silly comparisons.

Eurozone-credit-growth

  • LEAKED: Draghi’s Sudden Switcheroo On QE (Wolf Richter, Testosterone Pit) Behind closed doors Germans are reported to have reversed Mario Draghi from his 03 April statements about "using also unconventional instruments within the mandate to cope with prolonged low inflation". The meeting took place this past weekend. (See previous two articles.)

  • China Set to Overtake U.S. as Biggest Economy Using PPP Measure (Kevin Hamlin, Bloomberg) Hat tip to John Katz. While the GDP of China is approximately half the size of the U.S., when the comparison is made normalizing for domestic purchasing power in each country China is close to even with America. In 2011 the so-called PPP (purchasing power parity) GDP for China was 87% of the U.S. Extrapolating China will likely surpass the U.S. in PPP GDP this year or next.
  • Two Giant Banks, Seen as Immune, Become Targets (Ben Protess and Jessic Silver-Greenberg, The New York Times) The banks and Credit Suisse (aiding tax evasion) and BNP Barnibas (finance with black-listed countries). So we are still waiting for criminal charges related to the mortgage and mortgage securities fraud.
  • KCK14 – May Coffee (Last:208.90) (Rick Ackerman, Rick's Picks) Rick Ackerman has contributed to GEI. The sharp decline and rebound for the May coffee contract has Rick looking for a quick 25% gain once resistance is breached.

Click on chart for larger image at Rick's Picks.
coffee-may-2014-600x300

  • A Deadly Fungus and Questions at a Hospital (Ian Urbina and Sheri Fink, The New York Times) A flesh eating fungus that has been devouring children in Children's Hospital in New Orleans. The C.D.C. (Center for Disease Control) has not faulted the hospital but the New Orleans community is. This is part of a much larger epidemic: An estimated 75,000 people die in hospitals each year from infection contracted in health care facilities.
  • Finding a Flash Drive in the Sea (Kevin Ashton, The New York Times) The author says the biggest problem in finding the missing Malaysia Airlines plane is the tracking technology which is "stuck in the 1970s". The satellites which track planes are ancient relics with the same data storage capability as seven iphones. A new flock of nanosatellites may soon change that, according to the author.
  • Why the Endogenous Money Debate Matters (Cullen Roche, Pragmatic Capitalism) Roche steps in to explain why the creation of money as bank credit is an independent "endogenous" factor in the modern macroeconomy and not just an intermediation vehicle. He points out that the basic assumption depicting control of money with IS/LM graphics assumes a fixed amount of base money interacting along defined supply and demand curves depending on interest rates. Clearly an incorrect assumption. See also: Solving a Monetary Puzzle. Note: Econintersect is currently organizing a Great Debate feature of this topic.

is-lm-roche-2014-apr-29


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