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What We Read Today 05 May 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.

  • No Amount of Alcohol Is Safe (Laura A. Stokowski, Medscape) For some cancers the correlation between the amount of alcohol consumed and incidence of disease is now well established. For other types of cancers the data is conflicting.

The vision is to use a system that works similarly to how we conduct the most sensitive forms of online transactions, like applying for a mortgage. It will utilize two-step authentication, say, some combination of an encrypted chip in your phone, a biometric ID, and question about the name of your first cat.

It is easy to anticipate that this will be extended to replacing all existing sign-ons, from Facebook to your personal blog page. But this also raises a number of questions. Since this is essentially a "one password" scheme it exposes all of your internet activity and information to a single breach point. Just how secure can such a system be? It will have to be the "Fort Knox" of security systems - it will be the ultimate motherlode for hackers.

It also raises the question of abuse of power by central control, be that private sector or government. You essentially relinquish the ability to access a wide range of internet content to the possibility of central censorship. The facilities would exist to classify categories of users (via their cyber ID) as restricted from any list of resources that might be designated. Think government censorship, think unfair blockage of competition. Unless you have government authorization you might not be able to access Chinese government news services. If you do business with Amazon you might be blocked from online access to other retailers.

And, of course, this creates a central repository of all your online activity. Whatever slim veil of privacy still remains in cyberspace would be gone with very little additional government effort.

As you might guess Tyler Durden at Zero Hedge has this on his radar screen with a post from Mike Krieger of Liberty Blitzkrieg blog.

  • 10 top spots for foreclosures (Chris Kahn,, MSN Real Estate) Nationally, foreclosures rose by 4% from February to march. The top ten states for foreclosures contain four surprises: Connecticut, Delaware, Indiana and Maryland. But the biggest surprise for Econintersect? Arizona is not on the list.

Today there are 10 articles discussed 'behind the wall'.

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  • Expensive surprise with reverse mortgage (Don Taylor, This is a description of someone who entered a reverse mortgage contract and apparently didn't understand how it worked (or even worse didn't know how to add). With a conventional mortgage of $152,500, a check received at closing on the reverse mortgage of $9,500, he doesn't understand why the reverse mortgage balance ended up at $162,000. (All amounts are rounded.)
  • How The U.S. Can Slay The Deficit In 4 Years (Dale Roberts, Seeking Alpha) Interesting article but doesn't deal from a full deck (work with a complete accounting ledger). Read all the comments for a view of some of the missing cards.
  • Europe’s Precarious New Normal (Erik Berglof, Project Syndicate) The author, Chief Economist of the European Bank for Reconstruction and Development, argues that the social fabric is what is precarious. The economic fabric of the EU is strong, provided politics doesn't get in the way.

Comparing Poland and Ukraine underscores the difference that EU membership has made. In 1989, Poland and Ukraine had approximately the same standard of living; today, Poles are three times richer. Poland's income gap with Western Europe today is smaller than it has been at any point since the year 1500.

Given that the EU's combined GDP is eight times larger than that of Russia, we should expect a path toward normality for Ukraine to mean that the EU would dominate the country's foreign trade. But this does not imply a complete break with Russia, whose weight in Polish exports has tripled since 2004. Given their geographic proximity and industrial networks, the potential for trade between Russia and Ukraine is much greater.

But the new normal is about democracy and dignity as well. It is hard to imagine that what is currently happening to the social fabric in eastern Ukraine could happen in Poland.

  • This Week In BI Intelligence: eBay's Payment App Is Blowing Up On College Campuses (Keith Griffith, Business Insider) Venmo is an Amazon app for peer-to-peer payments and contains optional social networking features so that your netwrok can see what you buy but not what you pay. It is going viral, with activity centered on college campuses and spreading from there. It is emerging as a leader in a space occupied by companies like PopMoney, Square Cash, and Google Wallet. Other innovations for in-app purchases are discussed, including a new Amazon effort that appears to under-cut fees currently charged by Apple and Google.

  • Economics students call for shakeup of the way their subject is taught (Phillip Inman, The Guardian) Hat tip to Steve Keen. Economics students from 19 countries have joined forces to call for an overhaul of the way their subject is taught, saying the dominance of narrow free-market theories at top universities harms the world's ability to confront challenges such as financial stability and climate change. The ISIPE (International Student Initiative for Pluralist Economics) says in a manifesto:
"The lack of intellectual diversity does not only restrain education and research. It limits our ability to contend with the multidimensional challenges of the 21st century - from financial stability to food security and climate change. The real world should be brought back into the classroom, as well as debate and a pluralism of theories and methods. This will help renew the discipline and ultimately create a space in which solutions to society's problems can be generated."

Andy Haldane, Executive Director of Financial Stability at the Bank of England has endorsed the movement:

"The crisis has laid bare the latent inadequacies of economic models. These models have failed to make sense of the sorts of extreme macro-economic events, such as crises, recessions and depressions, which matter most to society."

This article also quotes from Thomas Piketty:

"For too long economists have neglected the distribution of wealth, partly because of the profession's undue enthusiasm for simplistic mathematical models based on so-called representative agents."

See also GEI News for a complete copy of the statement issued by ISIPE.

  • Healthy or Hogwash? The Pros and Cons of a Vegetarian Diet (Leigh Erin Connealy, MD, Newport Natural Health) Definitions of diet terms alone is enough to read this article. Dr. Connealy goes on to extol the virtues of a meat-free diet, but concludes with a concession to those who want to continue to eat meat: "OK as long as it is really eaten in moderation."
  • The Right’s Piketty Problem (J. Bradford DeLong, Project Syndicate) Brad DeLong has contributed to GEI. The author summarizes conservative criticism of Piketty's book: "its author is a mentally unstable foreign communist". There is considerably more detail, so read the article.
  • Here's Why India Will Soon Outpace China (James Gruber, The usual arguments for Indian advantage center on demographics. Gruber says we won't have to wait for the Chinese to grow old. Before that are significant factors centering on the stabilization of the currency and increasing investment and productivity. One specific sign of a resurgence for India is the rapid improvement in the current account deficit depicted below. So, while China's necessary rebalancing, corruption elimination and expensive environmental issues will be slowing China's growth in the next couple of years, India will be moving in the opposite direction.

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