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What We Read Today 12 June 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.

  • Modi Govtís reform agenda sends Sensex surging (KR Srivats, The Hindu Business Line) A raft of moves to encourage investment, simplify taxes, develop infrastructure and rein in inflation are creating a boom in the Indian stock market.

The next four articles are about the suddenly critical situation in Iraq.

  • Iraqi insurgents 'seize new city' (Paul Wood, BBC) An Iraqi insurgency known as ISIS (Islamic State of Iraq and the Levant, also called ISIL) has been making rapid gains in seizing control of key parts of the country in recent weeks. Now their advance seems to be accelerating as they seized Mosul, a city of 1.5 million, on 10 June and Tikrit, hometown for ex-dictator Sadam Hussein, on 11 June. Fighting is now reported around Samara, ISIS is a follow-on to Al Qaeda in Iraq.

iraq-partition-2014-june-11


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

Three involve discussions of the student loan debt problem.

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stocks-global-post-crisis

"Make no mistake, there is now a major trade war going on between Europe, the US and to some degree the UK."
  • World Bank cuts growth outlook as Ukraine crisis weighs (Anna Yukhananov, Reuters) The World Banks has cut its global growth projection for 2014 to 2.8%. In January the projection had been 3.2%. A spokesman for the bank said that 2014 would be slower than previously projected. But "[t]he real concern is what happens in 2015, 2016."
  • Will China avoid a severe housing market correction? (Walter Kurtz, Sober Look) Kurtz says there is "no doubt that we are going to see some failures among developers". But this will not be a crisis, just another part of the continuing housing cycle for China. He provides the following graph from Deutsche Bank as evidence.

PropertypricesinChina-sober-2014-june-11

  • UK employment rises at record pace (Brian Groom, Financial Times) UK employment is rising at the fastest rate on record (records start in 1971). But pay growth is still less than inflation. The government has estimated that the UK is still years away from seeing real incomes returning to 2009-2010 levels.
  • Chart of the Day: iron ore (Chris Becker, Macro Business) Actually we'll show two of the price charts for iron ore: one for 2014 (showing a 30% decline) and a second showing the four-year down trend which has now seen a decline of more than 50%. There are more charts including several mining stocks in the article.

iron-ore-mb-2014-as-of-jun-12

iron-ore-mb-6-years-2014-jun-12

  • Capitalism, democracy and land (Catherine Cashmore, A Place for Shelter) Hat tip to Macro Business. Cashmore highlights the dramatic shift away from public benefit from resources in Australia to the enrichment of "rent seekers". Two excerpts from her summary:
Economist Michael Hudson points out in USA studies, how the magnitude of land-price gains are brushed under the carpet to hide the massive unearned profits reaped by those who hoard it.
When you appreciate how lucrative rent-seeking is to those in power, it is very easy to see how democracy fails us - working tirelessly to silence voices by politically reinforcing faulty economic theories, while strenuously working against efforts to liberalise them.

australia-resource-taxes-royalties-profits-cashmore-2014-jun-11

Private student loans reflect the very worst practices of our consumer credit culture. The same system that brought down mortgages is now making personal debt too big not to fail.
  • If colleges didn't waste your tuition, we wouldn't need new student loan reform (Michelle Chen, The Guardian) Higher and higher student loan debts (Chen calls them "unsustainable") is only a symptom of a "deeper erosion within higher education". This article points to a parasitic system where students are charged for ever more wasteful things that have nothing to do with the quality of their education.n And, Chen says, ultimately society will pay the bill.

But for now, students must constantly wrestle with the dilemma of whether the benefits of a college education are worth the tremendous cost. Instead, it's time for policymakers rethink the way we, as a country, value higher education and what its purpose should be. When a university functions as a business, we rob a public trust and debase the country's intellectual assets.

Students might carry a student debt load today, but eventually, we'll all bear the social cost of their wasted opportunities.

  • IMF sounds global housing alarm (Robin Harding, Financial Times) The IMF warned that action is required to contain the risk of another housing crash. Many countries have housing prices way above historical norms. Read the IMF report here. The IMF graphics are "cute" but the Financial Times has ones that are more readable. Two are shown below.

house-price-index-global-ft-harding-2014-June-11

house-price-rent-ratio-global-ft-harding-2014-jun-11


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