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What We Read Today 16 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.

  • El Niño Could Make U.S. Weather More Extreme during 2014 (Kevin Schultz, Scientific American) Scientists are reporting a rising probability of El Nino conditions impacting North American weather by late summer and even higher probability next fall and winter. Weather patterns that exist at other times are sometimes reversed during El Nino with normally wet areas becoming dry and vice versa. El Nino is associated with warming of the Pacific Ocean off the coast of Ecuador. Weather economist Sig Silber follows global weather patterns and reports on them every Monday at GEI News. In recent weeks he has given much attention to the El Nino outlook which has been fluctuating significantly week to week.

  • Yes, Theoclassical “Economists [are] Basically Immoral” (William K. Black, New Economic Perspectives) William K. Black contributes to GEI. This is a dissection of "theoclassical" economics by examination of false premises asserted as facts. Economics is in such a sad state at least partially because assumptions made at one point in history come to be treated as laws at a later time.


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  • US bank-held consumer credit on the rise (Walter Kurtz, Sober Look) Bank-held consumer credit in the US continues to rise This includes revolving debt (mostly credit cards and non-revolving debt (auto loans, RV and boat loans and personal loans being the largest components). This does not include any new student loans, which are all held by the federal government. Econintersect calculations: From 1Q/2011 to 1Q/2013 bank held consumer debt increased by about $20 billion per year (approximately 1.8%). From 1Q/2013 to this month (May 2014) the increase was about $40 billion per year (3.5%).


  • What's the Penalty for Pundits Who Get It Wrong? (Barry Ritholtz, Bloomberg) We guess the key operative here is "pundits". See the next article for an example discussed by Ritholtz. He says that "the deceptions need to end" referring to pundits masquerading as economists. He quotes the Cambridge economist of the mid-twentieth century, Joan Robinson:
"The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists."
We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s.


  • The True Cost of Hidden Money (Jacques Leslie, The New York Times) Why do international balance sheets each year show more liabilities than assets, as if the world is in debt to itself? Leslie reports on research indicating 8% of the world's personal financial wealth is stashed in tax havens and that tax evasion is what creates much of the hole in the global balance sheet. Corporations shifting profits offshore constitute most of the rest. The research reported also indicates that if these tax evasion numbers were properly accounted "American indebtedness would fall from 18% of GDP to 9%". Econontersect assumes Leslie means personal indebtedness but has not made an effort to confirm.
  • Market Strength Continues to Build as Laggards Become Leaders (Chris Puplava, Financial Sense) Hat tip to John O'Donnell. Puplava finds many data trends that indicate to him that the stock market will continue to advance. One of them is narrowing yield spreads which he sees as a positive. (See graph below.) But not all agree. Earlier this week Lance Roberts cited the same characteristic as a warning sign requiring vigilance. See A "Confirmed" Buy Signal at GEI Investing.


  • The secret to Conservatives’ success, and why they deserve to win (Fabius Maximus) Fabius Maximus has contributed to GEI. FM attributes the rising influence of right wing political thinking to "patient, long-term investment". He describes it as "intelligent design of a society". This article is short and sweet except for a three paragraph excerpt from Paul Krugman which is used to illustrate the strength of the right wing position compared to the left.
  • Monetary Reflation Won’t Revive Main Street: Lessons From The 1930s (David Stockman, Contra Corner) Hat tip to John O'Donnell. Stockman makes a statement which needs qualification: "... the Great Recession is dwarfed by the immense nature of the downturn of the 1930's by any measure." He then goes on to look at unemployment data and proves his point by that measure. But Econintersect would suggest that the word any cannot be supported. For the sheer size of the monetary impact in the financial system, nothing comes close to the Great Financial Crisis of 2008, even when adjusted for inflation and population. See Banking Crisis Dwarfs Depression (John Lounsbury, The


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