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What We Read Today 04 July 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.

  • Yellen Says Financial Instability Shouldn’t Prompt Rate Change (Craig Torres and Jeff Kearns, Bloomberg) The Fed chair told the IMF (International Monetary Fund) this week that there are "pockets of increased risk-taking" in the financial system, but that is primarily a concern of regulation, not of interest rate policy which faces "significant limitations as a tool to promote financial stability".

  • Hurricane Arthur to hit energies (Phil Flynn, Futures Magazine) Employment numbers and lowered inventories are bullish but both may be dominated by a drop in demand in the wake of hurricane Arthur. The expected July 4th holiday driving surge along the U.S. east coast may be washed out by the first hurricane of the 2014 season.
  • S.Korea, China agree to launch Won-Yuan trading market in Seoul (Xinhua) According to the South Korean presidential office, South Korea and China have agreed to launch a market for direct trading between currencies of the two countries. An exchange may open in Seoul this year. The stated objectives are to reduce foreign exchange costs and risks for companies and boost bilateral trade and investment. See more 'behind the wall'.
  • Have We Been Reading the Declaration of Independence All Wrong? (MSN News) Scholars are uncertain whether a period (see below) actually exists in the original Declaration of Independence. If it is not there then Jefferson and the signers of the Declaration of Independence can be inferred to have a "big government" view that has not previously been considered and also that the fundamental rights of "all men" extend beyond "Life, Liberty and the pursuit of Happiness" to the power of government. With the period in question in place, government can be interpreted as subservient; without it government assumes a more equal footing. See also If Only Thomas Jefferson Could Settle the Issue (Jennifer Schuessler, The New York Times).


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  • Army of Long-Term Jobless Dwindles as Hiring Accelerates (Michelle Jamrisko, Bloomberg Businessweek) The share of long-term unemployed (27 weeks or more without a job) remains more than twice the historical average (going back to 1948) of 15.1%. But the data for June shows that it has pulled back to the lowest level in five years. The number of long-term unemployed has been declining for almost one year - during the past year there have been 2.27 million fewer unemployed and over half (1.24 million) of the decline have come from the long-term unemployed.

Econintersect cautions: The decline in the number of unemployed is the total of the increase in employment over the past 12 months (2.146 million) and the decline in the labor force (128k since June 2013). But since the working age population increased by 2.23 million over the last 12 months (and number not in the labor force increased by 2.39 million) it is impossible to determine how much of the decrease in the number of long-term unemployed is due hiring from that cohort or due to those leaving the labor force. Jamrisko mentions this source of uncertainty in her article. Further discussion of the data details can be read at Are grey clouds hovering over the June employment report? (Michael Haltman) and BLS Jobs Situation Again Strong in June 2014 (Steven Hansen, comprehensive data analysis).

  • Google U-turn over deleted newspaper links (Richard Waters and Henry Mance, Financial Times) The ill-conceived European Court of Justice ruling that people can demand links be removed if the information is inadequate, irrelevant or excessive has met its first challenge and has apparently been found wanting. A series of links to articles in the Guardian newspaper that were suppressed by the Google search engine earlier in the week were reinstated on Thursday after the news organization complained publicly about the removals. This may be only the first of thousands of such cases. From the FT:

Some 70,000 removal requests concerning nearly 270,000 different web pages have been received so far, with around 1,000 new requests coming in each day, Google said. The company has hired an army of paralegals to vet every web address before deciding whether to strip links from its search engine. In all cases, the original web pages remain untouched.

The search engine has notified publishers of its decision to remove links to stories, a step it is not legally required to take. The move has prompted wider discussion of the cases. Some media observers suggested that Google had sought to publicise the forgotten articles in order to undermine the court ruling.


  • The truth about China's lies and statistics (John Lee, China Spectator) China has a very low GDP per capita and over one quarter of its people live on less than $2 (U.S.) per day. Over 100 million are still below the poverty line figure of $1.25 per day. Its debt-to-GDP ratio is over 200% (possibly 300% due to inflated GDP reported), and the fixed investment model is running out of steam. As its population ages, increases in labor productivity are the main hope for sustained growth. The trends may not be disastrous, but China is becoming a 'normal' economy with abnormally big problems.
  • China Will Allow Banks to Set Yuan-U.S. Dollar Rates for Retail Customers (Wynne Wang, The Wall Street Journal) This sounds significant at first blush but is quite limited in scope. It applies only to individual customers who are only allowed to purchase a total of $50,000 of foreign currencies in a year. China seems to be inching toward an easing of exchange rate controls over the renminbi. In March, China doubled the parity rate, a daily reference rate, to allow the yuan to trade 2% either way against the dollar. This increase was expected to inject greater volatilities into the currency exchange market.


  • ECB seen indirectly boosting Asian assets (Steve Price, Asian Investor) Now the European Central Bank (ECB) is providing the "liquidity" for global asset price inflation that the Fed has been taking away.
  • Foreclosure starts rose by 9.5 percent in May, the first such increase in eight months
  • Overall, year-to-date foreclosure starts lowest since 2007; down 32 percent from year ago
  • Seasonal purchase activity picking up; purchase originations on par with 2013
  • Negative equity down to 8.9 percent of total active mortgages; nearly 80 percent of seriously delinquent and foreclosure inventory underwater
  • U.S. Job Creation Index (Weekly) (Gallup) Gallup's Job Creation Index is the net of Gallup's Job Market measure, subtracting the percentage of workers who say their employer is letting people go and reducing the size of its workforce from the percentage who say their employer is hiring new workers and expanding the size of its workforce. Weekly results are based on telephone interviews with approximately 4,000 working adults; margin of error is ±2 percentage points. The index has not been higher than the current level since 2007.


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