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What We Read Today 16 August 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 (and sometimes longer ones) 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.

  • Wage Gap Widens from Recession as Income Inequality Grows (Press release, The United States Conference of Mayors) Hat tip to Rob Carter. Jobs gained during the economic recovery from the Great Recession pay an average 23% less than the jobs lost during the recession. The average annual wage in sectors where jobs were lost during the downturn was $61,637. New jobs gained through the second quarter of 2014 showed average wages of only $47,171. This wage gap represents $93 billion in lost wages, corresponding to more than 0.5% lower GDP, assuming no multiplier effect.

  • There's a Suicide Crisis in America (Stephen Marche, Esquire) Robin Williams is the latest face on what has become the leading cause of death from injury in the U.S. Two years ago suicide surpassed car accidents to take over top spot for the first time ever. See next article which says the change occurred four years ago.
  • Suicides More Common than Traffic Deaths (Crystal Phend, MedPage Today) Four years ago traffic fatalities fell to second place as a cause of death due to injury, replaced by a new number one: suicide. In addition accidental poisoning climbed into third place pushing homicide down to number four. Of course, the number of deaths that are ruled accidental poisonings that are possibly suicides is anyone's guess.


  • Do We Look Fat in These Suburbs? (James Hamblin, The Atlantic) People who live in densely populated cities with interconnected streets are thinner and much healthier than those living in suburban sprawl. The reason? The city folks walk more.

There are 12 articles discussed today 'behind the wall'.

Today we include discussion of three articles about the prospects for the gold market and four articles about corporate income taxes (last 7 articles).

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  • The ESOP Exit Strategy (Scott D. Miller, Journal of Accountancy) Employee stock option plans are one excellent strategy for a small business owner to plan for his exit from the business he owns. It has the advantage that it transfers ownership in stages over time to the employees. It is also a useful mechanism to continue to transfer ownership to future generations beyond the first that followed a single owner-founder. Many advantages for the employees and the company can obtain. For example, companies with employee owners generally outperform other companies; and owner-financed selling of stock to employees upon retirement is a much more secure transaction for the retiree. This type of succession planning is most common with S-corporation.
  • The 10-year bond is at 0.966% (Walter Kurtz, The daily Slot email, no url) That's the German ten-year government bond which appears to be chasing the 10-year Japanese government issue (0.51%) into a financial black hole. For more see Germany 10-Year Bond Yield Drops Below 1% as GDP Shrinks (Lukanyo Mnyanda and Neal Armstrong, Bloomberg).


  • Banking on the BRICS (Barry Eichengreen, Project Syndicate) Barry Eichengreen has contributed to GEI. Prof. Eichengreen says the talk of the new BRICS bank as competition for the World Bank is nonsense. It should function like dozens of other development banks within the global financial system.


  • Gold: Not Much Of A Hedge For Anything, Unless You're A Centurion (Daniel Fisher, Forbes) If you could live long enough history suggests that gold will hold its value. For example a Roman centurion was paid in gold at the same rate as a modern-day U.S. Army captain would be if he converted his dollars to gold. But for shorter time periods there can be periods when gold loses value. So, in the long run it can be said that gold holds its value, we all live in the "short run". In this regard, the quotation on the subject from John Maynard Keynes is a propos:
The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.


  • 20 big profitable U.S. companies paid no taxes (Mike Krantz, USA Today) Hat tip to Marvin Clark. One of the companies on this list, in fact the largest, Merck, paid no taxes in 2Q 2014 but has paid taxes in the past. For the tax year 2013, for example, Merck paid 18% corporate income tax according to USA Today. But the second largest company on the list, Seagate, "has made a habit out of keeping effective tax rates low".


"... unlike in Canada where income earned and taxes paid by corporations appear to correlate with each other along with explainable economic interruptions, U.S. business taxation is distorting. The excessively high corporate income tax rate has become a cause of tax inefficiency and ineffectiveness by leading businesses to excessive tax planning and tax-induced avoidance of incorporation. We are aware that both the government and the business sector in the U.S. are interested in reforming their corporate tax system. We want to point out, however, that the messy picture of U.S. effective corporate tax rates only reflects the inefficiency and complexity of the U.S. corporate tax system; it should not be used as an excuse for delaying its reform."


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