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.
Ukraine factories equip Russian military despite support for rebels (Michael Birnbaum, The Washington Post) Hat tip to Roger Erickson. Ukraine factories are still shipping weapons to Russia. The government in Kiev has passed new laws which enable it to stop this practice. But workers in the factories strongly object to the lost work at a time when the country is into a deep recession brought on by the nine months of internal conflict waged by insurgents sympathetic to Russia. Whether actions to reduce shipping arms to Russia can be implemented without weakening support for the government further is quite problematic.
While others are in the early stages of exploring the technology, two-year-old Ditto is now analyzing photos on behalf of Kraft Macaroni & Cheese, Cadillac and Coca-Cola. By parsing photos, Chobani was able to determine that many consumers were putting their yogurt containers in car cup-holders and engaging in some dashboard dining. Designer handbag maker Vera Bradley was also able to determine that its products were often given as a rite of passage, frequently to girls hitting their 16th birthday. Such ethnographic research is just one way that photo-based data might be valuable to marketers, Rose says. Other applications include competitive intelligence (how many people are posting photos of our product vs. the competition?) and tailored audience targeting.
Gold Demand Down – What’s To Come? (Barry Norman, FX Empire) Asian jewelry is a major source of demand for gold and 2014 is running behind the boom year of 2013. But sales this year are higher than 2012 so the rising demand trend is still intact.
Silent Darien: The gap in the world's longest road (Carolyn McCarthy, BBC) The Pan-American Highway stretches more than 27,000 miles from Prudhoe Bay, Alaska on the Arctic Ocean to the southern tip of South America on the Cape of Good Hope. Except for a gap of less than 100 miles in Panama, south of the Panama Canal, adjacent to the border with Colombia, that is. Read this fascinating story of the Darien National Park and why it may be a good idea if the gap remains in the world's longest highway forever.
There are 10 articles discussed today 'behind the wall'.
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HFT Rats Find New Targets Even as They Flee Banks (Shah Gilani, Wall Street Insights & Indictments) Shah Gilani has contributed to GEI. Gilani says that HFT is legalized insider trading. The machines used analyze order flows coming into the market and enable the operators to trade against those flows before they are executed to shift prices to the detriment of the original orders and to the benefit of positions taken by the HFT traders. This is a form of proprietary (prop) trading. The Volcker rule prohibits TBTF banks from prop trading and so these skimming operations must move to other homes. Gilani says regulations must be changed to eliminate this "legalized, institutionalized pick-off-the-suckers game".
Oil Sands are Biggest Losers From Low Crude Prices: Study (Joe Carroll, Bloomberg) Some oil sands (including some in Canada) need oil at $150 to turn a profit. A couple of Alberta fields need oil at $157-$159 to be profitable, while others will lose money below $147 and $134 for two more examples mentioned. On average this article says that $95 is the price needed to bring oil on line from new sources in "the Arctic, oil sands and deep oceans".
1. Government bonds crowd out private sector credit, limiting loan growth in a number of countries.
2. Banks are becoming more intertwined with their central governments - something that was part of the cause of the debt crisis. Governments depend on banks for cheap funding and banks depend on their governments for support (bailout) in case of a liquidity crunch.
Does Econintersect support the crowding out statement? After all we have ranted about the fallacy of U.S. government debt crowding out private investment, an effect that some economists argue is a problem. Yes we do agree with Kurtz. The Eurozone countries do not have their own sovereign currencies and every dollar borrowed by government is a dollar that cannot be borrowed in the private sector. In the U.S. every dollar borrowed by the federal government creates a dollar in the private sector. The effect is just the opposite of crowding out.
The Cable Guys Have Become the Internet Guys (Peter Kafka, re/code) The proposed Comcast - Time Warner merger would put more than 40% of all broadband data pipes under the control of one company (although Comcast argues it would be "only" 35%). From Kafka's article:
The cable TV business hit an important milestone last month: It turned into the Internet business. Last quarter, for the first time ever, the biggest cable TV providers started selling more broadband subscriptions than video subscriptions, according to a new tally from Leichtman Research Group. Not by much. The top cable guys now have 49,915,000 Internet subscribers, compared to 49,910,000 TV subscribers. And to be sure, most cable customers are getting both services.
Russia’s Eurasian Vision (Nouriel Roubini, Project Syndicate) Roubini thinks that Putin's vision is one of an expanded European Union with Russia at the center and extending to include the Asian former Soviet Republics.
How Much U.S. Debt Does China Hold? The U.S. Isn’t Sure (Ian Talley, Real Time Economics, The Wall Street Journal) Hat tip to Ian R. Campbell, GEI Discussion Group, LinkedIn. First, it appears the graph below was created for an Arabic audience - the line line increases from right to left. The most recent data point for June 2014 is on the left. Talley asks: "Did China add $24 billion on cut its holdings by $2.5 billion?" The answer is that no one knows. The problem with the U.S. Treasury data is even greater when the entire year back to July 2013 (on the right) is considered. Econintersect estimates from the graph that the Treasury records of sales to China total more than $120 billion (red) but another Treasury record shows the estimated holdings of Treasury securities declined a little less than $10 billion (blue). The reason for these dramatic differences is that Treasury securities do not have a transfer of record maintained and they are freely exchanged around the world without knowledge of the originator (the U.S. Treasury). This is much the same as the use of U.S. currency throughout the world (Federal Reserve notes); we have little idea where all the paper resides. It is tracked only by self-disclosures and since not all are made on the same date the U.S. never knows exactly who owns its debt.
The Nature and Necessity of a Paper-Currency (Benjamin Franklin, franklinpapers.org) Hat tip to Roger Erickson. In 1729 Benjamin Franklin explained why abundant paper money drives the interest rate toward zero and encourages increased productivity; and why a scarcity of money creates an unproductive society. These are two concepts that remain a mystery to many to this day.
There are now more jobs available - but unfilled - in the United States than there were before the Great Recession began at the end of 2007. And employers are firing fewer workers than they did when times were good. But they are also hiring fewer people. In a report this week, the Bureau of Labor Statistics said that employers reported in June that they had 4.5 million available jobs that they were unable to fill. That is the highest number since 2007, and more than twice as high as the figure in October 2009, when the economy was officially beginning to recover but there were no signs of that in the labor market.
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