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What We Read Today 21 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.

  • German manufacturing PMI falls less than forecast in August ( German manufacturing appears to be a little stronger in August than expected. The Flash (preliminary) Markit PMI (Purchasing Managers' Index) came in at 52.0, down from 52.4 in July, but better than the 51.8 expected.

  • Articles about Ferguson:

Cop to Ferguson protesters: "I will fucking kill you… Go fuck yourself" (German Lopez, Vox) Includes video.

Trigger happy (D.K., The Economist) Hat tips to Michael W. Hudson and Jesse Drucker. Officer Darren Wilson fired twice as many shots at Michael Brown as did all British law enforcement officers for all of 2013.

7 Documentaries You Can Stream Right Now To Better Understand What's Going On In Ferguson (Lauren Duca, Huffington Post)

How for-profit policing led to racial disparities in Ferguson (German Lopez, Vox)

  • Articles about wars elsewhere:

Air strikes again batter Gaza as peace negotiations collapse (Orlando Crowcroft and Hazem Balousha, The Guardian)

Sides trade blame over Gaza truce breakdown (Al Jazeera)

Iraq crisis: EU backs plans by member states to arm Kurd fighters (Matthew Weaver, The Guardian)

Western intervention over Isis won’t prevent the break-up of Iraq (Paddy Ashdown, The Guardian)

Before we start a new war with ISIS, let’s remember how we stumbled into the last two (Fabius Maximus)

ISIS Pressed for Ransom Before Killing Journalist (Rukmini Callimachi, The New York Times)

The Only American Fighting for Ukraine Dies in Battle (Simon Ostrovsky, Vice News)

Ukraine warplane shot down as clashes kill dozens (Nicolas Gaudichet, Yahoo! News)

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

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  • China housing markets (Walter Kurtz, The Daily Slot email, no url)


  • The Rise and Fall of General Laws of Capitalism (Daron Acemoglu and James Robinson, MIT Dept. of Economics) The authors use historical data from two countries to show that all general laws of economics are unhelpful as a guide to understand the past or predict the future, because they ignore the central role of political and economic institutions in shaping the evolution of technology and the distribution of resources in a society. These authors argue that institutional factors have much more influence on inequality factors than does the relationship Piketty develops in his book. See also next article.
  • The Victors Write the History Books, Even in Finance (David Merkel, The Aleph Blog) David Merkel has contributed to GEI. The graph below is one that Merkel finds revealing. He says that stock buybacks area form of leverage for a company: buy to increase leverage and don't buy to maintain (or if they're making money and retaining earnings) to reduce it.
A lot of what passes for investment knowledge is history-dependent, and may not serve us well in the future. Further, a certain amount of it is misinterpreted, or, those writing about it, even really bright people, don't understand the hidden assumptions that they are making. I'm going to clarify this by commenting on three graphs that I have seen recently - two that I think deceive, and one that I think is accurate.


  • Saving Horatio Alger: Equality, Opportunity, and the American Dream (Richard V. Reeves, Brookings Institution) The sad fact is that "the land of opportunity" has unequal realization of that opportunity based on circumstances of birth. This lengthy but very readable essay is too complex to characterize with a brief excerpt but we will give one anyway:

For the first time ever, most parents in the U.S. think their children will be worse off than themselves, according to polling by the Pew Foundation. Two-thirds of Americans think the gap between the rich and the rest of society has grown in the last decade, and the same proportion believe government should do more to close this gap (although there are sharp differences of opinion between Democratic and Republican voters on this score). Faith in the Horatio Alger ideal remains, but has been shaken. Sixty percent of American adults still think "most people who want to get ahead can make it if they are willing to work hard," down from 68 percent in 1994.

Optimism about American opportunity may fade further as meritocracy comes under pressure from two sides: a growing economic divide between earned income and inherited wealth; and a growing social divide, marked by differences in family structure, education, and community.

  • 40 charts that explain money in politics (Andrew Prokop, Vox) A data mine on how the U.S. government is bought. Here is one graph showing the three-fold increase in money spent on buying government over the last four presidential election cycles. Hit the title link for the other 39.


  • US State Breaks Ground on a "Perfect" Solar + Storage Microgrid that Can Provide Resilient Power (Jennifer Runion, Hat tip to Reverse Engineer, Doomstead Diner. Vermont is the first state to start a project that combines solar and energy storage in a microgrid, funded through a unique federal-state-utility-NGO partnership. The storage will use both lead-acid and lithium batteries. The facility is expected to be completed and operational by December this year. (Econintersect: Just in time to provide employment to snow shovelers to keep Vermont's copious snowfalls off the solar panels.) For more about microgrids (aka distributed energy resources) read A Requiem for Today’s Grid (Mahesh, Bhave,
  • There Isn’t $10.8 Trillion “Stuffed Under Mattresses” Because of QE (Cullen Roche, Pragmatic Capitalism) The idea that QE put money into the economy is simply not true. In fact, because Treasuries (which pay interest) were exchanged for bank reserves (which pay very little interest) the result of QE was actually to take what would have been paid in interest to the public each year and returning it to the government.



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