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.
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The Unknown Known - How Unwinding $4.3T? (Pascal vander Straeten, LinkedIn) Hat tip to Ken Workman, GEI Discussion Group, LinkedIn. Will the Fed hold the $4.3T fixed income to maturity? Will it sell them back into the market? Will the Fed's balance sheet ever return to its pre-quantitative easing size? When interest rates inevitably rise after the Fed stops manipulating them, will the Fed take the mark-to-market losses on its huge portfolio? The author considers the possibilities and the consequences. Ken Workman made comment:
It strikes me that the unwinding gives the Fed considerable flexibility to continue strong influence on interest rates by the fluid option to sell ABSs into the market absorbing the extant liquidity, or not selling as circumstances warrant. However the risk could be a rigid schedule to unload ABSs regardless of circumstances, possibly pushing rates higher than warranted, with negative impact on housing, credit, debt service, etc. There is no deadline, and the possibility of keeping ABSs through maturity adds to comfort zone.
PPACA rationing: 5 ways insurers can limit care access in this brave new world (Craig Gottwals, Life Health Pro) Obamacare is still subject to ([e]conomic self-interest demands that businesses find ways to maximize profit and minimize the restrains of governmental interference". The author describes how insurers are manipulating the market to "nudge the worst risk among us to choose the other insurer's plan".
Trapped in Venezuela: Looking to Get Out? Good Luck! (Mike Shedlock, MISH'S Global Economic Trend Analysis) With the cash-strapped government holding back on releasing $3.8 billion in airline-ticket revenue because of strict currency controls, carriers have slashed service to Venezuela by half since January, adding another layer of frustration to daily life here.
Markets expect negative overnight rates in the Eurozone through mid 2016 as reserves become a "hot potato" (Walter Kurtz, Sober Look) What are banks doing with their cash? The easiest option is to buy sovereign debt, particularly short term notes. Government paper has minimal to no impact on regulatory capital needs and does not cost banks the 20bp charged by the ECB. So sovereign debt is driven to negative yield with a presumed lower bound of the -0.2% excess reserve cost imposed by the ECB (European Central Bank). Example is the German 6-month security:
Hillary Clinton says deficit sends message of weakness (Andrew Quinn, Reuters) Hat tip to Roger Erickson. Econintersect: Come on, Hillary, you are embarrassing yourself. If you believe the statement, you are displaying outright ignorance. If you are merely posturing, what about showing some leadership. We can understand the tactics: You can only be beaten from the right so cut off their fallacious arguments. The only trouble is that the left has the same arguments, and if you cater to the ignorance of both then can you ever get to the correct logic?
What Came before the Big Bang? (Martin Bojowald, Scientific American) Is it possible that the theoretical singularity known as "The Big Bang" was a stage in a quantum-gravitational continuum? Did "God" find the arrangement of matter that existed before the big bang so displeasing that she crushed it into a single point of space-time and has since been observing to find out if the rearrangement of matter from the resulting explosion is any more pleasing than the previous one. See also an article from six years ago: Big Bang or Big Bounce?: New Theory on the Universe's Birth (Martin Bojowald, Scientific American).
This is Who Laid your Free Range Eggs (Abigail Geer, Care2) The author claims that "free range chickens constitute one of the biggest scams ever. There is a distressing picture\s with the article that we chose not to bring over. Follow the link for a disgusting view.
Many farmers do not allow access to the outside until 5 months of age, by which time they have become so accustomed to living inside that they are afraid to venture into an unknown area. In practice this means that the majority of free range hens never actually go outside and instead live their entire lives in huge, cramped, squalid conditions which lead to feather loss, illness, disease, injury and depression. Hardly the picture printed onto the side of the egg carton, is it?
10 worst places to retire (Employee Benefit News) Number 10 is Jersey City, NJ. Click on title to go to slide show to find out which 9 places are worse.
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