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What We Read Today 12 September 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.

  • ‘Bizarre’ surge in Australia jobs numbers (Jamie Smyth, Financial Times) Official data yesterday showed seasonally adjusted unemployment fell from 6.4% in July in August to 6.1% in August. The number of people employed jumped by 121,000 to 11.7m. The employment numbers were boosted by a large increase in part-time employment.

The size of the employment jump in proportion to population is the equivalent of 1.5 million increase in employment in the U.S.. That is why it is being called a sampling error by some. Note: Australia's unemployment rate is subject to frequent sharp ups and downs. The July increase and August decline a little larger than the others in recent years.


  • U.S. threatened massive fine to force Yahoo to release data (Craig Timberg, The Washington Post) Court records have been unsealed which show how Yahoo! was eventually forced by court order to provide company data on users to the U.S. government as part of NSA (National Security Administration) activities. Before the final rulings the government threatened to impose extra-judicial administrative fines on the company of $250,000 a day in an effort to get them (Yahoo!) to "voluntarily turn over what the court ordered them to in the end. Yahoo! resisted, stating they believed the request was unconstitutional. As part of the final court decision Yahoo! was forbidden to make any public statements about the entire proceedings.
  • Scottish support for independence slips behind unionists a week before vote: poll (Allistair Smout and Angus MacSwan, Reuters) The YouGov survey for The Times and Sun newspapers put Scottish support for the union at 52 percent versus support for independence at 48 percent, excluding those who said they did not know how they would vote. YouGov's last poll showed support for independence at 51 percent. The margin of error is 2-3% so the recent results are not significantly different from a tie.


  • Recent articles about Ferguson:

New witnesses to Ferguson shooting come forward (

  • Articles about wars elsewhere in the world:

Nigeria's Boko Haram puts Maiduguri under 'siege' (BBC News)

Syria airstrikes need boots on the ground, AF officer says (USA Today)

Obama's Next Move Against Islamic State (Bloomberg Editors)

Russia warns US against strikes on Islamic State in Syria (BBC News)

Islamic State crisis: Kurds 'ready for action' in Iraq (BBC News) Includes video

With Gas Cut Off, Ukraine Looks West (The New York Times)

Russia faces new U.S., EU sanctions over Ukraine crisis (Adrian Croft and Arshad Mohammed, Reuters)

Obama Says U.S. Will Join EU in Tighter Russia Sanctions (Roger Runningen, Bloomberg)

Russia Sanctions Are a Race to the Bottom (Leonid Bershidsky, Bloomberg View)

There are 13 articles discussed today 'behind the wall'.

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  • And the market says No (Dan McCrum, FT Alphaville) Free registration required. With one week to go the gambling odds are 6:5 for 'No' ($5 bet will gain an additional dollar back if a winner) and 10:3 for 'Yes' (a winning $3 bet will get $10).


  • Credit Agricole Near Accord in Sanctions Probe (Suzi Ring and Fabio Benedetti-Valentini, Bloomberg) The charges concern money laundering involving violations of trade embargoes and sanctions with countries such as Iran. Rumors have the settlement to be between $500 million and $1 billion.
  • How 'Keynes' Became a Dirty Word (Noah Smith, Bloomberg View) Smith says the association of the words "socialist," "progressive," or "liberal," is wrong. First, says Smith, Keynesian (more precisely "New Keynesian") economists deal with models which try to explain how monetary policy affects the economy and has little to do with what might be called political economy, or policy setting. Many New Keynesian economist lists include those who are generally considered "conservative", such as Milton Friedman, Greg Mankiew and John Taylor. Econintersect: Noah Smith barely scratches the surface of the misrepresentation of John Maynard Keynes. See Keynes’ General Theory, the ISLM and Roy Harrod’s ‘Dynamics’ (Philip Pilkington, GEI Analysis, 07 September 2014) and Pilkington: Keynes Was Misinterpreted from the Start (John Lounsbury, GEI News, 08 September 2014)
  • The State of U.S. New Home Market (Ironman, Political Calculations) The state of the new home market is close to where it should be based on capitalization fo new homes and previous historical levels. Using this as a guide there is no reason to expect that this is a new bubble and that a sharp decline could be imminent, But growth above the current level of new home sales is not likely either. The bubble from the late 1990s to 2006 created a memory which too many are using as a standard. Shouldn't the current market look more like the 1970s and 1980s. So far it does. The outlook for a couple (or several) years is for little more price x volume advance for new homes and the next market move after that is more likely down than up.

Click for large image at Political Calculations.

  • Pimco’s Gross Says Good Time to Lever Up on Credit Investments (Lisa Abramowicz, Bloomberg) Bill Gross suggested Thursday that this was a good time use leverage "in a mild way" for U.S. Treasuries. For the next three to five years investors might do well borrowing money at today's low rates and buying long matrity Treasuries paying a higher dividend. This is a borrow short and buy long carry trade strategy which gooses returns as long as market value of the Treasuries stays high. Of course, if interest rates rise then market value falls and leverage multiples the losses. This is the month after Gross sold Treasuries in August when the market was rallying (Gross Cut Government Debt in August as Treasuries Rallied). Logically he could now be accused of buying at the top. Or did he change his mind over the last couple of weeks? Or does he just like to hear himself talk?
  • Why the key to the economy could be in your gas tank (Patti Domm, CNBC) Hat tip to Marvin Clark. For every 10 cents the price of gasoline drops and stays there, an additional 0.1% is added to GDP. It is possible that gasoline that averaged $3.70 a gallon nationally a few months ago could hit $3 by year end. But can it stay there? Some are skeptical.
  • Canadian dollar Loses 4% in Two Months (Walter Kurtz, The Daily Shot email, no url) Falling oil prices and a weakening domestic economy are having their impacts.


  • Financial Strategies for the New Single Majority (Ben Steverman, Ventured & Gained, Bloomberg) There is a new majority in the U.S., possibly for the first time since maybe in colonial days. The new majority is single people. The "earliest comparable statistic available, 37 percents of adults were single" in 1973. This article discusses the implications of single status on managing personal finances.


  • Other Economics and Business Items of Note

Tech Turns Chicago Skid Row Into Top Market (Bloomberg)

Clash of the titans: Wal-Mart rejects Apple Pay to pursue a competing mobile payment system (The Washington Post)

Living Simply in a Dumpster (The Atlantic)

Nevada lawmakers approve $1.3 billion in tax breaks for electric car maker Tesla (Reuters)

Twitter Seeks Up to $1.5 Billion in Debt Offering (Bloomberg)

Have Economists Been Captured by Business Interests? (Harvard Business Review)

Have Markets Become More Dovish Than the Fed? (The Wall Street Journal)

Paul Pfleiderer on the Misuse of Economic Models (Library of Economics and Liberty) Audio file of interview.

Look for a 5 to 10 percent correction in stocks - Rosenberg (Reuters) Video

The content of standard introductory economics courses (Real-World Economics Review Blog)

Facebook Says Chinese Want Its Site as Regulator Says No (Bloomberg)

Dollar hits fresh six-year high versus yen, Aussie flounders (Reuters)

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