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What We Read Today 10 October 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.

  • Investors snub Goldman’s ‘Figsco’ debt (Tracy Alloway, Financial Times) Goldman Sachs is finding that investors are no longer interested in the black magic that produced toxic CDOs (collateralized debt obligations) that went belly-up in large numbers in the Great Financial Crisis (GFC).

What the FT refers to as "a controversial new type of debt", Fixed Income Global Structured Obligation (Figsco 2014-01) has found no takers since being introduced over three months ago. Goldman's sales pitch included the promise of "top credit ratings combined with the chance to earn additional returns, or spread". The FT article mentions other failed efforts with similar products from Citigroup, JP Morgan Chase and Morgan Stanley. There may be a new "sucker born every minute" (attributed to carnival showman David Hannum) but the suckers born since 2008 are not old enough yet to buy these new wonders.

  • Nobel Prize 2014: Inventor of the red LED hits out at committee for 'overlooking' his seminal 1960s work (Paul Gallagher, The Independent) For years there have been critics of the Nobel Committee for overlooking the pioneering work of Prof. Nick Holonyak (University of Illinois) who invented the first visible spectrum LED (light emitting diode) in 1962 while working at General Electric. (The color was red.) Now the 85-year old has finally expressed his opinion on the subject and he is not happy to have been overlooked.

Between the first red LED and the 1990s green was added to the LED spectrum but blue remained illusive. Then Isamu Akasaki, Hiroshi Amano, and Shuji Nakamura, recognized that gallium nitride would lead to a blue color and discovered a way to produce the light in an efficient way by adding in aluminum and indium. This work was the basis for the LED light bulbs which are on their way to becoming ubiquitous low-energy, long-life lighting devices by completing the color spectrum of LED emissions enabling the production of white light. That work led to the 2014 Nobel Prize in Physics. Read Inventors of blue LEDs win 2014 Nobel Prize for physics (Jacob Kastrenakes, The Verge).

Holonyak finds the actions of the Nobel Committee "insulting". Of course they may have the opportunity to recognize his work with a future award, but time is short. Holonyak lives in a nursing home and Nobel Prizes are not awarded posthumously. It may be hoped that he will not join the list of deserving physicists to have never won the Nobel, a list which Econintersect heads with Satyendra Nath Bose.

Bose developed the fundamental field of nuclear physics known as Bose-Einstein statistics and the theory of the Bose-Einstein condensate. This led to the study of a class of elementary particles called "bosons" (named after him), the most famous being the Higgs boson (nicknamed the 'God particle' because of its central role in what is called the 'Standard Model' of physics). Peter Higgs and Francois Englert won the Nobel Prize for Physics in 2013 for their pioneering theoretical work on the particle, which was defined theoretically in the 1960s but not first detected until 2012.

Note: The economics of low cost lighting (low energy consumption) made available with LED lighting is discussed 'behind the wall'.

  • Recent articles about Scotland Independence and Similar Movements

Scottish Budget: Boost for first-time buyers (BBC News)

Why Catalonia Isn’t Scotland as Nationalists Demand Vote (Bloomberg)

  • Articles about conflicts and disease around the world

Ebola

The ominous math of the Ebola epidemic (The Washington Post)

Ebola spreads slower, kills more than other diseases (The Washington Post) Animated graphic.

Ebola Screening Will Start in 5 US Airports (Yahoo! News)

Ebola: Are US airport screenings more about controlling fear than disease? (Christian Science Monitor)

UK Ebola screening for arrivals from affected countries (BBC News)

Ebola-hit states say world response is slow (Al Jazeera)

Live updates / Lawmakers want U.S. to bar entry of West Africans over Ebola fears (Haaretz)

Turkey

Mr. Erdogan’s Dangerous Game: Turkey’s Refusal to Fight ISIS Hurts the Kurds (The New York Times)

Turkish action against IS in Syria 'unrealistic' (BBC News)

While Kobane Burns; The reluctance to strike IS may redound on Turkey’s president (The Economist)

Syria

Obama’s Syria choices go from bad to worse; The world’s most powerful leader has a blind spot about the exercise of power (The Financial Times)

Kobane: Air strikes 'stall IS advance' on Syrian border town (BBC News) Reports are that ISIS has had to pull back although fighting is still heavy within the town making confirmation of reports impossible.

Iraq

Poll: 72% Believe U.S. Will Use American Combat Troops Against ISIS (NBC News)

Islamic State: no-one wants to talk to terrorists, but we always do – and sometimes it works (The Conversation)

Ukraine

MH17 crash: Dutch minister says passenger 'wore oxygen mask' (BBC News)

Battles rages for Donetsk airport despite Ukraine ceasefire (euronews)

‘Almost lynching’: Radicals attack Ukrainian officials, throw into trash bins (RT)

Russia

OSCE monitoring of Russia-Ukraine border 'too weak', says US (BBC News)

Hard Evidence: who will reap rewards from Russia farm sanctions? (The Conversations)

Hong Kong

Economics, Tensions With Mainlanders Fuel Hong Kong's Protests (KALW San Fransisco)

Hong Kong students call for protests as talks cancelled by government (BBC News)

North Korea

North Korea leader Kim is still in charge, has injured leg: source (Reuters)

What’s Up With North Korea’s Kim? It’s a Mystery to CIA (Bloomberg)


There are 15 articles discussed today 'behind the wall'.

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  • LED bulb efficiency expected to continue improving as cost decline (Owen Comstock, Kevin Jarzomski, U.S. Energy Information Administration) There is still much more cost reduction coming for LED lighting. In ten years the initial purchase cost of LEDs will be the same as incandescent and halogen lamps and also compact florescent lamps (CFL). With much longer usage life for LEDs the other technologies will be non-competitive on a cost basis.

lighting-efficacy-2010-2014

  • LEDs: Lighting The Way To Major Energy Savings (Eric Savitz, Forbes) The lower cost per unit of light output has the potential to cut the electricity use for lighting in the U.S. by 80%. With the cost of LED light bulbs coming down rapidly (a few are already less than $10) the initial installation costs averaged over the life of the bulb is also getting closer to even, about $0.40 per 1,000 hours for LED vs. about $0.25 per thousand hours for an incandescent bulb. The electricity savings over 25,000 hours with LED is about $150 with less an additional $4 spent on light bulbs at current prices and electricity costing about $0.12 per kwh (kilowatt hour). Go here for a comparison which seems to aggressively favor LED.
  • The Problem With Energy Efficiency (Michael Shellenberger and Ted Nordhous, The New York Times) The authors trace the history of lighting from the 19th century and find that the dramatic costs savings for illumination achieved over the 120+ year history has not led to less energy consumption but more. The cheaper lighting became the more it was used and the growth has consistently outstripped the cost savings.
  • The American Middle Class Hasn’t Gotten A Raise In 15 Years (Ben Casselman, FiveThirtyEight Economics) There is a lot of good data analysis in this article, but perhaps none is more descriptive than the graph below. Defining the middle class as those earning between 2/3 of median income and twice that amount (approximately the middle 60% of all incomes, between $35,000 and $103,000 in 2013), the middle class has shrunk by more than 20% between 1970 and 2013 (57% of all households down to 45%). That is a real hollowing out.

middle-class-shrink

  • ECB’s Draghi Pledges Inflation Boost (Brian Blackstone, The Wall Street Journal) European Central Bank (ECB) President Mario Draghi indicated Thursday (09 October 2014) that he would continue further monetary stimulus next year, even as the UK and the U.S. are looking toward tighter policies. But Draghi indicated that monetary policy alone can't do the job. Blackstone says Draghi "hinted that Germany should be doing more to support European growth by cutting taxes or raising public investment spending". Econintersect thought: Could Germany do to the economy in the 20-teens what France did in the early 1930s? France is thought to have reinforced a deflationary slump by hoarding gold; in the modern case Germany could do it by hoarding fiat. It doesn't matter what the monetary system is, if there is insufficient money to support a level of economic activity there will not be that level of economic activity. For some history lessons see Did France Cause the Great Depression? and What Caused the Recession of 1937-38? Both are GEI Analysis (old Analysis Blog) articles by Douglas Irwin of Dartmouth College. Irwin's analysis indicates that France hoarding of gold ("sterilizing" or failing to monetize it) from 1929 t0 1933 was a key contributor to the Great Depression and the similar action by the U.S. Treasury in 1937-38 provided the same depressing effect in the "echo" recession that occurred at that time.

  • Brussels in crackdown on ‘double Irish’ tax loophole (Alex Barker, Vincent Boland and Vanessa Houlder, Financial Times) Ireland has attracted major investment from global giants originating in the U.S. and elsewhere by implementing a corporate tax code loophole that allows for tax bill reduction well below Ireland's already low 12.5% rate. It tax provision is essentially the legalization of a shell game which is illegal in the rest of the world. The Irish operating company pays fees for intellectual property to a second, related Irish company, which benefits from tax residence outside Ireland in some tax-free haven like the Caymen Islands or Bermuda. If a U.S. company is involved then income that would be subjected to a high U.S. tax (up to 35% federal income tax rate) is "earned" in Ireland with a much lower tax rate and even much of that tax is avoided by paying the off-shore shell company for its "intellectual property". According to the Financial Times many technology and pharmaceutical companies have large operations in Ireland to take advantage of this unique arrangement, including "the likes of Google, Microsoft, Facebook and Abbott Laboratories".
  • Contempt, Crazy Hours and the Economics of Quitting Your Job (Wharton, University of Pennsylvania) The economy has shown a remarkably consistent recovery in jobs. It's just not remarkably strong. This report from the Wharton School of Management suggests that the slow progression to greater numbers of people quitting their jobs over time is less an indication of job satisfaction than it represents a level of overwork that leaves little time for looking for a new job. And most people don't quit until they have a another job offer. For more on Job openings, hires and quits see GEI Analysis JOLTS reports.

JOLTS-2004-2014-wharton

  • Capital “Can’t be Gamed” – Except Whenever the Bank CEO Wants To (William K. Black, New Economic Perspectives) This is a short note which points out that one day the Wall Street Journal says get rid of regulators because they can be captured by the regulated and rely on accounting reports - and the very next day they document how many accounting reports are fraudulent.

inflation-2014-oct

  • Other Economics and Business Items of Note and Miscellanea

10 Best And 10 Worst US Presidents (Rant Political) This will start some arguments.

Despite Obamacare, U.S. healthcare system still dysfunctional (Los Angeles Times)

Bill Gross, in his 'second life,' says Janus role is simpler (Reuters)

Sharp Rise in Cuban Migration Stirs Worries of a Mass Exodus (The New York Times)

China imposes 3% tax on coking coal, anthracite imports from Oct 15 (Platts, McGraw Hill Financial)

Seniors in almost every state are struggling to afford retirement (CNN Money)

WSJ Survey: Most Economists Confident in Fed’s Exit Tools (The Wall Street Journal) If economists are confident, you should be worried.

7 economists worth their weight in gold (Fortune)

A hard look at corn economics — and world hunger (Marketplace Sustainability)

Social welfare and energy policy drive Evo Morales to brink of historic third term in Bolivia (The Conversation)

Occupational hazards of working in finance(and having moral character) (LinkedIn)


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