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What We Read Today 21 November 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.

The actions I’m taking are not only lawful, they’re the kinds of actions taken by every single Republican president and every Democratic president for the past half-century,” Mr. Obama said. “To those members of Congress who question my authority to make our immigration system work better, or question the wisdom of me acting where Congress has failed, I have one answer: Pass a bill.”
  • Obamacare Sign-Ups Were Inflated With Dental Plans (Alex Wayne, Bloomberg) When 380,000 dental subscribers are backed out of the Obamacare total for 2014 (as of 14 October) the revised enrollment is 6.7 million. The erroneous inclusion of dental plans was discovered by Republican investigators for the House Oversight and Government Reform Committee, using data they obtained from the U.S. Centers for Medicare and Medicaid Services.


The following graph was also presented to support the argument that accelerating global warming is not occurring, inferring that the interpretation of the data through 2006 was incorrect:


These authors are not recognizing an obvious pattern in the data (or they do see it but hope that their audience will not?). Econintersect has added additional lines to the IPCC graph above (extending trend lines to 2014 for data not shown since 2006).


And one more pattern not acknowledged by these incomplete examinations of the data:


Instead of the unsupportable contention that the current pause (or down zag) disproves the IPCC finding that global warming is occurring and accelerating, the correct questions would center on why the progression of the trend is happening in fits and spurts. The accumulation of greenhouse gases is a much smoother progression than the observed temperature response. See next two articles. What are the other interactions that modulate the effects of the greenhouse gases if they are behaving as postulated and as data over the past couple of centuries indicates? It is very correct to ask questions, but some questions lead to a progression of knowledge while others can lead to an inculcation of ignorance among the intellectually lazy.

For climate and weather news every week follow climate-economist Sig Silber at GEI News.


  • Articles about events, conflicts and disease around the world


New York, Missouri patients test negative for Ebola virus (Reuters, Yahoo! News)

New Ebola Vaccine Trial Starts in Baltimore (NBC News)

Ebola Makes an Appearance in the Fed’s October Minutes (The Wall Street Journal)


Why Greenland is a better template for Scotland than any of its neighbours (The Conversation)


US, Turkey Still Not in Sync on Syria (abc News)


RAF jets blast jihadis hiding in Iraq bunker: Tornado fighter bombers use 500lb laser guided bombs in precision airstrike (The Daily Mail)


Anger over Israel mayor's ban on Arab workers (Al Jazeera)


Exclusive: U.S. increasing non-lethal military aid to Ukraine (Reuters)

Russia warns US against supplying ‘lethal defensive aid’ to Ukraine (RT)


A wounded economy: It is closer to crisis than the West or Vladimir Putin realise (The Economist)

Hong Kong

Half of Occupy Central protesters ready to pack it in if asked by organisers (South China Morning Post)


Egypt Prosecutor Asks for Death Sentence for Morsi (abc News) Is this proper for the only freely elected president in the country's history?

There are 11 articles discussed today 'behind the wall'.

Do not miss "Other Economics and Business Items of Note", the final section every day.

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  • Anti-Corruption Measures (Rosa Kim, Twitter)

  • Debunking 10 Momentum Investing Myths (Charles Rotblut, Editor, AAII Journal) Momentum selection of stocks can be a powerful adjunct to managing a portfolio. Rotblut summarizes a paper from the Journal of Portfolio Management by Clifford S. Asness, Andrea Frazzini, Ronen Israel and Tobias J. Moskowitz: Fact, Fiction and Momentum Investing (May 2014 draft of November 2014 publication).

Fiscal austerity does not work in a liquidity trap and makes as much sense as putting an anorexic on a diet. Yet, "diets" are the very prescriptions that fiscal austerians2 have imposed (or plan to impose) in the U.S., U.K. and Eurozone. Austerians fail to realize, however, that everyone cannot save at the same time and that in liquidity traps, the paradox of thrift and depression are fellow travelers that are
functionally intertwined.

When it comes to moral principles applied to the Great Financial Crisis (GFC), the authors point out that one faction's fairness is another's unfairness:

The fiscal authority has been rejecting the idea of principal forgiveness on moral grounds: it would be not fair to all those who made their payments faithfully and let those off the hook who purchased larger homes than they could afford. But policy paralysis due to concerns of moral hazard will only prolong the liquidity trap and delay recovery. And that is not fair, either.

The authors identify the conflict is between "rentier and laboring classes" and "swift resolution is key to a recovery".

The authors fault the fiscal authorities during and following the GFC for lack partnership with the central banks. They say that monetary stance has "willingly encourage[d] and accommodate[d] fiscal expansion to facilitate the private sector's deleveraging without depression". But the fiscal authorities, especially in Europe but also in Japan and the U.S., have been MIA.

Just as it did during the gold standard, acting responsibly relatively to orthodoxy will fail in Europe, and like Chancellor Churchill, Chancellor Merkel will likely come to regret insisting on Procrustean austerity and will ultimately come around to see it as the greatest mistake of her political life.

The mistakes of the Great Depression are being repeated:

On a more systemic level, Germany's refusal to inflate at the core while insisting on internal devaluation in the periphery is eerily similar to the frictions caused by the imbalance between gold surplus countries refusing to inflate and deficit countries unable to sufficiently deflate during the 1920s and early 1930s.

The authors include a graph which points out a fiscal contraction that resulted from the QE monetary easing of the Federal Reserve in the U.S. Securities that were held in the private sector paid coupons to private sector entities. But once on the Fed's balance sheet the interest payments accrued to the U.S. Treasury. This had an effect equivalent to a tax increase and was, in effect, a measure of austerity. The payments by the Fed were "money out of thin air" but that money was assigned to the reserve accounts of Fed member institutions where they are receiving only 0.25% interest, much less than the coupons of the securities purchased by the Fed.


  • China Factory Gauge at 6-Month Low Bolsters Easing Case: Economy (Xin Zhou, Bloomberg) The preliminary Purchasing Managers' Index from HSBC Holdings Plc and Markit Economics was at 50.0, below the median estimate of 50.2 in a Bloomberg News survey and lower than last month's 50.4. The reading of 50 is exactly on the boundary between expansion and contraction of the Chinese manufacturing sector. A key component of the index is output and that came in under 50 (49.5). Some analysts say the weak data raises the probability that the government and central bank will provide some kind of stimulus in the near future.

  • Money creation: is the truth finally out? (Josh Ryan-Collins, New Economics Foundation) This discussion of money started Thursday afternoon and will continue Friday (21 November). This article says the last time parliament debated money was 14 and resulted eventually in the Bank of England assuming England's monetary control system. An argument will be presented that the monetary system is threatened when money is created in the private sector an credit and the credit issued by the financial sector to itself has exploded out of control. In the graph below the curve for financial sector credit does look rather like the Loch Ness monster, doesn't it?


  • Concentration of Wealth, BRICS and Mexico (Gyanendra Awasthi, Twitter)

  • Economics a factor in results of School Performance Profiles (Clarence Polke, Pittsburgh Post-Gazette) Not really surprising is this report that the economic standing (wealth, incomes, property values) correlate with academic performance in the public school system districts in Allegheny County (Pittsburgh), PA
  • Coal ports' critics question the economics ( Opponents of two new super-ports for coal in Washington state say that demand is down and the new ports are not needed. Existing ports are operating at about 1/3 capacity. In addition, British Columbia has already expanded coal shipping port capacities and much if that expansion is sitting unused. The proponents point out that coal usage is expected to increase by 56% by 2040 and the short-term market should not define what will be needed.

Click for larger image without added annotations.

  • Other Economics and Business Items of Note and Miscellanea

Topix Gains Third Day as Yen Weakens to Seven-Year Low (Bloomberg)

Americans more worried about Ebola than obesity, cancer (Modern Medicine Network)

Wall Street is Taking Over America's Pension Plans (The Intercept) Hat tip to David Sirota.

Can Whole Foods Change the Way Poor People Eat? (Slate)

OECD Economic Surveys: India 2014 (OECDi Library)

Uber Scandal Highlights Silicon Valley’s Grown-Up Problem (The New York Times

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