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What We Read Today 01 December 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.

Kurtz quotes Scotia Bank cost estimates for Bakken (North Dakota) at $69 and Permian (Texas) at $68. (Note: Not all estimates agree with those from Scotia Bank - see next article.) The U.S. oil price (WTC- West Texas Intermediate Crude) starts the week at $66. If oil stays at this level or lower it is likely that drilling will stop in these two high producing fields and within a year production will likely decline by more than 50% from these sources that currently produce more than a quarter of all U.S. oil (Permian 15% and Bakken 13%). Kurtz suggests that the U.S. government could support this production by building the U.S. petroleum reserve but it would have to buy above market (somewhere in the $70s) to keep Bakken and Permian drilling continuing. But how long that could continue is in doubt. See Oil at $40 Possible as Market Transforms Caracas to Iran (Gregory Viscusi, Tara Patel and Simon Kennedy, Bloomberg). See also next article.


  • OPEC Gusher to Hit Weakest Players, From Wildcatters to Iran (Bradley Olson and Rebecca Penty, Bloomberg) While some U.S. producers are likely to cut back on (or stop completely) new drilling, there are many areas in the world with even higher production costs which will be hard hit if prices remain in the $60s or move lower. This article lists OPEC members Iran, Iraq, Venezuela and Nigeria plus non-OPEC countries Russia and Norway who cannot afford to produce oil below $70. The same is true for Canada's tar sands bitumen production. Note: Differing from Scotia Bank in the preceding article, this article quotes the U.S. EIA (Energy Information Administration) to provide a production cost estimate for the Bakken shale below $42.
  • Near-collisions between drones, airliners surge, new FAA reports show (Craig Whitlock, The Washington Post) This issue hasn't been in the headlines but as soon as one of the near misses isn't a miss it will be. Then Congressional politicians and others will demand to know why the accident wasn't prevented. But right now all these then-to-be-outraged people are too busy eating turkey to be bothered with this.
  • Articles about events, conflicts and disease around the world


Was Michael Brown surrendering or advancing to attack Officer Darren Wilson? (Sandhya Somashekhar and Kimbriell Kelly, The Washington Post) See witnesses' one liners below:


Case: State of Missouri v. Darren Wilson (Transcript of: Grand Jury Volume V - Date: September 16, 2014)

Ferguson mayor: No severance pay for Wilson (USA Today)

In Ferguson's Violence, Small Business Owners Are the Biggest Losers (Bloomberg Businessweek)

A deafening liberal silence on Ferguson (Al Jazeera)

Ferguson demonstrators begin 120-mile march to Missouri state capital (Reuters)

Ferguson a defining moment for race relations in USA (USA Today)


After the Ebola Zone: The Life of a New York Doctor In Quarantine (Bloomberg Businessweek)

Ebola Rages in Sierra Leone as UN Misses Curbing Targets (Bloomberg)


Gaza floods: UN declares state of emergency (BBC News)


Blast in eastern Kenya wounds one: police (Reuters) More chaos spills over border from Somalia.


Mubarak verdict fuels protests, mockery in Egypt (Reuters)


Thirty U.S.-led strikes hit Islamic State in Syria's Raqqa: monitoring group (Reuters)


Iraqi army 'had 50,000 ghost troops' on payroll (BBC News)

Iraq's divisions will delay counter-offensive on Islamic State (Reuters)


Ukraine in maps: How the crisis spread (BBC News)


Thousands protest against Russian health cuts (BBC News) Russia's budget is under pressure from Western sanctions and low oil prices.

The Russian Rouble Is Collapsing To New Record Lows (Business Insider)

Bulgarians see Russian hand in anti-shale protests (Financial Times) Fear of Kremlin "empire" designs.


Moldova votes in 'EU v Russia' election (BBC News)


Swiss voters reject immigration cap (Al Jazeera)

Swiss Voters Reject Initiative on Central-Bank Gold Would Have Forced Central Bank to Hold a Fifth of Its Assets in Gold (The Wall Street Journal)


Kabul police chief quits after South African family dies in Taliban attack (Reuters)


Colombian General Alzate freed by Farc rebels (BBC News)

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  • China has ‘wasted’ $6.8tn in investment, warn Beijing researchers (Jamil Anderlini, Financial Times) Chinese government economic researchers have found what they call "ineffective investment" from 2009 through 2013. The analysis shows that "empty apartment blocks, abandoned highways and mothballed steel mills sprawl across China’s landscape" amount to $6.8 trillion of "wasted investment" over the five years. They attribute much of the waste to massive government stimulus following the Great Financial Crisis of 2008. The two economists, Xu Ce (National Development and Reform Commission) and Wang Yuan (Academy of Macroeconomic Research) say:
"Investment efficiency has fallen dramatically [in recent years]. It has become far more obvious in the wake of the global financial crisis and has caused a lot of over-investment and waste."

Further examination of their data suggests there are more nuances in the Chinese data than Xu and Wang have revealed. See today's article What You Need to Know about Investment in China in 8 Charts (GEI Analysis). See also China's $6.8-trillion hole? (S.R., The Economist) and the original paper: Inefficient and ineffective investment causing a huge waste (Xu Ce and Wang Yuan, Shanghai Securities News - in Chinese).

But the Xu and Wang research is not the only work that is identifying waste and inefficiency in the Chinese economy. Other work is reported by Anderlini:

Jonathan Anderson, founder of Emerging Advisors Group, the consultancy, estimates that about $1tn has gone missing in China in the past half-decade as a result of weak oversight and the enormous opportunity provided by the investment boom. "That translates into maybe 5 per cent of GDP per year worth of skimming off the top," he says.

"Think about it: every local government wakes up one morning in 2009 and finds that the central authorities have lifted every single form of credit restriction in the economy," he says. "With no one watching the till, it would be awfully hard to resist the temptation to sidetrack the funds, squirreling them away in related official accounts or paying them out through padded contracts to other connected suppliers and friends."

Is it any wonder that China is looking all over the world for ex-pat government officials as well as at home? See China Seeks More U.S. Help to Return Fugitive Corrupt Officials (Edmond Lococo and Ting Shi, Bloomberg) and China shames 'most fashionable' corrupt officials (Tom Phillips, The Telegraph).

  • The Simple Economics Of Oil (David Blitzer, Seeking Alpha) We suggest the emphasis here should be on the "simple" and not on the "economics".


  • 10-month budget gap narrows to P33.6B (Philippines Daily Inquirer) Shrinking deficit should not be a problem if the Philippines maintain 2014 positive balance of trade and long-term positive current account balance. The U.S., on the other hand ...
  • Heterodox Economic Theories and GDP (George Dorgan, Bookmark this one. Great summary with excellent source references to Martin Wolf, Steve Keen, Richard Koos, Michael Pettis, Hugo Keuzenkamp, Simon Kuznets,Eugen Bohm von Bawerk, Hans Werner Sinn, MMT and other great sources.
  • Secular Bull and Bear Markets (Doug Short, AdvisorPerspectives Doug Short contributes to GEI. When the S&P 500 chart is adjusted for inflation you can see why the secular bear market - new bull market debate is still active.


  • Other Economics and Business Items of Note and Miscellanea

Economics’ failure to tackle real-world issues drives women away (The Guardian)

MYEFO: Government source issues warning on falling ore price as Deloitte Access Economics warns 'the budget is burning' ( Australia budget panic.

Government way of pushing trade agenda upsets voters: economist (Focus Taiwan) Antagonism toward the mainland still runs deep in Taiwan.

The sages of the pampas: Like the tango, the fame of Argentine economists is tinged with sadness (The Economist) You can tell how much trouble an economy is in by how much visibility economists get.

Bricks-and-mortar sales edge lower at start of holiday season; online surges: data (Reuters)

Black Thursday? Thanksgiving sales numbers growing (CNN Money)

Local shoppers showing support on Small Business Saturday (The Boston Globe)

Why does sales shopping turn us into barbarians? (The Telegraph)

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