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.
Intro 07 dec 2014
We are continuing to develop a new and improved "What We Read Today" daily column. Please excuse formating variations and inconsistencies when they occur during this process over the next several days. As always we will endeavor to keep the content itself at the highest quality and value levels.
California needs more rain, any way you count it (Matt Stevens, Los Angeles Times) After two days of rain dumped from 1.5" to 3" of rain across much of California, the state has two things to show for it: Mud slides and a continuing drought. Much more rain is needed - click Read more >> to find out how much.
How much precipitation do we need to end the drought? (Matt Stevens and Raoul Ranoa, Los Angeles Times) If ground water is the measure, one amount of rain is needed to end the drought. If water supply needs are used much more rainfall is required. Click on image below for infographic at the LA Times explaining the different criteria.
Following the time line and assuming all reports are timely and accurate, it appears that ISIS advanced and then was repelled. That was our take as of 6 pm GMT 06 December 2014 (Saturday). As we prepare to post this 4 am GMT 07 December 2014 there is no further news on this.
How will we care? Finding sustainable long-term care solutions for an ageing world (Swiss Re) By 2030 there will nearly 1 billion people in the world over the age of 65, almost double the number in 2010. In the U.S. approximately 1/3 will need long-term care support (assisted living and/or nursing home) and 20% will require more than 5 years of care. But the U.S. is very poorly positioned to meet that need. The top three countries (of 12 surveyed) in being best able to meet long-term care needs based on median retiree income are Canada, Italy and Australia, and, based on median retiree wealth the top three are Italy, Australia and France. The U.S. is tied for 10th (next to last) with China in both cases. See also How Much Care Will You Need? (longtermcare.gov)
Gloomy Gross Sees No Return to Normal in His Lifetime (Gil Weunreich, ThinkAdvisor) Bill Gross has contributed to GEI. Gross thinks that the 'new normal' is here tostay and the 'old normal' willneber return, or at least not for a very long time. Among the difficulties he sees is the global lack of corrdination between monetary and fiscal policies. Austerity in parallel with monetary easing "makes little sense". He decries the "trickling down of faux wealth to the working class". He says he is preparing for "at least a halt of asset appreciation engineered upon a false central bank premise of artificial yields [and] QE". It is time to take "some chips off the table". Read the entire December Investment Outlook: How Could They?
HSAs and 401(k)s: Is is really necessary to pick just one? (Steve Christianson, Employee Benefit News) With the advent of high deductible health care insurance plans, the HSA (Health Savings Account) has become more common. The question then arises: Which is a better tax deferred saving vehicle, an HSA or a 401(k) plan? This author says that there should be no competition, that both plans should be funded. In many cases the new health insuance and savings account arrangements may actually free up more dollars for 401(k) investment than were previously available. Interesting article with some good case studies.
American Incomes 1774-1860 (Peter H. Lindert and Jeffrey G. Williamson, NBER Working Paper No. 18396) Even including slaves in the income aggregate, the British colonies in North America had average household incomes exceeding those in England in 1774. The authors determined that the colonies not only had more equality of income than England (including Wales) but were more egalitarian than anywhere else in the "measureable world". The Revolutionary War destroyed many colonial incomes and by 1790 the new United States had lost all personal (household) income advantages over England. The from 1790 to 1870 personal income was shifted from the southern states to the northern (and not just with the Civil War) and income inequality increased dramatically in the South. Read the July 2011 version of this paper (entire paper).
Measuring Ancient Inequality (Branko Milanovic, Peter H. Lindert and Jeffrey G. Williamson, NBER Worling Paper No. 13550; There are a number of interesting generalizations here. (1) Income inequality in third world (pre-industrial stage) countries today is similar to those in "distant pre-industrial times" (2) The extraction ratio (how much of potential inequality was converted into actual inequality) was significantly bigger then than now. The extraction ratio is a measure of how dominant the role of (control by) the elite is in a society. (3) Lifetime longevity differences between rich and poor have greatly increased over the past two centuries. (4)In the distant past the concentration of wealth by the elite does not show any significant correlation to overall inequality. This is contrary to the modern age where such a correlation exists. One reason for the observation is that in the distant past for some (many?) societies a handful of people were very rich and everyone else was very poor. The authors refer to the condition described as hierarchical and others with more gradation of incomes from top to bottom as "socially diverse It is the latter that many in the modern world feel is the best economical structure for a strong economy. The authors write in their conclusion (following a first point about the structure of agrarian societies):
Second, whether the country is the colonizer or the colonized should matter. Throughout history, colonial powers have ruled by rewarding indigenous elites, not by mollifying the masses. Third, a mixture of political and market forces must have been at work, especially the former. More political power and patronage implies more inequality. The frequent claim that inequality promotes accumulation and growth does not get much support from history. On the contrary, great economic inequality has always been correlated with extreme concentration of political power, and that power has always been used to widen the income gaps through rent-seeking and rent-keeping, forces that demonstrably retard economic growth.
America doesn't have an education problem, it has a class problem (Matt Phillips, Quartz) From probability of going to college, to probability for graduation once admitted, to incomes received, who your parents are is the most important society-wide variable. The U.S. has lost the roots that it had established prior to the American Revolution:
Since its birth, the US has always defined itself as a egalitarian meritocracy, fundamentally distinct from the class-ridden societies of Europe.
If you want those ideals today, go back to Scandinavia or move to Canada or Australia.
Illinois approves private sector retirement solution (Michael Giardina, Employee Benefit News) The Illinois legislature has approved a program for individual retirement accounts that will be funded by automatic payroll deductions for those electing to participate. This state-run program will be available to the 2.5 million Illinois workers who do not currently have available an employer sponsored retirement plan. Businesses within the state with 25 or fewer employees can elect to join and all new businesses of any size can participate. A new board composed of employers and employees will oversee "risk management, investment firms, and investment options”.
The Geography of Fandom (Robinson Meyer, The Atlantic) The Patriots really do rule New England, and the Cowboys might just be America's team. But after that, things get complicated.
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