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What We Read Today 27 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.

Tesla Roadster nearly doubles miles with upgrade (Evelyn Chang, CNBC)  Hat to to Marvin Clark.  A new battery upgrade will boost the Tesla Roadster driving range to more than 400 miles.  However, you can't run out and buy the long-range car; Tesla discontinued production of the Roadster model a couple of years ago.  So only owners of the Roadster will benefit by buying a replacement battery.  Elon Musk tweeted that the battery pack upgrade is not coming soon for the Model S which has a 265 mile maximum range, "but it obviously *will* happen long-term."  

Japan’s Savings Rate Turns Negative in Challenge for Abe (Keiko Ujikane and Toru Fujioka, Bloomberg)  The legendary Japanese saver has bitten the dust:  Driven by the largest decline in real wages in five years (back to when the Great Recession was ravaging the global economy) the Japanese consumer survived the 12-month period ending in March 2014 by drawing down savings.  Records go back to 1955 and this was the first time ever for a negative savings rate.  The numbers:  Savings rate = - 1.3%;  Real wages growth = - 4.3%.  The decline in real wages was not unusual (although the magnitude was):  This was the 17th consecutive decline.  Econintersect:  When deflation becomes entrenched it can become a self-fulfilling prophecy.

Suicide Surpasses War as Leading Cause of U.S. Military Deaths  (Greg Zoroya, Reader Supported News) Hat tip to Rob Carter.  War was the leading cause of death in the military nearly every year between 2004 and 2011 until suicides became the top means of dying for troops in 2012 and 2013, according to a bar chart published last week in a monthly Pentagon medical statistical analysis journal.

military-deaths


Here's Where You'll Find All Of America's Shale Energy (Sam Ro, Business Insider)  This is where all the action has been and where all the pain will be (unless oil quickly increases in price):

tight-oil-shale-us-map


Articles about events, conflicts and disease around the world - Today focused solely on the Islamic State

Epic Price Reversal for Commodities in 2014 (Frank Holmes, U.S. Global Investors)  Frank Holmes has contributed to GEI.

commodities-reversal-2014


Solving tax avoidance will not cure the Eurozone of stagnation (Bill Mitchell, billy blog)  Prof. Mitchell laments the oblivious President of the French Socialist delegation in the European Parliament, Pervenche Berès. Her committee role as a member of the EP includes the Committee on Economic and Monetary Affaris.  He suggests that Mlle. Berès would not understand the following:

"So the reality is the opposite of the intuitive view that conceives of taxation as providing revenue to the government, which permits it to spend. In fact, government spending provides revenue to the non-government sector which then allows them to extinguish their taxation liabilities. So the funds necessary to pay the tax liabilities are provided to the non-government sector by government spending."

 The only solution, according to Prof. Mitchell, to resolve unemployment is to create the additional currency needed to pay more workers.  Since euro zone countries have given up control of currency their only option (other than breaking up the euro zone) is to run deficits that will put more money in circulation.  Increasing tax revenue as Mlle. Berès proposes would be "likely to reduce private spending further and create the need for even larger fiscal deficits – deficits of a scale which are prohibited under the Eurozone rules".


Enrollment for Obamacare jumps with 2 million new sign-ups (Noam N. Levey, McClatchy DC)

Enrollment in health insurance through the Affordable Care Act is increasing rapidly, with more than 2 million people so far signing up for coverage for the first time, figures released Tuesday show.

In addition to the new enrollments, which surpass last year's sign-up rate, several million more people have been re-enrolled in plans in the law's second year of expanding coverage.

The new tally, outlined in a report from the Department of Health and Human Services, covers the 37 states whose residents can use a federal website to buy coverage. Several hundred thousand additional sign-ups are expected from 13 states, including California, Maryland and Connecticut, and the District of Columbia that run their own online marketplaces.

The numbers provide an early snapshot of how well the law, also known as Obamacare, will work in 2015. They underscore improvement in how the enrollment process is working this year compared with last, when technology problems made sign-ups on Health.Care.gov virtually impossible for consumers for weeks.

ObamaCare woes: Struggling Iowa health insurer taken over by state (Associated Press, Fox News)  The Iowa Insurance Division announced Wednesday that Insurance Commissioner Nick Gerhart was taking over CoOpportunity Health, a struggling cooperative that sprouted out of the Affordable Care Act. The co-op was suffering from "deep financial problems".  For additional information read Insurer That Got $145 Million Loan Under Obamacare Is Almost Broke (Anna Edney, Bloomberg).  See also next article.

Obamacare Co-Ops Cut Prices, Turn Up Heat On Rival Insurers (Phil Galewitz, Kaiser Health News)  About two dozen health insurance co-ops have been formed under Obamacare and have received a collective total of $1.9 billion in federal loans.  For 2015 co-ops exist in nine states, according to the National Alliance of State Health CO-OPs (NASHCO):  Arizona, Connecticut, Colorado, Idaho, Illinois, Maine, Maryland, New Mexico and New Jersey.  The co-op which has failed in Iowa apparently was not associated with this trade group.  Co-ops have insured about 450,000 people in 2014, a little more than 5% of the total insured under the ACA (Affordable Health Care) program.


Semiconductor Sector Update (Gary Tanashian, Notes from the Rabbit Hole)  Semiconductors are looking fairly strong, which is a good indicator for the economy overall.  November bookings were up more than 10% from October.  Tanashian also looks at machine tools which have been rising smartly into year end, which is expected.  Taken all together Tanashian sees an economy which is "policy-stoked" and "still humming along".  Here is his semiconductor graphic which has an arrow indicating the 10%+ upswing for November which was not of the original chart he used.

semicinductor-book-billing-2014-oct 


5 ideas for the next health reform fight (Allison Bell, Life Health Pro) Republican lawmakers are looking for ways to reduce government spending on health care programs. Bell has five ideas that may get consideration:

1. Squeeze the Medicare providers, not elderly and disabled enrollees
2. Make drug providers offer Medicaid enrollees rebates.
3. Update traditional Medicare – make it more like commercial insurance with co-pays and limit out-of-pocket maximums each year.
4. Apply the same risk-adjustment system to all Medicare enrollees.
5. Reduce PPACA exchange plan subsidies

Yes, the Business Cycle is Real (Cullen Roche, Pragmatic Capitalism) Cullen Roche has contributed to GEI.  Roche has taken exception to a suggestion by Noah Smith that the business cycle may not be a cycle in the sense that the economy moves forward in time, through expansion and contraction, and eventually returns to the same condition.  Roche goes further to challenge the broader statement that purports that there is no such thing as a business cycle.  In updates at the end he clarifies his thinking and (correctly) states that the cyclicality is dynamic (implying that there is no 'equilbrium' condition to which an economy returns after deviating from trend).  But to support his contention that the business cycle (or the economy) goes through oscillations (aka cycles) he presents the 66-year chart of real GDP changes (annual rates).  QED.

gdp-real-ann-rate-change-1948-2014-cullen


Maybe There's No Such Thing as a Business Cycle (Noah Smith, Bloomberg View)  This article prompted the one immediately above by Cullen Roche.  Smith (correctly) criticizes the neoclassical assumption that the macroeconomy exists as an equilibrium which experiences temporary shocks and then returns to the equilibrium.

"...modern macroeconomic theories all assume that recessions are temporary -- that they don’t permanently damage the economy’s productive potential. If that assumption is wrong, then most modern macroeconomic theories are barking up the wrong tree. If recessions do cause permanent damage, then the whole ball game of macroeconomic policy changes. It might mean that government needs to engineer a boom to undo the effect of a slump."

real-gdp-1990-2014-600x480


The Dangerous Economics of Shale Oil (Chris Martenson, iStockAnalyst)  Martenson claims that even with oil at $99 a barrel, honest accounting produces a loss for a typical shale oil well. (First table.)  And at $55 each well loses millions. (Second Table.)  At $99 a barrel fixed expenses after the third year are more than the value of the oil produced.  Note:  Econintersect has not verified the figures in these hypothetical examples.

shale-well-economics-99-Martenson

shale-well-economics-55-Martenson


China money rates fall as IPO funds unfreeze, fiscal deposits flow in (Shanghai Newsroom, Reuters)

China's money market rates slid this week as funds locked up for IPO share subscriptions were unfrozen and the Ministry of Finance injected liquidity into the market via an opaque policy tool known as fiscal deposits,traders said.

Market sentiment also improved after reports said that the People's Bank of China (PBOC) plans to include interbank lending by non-bank financial institutions as part of the calculated deposit base, which will expand the base for calculating loan-to-deposit ratios.

By midday, the weighted average of the benchmark seven-day repo rate had fallen 122 basis points from last Friday's close to 4.71 percent.

The active 14-day rate, dropped 96 basis points from Dec. 19's close to 5.43 percent, while the one-day rate fell 32 basis points.

"Liquidity is much better this week, as IPO money comes back and fiscal deposits have been poured into the banking system," said a dealer at a Chinese commercial bank in Shanghai.

About 10 initial public offerings (IPOs) launched in the Shanghai and Shenzhen stock exchanges were opened to investor subscriptions last week and this week, together locking up around 1.6 trillion yuan ($258 billion) for a few days before the money began to be released, starting Wednesday.

The finance ministry typically redistributes a large amount of taxes collected from firms in December via the form of fiscal deposits, which typically help ease the year-end liquidity pressure in the money market.

Deutsche Bank's Top Economist Declares The 'Chart Of The Decade' (Sam Ro, Business Insider)  For the past ten years Wall Street economists have been forecasting higher interest rates.  A little less than 25% were they correct on direction and much less than that close on magnitude.  We guess that’s why they get the big bucks, although less than the average .250 hitter in major league baseball in some cases.

interest-rate-predictions


Other Economics and Business Items of Note and Miscellanea

Oil will be the wild card in 2015 economic outlooks (Montreal Gazette)  Canada is not looking forward with much hope for 2015, at not for the first half.

Dollar inches back vs. yen, euro as markets slowly get back into gear (Reuters)

Saudi Arabia Seen by Former Adviser Assuming $80 Oil (Bloomberg)

The Interview' proves popular—for pirates (CNBC)

What’s Really Going on Inside the Latest GDP Number (Wall Street Insights & Indictments)

The economics of gold smuggling (bd news 24)

The economics of Christmas gifts (Hurriyet Daily News)

The 15 Most Intense Ski Runs In The US (Business Insider)


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