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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.
Europe Stocks Gain, Asia Falls as Oil Slide, US Jobs Weighed (Joe McDonald, AP, abc News) Asia stocks slid lower as has oil so far to start this week, but European stocks are trading higher, as are U.S. stock futures. The U.S. dollar has strengthened against the Japanese yen and the euro. This article was posted at 4:17 am EST (New York time).
Survey: Minimum card payments rising (Karen Haywood Queen and Marissa Fajt, CreditCards.com) In 2014 minimum required payments on many credit cards increased. A new typical formula was 1% of the balance plus interest and fees or $25, whichever was larger. In other cases the alternative minimum payment when larger was still as low as $10. Before 2014 flat $10 minimum payments were available on some cards which kept cardholders using the minimum in perpetual, and in many cases rapidly growing, debt.
Most Americans are one paycheck away from the street (Quentin Fottrell, MarketWatch) Hat tip to Reverse Engineer, Doomstead Diner. Here is a list of polling results Fottrell has collected:
What kind of loans are available to these people with no money? If they can get any credit it is likely using a credit card. See also next article. The following table shows current credit card rates:
How long will it take to pay off credit cards? (Bankrate.com) Using the calculator provided here Econintersect calculated how long and how much it would take to repay a $1,000 emergency loan for one of the folks with no other means to manage an emergency.
At 15% rate and 1% minimum balance repayment per month ($15 monthly minimum when qualified), the repayment time was 12 years with total repayments of $2,163.43.
At 23% rate and 2.5% minimum balance repayment per month (and $25 monthly minimum when qualified), the repayment time was 13 years, seven months and the total repayments would be $2,864.09.
Talk about debt slavery!
Articles about events, conflicts and disease around the world
AirAsia Flight 8501
The curious case of Brazil’s closedness to trade (Otaviano Canuto, Cornelius Fleischhaker and Philip Schellekens, Voxeu.org) Brazil ranks last (behind 9th place U.S.) among ten of its peers in both exports and imports as a percentage of GDP. Totaling exports and imports, the total for Brazil is 28% of GDP (the U.S. is 31%) while the average for for the six countries with a larger GDP than Bazil the average is 55% and 96% for all 176 countries in the World Bank's WDI (World Development Indicators) data base. Looking at global geographic factors, the authors found that this "closedness" is a Latam characteristic. The authors attribute the low values for Brazil (and the U.S.) to limited participation in global supply chains. This is the reason that Brazil and the U.S. rank second and third globally for domestic value added in all exports and first and second for manufacturing exports only.
Rising deflationary risks in the United States (Walter Kurtz, Sober Look) Kurtz does not think the U.S. faces the same serious deflation threat as does the eurozone, but he says
"risks of such an occurrence have increased materially. This for example can be seen in the intermediate-term market-based inflation expectations":
One of the factors that is increasing deflation concern is the recent jobs report with a one-month reading of sharply falling hourly wages. (Caution: Don't bet the farm on one month of data.) Of cource commodity prices continue to decline and Kurtz discusses that as well. See next article for more on deflation.
The global deflation shock – how big and how bad? (Gavyn Davies, Financial Times) Davies calculates that if oil stays at $50 a barrel the US will have a brief four months this summer of (shallow) year-over-year deflation before returning to the trend level of 1.5% by the end of the year (actually in the text he says 1.5-2.0%). But notice how little the core inflation changes in the graphs below. This analysis seems to be exposed to ceteris paribus risk. Davies sees a longer period (about 12 months) of slightly deeper deflation for the Eurozone, reflecting the weakened state of the 18 nation monetary union's economy. See second graph below.
Combatting Eurozone deflation: QE for the people (John Muellbauer, Voxeu.org) Why not have helicopters drop money on people instead of banks? That is the question that this article considers. In fact, versions of this have been tried before and they have always worked, but only temporarily. Most of the money delivered to the people is spent in the first two quarters and does little to raise GDP further thereafter. Is there another solution to one-time money fading? See the next four discussions. Muellbauer reviews the positives and negatives and suggests that for the current edge-of-deflation condition of Europe the positives outweigh. Read also Helicopter money (Stephen Grenville, Voxeu.org)
Time for a Guaranteed Income? (Veronique de Rugy, reason.com) The article quotes Cato Institute analyst Michael Tanner who says the federal government spends close to $1 trillion each year at the federal, state, and local levels on anti-poverty programs-everything from Medicaid to job training to food stamps. That is more than $3,000 for every man, woman and child in the U.S. Why not just hand out the money on that basis? Everybody gets a basic subsistence allowance. Michael Tanner has discussed variations on the theme: The Basic Income Guarantee: Simplicity, but at What Cost? (Cato Unbound). See also The cheque is in the mail (The Economist).
Your Government Owes You a Job (Raul Carillo, The Nation) This is a short but comprehensive review. The first 1/3 is below and the rest is equally well done. When you go to the article, read the comments. Readers say we can't afford it. They ask how can we pay for it? What do you think? Can we afford it? How could we pay for it?
Involuntary unemployment is barbaric. In the wealthiest country in history, almost 30 million people wish they had full-time work. But, as always, there aren’t enough jobs. And because economic security requires decent work, it’s unsurprising that 50 million people are poverty-stricken and 16 million children are hungry.
Gender and the Job Guarantee - Center for Full Employment (L. Randall Wray, pdf) This is a well-referenced description of the job guarantee program which would make a job available to any qualifying individual who is ready and willing to work. It is also called the employer of last resort (ELR) program in which government promises to provide a job to anyone legally entitled to work. See also The secular stagnation hoax (Bill Mitchell, billy blog)
The Conservative Case for a Guaranteed Basic Income (Noah Gordon, The Atlantic) Creating a wage floor is an effective way to fight poverty—and it would reduce government spending and intrusion. Many well-known conservatives have advanced the idea over the years. David Frum has highlighted the idea of a guaranteed basic income, otherwise known as just giving people money. See A Rule for Conservative Anti-Poverty Plans: Keep It Simple (The Atlantic). Several present-day conservative leaders have suggested getting rid of a multitude of means-tested programs and substituting a general "flex-fund" release to the states for use as they see fit. But going back in history conservatives (and some no-so-conservative) have suggested something more radical. From this article:
In any case, these ideas are circumscribed by traditional boundaries. Neither is a truly radical small-government idea alternative. But one idea that Frum highlighted is more radical: a guaranteed basic income, otherwise known as just giving people money.
This is why the economy has fallen and it can’t get up (Matt O'Brien, The Washington Post) Matt O'Brien discusses aspects of Larry Summer's secular stagnation dilemma which arises because monetary policy has been unable to lower interest rates enough to get the private sector to create enough jobs to produce the potential economic output that would occur with "full employment". The discussion does not consider any of the possible options discussed in the sections above. For the full paper by Larry Summers, see GEI Analysis: Reflections on the New 'Secular Stagnation Hypothesis'.
Other Economics and Business Items of Note and Miscellanea
Detroit auto show hails return of power and luxury (Financial Times) Do you know anyone who bought a 6mpg Hummer during the 2008 oil crash?
The economics of happiness can make for sad reading (The Guardian)
Only in Kentucky: Jailers Without Jails (Kentucky Center for Investigating Reporting) Kentucky has already started a jobs guarantee program. :-)
If we all saw the same America, perhaps we could fix it. (Fabius Maximus) FM has contributed to GEI.
Real World Economics: Analysis yields gasoline tax insight (Twin Cities Pioneer Press)
Columns: The new economics (The Financial Express) What do you do when everything is discredited? An article from India.
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