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What We Read Today 01 February 2015

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.

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Yannis Varoufakis and the New Economics for Greece (Haider Khan, The World Post)  Varoufakis says the Greece will be working in a completely new manner to resolve the crisis the country faces.  Here is the final paragraph of this article:

This new government will thus negotiate its anti-austerity policies and the medium and long-term growth with equity policies for Greece from a position of genuine strength by going outside the proverbial conventional neoliberal toolbox.

Econintersect:  Varoufakis says where Greece will go but there won't be anyone else there.  The Troika, the German national bank and all the other members of the Eurozone are firmly planted in the neoliberal box, as firmly as the Pope is planted in the Vatican, and they are there with as deep a faith as the Roman Curia


Articles about events, conflicts and disease around the world

EU

Greece

Denmark

Spain

podemos-video

Syria

Iraq

Azerbaijan

Ukraine

Russia

North Korea

China


As safe as houses (The Economist)  Banks have been boosting mortgage lending for decades, at the expense of corporate loans.  One problem you have to get past is at the beginning of the article the discussion sounds like an invocation of the no longer applicable (if it ever was in modern times) loanable funds theory of banking.  But once you get past that "defect" the rest of the argument is well presented.  The major problems with the shift from business lending is that lending has shifted from supporting production to supporting consumption.  Yes, a house is a form of consumption.  If people wanted to invest they could do much better than put their money in a house for their own use.  The money they spend on the house simply replaces rent and the fact that they pay more for "owning" a house than for renting some place more modest but meeting basic requirements is justified by the rationalization that they will get some of that extra money back when the house is sold.   Sometimes they do and sometimes they don't,  And when they do get an investment gain it is, on average, less than most other investments.  Only during the relatively few housing booms is the return on investment attractive.  Consider that over the last 27 years the Case-Shiller National U.S. Price index has increased by 162% (62.75 in January 1987 and 167.0 in November 2014) .  That is 3.6% a year, compounded.  That is less than interest paid on the mortgage and doesn't include the cost of property taxes and maintenance, both of which are included in a rent payment.  Plus homeowners insurance is more than renter's insurance.  The average homeowner lost money big-time from 1987 to date.

So why is productivity faltering?  Many lay it at the foot of labor.  This data indicates that it should be at least partially attributed to malinvestment. In the first half of the 20th century capital was used 60% to 80% for business investment.  That declined in the second half of the century, reaching around 45% by 2000 and moving still higher by 2012.

Safe as house is an inside joke and now you are an insider.

mortgage-lending-1900-2012


Seven Reasons Cheap Oil Can't Stop Renewables Now (Tom Randall, Bloomberg Business)

  1. The Sun Doesn't Compete With Oil
  2. Electricity Prices Are Still Going Up
  3. Solar Prices Are Still Going Down 
  4. Sales of Plug-Ins Are Doing Just Fine, Actually
  5. Pump Prices Haven't Dropped as Much as Oil Prices
  6. Oil Prices Won’t Stay This Low Forever
  7. Global Investment in Clean Energy Keeps Flowing

Click for larger image.
electricity-and-nat-gas-prices-2006-2014


Freddie Mac: Mortgage Serious Delinquency rate declined in December (Bill McBride, Calculated Risk)  Serious delinquencies are still way more than double pre-crisis levels.  And if they were to continue to decline linearly from the current level they would not get back to the 2007 level until sometime after the start of the next decade (2020s).  But linear decline is likely too aggressive,  There is concave curvature in the existing data suggesting the return to normal could take much longer.

Click for large graph at Calculated Risk.
delinquencies-serious-2015-jan


Who actually benefits from Obama's 'Middle Class Economics' (Tami Luhby, CNN Money)

  • Nearly 51% of middle class filers with kids would receive a tax cut. These taxpayers would receive a $329 decrease, on average.
  • Some 45% of married folks who file jointly would get a tax break. This group would see an average cut of $200.
  • Only 12.5% of single filers would get a tax cut. Overall, this group would see a $61 increase, because nearly 7% of middle class singles would see their taxes go up and that skews the overall average.
  • Among the elderly, only 10% would enjoy a dip in their taxes.
  • Overall, fewer than one in four middle class taxpayers would benefit from Middle Class Economics.

obama-tax-cuts


Other Economics and Business Items of Note and Miscellanea

Fed-Watchers Look to Janet Yellen’s February Testimony Before Congress  (The Wall Street Journal)

“Middle Class Economics” — What is its History? What is its Future? (Ricochet)

Obama's budget proposals include 19 percent tax on foreign earnings: Bloomberg (Reuters)

The Toxins That Threaten Our Brains (The Atlantic)

Ecological Economics, and Changing Everything (Global Research)  Text of talk discussing Naomi Klein's book.



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