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What We Read Today 02 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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Fourth Quarter GDP Reverts To The Weak New Norm  (Bob McTear, Seeking Alpha)  After all the volatility over the past several quarters, this former Fed governor points out that moving averages are still indicating a "new normal" GDP growth rate around 2%.  See also GEI reviews and analysis of the latest data by Steven Hanson and Doug Short (coauthors) and Rick Davis (Consumer Metrics Institute).


Researchers may have cure for peanut allergies (Robert Ferris, CNBC)  Hat tip to Marvin Clark.  Eating a bacteria which is a strain of Lactobacillus, a beneficial bacteria found in some fermented food products, may be the key to overcoming a potentially life-threatening food allergy, according to new research from Australia. This particular bacteria is thought to be valuable in maintaining digestive health. according to new research from Australia.  More than 80% of the formerly peanut sensitive subjects tolerated eating peanuts well after 18 months of treatment.  A control group given placebo produced only  4% with tolerance.  See Administration of a probiotic with peanut oral immunotherapy: A randomized trial (Mimi L. Tang et al, The Journal of Allergy and Clinical Immunology, 13 January 2015).


Articles about events, conflicts and disease around the world

Greece

Spain

Serbia

Nigeria

Egypt

Syria

Iraq

Ukraine

Russia

China


World Trade Growth:  Now a Scariest Chart Candidate (Constantin Gurdgiev, true economics) Constantin Gurdgiev contributes to GEI.  After the Great Recession, world trade volumes are growing at the slowest average pace in 35 years (even if we exclude recession effects, accept the rosy projection for 2015 from the IMF (International Monetary Fund and ignore latest Baltic Dry Index collapse).

Click for large image.
world-trade-growth-gurdgiev-2015-feb-01-600x400


Demographics and GDP: 2% is the new 4%  (Bill McBride, Calculated Risk)  McBride points out the rough correlation between growth in the civilian labor force and growth in GDP.  After factoring in productivity changes McBride concludes that demographic factors make GDP growth of 2% today roughly equivalent to GDP growth of 4% when labor force growth was more than double what it is today.  Things are not all doom and gloom, though,  The civilian labor force will be growing modestly in the next decade, again simply driven by age demographics.  Econintersect:  Now all we need to do is to keep automation from removing more jobs than we can create to employ this growing prime earning years population growth.

Click for large graph at Calculated Risk.
civilian-labor-force-1950-2014-600x400


Fleeing capital clips wings on US yields (Mia Tahara-Stubbs, CNBC)  Here comes the carry trade, there go the U.S. yields.  If yields in Japan and Europe stay much lower than in the U.S. while both central banks are pumping liquidity, leakage will come to the U.S., bidding up our securities.  If this continues for all of 2015 we could see the 10-year yield on U.S. Treasuries below the 1% predicted by Jeffrey Gundlach.  Perhaps much below.


OPEC Sees Oil Prices Exploding to $200 a Barrel (Matt DiLallo, Motley Fool)  OPEC Secretary-General Abdulla al-Badri says we've already hit bottom for oil prices.  He doesn't give specific timeline estimates, but does say that $200 is a low side estimate.  Oil prices will only be held under a $200 a barrel cap if additional drilling produces ~200 billion barrels additional oil over the next 15 years.  That is the number of barrels needed to replace declining production from wells already drilled and the increase in demand rising to about 10% more than current levels by 2030.  See following articles.

oil-supply-demand-2030


Crude oil trading outlook: futures fall on US strike action, OPEC output (Binary Tribune)  After soaring more than 8% on Friday U.S. oil is already down 2.7% in early London trading.  One news item related is the prospect for a strike shutting several U.S. refineries significantly reducing demand for crude - up to 2/3 of U.S. refining capacity could be affected.  Econintersect: What a prospect.  If there is a prolonged strike, the price of WTI crude could be driven down, perhaps even well into the 30s, and gasoline inventories could be used up.  Gasoline availability at retail could be restricted.  That could drive prices at the pump up to much higher levels, if and when there was any gasoline available.


 Oil price will average less in 2015 than during financial crisis, survey finds (Reuters, The Times of India)  A survey of 33 economists has forecast that the average price for the calendar year 2015 for Brent crude will be $58.30 a barrel.  The price will be below $50 for a time in the first half of the year (touching but not going below $40) and rising above $60 late in the year.  Goldman Sachs is reported in the article to have an average price forecast for 2015 as only $50.40 a barrel (almost 14% less than the Reuters number).  Econintersect:  There seems to be widespread agreement that there will not be a rapid rebound in the price of oil this time as there was in 2009.  From a low near $32 in January 2009, WTI crude surged to $80 in the first quarter of 2010.  Chart from Investing.com:

crude-2006-2015-jan


Historical Oil Prices Chart (Tim McMahon, InflationData.com)  The red line on the chart shows oil prices adjusted for inflation in January 2014 dollars. The black line indicates the nominal price (in other words the price you would have actually paid at the time).

Click for larger chart at Inflation data.com.
oil-1946-2014


U.S. crude oil stocks return to 1930s crisis levels: Kemp (Reuters)  U.S. commercial crude oil stocks last week hit their highest level since 1931 - when the opening of giant oil fields in the United States coincided with the Great Depression to create an enormous glut and sent prices tumbling to just 13 cents per barrel.  Econintersect:  This suggests a oil price price chart more like the 1990s than the 2000s.  See two preceding articles.


Other Economics and Business Items of Note and Miscellanea

Local Voices: What economics teaches us about environmental protection (South Coast Today)  A basic premise in economics is that companies should pay all of the costs that are incurred in the process of producing their goods and services.  That is not the case for coal which is priced far too cheaply.

The economics of the ignorami (The Tribune-Review)  If you love the ignorami you will love this article.

Teaching cursive handwriting is an outdated waste of time (The Conversation)

Humans and Neanderthals: A Mediterranean Romance? (Sci-Tech Today)  A 55,000-year-old skull puts home sapiens in the right time and place to interact with Neanderthals but there is still no proof that they did.  There appears to be a 5,000-year time window where both species lived in what is now Israel.

Doubling down on 'middle-class' economics (Politico)  President Obama is betting that concern about budget deficits is fading.

Study: 50,000-year-old poop proves Neanderthals ate their veggies (LA Times)

First atomic bomb test may mark the beginning of the Anthropocene (The Conversation)



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