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What We Read Today 19 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.

This feature is published every day late afternoon New York time. For early morning review of headlines see "The Early Bird" published every day in the early am at GEI News (membership not required for access to "The Early Bird".).

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AP-GfK Poll: Most Americans Favor a Higher Minimum Wage (Emily Swanson, Associated Press, abc News)  Proposals to increase the federal minimum wage, as well as to require employers to give paid leave to their employees, find few objections among Americans as a whole but Republicans are more nearly evenly divided.  For all Americans:

  • Raise minimum wage:  60% pro, 20% against.
  • Paid sick leave:  60% pro.
  • Maternity leave:  67% pro.
  • Government does too little to help middle class and poor:  60%.
  • Government does too little to help the unemployed:  More than 50%.
  • Government does too much to help the wealthy:  67%.
  • Approval of Obama helping middle class and poor: "Most disapprove".
  • Which party will help middle class more:  Democratic nearly 67%, Republican approximately 33%.
  • Which party will help the poor more:  Democratic nearly 75%, Republican approximately 25%.
  • Government needs more laws for gender workplace equality: 41%.
  • Free community college:  56%.

For result details go to The AP-GfK Poll, January 2015.


Articles about events, conflicts and disease around the world

Greece

Germany

Norway

Islamic State

Egypt

Libya

Qatar

  • An American Ally’s Grand Mosque of Hate (The Daily Beast)  The wealthy of tiny Qatar (the "richest little emirate in the world") and in Saudi Arabia compete to spread the "extreme and ascetic view of Islam" (Wahabbism) that has "spawned Al Qaeda and the so-called islamic State".

Ukraine

Russia

China

The Chilling Thing Devon Energy Just Said About the US Oil Glut (Wolf Richter, Wolf Street) Oil production in the U.S. will continue to rise in 2015 in spite of the price of oil being half what it was a year ago.  The production with rise in spite of the reduction in drilling cap ex and a 1/3 reduction in the number of drilling rigs.  Richter explains what is going on as an increase in production by exploiting only the high production wells in an effort to realize the cash flow necessary to carry the large debt loads that exist for the producers.  He offers an example from a recent Devon Energy statement.

Stuff happens when the price of oil plunges.

But production soared – and will continue to soar. CEO John Richels explained the phenomenon in the press release:

We expect to sustain operational momentum in 2015 with the significant improvements we have seen in our completion designs and a capital program focused on development drilling. With strong results from our enhanced completions and a focus on core development areas, we expect growth in oil production to be between 20 and 25 percent in 2015, even with a projected reduction of approximately 20 percent in E&P capital spending compared to 2014.

So, despite slashing the capital expenditure budget by 20%, the company’s oil production in 2015 would grow 20% to 25%.

Richter shows the nearly 50% increase for Devon oil production in 2014.  They expect to "only" increase by half as much in 2015.

oil.production.devon.2014


What Will Happen to Housing When the Baby Boomers are Gone? (George Masnick, Housing Perspectives, Harvard Joint Center for Housing Studies)  Adult population growth in the U.S. will decline from recent rates between 2.2 and 2.6 million per year to close to1.5 million within three decades.  That implies something of the order of a 40% decline in the growth rate for housing units at the most and certainly more than 20% if many adults cohabit with another adult.  The organic growth of U.S. population will fall by about 70%; the only things saving the U.S. from a Japan like or China-like population growth contraction is international migration, which is projected to increase by 25% by the 2050s.  Here is this paper's conclusion:

In short, while the housing market does somewhat resemble a game of musical chairs, with successive age groups “moving up” as their incomes and families grow, and older households exiting, this process can be inefficient for young adults moving into units vacated by baby boomers because of the reasons discussed. In addition, the majority of baby boom household dissolutions will not take place until after 2030. It will not be until 2060 or later that the last of the baby boomers, born in the early 1960s, will die. Between now and 2030, new construction will still be needed to meet the housing demand from the large cohorts under the age of 30 that are currently in the pipeline, and which will be further inflated by any future immigration. Where that housing will be located and what it will look like is far less certain.

 us.adult.pop.growth.to.2050

us.pop.growth.natural.and.immigration


Mind-Blowing: China Consumes More Gold Than the World Produces (Frank Holmes, U.S. Global Investors)  Fran Holmes has contributed to GEI.  The headline is suspect only because within the article the consumption and production numbers are restricted to a short time period:

Most loyal readers of my Frank Talk blog know that China, along with India, leads the world in gold demand. This Chinese New Year is no exception. Official “Year of the Ram” gold coins sold out days ago, and since the beginning of January, withdrawals from the Shanghai Gold Exchange have grown to over 315 tonnes, exceeding the 300 tonnes of newly-mined gold around the globe during the same period.

Actually for longer periods of time (like the years shown below) the consumption of gold is far less than the 2,000 to 3,000 metric tons annualized from the short period selected.  In fact, except for 2013. India and China combined have been consuming less than 2,000 metric tons of gold annually.  See next article for amount of gold mined each year.

gold.india.china


Global mine production of gold from 2005 to 2014 (in metric tons) (Statista)  Using the data in the previous article, we can see that in recent years India and China combined have grown to have more than half the global production of mined gold annually.

gold.mine.production.2005.201


Money Is Bailing Out of Canada (Wolf Richter, Wolf Street)  Foreign investors and Canadians themsleves dumped stocks and bonds in December, the second largest decline for bond holdings in at least four years and the third largest decline in equities over the same time period.  Rcihter says the bulk of the bonds sold by Canadians haad proceeds going into U.S. Treasuries.  (Econintersect:  This is undoubtedly a "carry trade" effect as the Loonie (Cnadian dollar) has been falling vs. the U.S. dollar.)

canadasecuritiesforeigninvest

canadianinvestinforeignsecurities



Other Economics and Business Items of Note and Miscellanea

7 Lies Employers Use To Trick You Into Working For Them (LinkedIn)

Supply-side Costs of the Great Recession (Brookings Institution)

Warning: too much finance is bad for the economy (The Economist)

Reassessing the impact of finance on growth (BIS Working Paper)

Econintersect note:  The empirical evidence (above) supports the contention that excessive financial activity is parasitic for the rest of the economy.

Gundlach: Fed Raising Interest Rates ‘Philosophically’ (ThinkAdvisor)  DoubleLine Capital CEO Jeffrey Gundlach is bullish on gold and bearish on oil.

A stronger U.S. dollar: the winners and losers (Brookings Institution)



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