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What We Read Today 15 March 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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The one – relatively – easy step to make every vote count again in the U.S. (Rob Richie and Claire Daviss, Reuters)  We think of the presidentila election as a national election.  But that is not the case.  It is something like a 12-state election; the other 38 don't count in the campaign equation because they are a lock for one candidate or the other.  Here's how this article put it:

The presidential battleground is shrinking. After the major party conventions in 2012, only 12 states received campaign visits. Even as they ignored other states, Obama, Republican presidential nominee Mitt Romney and their running mates campaigned in Ohio 73 times, Florida 40 times and Virginia 36 times. New studies show that presidents steer federal grants toward swing states as well.

One state, Nebraska has had a formula since 1991 to award electoral votes according to the popular vote in each house district.  But that Republican stronghold state has a movement underway to change back to the winner-take-all formula used in other states.  Why?  Because the state is districted into several safe Republican districts and one safe Democratic district in order to assure Republicans maximize their congressional delegation control of the state.  But in the case of the presidential election the GOP doesn't like having one of the state's electoral votes going to the opposition.

This article doesn't like the congressional district formula for a different reason:

Some four in five districts are locked up for one party’s presidential candidate. A nationwide congressional-district system would make it even more likely to have a “wrong-way outcome.” Our recent report, “Fuzzy Math,” found that Romney would have won the 2012 election by 10 electoral votes — despite winning 5 million fewer votes nationwide.

And, of course the reason that the hypothetical outcome above could occur is a result of the widely used practice of gerrymandering.  How gerrymandering looks to an outsider was exemplified by Australian Paul Hanly's 2010 article at GEI OpinionThe Gerrymander Triumph.

Richie and Daviss suggest that electoral votes be assigned in each state in proportion to the popular vote.  There is a movement underway called the National Popular Vote plan.

The National Popular Vote proposal is an interstate agreement, an exercise of states’ right to form compacts among states and to determine how to award their electoral votes. States commit, as a group, to award all their electoral votes to the candidate who wins the most votes in all 50 states and the District of Columbia. The plan is activated only after being adopted by states that collectively represent a majority of the Electoral College, 270 electoral votes or more.

To date, 11 states have signed on, holding a total of 165 electoral votes. Since Maryland became the first state to pass the National Popular Vote in 2007, progress has been slow but steady. New York was the latest signatory in 2014, when it passed with overwhelming bipartisan support.

Econintersect:  If only states with 270 electoral votes operated under this agreement then election outcomes could become even further from determination by popular vote.  For example, let's say that those states had popular vote strongly Republican by, say, 60/40.  And let's also say the 270 votes would have gone 192 to Republicans and 78 to Democrats under the winner-take-all arrangement but the national popular vote was 55% Republican and 45% Democratic.  The allocation of votes under the National Popular Vote plan would be 148 R and 122 D.  The states remaining with winner take all formulas would be overwhelmingly Democratic and possibly divide 190 Democratic and 78 Republican.  The final electoral vote under winner-take-all would have been 270 R and 268 D.  But under the split the result would be D 322 and R 226, quite out of line with 55/45 R advantage in the total popular vote.

The proposal to implement theNational Popular Vote plan with less than all states participating could produce severe distortion of election results under certain circumstances.    

Articles about events, conflicts and disease around the world


Arrest Made In Connection To Ferguson Police Shooting (Huffington Post)

Three New York residents deny 'IS aid plot' (BBC News)


Language of Greek Crisis Shifts From Financial Jargon to Humiliation (The New York Times)  The language of the Greek crisis has become about humiliation, national pride, moral hazard and hypocrisy.


Egypt expanding Suez canal to boost economic growth - Gen. Mameesh  (Kuwait News Agency)


Netanyahu, Trailing in Polls, Offers Rival Finance Ministry (Bloomberg)  Stunning turnaround in campaign - voting in two day.


Kerry says Syrian transition would have to be negotiated with Assad (Reuters)  Afterwards State Department says "Washington would never negotiate with the Syrian leader".


Iraqi offensive on Tikrit stalls, Kurds say Islamists used chlorine (Reuters)


Russia Was Ready for Crimea Nuclear Standoff, Putin Says (Bloomberg)


Beijing has a bitcoin problem on its hands (South China Morning News)  Other currencies are now very minor players in the bitcoin game.  The Chinese yuan renminbi is now used for 80% of bitcoin transactions.


Economics ministry denies trying to extend life of two nuclear plants (Focus Tawain News Channel)


Dozens dead, injured as Pakistan Taliban splinter targets Christians (Al Jazeera)


More Than a Million Hit Brazil Streets to Protest Rousseff (Bloomberg)

The Global Dollar Funding Shortage Is Back With A Vengeance And "This Time It's Different" (Tyler Durden, Zero Hedge)  ZH says: 

The last time the world was sliding into a US dollar shortage as rapidly as it is right now, was following the collapse of Lehman Brothers in 2008.

Actually the last time was in 2011, although the last time this seteep a decline occurred from a condition of "balance" was 2008.  But an important point is that there have been various degrees of "scarcity" for the dollar since Lehman except for very brief period last year when the currency pairs in the sample were "in balance".  ZH says that the reason for the rapid change occurring now has to do policy imbalances between central banks, with Japan, the ECB and possibly even China (they deny it, officially) with large QE programs at a time when the U.S. has withdrawn from that arena.  Think of it this way:  If other major currencies are greatly increasing liquidity and the reserve currency is not what do you think will be the scarce currency?

There, in a nutshell, you have the reason for the soaring dollar.  When supply goes down and demand goes up what happens to price?  It goes up.


Credit Markets Review and Outlook (John Lonski, Moody’s Analytics)  Is the dip in M&A activity sending a message (like 2000 and 2007) or a head fake (like 2012 and 2014)?  Decreases in M&A have predicted 4 of the last 2 bear markets.


The Airline Industry Ascended to New Records in 2014 (Frank Holmes, U.S. Global Investor)  It's a great sector shift trade:  buy air transport and sell oil.  And when oil finally turns upward in a sustained move, reverse the trade.  What is happening in the air transport boom is viewed in the following graphs.  International flights from the U.S. are covered in the first two graphs and from China in the third.  Extrapolating current trends China's international passenger air traffic is due to surpass the U.S. within a couple of years.



Opinion: America is full of slackers and deadbeats who won’t work - Page 1 (Rex Nutting, MarketWatch)  The author quotes the official numbers:  93 million have "dropped out of the labor market", less than half of all Americans have a job and 172 million (102 million adults) "aren't working".  He discusses why these numbers are misleading in the next article.


Opinion: America is full of slackers and deadbeats who won’t work - Page 2 (Rex Nutting, MarketWatch)  The numbers in the preceding article that are so often quoted for political purpose are discussed here in an economic context.  There are actually 6.6 million people who say they want a job but are not invluded in the labor force by Dept. of labor convention because they have not looked for a job in the past four weeks.  The reason:

According to researchers at the Richmond Federal Reserve, people who say they want a job but didn’t look last month have about the same probability of landing a job in the next 30 days as people who’ve been out of work longer than six months and who did look last month — about 14% of both groups will land a job.

Nutting maintains that

The 93 million figure is meaningless bunk, just as my 172 million number is. Both figures arbitrarily include millions of people who can’t work, don’t want to work and don’t need to work.

He points out that some of the remaining 83 million adults that are not "employed" and are not "looking for a job" may actually be doing something productive such as retiring and doing vo;lunteer service, going to school, maintaining a household for others who are officially employed and caring for family.   

Measuring Resource Utilization in the Labor Market (Andreas Hornstein, Marianna Kudlyak, and Fabian Lange, Richmond Fed)  This research constructed a "nonemployment rate" which differs from the official unemployemnt rate in that it includes recent data on the relative degrees of "labor force attachment" for different groups who do not have a job.  See article immediately preceding.  The nonemployment rate offers no additional insight into the cyclical behavior of the economy than does the official unemployment rate but does suggest that the official rate is not as good an indication of labor market dynamics as the nonemployment rate.  As can be seen below the unemployment rates indicate more labor  slack in periods of high unemployment while the nonemployemnt rates indicate more slack during periods of  low unemployment.  This insight is especially important now that the Fed must decide when labor market dynamics will force it to raise interest rates to reduce labor market tightness.


Other Economics and Business Items of Note and Miscellanea

An ultra-low interest rate show that could run and run (Gillian Tett, Financial Times)  Instead of Japanification, we should probably now switch to a new term: Europification.

Facebook Powers Up Its E-Commerce Ambition (Seeking Alpha)  Another review of Facebook's acquisition and integration of the shopping service The Find.

How can we track trends in educational attainment by parental income? Hint: not with the Current Population Survey (Brookings)  Hat tip to Timothy Taylor.  Debunks a widely cited Pell report:  Indicators of Higher Education Equity in the United States.

How Cloud Companies Are Killing Checks (Bloomberg)

Poll: Energy Efficiency is America’s No. 1 Housing Concern (Triple Pundit)

We must consider the economics of violence for change to occur (Pittsburgh Post-Gazette)  Is the cost of violence enough that we should spend money to address a significant root cause - no jobs?

What is the proper role of mathematics in economics? (South China Morning Post)  The real issue is not the difficulty, but the 'proper' use of math, especially when it takes the place of common-sense observations.

Real World Economics: Falling prices can signal end of cycle (Twin Cities Pioneer Press)

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