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What We Read Today 18 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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Every day most of this column ("What We Read Today") is available only to GEI members.

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Microsoft is killing off the Internet Explorer brand (The Verge)  Microsoft has revealed that its next operating system will have a new browser, for now called "Spartan".  Internet Explorer will still exist in some versions of Windows 10 mainly for enterprise compatibility, but the new Project Spartan will be named separately and will be the primary way for Windows 10 users to access the web.  For all the quirks we have had to live with using IE, including serious instability problems, we are inclined to withhold the "RIP".


Articles about events, conflicts and disease around the world

U.S.

  • Herbalife wins dismissal of U.S. 'pyramid scheme' lawsuit (Reuters)  Shareholders did not show that questions raised about Herbalife's business by hedge fund manager William Ackman and various investigators showed that the company had fraudulently inflated its stock price.
  • Preppy State Proposes Amnesty for Potheads (The Daily Beast)  A Connecticut Supreme Court ruling came in favor of 31-year-old Nicholas Menditto, who argued that the two marijuana possession convictions on his record should be erased now that less than a half-ounce of the drug has been decriminalized.  Lower courts had ruled against Menditto.
  • What the Oklahoma frat video tells us about America (Al Jazeera)  Racism, like fraternity life, is a structure of white-supremacist social stratification.
  • Lindsey Vonn claims race, title (ESPN)  Vonn overcame two knee surgeries to win the latest World Cup downhill race and discipline title.  She is the all-time record holder for women in downhill (7 titles), for all disciplines (18 titles) and for race victories (65), in spite of going two years without a victory due to her knees.

UK

Germany

Switzerland

Tunisia

Israel

Iran

Japan


Liquidity Alert - Treasury Market Depth Hits New Low Ahead Of FOMC (Zero Hedge)  Every Fed meeting day trading in U.S. Treasuries completely stops at the "witching hour" in the moments before the meeting results are announced.  Today the approach dropped to a level not seen in the past two years half an hour before the "zero hour".

treasury.liquidity.on.fed.day


When Militaries Mobilize (Dave Gonigam, 5 Min. Forecast)  Who's winning the new Russia - U.S. confrontation?  Well here's what the stock markets think:

russian.rally


How a Strong Dollar Creates Trouble Elsewhere  (Neil Irwin, The New York Times)  For years low-interest-rate policies from the Fed have encouraged companies in fast-growing emerging markets to borrow dollars because they could do it more cheaply than if they took out loans in their local currencies, like the Indian rupee or Brazilian real.  By September 2014 there were $9.2 trillion of such dollar loans outside the United States, up 50 percent since 2009, according to the Bank for International Settlements.  Now these borrowers have to repay these loans out of earnings in their local currencies which have been marked down against the dollar.  See graph below.

Borrowing in dollars is like playing Russian roulette, especially if you’re borrowing relatively short term.”
- Raghuram Rajan, governor of the Reserve Bank of India

emerging.market.currencies.2013.2015


 

Credit Markets Review and Outlook (John Lonski, Moody’s Analytics)  Credit spreads for U.S. corporates have been trending lower recently but are still higher for investment grade bonds that they were before the Great Recession.  Curiously, spreads for junk are similar to what they were much of the time 2004, 2005 and 2006.  Note:  Spreads are the difference in yield between corporates and the corresponding tresasury of the same maturity.  Is the difference in spreads for investment grade relative to junk narrower now because in the current time there is more chasing yield effects driving junk yields lower or is there some other reason?

bonds.corporate.spreads.2003.2015


 

US Interstate Transfers and the Euro Crisis (Naked Keynesianism)  Hat tip to Roger Erickson. How did the U.S. minimize damage from the Great Recession when the Eurozone did not? It is because the U.S. is a fiscal and monetary union whereas the Eurozone is monetary only.  Can you imagine a shift in fiscal transfers in the EU along the lines of what was done in the U.S. between 2008 and 2009?  (See graph below.)  The authors maintain that the shift in interstate transfers is actually a very small contributor to the success of the U.S.  The big difference between the U.S. and the EU was that collectively the states as "partners" in the federal government benefitted from the "holding company" going into debt to greatly increase transfers to most of the states.  How would the U.S. problems have been handled in the EU?  Art Patten (who has contributed to GEI) puts it well on Twitter:

Imagine DE & MN telling WV & MS that they need to implement (mostly labor) reforms or else. That's the #euro zone.

states.fiscal.transfers.2008.2009.600.450


 

Other Economics and Business Items of Note and Miscellanea

U.N. Orders Review of 1961 Crash That Killed Dag Hammarskjold (The New York Times)  Hat tip to Rob Carter.  Supposed witnesses have involved "Belgians" or "Americans".  Probe will ask for "unpublished material" from the U.S., Britain, South Africa, France and Belgium.

One Bank Is Finally on Trial for the Financial Crisis (The New Republic)  Japan's Nomura refused to settle for the tens of billions paid by other banks and now is on trial for bank fraud with regard to mortgage quality securities they sold.

February Freeze in Housing Starts is a Bad Bellwether (Money Morning)

Maya MacGuineas: The Profound Fiscal Irresponsibility of Resistance to Facts (Joe Firestone, New Economic Perspectives)  Joe is a contributor to GEI.  The conclusion of Firestone's argument is that running private sector deficits is worse than public sector deficits.  One or the other (or both can share) must be in deficit in the amount of the current account deficit (largest part is trade) - simple accounting.  Econintersect:  Joe is not explicit but running a trade deficit is a requirement of the reserve currency supplier or the rest of the world will be in depression.

Gold Demand in Asia Seen Doubling as ANZ Predicts Record Prices (Bloomberg)  Predictions are for next 15 years.  A double in prices after 15 years is about 4.7% a year compounded.

Democrats Push Tax-The-Rich Plan For Social Security Solvency (Huffington Post)  As GOP proposes to cut safety nets the Dems want to build them up.

The Truth About Iran’s Impact on Oil Prices (Money Morning)  If sanctions were lifted it would take many months to repair oil and shipping infrastructure.

Bright Spots on Ceres Could Be Active Ice (Scientific American)  Could be an active ice plume.  See Video of the Day for a less serious suggestion.

March Madness Makers and Takers (Bloomberg)  The way the NCAA distributes the staggering revenue from the basketball tournament has created a polarized system where some schools make money and others just take it.



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