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What We Read Today 23 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".).


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

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Week ahead in business and economics: March 23 to March 27 (The Telegraph)  Here is a London view of what is on the calendar for this week.

Articles about events, conflicts and disease around the world











It looks like the Fed believes in secular stagnation (Myles Udland, Business InsiderEconintersect:  Actually it looks like the Fed doesn't believe in secular stagnation and has to be repeatedly taught what it is.  Isn't that a correct interpretation of what they have done:  repeatedly forecasting an economy that will improve which it turns out again and again to be going nowhere?  Now they are forecasting going nowhere - will the pattern of over-estimation continue?  Or will there be mean reversion?  This record is an abject embarassment.



Productivity:  The UK's No. 1 Challenge (Frances Coppola, Pieria)  Frances Coppola has contributed to GEI.  While the U.S., France and Germany have renewed productivity improvement following the Great Financial Crisis of 2008, the UK has not.  Coppola calculates that the UK has a 15% productivity gap.

Wage Inflation Is Coming (Sam Ro, Business Insider) This is repeated from WWRT from last summer.   Put it in the 'Department of Why You Should Always be Skeptical' (as we were here). Sam is showing some graphs produced by Deutsche Bank economist Torsten Slok. The first purports to show that wage uptrends last for 4-5 years. Econintersect has added a red ellipse right in the middle of the graph to show that statement is not always true. The second graph suggests that unit labor costs and rates "historically have correlated so well". We have added a green ellipse right in the middle of that graph to show that the correlation is far from perfect at all times. Precedence can be a bitch! The jury must remain out on the divergences to see which precedence will be followed. 

The preceding discussion is from last summer - for how this has turned out so far, see next article.



Yellen Is Watching These Four Indicators for Signals on When to Raise Rates (Steve Matthews, Bloomberg Business)  Referring back to the first graph in the preceeding article below (first graph) is hourly wage data but on a much shorter time scale.  The rise from starting in late 2012 from less than 1.5% y/y change to more than 2% does not look like a surge at all.  Is there any other erason the two graphs don't look that similar?  The graph below is the same as the one on the St Louis Fed Fred data base, which has data only back to 2007.  See here.  But the graph in the previous article was a subset of all hourly compensation:   Average Hourly Earnings of Production and Nonsupervisory Employees:  Total Private.  The second graph below is the latest data from the St. Louis Fed Fred data base for that data set - and shows that this has taken a nosedive in recent months.  This is another sign that the economy is not about to take off on a higher inflation trajectory.  So much for the observation that wage growth accelerations have always lasted 4-5 years.  There has to be a major trend change in the next few months to fit into that previous pattern now.



Has the Fed Disrupted the Dollar Rally? (Action Forex)  Charts still look bearish for the euro.


Other Economics and Business Items of Note and Miscellanea

Global fund managers warn of a bond bubble (Financial Times)  Four out of five fund managers said bonds were overvalued in a survey of 300 global managers by CFA UK.  Corporate bonds are more overvalued than ever before, while government bonds are the most overvalued asset class, the group said.  The group warned of huge losses possible in a disorderly sell-off.

Fed’s Mester: Fed Needs Further Refinements of Forward Guidance (The Wall Street Journal) Ms. Mester wants more description of process.

Solar Panels Can be a Deal Killer (Realtor Magazine)  Some sellers with leased solar panels are finding they cannot close without buying out the lease and including solar panel ownership in the deal.

Sorry, but it's not a 'law of capitalism' that you pay people as little as possible — it's an excuse (Business Insider)

xАфины требуют от Берлина компенсации за разрушенное во Второй мировой и грозятся выходом из ЕС (www.1TV.rv)  You must know Russian to understand it, but GEI contributor and former IMF economist Elliott Morss makes a brief interview appearance at 05:18.

THE TRUTH ABOUT THE ECONOMY: In the 1980s, Greed WAS Good... Then We Went Overboard (Business Insider)


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