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What We Read Today 22 April 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 GEImembers.

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Day Trader in Leather Jacket Far Cry From Wall Street Flash Boy  (Liam Vaughan,John Detrixhe and Suzi Ring, Bloomberg)  Great review of the "financial terrorist" arrested for causing the 2010 Flash Crash.  The more that comes out about this case the fishier it becomes.  How could one small trader in London, with several thousand miles of latency, significantly impact a market dominated by billion dollar HFT (high frequency trading) operations all trying to minimize distance latency to a few miles?

Remco Lenterman, managing director at market maker IMC Financial Markets in Amsterdam is quoted:

“To say it’s one guy who caused this is ludicrous.  To say that it contributed, that makes more sense. Many factors contributed.”

How do you spell scapegoat?


Articles about events, conflicts and disease around the world

U.S.

  • Americans wish Congress, Administration would turn their attention to Rx drugs (Employee Benefit Adviser)  More than 3/4 of all Americans think the government should make sure "high-cost drugs for chronic conditions – such as HIV, hepatitis, mental illness and cancer – are affordable to those who need them".  This was the top ranked concern across the political spectrum when people were asked to rank many different needs in healthcare delivery.
  • Kaiser Health Tracking Poll: April 2015 (Kaiser Family Foundation)  Currently public opinion on Ovbamacare is 43% favorable and 42% unfavorable, only modestly changed over the past five years.  The poll results are strongly partisan with 70% of self-declared Democrats favorable and 75% of self-declared Republicans unfavorble. Independents are 42% favorable and 46% unfavorable.

obamacare.public.opinion

  • Employers to Congress: Five years in, the ACA is a burden (Employee Benefit Adviser)  Many employers testifying indicate that compliance with the law is more costly, complex, complicated and confusing.  Some employers complained of higher premiums.  However, Sabrina Corlette, senior research fellow at the Georgetown University Health Policy Institute Center on Health Insurance Reforms, says on average, premiums are decreasing under the ACA.

EU

UK

France

Greece

  • Greece Heading for the Bust? (Constantin Gurdgiev)  Constantin Gurdgiev contributes to GEI.  The data is looking grim and talk has started (again) about a dual currency for Greece.  See next two articles.
  • EZB prüft Parallelwährung für Griechenland (Tages Anzeiger)  In german.
  • Beware of Greeks Bearing Bonds (John Cochrane, The Grumpy Economist)  Dual currencues doesn't make sens to Prof. Cochrane.  He says that "U.S. corporations, municipalities, and even states default, and do not have to leave the dollar zone as a result."  But then he goes on to discuss how what were essentially dual currency moves have been made in the U.S. and discusses how Greece might pull it off.  This is a very good piece of thinking out loud.  Strongly recommended read.

Japan

  • Maglev’s economics as dizzying as its speed (The Japan Times) Yesterday (Tuesday 21 April) Japan's magnetically levitated train set a new world speed record for a train:  605 kmh (380 mph).  This article questions whether the maglev development makes economic sense for Japan, a country with a shrinking population and a declining economy.

Afghanistan

Australia

  • Australia's economy: Unlucky country (The Economist)  More about what is the heart of Australia's economic woes.  Chinese demand for steel soared over the past decade as the country’s economy boomed. That sent prices sky-high for iron ore, the raw material from which steel is made; sustained demand helped keep Australia prosperous. Now China’s economic slowdown and the accompanying plunge in iron-ore prices has put the Australian economy in the doldrums.

China Margin Lending: Extreme Edition (The Wall Street Journal)  How about margin debt in China at 3X the level of the top of the dot.com bubble in the U.S.  On the basis of market free float it is just about 3x.  On the basis of market capitalization China is 1.3x the earlier U.S. mark.

margin.debt.china.vs.us


Everything we know about PE ratios crammed into a useful, yet somewhat confusing chart (Business Insider)

pe.all.in.one.graphic
 


Keep It Simple And Complex, Stupid (Steve Keen, Forbes)  A good discussion of nonlinearity in economic systems.  The graphic below shows 42 years of U.S. data points in 3-dimensional space.  The debt ratio is for private debt.  What better demonstration could be given for the futility of trying to apply linear equilibrium models to gain an understanding of relationships between debt, employment and wages?  That futility describes the efforts of all too many highly regarded economists.  Go to the article to see some more illuminating graphics, including one of a debt-deflation spiral.

employment.wages.debt.1970.2012


New-Home Prices Are on Fire (The Wall Street Journal)  Historically new homes have commanded a 10% to 20% premium over equivalent existing homes.  Currently the spread has widened to 40%, driven in part by the large number of poorly maintained existing homes that experienced more wear and tear than usual due to the flood of foreclosures in recent years.  What you may not realize is that new homes have median prices nearly 20% higher than the peak of the housing bubble.  Bubbling again?

home.prices


Other Economics and Business Items of Note and Miscellanea

Largest Structure in Universe a Supervoid 1.3 Billion Light Years Across (Scientific Computing)

The dismal failure of supply-side economics on vivid display (AJC.com)  All about Kansas.

Twilight Zone Economics (SilverSeek.com)  A valiant attempt to compare U.S. government debt to personal debt.  Wouldyou buy silver from this man?  That's what he appears to be doing.

The Three Cs of Economics (The Vermont CynicDisclosure:  This editor wrote for this paper when in college.

When there are no courses educating students on the criticisms of capitalism, how are solutions expected to emerge? When there is no discussion of the lively debate within the economics discipline, students are not being taught economics, they are learning a political ideology. Let’s all congratulate the economists at the Federal Reserve, at the World Bank and at the International Monetary Fund for accurately preventing the Great Recession with their neoclassical theory.

Let’s give these “scientists” a pat on the back for their 19th century philosophy that solved climate change, addressed wealth inequality and ended overproduction. In the study of economics, we are not here to question the status quo – we help promote corporate interests. 

Should Asia’s Governments Spend More? (The Wall Street Journal)  Are Asian governments also abandoning the "fiscal tool"?



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