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What We Read Today 02 May 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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Articles about events, conflicts and disease around the world



  • Almost half of Obamacare exchanges face financial struggles in the future (The Washington Post)  Many of the 17 online exchanges set up by states and the District of Columbia are wrestling with surging costs, especially for balky technology and expensive customer call centers — and tepid enrollment numbers. To ease the fiscal distress, officials are considering raising fees on insurers, sharing costs with other states and pressing state lawmakers for cash infusions. Some are weighing turning over part or all of their troubled marketplaces to the federal exchange,, which now works smoothly.
  • Chuck Schumer Warns Obama His Trade Agenda Is Dead Without A China Currency-Manipulation Crackdown (Huffington Post)  Schumer, likely the next leader of Senate Democrats, has railed for years against the Chinese practice of keeping the value of its currency artificially low, which makes its products cheaper and American products more expensive. The imbalance is estimated by some to have cost more than 3 million U.S. jobs.
  • Freddie Gray: Baltimore police officers 'did nothing wrong' (BBC News)  Attorney for the accused officers makes a public statement.
  • What backing up your home with Tesla’s battery might be like (The Washington Post)  Storing 1/3 of a day's electricity for an average home will cost $3,500 for battery purchase, musch less than many expected.  There will be aggressive competition in this space so these costs should come down over time.  To store a full 24 hours of power would come to $12.000 to $15,000 at current prices, including inverters and installation so true grid independence will be out of reach financially for most.



  • Greece Races to Bridge Gap With Creditors Before Debt Bill (Bloomberg)  Talks have picked up pace in recent days, but the two sides are still trying to bridge differences on stalled reforms. It isn’t yet clear that there will be enough progress to clinch a deal in time for the planned May 11 meeting of euro-area finance ministers, some officials warned.  Failing to close a deal will likely lead to a Greek default this month.




Punk Q1 GDP Wasn’t Surprising—It Extends A 60-Year Trend Of Exploding Money And Imploding Growth (David Stockman)  Stockman blames loose money for growing income inequality since the 1970s and QE for the most recent stall speed recovery, supplemented by growth in the GDP portion spent on defense, which he calls "pure economic waste".  He further criticizes the use of owner's equivalent rent as a CPI when real rent is growing at a faster rate (see graph below).  He also gives some other examples of things that have increased in price more rapidly than CPI (cars specifically) which have doubled in average price over the past 17 years but the CPI component is up less than 2% due to hedonic quality adjustments (cars today have many more features than they did 17 years ago).  Stockman argues that things would be much better "without state management of the business cycle".  He calls for the abolishment of credit creation of money when he calls for a system of "self-liquidating collateral" and a return to "true depository lenders". 

Econintersect:  Stockman raises some valid points but we would not ask for a system that operated according to the hypothetical loanable funds market theory, which a logical result of his discussion.  We maintain that the word hypothetical is key in the Wikipedia description because no such market has ever existed on a large scale.  Throughout much of human history (and certainly history since the start of the industrial revolution) we think that credit creation against collateral has been the modus operandi of banking. We do think that he is correct that the government should stay out of the private sector economy.  But we also think the private sector should stay out of the government operations and funding thereof.  We expect Stockman might object to the latter idea (separate public and private banking functions) but would like to discuss it with him. 

Finally, nowhere does Stockman discuss the contribution of economically inefficient distribution of income.  He does talk about the inefficiency of defense spending but does not mention other non-productive use of capital (such as the growing share of wealth in residential real estate).  And he does not discuss the incentives for use of wealth provided by the tax system.  We know he favors reduction of all taxes but we would argue that if taxes are reduced in a way that encourages non-productive use of capital then the reduction is a bad thing.  And, with regard to difference between owner imputed rent and real rent, the graph implies that owning is cheaper than renting, which may be debatable but is a widely promoted idea.  And if it is true that owning is cheaper than renting, then there should be two curves in the graph.  And the argument might be proposed that since approximately 2/3 of Americans live in owner occupied homes that a weighted average of the two metrics should be included in CPI which would raise the housing component from 2.7% based solely on owners' equivalent rent to 3.2% weighted average for the annual inflation rate average for housing.  This would change the total average inflation rate since 2000 from 2.2% to 2.3% and not the 2.5% that Stockman has incorrectly suggested.  Stockman has a mission and raises those points that support his mission.  We have some shared sympathies but will not go some of the places he does and are pretty sure he would not support some of our ideas.  All to the good - it is such discussion, honestly undertaken, which can advance the state of our society.


Other Economics and Business Items of Note and Miscellanea

A View to the Future: Changes in the Investment Industry (Enterprising Investor)

An Even More Dismal Science (Project Syndicate)  Brad DeLong suggests that economics is an even more dismal science now that so many debates are ranging between different pessimistic viewpoints.

GOP has Little New to Say about Baltimore (The New Yorker)  The title is misleading.  From the article it is clear that the attitude towards crime and punishment is changing within the group of Republicans running for (or considering running for) the presidency.  So speaking out substantively about Baltimore would have been counterproductive for the rising thought that we need "initiatives aimed at reducing the prison population and ending custodial sentences for non-violent offenders, such as low-level drug dealers".  This is what is being pursued by a number of Republican governors and GOP members of Congress.

Taylor Swift shows us love in the 21st century (Fabius MaximusFM contributes to GEI.  Fabius sees Taylor Swift as a highly intellectual sociologist.  After you read this, you will too. 

The Kickstarter Hall of Slightly Insane (projects) (CNBC)  Hat tip to Marvin Clark.  Pass gas more than 13 times per day? That could be a problem, and one entrepreneur says he has the solution. CH4 is a fart-o-meter (yes, you read that right) worn like a pedometer in your back pocket.

Economic Policy Turned Inside Out (Project Syndicate)  Former Morgan Stanley chairman Stephen Roach argues that monetary policy cannot do what needs to be addressed by structural reform.

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