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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.
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Articles about events, conflicts and disease around the world
Income Inequality in the United States in Cross-National Perspective: Redistribution Revisited (Janet C. Gornick and Branko Milanovic, City University of New York) Figure 1 is a classic presentation of this line of analysis. This figure, which reports inequality in income received during 2010, includes the United States and 18 other high-income countries – Australia, Canada, and 16 European countries.
"Good Cop, Bad Cop," Monetary Edition (Dave Gonigam, 5 Min. Forecast) Gonigam sees the IMF's "special drawing rights" (SDR) as a precursor to the next evolution in global reserve currency, SDRs are the credits the IMF (International Monetary Fund) issues to satisfy its obligations. Currently the SDRs are constructed as shown in the graphic below. At some point in time, Gonigam says, the Chinese yuan renminbi will be added to the mix. The composition of the SDR is reviewed every five years and the next such occasion is coming up this autumn.;
The State and Fate of Community Banking (Marshall Lux and Robert Greene, M-RCBG Associate Working Paper Series, No. 37, Harvard Kennedy School, Mossavar-Rahmani Center for Business and Government) This paper claims to prove that the Dodd Frank Act has resulted in undue hardship for community banks. The author's provide evidence to support their claim. This evidence is bogus and Harvard should demand that the paper be revised or removed from association with the University. Lux and Greene base their claim on the data which produced the graph shown below. They examine the data for the four years immediately preceding the passage of the Dodd Frank Act into law 21 July 2010 when they say the change in share commercial banking assets for small community banks was 8.6% and the four years following where the decline was 18.8%. Ergo, Dodd Frank damaged the community banks. Looking at the graph below we can see that a trick has been played by using change in share for short periods of time instead of calculating the decline in share. Using change in share for a smaller base starting percentage magnifies the imputed impact and does not represent the actual absolute change. Here are the actual changes of market share for the three periods on the graph: 1994-2006, loss average 1.4% of market share per year; 2006-2010, loss average 0.25% of market share per year; 2010-2014, loss average 0.5% of market share per year. Proper use of the data gives an entirely different conclusion: The Dodd Frank Act did not impose any penalty on community banks compared to the years before the Great Financial crisis. In fact if any inference is to be made, they were better off after Frank Dodd than before. See also video at the end of WWRT below.
Other Economics and Business Items of Note and Miscellanea
Shiller, Gundlach: It's Not 1929, But ... (Financial Advisor) Achieving escape velocity from 2% or 2.5% GDP growth seems increasingly unlikely to both Nobel laureate Robert Shiller and DoubleLine CEO Jeffrey Gundlach. Neither man disagreed with Fed Chair Janet Yellen’s remarks that equity valuations are high. Using his CAPE ratio, Shiller says it indicates equities should return 2% annually for the next decade, and that is better than he expects bonds to do.
Is College Still a Good Investment? (ThinkAdvisor) As costs rise and standards sink, getting your educational money’s worth is a growing challenge.
Low Income Employees Improving Their Finances, Study Says (Financial Advisor) Employees who have access to financial wellness programs at work are taking more responsibility for their finances and improving their situations. The lowest income employees are showing the most notable improvements. Econintersect caveat: The study was conducted by Financial Finesse, a provider of workplace financial education programs.
What Will Be the Legacy of Dodd-Frank Legislation? (Bloomberg) Dennis Kelleher, chief executive officer at Better Markets, and Bloomberg’s Bill Cohan examine the fallout from Dodd-Frank legislation on the U.S. banking industry. They speak with Bloomberg’s Betty Liu on “In The Loop.”
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