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What We Read Today 07 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


  • Lobbyists, Bearing Gifts, Pursue Attorneys General (The New York Times)  Hat tip to ProPublica.  The biggest contributions to the campaign funds of states Attorney General candidates come from the corporations targeted by their investigations.  Plus the elected candidates are then wined and dined at luxury resorts by the same cohort of "responsible" corporate citizens - curtailed or abandoned investigations and sweetheart settlement deals.  Econintersect:  Are we now the "Land of the Fee and the Home of the Ethical Grave"?  See next article.
  • Money Going to Attorneys General (The New York Times)  A list of major contributors to states Attorney General candidates in 2014 election.
  • Why Do Police Get Immunity? (Foundation for Economic Education)  The proposition here is that the doctrine of qualified immunity has to be abolished.
  • NSA phone data collection 'illegal', US court rules (BBC News)  A US appeals court has ruled that bulk collection of phone records by the National Security Agency is illegal.  Overturning a 2013 ruling, the judges did not, however, halt the programme but urged Congress to take action.





  • Senate Overwhelmingly Passes Iran Bill; Tom Cotton Casts Lone Dissent (Huffington Post)  The Senate voted overwhelmingly today to pass a bill intended to give Congress a say in the emerging nuclear deal between Iran, the U.S. and its five negotiating partners. The final vote was 98 to 1, with Sen. Barbara Boxer (D-Calif.) as the lone no-show and junior Sen. Tom Cotton (R-Ark.) casting the only dissenting vote.  The bill was voted after a preceding vote to remove all non-germaine amendments, including Sen. Cotton's package which included the specification that an treaty would require Iran to recognize Israel as a Jewish state.


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

The Executive Computer (The New York Times)  Hat tip to Vala Afshar via Twitter. This 1985 article demonstrates the wisdom of future vision.  Here are some "wise" observations:

  • For the most part, the portable computer is a dream machine for the few.
  • [P]eople don't want to lug a computer with them to the beach or on a train to while away hours they would rather spend reading the sports or business section of the newspaper.
  • I.B.M. never legitimized the market with its much rumored ''Clamshell,'' probably because the company realized that laptops are a small niche market, not a mass market.
  • [W]ord processing and spreadsheet packages commonly available for them are intended to accomplish tasks to which laptop computers are simply not well suited.
  • [T]he real future of the laptop computer will remain in the specialized niche markets.
  • I ... can't imagine the average user taking one [a computer] along when going fishing. 

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.

“My gut feeling is this doesn’t look right,  I haven’t met anyone who sold everything. People are worried, but no one knows what to make of [the markets] because interest rates are so low.”

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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