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What We Read Today 09 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

U.S.

  • Democrats embrace the logic of ‘Citizens United’ (The Washington Post)  The consensus among Democrats opposing Citizens United has now been shattered by a book by conservative writer Peter Schweizer. In “Clinton Cash,” Schweizer charges Bill and Hillary Clinton with corruption. Not because there is evidence of any particular bribe. Instead, their corruption, Schweizer says, comes from a pattern of behavior: a constant (and, by the end of the book, practically grotesque) story of cash passing from people seeking the government’s favor to either Bill Clinton (and hence Hillary Clinton) or the Clinton Foundation.

UK

  • In U.K. election’s wake, questions on E.U., Scotland (The Washington Post)  The election has produced an unexpectedly clear outcome for the Conservatives, it may only have heightened the degree to which the country faces a period of internal debate, ­inward-looking politics and potential instability, with questions about the durability of the United Kingdom and its place in both Europe and the world still to be answered.

Greece

  • Schaeuble Says Greece Playing Chicken With Default Risk (Bloomberg) German Finance Minister Wolfgang Schaeuble warned that governments can sometimes default by accident, in a jab at Greek officials still holding out for a better deal from creditors as their cash supplies run critically low.

Islamic State

Russia

  • Russia stages massive WW2 parade despite Western boycott (BBC News)  Reminiscent of the old Soviet propaganda parades, thousands of troops marched across Red Square in Moscow, and new armor was displayed for the first time.  Many foreign dignitaries were present by most Western leaders stayed away,

Afghanistan


  • The Bernanke-Summers imbroglio (Lars P. Syll) In the past six months a debate (of sorts) has developed between (1) those who think that former Fed chair Ben Bernanke is correct in describing the current slow recovery to be the result of a savings glut and (2) those who think former Treasury Secretary Larry Summers has the correct reasoning that the problem is secular stagnation (secular decline in the level of investment).  Here is Syll's take (with excerpts from Keynes "General Theory" and Kilecki "Capitalist Economy"):

To me the debate is actually a non-starter, since they both rely on a loanable funds theory and a Wicksellian notion of a “natural” rate of interest — ideas that have been known to be dead wrong for at least 80 years …


  • The Inbred Bernanke-Summers Debate On Secular Stagnation (Steve Keen, Forbes)  Steve Keen has contributed to GEI.  Steve Keen very sharply criticizes the extreme narrowness of thinking which is involved in the so-called Bernanke-Summers debate.  See following articles for analysis details.

  • Bernanke-Summers Debate II: Savings Glut, Investment Shortfall, Or Monty Python? (Steve Keen, Forbes)  Steve Keen has contributed to GEI.  Keen offers the common textbook supply-demand diagram to show "how inbred this Bernanke-Summers debate really is".  They are both using the same myth-based concept to try to describe what is going on:  the loanable theory of funds.  The following diagram shows how both Bernanke and Summers are offering ideas for slow economic growth based on two hypothetical relationship between two variables:  interest offered and available deposits.  This is a diagram of the loanable theory of funds.  Note:  FE stands finacial equilibrium, a condition Keen is famous for maintaining does not exist.  Keen suggests a relationship exists that those of the Bernanke-Summers school "can't see".   See next article.

Keen.bernanke.summers


  • Modeling Financial Instability (Steve Keen's Debtwatch)  Steve Keen has contributed to GEI.  Keen provides in this paper a corrected formula for the role of the change in debt in aggregate demand.  In this paper there is an empirical relationship graphed showing the excellent negative correlation between change of debt and unemployment in the U.S. from 1994-2014.  Note:  For those who may not appreciate the meaning of the word empirical, it means real world recorded data without any fitting to a model.  In the preceding article Keen presented the graph with one of the variables not labeled and suggested it was an observed relationship that might not be known by Bernanke and Summers.

debt.change.vs.unemployment


  • Since March 2007 Latvia's population has shrunk by more than 10% because of net emigration.
  • GDP growth is now down to 1.9% annually.
  • After a brief period of surplus the current account is now back in deficit.
  • After 7 years real GDP has not returned to 2007 levels.

latvia.gdp



Other Economics and Business Items of Note and Miscellanea

Don't Fall for This Big Bank Scare Tactic (David Dayen, The Fiscal Times)  Another example (similar to the one discussed in WWRT yesterday) where data seemingly analyzed by knowledgeable researchers is simply abused for propaganda purposes.

Stock Market Milestone: ETFs One-Up Hedge Funds As Investor Assets Hit $3 Trillion (Trang Ho, Forbes)  Trang Ho has contributed to GEI.  See also GEI News 27 April 2015.



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