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What We Read Today 19 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



  • Free Trade Is Not the Enemy (William E. Daley, The New York Times)  Daley, who was special counsel for Bill Clinton's fight for NAFTA (North American Free Trade Agreement), argues that another trade agreement, the TPP (Trans Pacific Partnership), is needed to (1) assure the U.S. has a role in defining trade agreements in the Pacific (vs. abdicating that role to China) and to remove barriers against U.S. exports.  He also says it would result in all participants conforming to the standards of the United States, Japan, Australia, Canada and South Korea.  Econintersect:  At first blush Daley's arguments sure sound great.  But we ask the following:  (1) Is the U.S. at a disadvantage in negotiating trade agreements with individual countries today?  Could China interfere with that?  (2) Are there really significant barriers to U.S. exports imposed by other countries?  (See discussions later today, below.) and (3) If other countries would have to conform more to U.S. standards would not the U.S. have to conform more to other countries' standards as well?  What if some countries do not like our environmental protection laws?  Our banking regulation laws?  Our workers' rights laws?  See the following:  Fast/Track/TPP: The Death of National Sovereignty, State Sovereignty, Separation of Powers, and Democracy (Joseph M. Firestone, GEI Opinion) and The Trans-Pacific Partnership and the Death of the Republic (Ellen Brown, GEI Opinion).
  • After Duke guilty verdict, fears and questions linger about coal ash (LA Times)  Duke Energy admits to polluting rivers, but some North Carolina residents say a huge mess remains, with contaminated wells and other problems.  Econintersect:  What is the actual cost over the fullness of time in creating energy by means with long-term detrimental effects?
  • A Nun Walks Free:  The Government's Sabotage Case Dismissed (The New Yorker)  The decision seems to establish that peaceful, non-violent protest is not sabotage, even if government property is damaged.  Perhaps the threshold might be crossed if government function was hindered?  In this case government function was actually aided.
  • Here Are the Winners and Losers of Puerto Rico's Debt Crisis (BloombergPueto Rico is a territory of the U.S. and all native-born Puerto Ricans are U.S. citizens.  It's bonds are tax-exempt in all U.S. states and now nominally total $72 billion at maturity but are trading at deep discounts because the commonwealth has a shrinking population (residents moving to the mainland) and a shrinking economy for the past 8 years.  This article lists the winners of the debt crisis:  Lawyers, hedge funds and consultants; Losers: Longtime bondholders, monoline bond insurers and the people of Puerto Rico.
  • The best indication of what a federal $12 minimum wage could mean for poor places comes from Puerto Rico (The Washington Post)  First, the headline is atrocious.  What makes this the "best" indication?  We suggest a correct statement would replace "best" by "possible".  Second, the statement is made:  "Employment had dropped by about nine percent, compared to what it would have been if Puerto Rico’s minimum wage-to-average wage ratio had stayed the same as it was on the mainland."  We have scanned through the paper referenced and nowhere did we see measurements of a parallel Puerto Rico which did not experience the increased minimum wage.  Obviously counterfactual assumptions were made that necessarily compromise the statement quoted above to some unspecified degree.  See When the Minimum Wage Really Bites: The Effect of the U. S .-Level Minimum on Puerto Rico (Alida J. Castillo-Freeman and Richard B. Freeman ,NBER)  
  • America Snores When Christian Terrorist Threatens to Massacre Muslims (The Daily Beast)  Have you heard about the Christian terrorist Robert Doggart, who was plotting a violent attack against a Muslim-American community in New York state? Probably not, because as opposed to when U.S. law enforcement officials arrest a Muslim for planning a violent assault, they didn’t send out a press release or hold a press conference publicizing Doggart’s arrest.  Islamberg is a hamlet in upstate New York, right along the Pennsylvania border, that was founded in the 1980s by a group of predominantly black Muslims who left New York City to escape racism, poverty, and crime.  A spokesman for Islamberg:

“Our community consists of veterans, doctors, lawyers, teachers, etc. We are true American patriots, unlike Doggart, who is not representative of Christianity, but more like the American Taliban.”



  • The Real Problem in Iraq (The New Yorker)   An ISIS fighter posted a video to the Internet last weekend, shot from a recently captured Iraqi police station in Ramadi., and showed box after box of American mortar shells and bullets that appeared shiny and new. Several Humvees, apparently not long out of the packing crates, sat abandoned nearby.  The narrator:

“This is how we get our weapons.  The Iraqi officials beg the Americans for weapons, and then they leave them here for us.”

  • My Son Died for Ramadi. Now ISIS Has It. (The Daily Beast)  Debbie Lee says she’s sickened that the city her son sacrificed his life defending has fallen—and furious at the Joint Chiefs chairman’s insistence Ramadi is ‘not symbolic in any way.’


History of the Yield Curve (David Paul Laipple)  a reliable indicator of an imminent recession is a flattening of the yield curve.  However, in a debt-deflation environment that may be a very poor indicator,  The last debt deflation episode (associated with the Great Depression) there were four recessions with little or incomplete yield curve flattening.  With the current debt deflation in full force should we expect any different behavior?

Click for large image at davidpaullaipple.

Trade and the Decline of U.S. Manufacturing Employment (Matthew Yglesias)  We haven't shipped manufacturing jobsoverseas thereby diminishing U.S. manufacturing output.  Industrial production is higher than ever.  Yglesias attributes the decline in manufacturing employment to increased use of automation rather than decline or changes in output.  See also next article.


Trade and the Decline of U.S. Manufacturing Employment (Paul Krugman, The New York Times)  From the 1950s to the 2010s U.S. manufacturing employment declined from around 30% of all employment to less than 10%.  See graph below.  Krugman focuses on the era from 1970 to date, where the decline is about 15% of total employment.  He compares that to a decline of about 3% in the trade balance of manufactured goods.  He says that declining manufacturing employment is a poor argument against free trade:

For the most part, in other words, declining manufacturing employment isn’t due to trade. Again, that doesn’t mean that trade deficits are OK, or that trade hasn’t had other effects. But even if we’d had a highly protectionist world or in some other way had blocked the move into trade deficit, we’d still have seen most of the great decline in industrial jobs.

The Mis-selling of TPP (Paul Krugman, The New York Times)  Prof. Krugman points out that the argument that U.S. exports are low because of overseas barriers ignores the correlation shown in the graph below.  Now, the good professor is guilty of inferring causation from correlation but other speculations presented without supporting data at least have to dismiss this potential causative factor (or provide their supportive data - or both) before they are credible.  Econintersect:  We have added two red lines to the graph which emphasize the significantly improving correlation as the country sizes increase.


Other Economics and Business Items of Note and Miscellanea



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