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 dayin the early am at GEI News (membership not required for access to "The Early Bird".).
How much of the decline in inflation is caused by short-term and temporary influences—such as low oil and gas prices? How much reflects output gaps, currency movements, and recent wage dynamics—which could also fade over time? Or are there permanent structural changes in the global economy generating a new era of permanently lower inflation? What are the risks of lower inflation?
"... In the case of China, the share of the US dollar in total cross-border claims dropped by 15 percentage points from 54% at end-2008 to 39% at end-2014.", a slow, steady rate of just less than 3%/annum. This combined with a slightly higher rate of disgorgement of USTs shows a rational, deliberate policy in motion over time.
Amazing Proof of Shale’s Seismic Shift (Robert Rapier, Investing Daily) Robert Rapier has contributed to GEI. Most of the oil and gas fields with the largest proven reserves in 2013 were not on the top 100 maps in 2009. Here is some of what Rapier has to say:
The Eagleville field (in the Eagle Ford Shale) was only discovered in 2009 but is now the #1 field in the U.S. based on its reserves (denoted by the large circle shown on the map in South Texas). Not only that, in 2013 — a mere four years after discovery — it was also the top producing oil field in the U.S. with 238 million barrels produced that year. This was more than twice the production of the second largest-producing field. In addition to the Eagleville, four other new Eagle Ford fields have joined the top 100 for the first time.
Who is producing all of this new oil? The top oil producers in the Eagle Ford include EOG Resources(NYSE: EOG), BHP Billiton (NYSE: BHP), ConocoPhillips (NYSE: COP), Chesapeake Energy (NYSE: CHK) and Marathon Oil (NYSE: MRO).
The top gas field by both production and reserves — the Marcellus Shale underneath Pennsylvania, West Virginia, southern New York, eastern Ohio, and extreme western Maryland — was only discovered in 2008 and thus did not even appear on the map in the 2009 update. The top five producers in the Marcellus are Chesapeake Energy (NYSE: CHK), Cabot Oil and Gas (NYSE: COG), Range Resources (NYSE: RRC), Southwestern Energy (NYSE: SWN) and EQT (NYSE: EQT). However, because there had been no significant gas production in that region in the modern era, the rapidly expanding drillers have faced logistical constraints that weren’t a big hurdle in ramping up oil production in Texas.
Other Economics and Business Items of Note and Miscellanea
American Pharoah's Triple Crown win is terrible news for stocks (Business Insider) For the ten years since 1928 the average return for the S&P 500 for the rest of the year was minus 9% when there was a Triple Crown winner, according to this article. Only one year (1935) had a gain (46.7% for the full year). Econintersect: Actually, this article is all too short-sighted. For the full years following a triple crown we calculate the index return (not including dividends) was up an average of plus 7.7% (only two down years: 1931 - 43.8% and 1974 - 25.9%). And if you invest for the long run, the second full year after a triple crown the average was plus 14%. We have calculated the 3-year aggregate return for the S&P 500 without dividends starting with the full-year return for the Triple Crown year: plus 20.4%. Caveat: We don't invest by such formulas.
Reverse Causation (Cullen Roche, Seeking Alpha) Hat tip to Marvin Clark. Our friend Cullen says "this isn't a personal competition"and "Dr. Krugman is WAY smarter than I am." He stays true to that into by saying nothing personal about Prof. K. But Cullen does attack the models used and supported by Krugman, point-by-point. He concludes (with an endorsement from Econintersect - completely after the fact):
...what we have here is a theory that is a "stripped down" model that misrepresents banking, uses a theoretical concept that may or may not exist and applies a totally unrealistic theory about permanency on top of all of that. Frankly, I find it hard to believe that any rational person could use such a model. And the sooner these kinds of models go away the sooner we will get to more realistic models and better policy outcomes.
The commercial and discursive triumph of Thomas Piketty’s Capital in the 21st Century symbolises this turning point in the public’s mood both in the United States and in Europe. Capitalism is, suddenly, portrayed as the purveyor of intolerable inequality which destabilises liberal democracy and, in the limit, begets chaos. Dissident economists, who spent long years arguing in isolation against the trickle-down fantasy, are naturally tempted to welcome Professor Piketty’s publishing phenomenon.
Arguing from the perspective of a radical egalitarian, I conceded that the libertarians had the better tunes. That their focus on the justice of the process generating values and what distributes them (i.e. their dedication to procedural theories of justice) was significantly more interesting, useful and, indeed, progressive than the pseudo-egalitarian dedication to end-state, distributive, theories of justice. That the libertarians’ readiness to separate ‘good’ from ‘bad’ inequality, rather than to treat inequality as a single, uni-dimensional metric, held more promise to those who wished to understand the vagaries, and instability, of capitalism than the social democrats’ protestations that income and wealth outcomes were too unequal. That those interested in reinvigorating a pragmatic, radical egalitarianism should abandon static notions, and simple metrics, of equality.
Reading Capital in the Twenty-First Century reminded me of how the cause of egalitarianism is often undermined by its most famous, mainstream proponents. John Rawls, despite the elegance and sophistication of his ‘veil of ignorance’, did untold damage to the egalitarian ‘cause’ by offering a static theory of justice that crumbled the moment a talented libertarian took a shot at it. Professor Piketty’s book will, I am convinced, prove even easier prey for today’s, or tomorrow’s, equivalent of Robert Nozick. And when this happens, the multitude that are now celebrating Capital in the Twenty-First Century as a staunch ally in the war against inequality will run for cover.
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