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What We Read Today 15 June 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


  • Carnival Will Stuff More Than 7,000 Humans Into Its New Cruise Ships (Bloomberg)  The four new ships will be the cruise industry's largest yet - but only in head count, not in size.  Econintersect:  How do spell 'sardines"?
  • Pope calls for action on climate change in draft encyclical (Reuters)  Pope Francis makes an urgent call for protection of the planet and repeats his view that global warming is mostly man-made in his keenly awaited encyclical, according to a draft published by an Italian magazine on Monday.  The Vatican said the document, leaked by the magazine l'Espresso, was not the final version. That is due for release on Thursday.


  • Hank Greenberg Wins Trial But No Damages in AIG Bailout Fight (Bloomberg)  The judge who called illegally onerous the terms of AIG’s $85 billion bailout -- hatched during the depths of the financial crisis -- also ruled that without it investors would probably have gotten nothing. As a result, he awarded Greenberg’s Starr International Co., AIG’s biggest investor at the time, no money.  Econintersect:  An amazingly rational decision.
  • Hillary Clinton has always been to Obama's left on economics (Vox)  Econintersect:  If Obama is a radical communist as we have read, where does that put Hillary?
  • Jeb Bush Announces He Is Running for President (Bloomberg)  A fluent Spanish speaker who hopes to make inroads with Hispanic voters, Bush declared “in any language, my message will be an optimistic one because I am certain that we can make the decades just ahead in America the greatest time ever to be alive in this world.” 


It is difficult to understand the logic of the International Monetary Fund’s (IMF) present negotiating position in its dealing with the Greek government. Since, after earlier having acknowledged that excessive fiscal tightening within a Euro straitjacket had played an important part in Greece’s horrendous economic performance over the past six years, the IMF is now prescribing very much the same policies for the period immediately ahead. This has to beg the question as to why the IMF believes that policies which it admits had failed in the past will now work in the future.

  • ECB’s Praet: Greece Has Choices Over Its Reforms (The Wall Street Journal)  Whether a country decides to reform aspects such as education; labor; or its adherence to the rule of law or corruption, Mr. Praet said, reforms need to be sustainable; offer a coherent package and must have ownership.


  • Islamic State conflict: Syrian Kurds 'seize Tal Abyad' (BBC News)  Syrian Kurdish fighters say they have taken control of the Islamic State-held town of Tal Abyad, cutting off a major supply route for the jihadist group.  Reinforcements are being sent by the Kurdish Popular Protection Units (YPG) to help secure the main road south to Islamic State's headquarters at Raqqa.



  • Economic analysis of retail price controls (Australian Government Department of Commerce)  This report concludes that telephone fixed line service price controls in place in Australia for 25 years are no longer needed due to increased competition in the market. 

NAHB Housing Market Index: Highest Since September 2014 (Advisor Perspectives  The HMI is back near the post-recession high but not yet above 60 which region is where previous peaks have occurred.

Click for larger image at Advisor Perspectives

Expectations for Interest rates and Inflation are Moderating (Walter Kurtz, The Daily Shot)


Other Economics and Business Items of Note and Miscellanea

  • The failure of trickle-down economics (CBS Money Watch)  There's a major problem with trickle-down economics: it not only doesn't work, but it ends up backfiring by actually shrinking a country's GDP, according to a report from the International Monetary Fund.  See next article.
  • Causes and Consequences of Income Inequality: A Global Perspective (IMF)  If the income share of the top 20% (the rich) increases, then GDP growth actually declines over the medium term, suggesting that the benefits do not trickle down. In contrast, an increase in the income share of the bottom 20% (the poor) is associated with higher GDP growth. The poor and the middle class matter the most for growth via a number of interrelated economic, social, and political channels. 
  • A theorem on the methodology of positive economics (cogent oa)  Econintersect: This is a cogent discussion of the absurdity of the basis of rational expectations economics.  Reality doesn't matter; only what observers think reality to be.  How is this rationalized with the fickleness of human belief?  This paper gets into the weeds of the absurdity and comes to some rational conclusions.  From the introduction:

In economics, it is customary to develop formal models of imaginary worlds based on assumptions that may have remote connection with the economic reality. It is not unusual to hear, for example, in a seminar presentation that “My model is not intended to be realistic, but only to demonstrate the potential for a particular outcome”. When someone suggests that an economic assumption within the model is absurd, they are told that they do not understand economics. “Have you ever read Friedman’s essay on positive economics?” the model builder would ask. “Well, if you do, you will understand that the realism of an assumption does not matter”. This intellectual attitude illustrates the typical reaction of the rational expectations economists when confronted with questions about the empirical existence of omniscient economic agents. 

  • Why libertarianism is closer to Stalinism than you think (Reuters)  This author finds Libertarianism has a complicated history, and it is by and large a sordid one. Its leading 20th-century theorist was the novelist Ayn Rand, who, for all her talk of freedom, was an authoritarian at heart. She was intolerant of dissent and conspiratorial to  a fault.

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