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What We Read Today 22 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

Global

  • Modern humans and Neanderthals 'interbred in Europe' (BBC News)   Modern humans and Neanderthals interbred in Europe, an analysis of 40,000-year-old DNA suggests.  The study suggests an early Homo sapiens settler in Europe harboured a Neanderthal ancestor just a few generations back in his family line.  Previous work has shown our ancestors had interbred with Neanderthals 55,000 years ago, possibly in the Middle East.

U.S.

EU

Greece

  • Greece spells out terms for debt crisis 'breakthrough' (BBC News)  Greece's economy minister has spelled out the terms of new proposals to end deadlock on its debt crisis, amid hopes a deal can now be struck this week.   Giorgos Stathakis told the BBC's Robert Peston that creditors accepted Greece's debt plan.
  • Greece Is in a Worse Spot Than America Was in 1933 (Bloomberg) Greater than the Great Depression?  The problem is lack of agreement on definitions.  But greater is not out of the question.  Econintersect:  We will be updating some old work soon on how to define depressions analytically.

China

  • China Margin Trades Buckle Leaving $364 Billion at Risk (Bloomberg)  The biggest tumble in Chinese shares since 2008 is proving especially painful for margin traders as their favorite stocks sink faster than the benchmark index, raising the risk of forced liquidations.  The 30 equities in Shanghai with the highest levels of margin debt relative to tradable shares have dropped 17% on average since the market peaked on June 12, versus a 13% decline for the Shanghai Composite Index. Margin positions on the city’s bourse fell for the first time in a month on Friday, a sign that leveraged investors are unwinding bets after they grew more than five-fold in the past year.


Soaring home prices not a 'bubble': Realtors (CNBC)  The U.S. housing market is booming (compared to 2009-2013 at least) and realty persons are excited.  What you don't get from this article is that median house prices are nearing a record but median real household income is down over the past 9 years and are lower today than since sometime in the last century.  That indicates real constraints for housing sales volumes.  (See next article.)  But not to worry for realtors.  Here is Lawrence Yun,chief economist for the NAR (National Association of Realtors), comparing apples (today's market) to oranges (2006 market):

1. Overall demand for housing is 25 percent lower than it was during the housing boom.

2. New home construction is about half of what it was during the housing boom.

3. Mortgage debt outstanding is 10 percent lower than during the housing boom.

  


The Median Household Income Rose in April (Doug Short, Advisor Perspectives dshort.com)  "Middle America" is losing ground:

Click for large image at Advisor Perspectives dshort.com.
median.household.income.2000.2015


Other Economics and Business Items of Note and Miscellanea

The Obama Administration Is Still Using Economics, Not Scare Tactics, to Sell Climate Change Action (New Republic)  The EPA (Environmental Protection Agency) is out with a peer-reviewed study on Monday that says the United States would see benefits in the hundreds of billions of dollars if the world takes aggressive action on climate change.  See Climate Change in the United States:  Benefits of Global Action.

Inequality: The Rhetoric and Reality (Foundation for Economic Education)  The author, James A, Dorn, argues for refraining from government action (as through tax policy, for example) to reduce income inequality.  He says:

Purveyors of that rhetoric, however, overlook the reality that when the state plays a major role in leveling differences in income and wealth, economic freedom is eroded. The problem is, economic freedom is the true engine of progress for all people. 

The Crowding-Out Tipping Point (Foundation for Economic Education)  Econintersect:  This is a mixture of good philosophy and bad empiricism.  For example, excessive debt is decried philosophically (good) and then characterized with a crude empiric which ignores the role of private debt in creating and limiting economic growth (bad). In most developed countries private debt is significantly greater than government debt and any, even crude, empirical treatment must include that data set.  And the crowding out hypothesis is an unfortunate citation because government spending (or investment) crowding out private spending (or investment) occurs in only specific and uncommon situations.  These situations must involve competition for a scarce resource.  Perhaps the biggest resource factor would be labor, so scarcity of labor would be necessary and simultaneous increase in government employment would have to be occurring for crowding out of private employment opportunity to occur.  There have been rare occasions when (1) unemployment has been less than 3%, (2) the civilian labor force participation rate has been 2/3 or greater (66.67%) and (3) government employment was increasing all at the same time.  See the three graphs below.  The third graph is especially informative as regards government crowding out private economic growth.  The most rapid periods of GDP advancement have coincided with periods of outsized government employment growth.  That doesn't prove that government growth directly creates GDP growth (we don't think that is likely) but it is a strong indication that for labor there is no case for government crowding out private endeavors.  There is far more at play here than a simple crowding out effect.  Finally, Dorn makes a statement which is valid  (regarding "the market") only for a free market, not one in which a very few dominate in control.

The nature of government is coercion; the nature of the market is consent.

unemployment.rate.1948.2015

civilian.labor.force.partic.1948.2015

gov.growth.ratio.pop.growth.annotated



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