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What We Read Today 26 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".).


Every day most of this column ("What We Read Today") is available only to GEI members.

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Breaking News

Escaped NY Murderer Richard Matt Shot Dead (The Wall Street Journal)

The rest of this post is available only the GEI Members.  Membership is FREE -  click here.

Articles about events, conflicts and disease around the world


  • It appears more and more likely that Japan has shaken off the negative impact of the sales tax hike from a year ago.
  • The EU appears to be growing
  • Australia, while still growing at a ~2% clip, is feeling the negative impact of the commodity bear market.
  • The US has shaken off the weak 1Q number.


  • California's Drought Is Part of a Much Bigger Water Crisis (Scientific American)  The problems are as much structural and systemic as they are natural.  California's is a severe, but relatively short-term, drought. But the Colorado River basin—which provides critical water supplies for seven states including California—is the victim of a slower-burning catastrophe entering its 16th year. Wyoming, Colorado, New Mexico, Utah, Nevada, Arizona and California all share water from the Colorado River, a hugely important water resource that sustains 40 million people in those states, supports 15 percent of the nation's food supply, and fills two of largest water reserves in the country.  "Killing the Colorado" has shown that people are entitled to more water from the Colorado than has flowed through it, on average, over the last 110 years. Meanwhile much of the water is lost, overused or wasted, stressing both the Colorado system, and trickling down to California, which depends on the Colorado for a big chunk of its own supply.  See also the ProPublica artiucle at GEI News:  Misguided Water Laws: Use It or Lose It.
  • The Gay Marriage Decision Was a Matter of Principle, Not Practicality (Bloomberg)  Hundreds of companies, from Main Street to Wall Street, urged the justices in friend-of-the-court briefs to strike down state laws banning same-sex marriage.  Allowing homosexuals to marry freely would help employers attract talent and simplify employee benefits, the corporations argued.
  • Two escaped New York prisoners headed to Canada: police (Reuters)  Two convicted killers who escaped from an upstate New York prison were believed to be headed for Canada after searchers in the third week of the manhunt found items they had dropped, police said on Friday.  They escaped from a prison only 20 miles from the border and items with DNA from one or both of the prisoners was found at an undisclosed remote cabin location only about 25 miles west of the prison earlier this week.  Two prisonn workers are suspected of helping with the escape.


  • Shelter from the Storm in Europe (Mohamed A. El-Erian, Project Syndicate)  The former CEO of PIMCO and now Chairman of President Obama’s Global Development Council says that Europe is in a position to address its three major problems individually but the convergence of all three could produce a "perfect storm".  The three challenges are presently "at different stages of formation":  (1) the Greek Crisis is boiling hot; (2) the Russian incursion into Ukraine is simmering; and (3) "political tumult brought about by the rise of populist political movements" is just warming up.  El-Erian sums up his view:

Though each poses a considerable threat, Europe, aided by the recent cyclical pickup, is in a position to address them individually, without risking more than a temporary set of disruptions. Should they converge into a kind of “perfect storm,” however, a return to sunny days will become extremely difficult to foresee any time soon.

  • British Muslim Accused of U.K. Bombing Plot Loses Damages Fight (Bloomberg)  A British Muslim convicted of plotting to carry out a bombing attack can’t appeal a ruling rejecting his bid to win compensation from the U.K. government for its alleged complicity in his torture.  Salahuddin Amin, who is currently serving a life sentence, sued the U.K. security services for their role in his unlawful detention in Pakistan and subsequent removal to Britain in 2005, where he was immediately arrested.


  • Greece debt crisis: Athens rejects five-month bailout extension (BBC News)  Greece has rejected an offer from its creditors to extend the country's bailout deal as too little and likely to cause recession.
  • Greece says it cannot accept 'unviable' debt solutions (Al Jazeera)  Greek Finance Minister Yanis Varoufakis said his country has done everything it could to accommodate the "strange demands" made by its creditors, and was determined to remain part of the eurozone.  Demands for tax increases and pension cuts that Greece's creditors are setting as conditions for the disbursement of financial aid are putting the country in an impossible position, Varoufakis told Irish national radio RTE on Friday.  He said:

"I am against increasing the corporate tax, but then again I am against raising the tax on hotels and against cutting the pensions of people who live below the poverty line." 


  • Dozens killed in Tunisia beach resort attack (Al Jazeera)  At least 27 people, including foreigners, are killed in a hotel attack in the coastal resort city of Sousse.  Econintersect:  It seems that the calendar is running backwards in the land that gave birth to the Arab Spring and dark winter has returned, a winter of discontent (apologies to John Steinbeck)..

Islamic State


  • Islamic State kills at least 145 civilians in Syria's Kobani (Reuters)  Islamic State fighters killed at least 145 civilians in an attack on the Syrian town of Kobani and a nearby village, in what a monitoring group described on Friday as one of the worst massacres carried out by the hardline group in Syria.  Islamic State also attacked government-held parts of the northeastern city of Hasaka, blowing up a security building and triggering a government appeal for all residents to take up arms. The United Nations said 60,000 people were reported to have fled the attack.  Islamic State's twin attacks which began on Thursday showed the group returning to the offensive in Syria after two weeks of defeats at the hands of Kurdish-led forces, supported by U.S.-led air strikes. Earlier this week the Kurds advanced to within 50 km (30 miles) of Raqqa city, the group's de facto capital.


  • India's Structural Challenges (Advisor Perspectives)  International optimism sparked by the election of Prime Minister Narendra Modi should be tempered by the fact that reforms he has promised face "challenges [that] have deep-rooted origins with no easy solutions".  With many of India's institutional traditions deriving from its colonial past many are short-term focused and disconcerting for Indians to modify due to the increase of uncertainty that accompanies the process.  The author, Sudarshan Murthy of Matthews Asia, provides a diagram summarizing his view of the reform terrain:


Greek Bank Deposits Fall to Eleven-Year Low (Bloomberg)  Data is now complete through the end of May and deposits in Greek banks have fallen 45% from the peak in September 2009 (€237.8 billion).  The ECB (European Central Bank) has used ELA (Emergency Liquidity Assistance) funds to maintain operations of the Greek banks  The total advanced thus far is nearly €89 billion which substantially offsets the €108 billion withdrawn since 2009.


The Last Time This Happened, The Bull Market Ended (Zero Hedge)  The last time spending on buybacks-plus-dividends exceeded operating profit was Q2 2007 and the market topped in early October.  Econintersect:  Remember two things:  (1) Past performance is no guarantee of future results; and (2) Those that do not learn from history are doomed to repeat it.  That both are often true is what makes life interesting.  But one thing is sure:  Corporations spending more than they make is not a sustainable situation.


Update: "Scariest jobs chart ever" (Bill McBride, Calculated Risk)  This graphic has become timeless.

Click for large image at Calculated Risk.

Other Economics and Business Items of Note and Miscellanea

  • Schizophrenia May Be the Price We Pay for a Big Brain (Scientific American)  Science suggests that numerous nonhuman species do suffer from psychiatric symptoms.  But at least one mental malady, while common in humans, seems to have spared other animals: schizophrenia, which affects an estimated 0.4 to 1 percent of adults. Although animal models of psychosis exist in laboratories, and odd behavior has been observed in creatures confined to cages, most experts agree that psychosis has not typically been seen in other species, whereas depression, obsessive-compulsive disorder and anxiety traits have been reported in many nonhuman species.

  • Finance Has Caught On to Behavioral Economics (Noah Smith, BloombergThinkAdvisor)  While macroeconomics has resisted behaviorism, finance has accepted the new ideas without even breaking stride. Behavioral finance chugs along mostly undisturbed.  Part of the reason is a difference in definitions. To most economists, behavioral economics means using findings from psychology to modify models of individual behavior. But behavioral finance has come to have a much more expansive meaning, basically encompassing anything that doesn’t conform to the EMH (Efficient Markets Hypothesis, which says that you can only earn market-beating returns by taking on extra risk).  Econintersect:  This emphasizes again the irony of the joint Nobel Prizes in 2014 for Shiller (Behavioral Economics) and Fama (EMH). 
  • Marriage ruling streamlines benefits administration (Employee Benefit Adviser)  U.S. businesses are looking forward to savings in the area of employee benefits administration after the SCOTUS decision today that gay marriage cannot be discriminated against by state laws.

The nice benefit for employers is the decision will help simplify benefits since all spouses will be treated uniformly.” 

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