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What We Read Today 04 July 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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Articles about events, conflicts and disease around the world


  • The ‘new’ type of war that finally has the Pentagon’s attention (The Washington Post)  The Pentagon is increasingly concerned about how to combat “hybrid warfare,” the combination of stealth invasion, local proxy forces and international propaganda that Russia used to annex Crimea and destabilize eastern Ukraine.  This kind of warfare transcends traditional notions of one military confronting another by incorporating conventional and unconventional forces, information warfare such as propaganda, as well as economic measures to undermine an enemy.


  • Weapon Designed to Kill Off Phone Theft Proves Lethal (Money Talks News)  California’s new kill-switch law is only a few days old, but the effectiveness of the technology it mandates for preventing smartphone theft has already been demonstrated. Kill switches allow phone owners to deactivate a lost or stolen phone, making the device utterly worthless, unless you’re looking for an expensive paperweight.  Because California requires all cellphones sold after 01 July 2015 to have the kill switch as an 'opt out' function, manufacturers have implemented it for all phones sold in the U.S. and many othercountries as well.  Prior to this the feature was available on all phones but required individual activation ('opt in') and few cellphone owners took advantage.
  • What the Declaration of Independence Really Claimed (The Washington Post)  When reading the Declaration, it is worth keeping in mind two very important facts. The Declaration constituted high treason against the Crown. Every person who signed it would be executed as traitors should they be caught by the British. Second, the Declaration was considered to be a legal document by which the revolutionaries justified their actions and explained why they were not truly traitors. It represented, as it were, a literal indictment of the Crown and Parliament, in the very same way that criminals are now publicly indicted for their alleged crimes by grand juries representing “the People.”  But Americans had to allege more than mere violations of rights. They had to allege nothing short of a criminal conspiracy to violate their rights systematically. Hence the Declaration’s famous reference to “a long train of abuses and usurpations” and the list that followed. In some cases, these specific complaints account for provisions eventually included in the Constitution and Bill of Rights.


  • Why Greece should vote 'No!' (Peter Morici, CNBC)  PM has contributed to GEI.  Urging a "Yes" vote, European leaders and their supporters in private institutions claim more austerity would reinvigorate the Greek economy and permit Greeks to keep the euro as their currency, but such claims simply contradict the facts.  Already, the Troika, led by German Chancellor Angela Merkel and IMF Managing Director Christine Lagarde, has imposed five years of budget cuts, higher taxes and labor market adjustments. The Greeks have endured a 25- percent contraction in GDP, 25-percent cut in private-sector wages and 25 percent unemployment.  Greece's debt-to-GDP ratio has soared to 180 percent from 130 percent of GDP, and that is an impossible burden to repay.  The only solution is for Greece to replace existing bonds with securities having longer maturities and paying lower interest rates, and with reduced face value — essentially, a haircut for creditors.  By voting "No," Greeks would provide Tsipras with leverage he does not now have to negotiate debt relief and more realistic economic policies. 
  • Third World in the First World (Amar Bhide, Politico)  Amar Bhide has contributed to GEI.   Prof. Bhide says that the real problem for Greece isn’t economic principles or policies, nor the Germans’ disregard for Greek democracy and their fetish for “austerity.” It’s the malfunctioning machinery of the Greek government.  Greece has the trappings of an advanced Western economy, but its government’s capacity to tax and spend seems distinctly Third World. The proportion of self-employed Greeks is more than twice as high as in the rest of Europe. And as everywhere, self-employment provides more opportunities for tax fiddling than does earning a salary; indeed the ease of tax evasion rather than the glamor of entrepreneurship is what draws many to self-employment.  But Bhide argues that, although this tax situation is problematic,it is not the thing that is fundamentally needed to make the Eurozone, with Greece as a member, function properly  He told GEI:

I would argue that integration of the banking system, consistency of banking rules and universal deposit insurance is a prerequisite for a common currency. Integration of taxes or mutualization of public debt is not.


  • Can India “Unlock Its Potential”? (LinkedIn)  Today, India is one of the few emerging economies that stand out in a trend of disappointing economic performances. Chinese growth in the first quarter of the year was 5.3% (down from 7.4% in Q1/2014), Brazil is experiencing stagflation and Russia continues to be isolated from global markets. In comparison, India's economy grew 7.5% in the first quarter of 2015, and is expected to maintain this rate over most of 2015 and 2016.  India's strengths are a strong technology field, a growing population and good political and trade relations with its largest neighbor, China.  Read more in the report: Can India “Unlock Its Potential” to Become a Key Global Economic Player? (Hedge SPA).

Update: Prime Working-Age Population Growing Again (Bill McBride, Calculated Risk)  Changes in demographics are an important determinant of economic growth, and although most people focus on the aging of the "baby boomer" generation, the movement of younger cohorts into the prime working age is another key story in coming years. Here is a graph of the prime working age population (this is population, not the labor force) from 1948 through June 2015.  Note the slight decline from 2006 to 2013 and the slight upturn since 2013.

Demographics and GDP: 2% is the new 4% (Bill McBride, Calculated Risk)  The relationship between the U.S. labor force growth and GDP growth over the past 65 years is interesting.  McBride discusses the progression over time in terms of government spending, changes in productivity and simple demographics.  This is a study we would like to return to and will maybe be posting some additional analysis some time in the future,


Other Economics and Business Items of Note and Miscellanea

For the past half-century, the academic macro story has gone something like this: There is a general trend of rising growth and prosperity in the U.S. economy, caused by steady improvements in technology. But this steady course is disturbed by unpredictable events -- “shocks” -- that temporarily slow growth or speed it up. The shocks might last for a while, but a positive shock today doesn’t mean a negative shock tomorrow. Recessions and booms are like rainy days and sunny days -- when you look back on them, it looks like they alternate, but really they’re just random. 

Why did macroeconomists arrive at this conclusion? First of all, the most simple theory of booms and busts -- that the economy is like a wave, peaking and plunging at regular intervals -- doesn’t hold up. The occurrence of booms and busts is highly irregular. Some people tried to compensate by making the models very complex and chaotic, but the math got too hard, and in the end, chaotic systems usually just end up looking random anyway. 

  • Three-year-old ETF becomes only game in town for investors hoping to play Greece volatility (Investment News)  The Global X FTSE Greece 20 ETF traded a record 14 million shares over three days, plunging 19% on Monday and then regaining half the loss on Tuesday and Wednesday. It dropped 0.9% on Thursday at 1:10 p.m. in New York. A similar fund with listings in Europe was suspended all week, making the U.S. version the only means to place bets on Greek equities after regulators closed the Athens Stock Exchange. With few of its underlying stocks trading, the ETF was transformed from its normal function of tracking Greek equities into a more speculative role for traders trying to predict where they'll go.  The symbol is NYSE:GREK.

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