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What We Read Today 20 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".).

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

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Today we have sections that discuss (1) the sharing economy innovations implemented by Uber and Lyft and (2) the contrasting economic and innovation viewpoints of Peter Theil and William Janeway. 


Articles about events, conflicts and disease around the world

Global

U.S.

  • Another bridge damaged during storm that caused collapse (Associated Press, MSN News)  Interstate 10 is closed in California after record rains create floods which are washing out bridges during the worst drought in modern history.
  • Americans favor Supreme Court term limits - Reuters/Ipsos poll  (Reuters)  Most Americans would support imposing a term limit on the nine U.S. Supreme Court justices, who now serve for life, a Reuters/Ipsos opinion poll has found in the aftermath of major rulings by the court on Obamacare and gay marriage.  Limiting terms would be difficult, requiring an amendment to the U.S. Constitution. Congress shows no signs of taking up the idea, though Republican presidential contender Ted Cruz has suggested the possibility of justices being voted out of office.  Support for the 10-year term limit proposed by the poll was bipartisan, with 66 percent saying they favored such a change while 17 percent supported life tenure.  Econintersect:  We would favor the Constitutional amendment also prohibiting reappointment at the end of a term or at any future time.

Germany

  • Variable geometry bites back: Schäuble’s motives (Voxeu.org)  The Greek crisis risks shattering the Eurozone as we know it. Germany’s Finance Minister Wolfgang Schäuble has been leading a coalition of hawks who appear determined to make Grexit an unavoidable outcome. If not immediately then at least once it becomes clear (or clearer) that it is impossible for Greece to satisfy the conditions it is being asked to meet.  This article takes us back 25 years for some background history.  In those years, Mr. Schäuble – heir apparent to Chancellor Helmut Kohl at the time – championed a ‘variable geometry’ approach to the Eurozone. A key implication of this ‘variable geometry’ was that that monetary unification should be restricted to a set of ‘core’ countries that shared Germany’s preference for austerity.

Greece

  • The Great Greek Bank Drama, Act II: The Heist (Coppola Comment) Frances Coppola has contributed to GEI.  Banking expert Coppola says the next phase of the impoverishment of the Greek people will be a "nationalization" of Greek banks by the EU and the ECB, followed by a bail-in of deposits sufficient to improve bank capitalizations to satisfactory levels.  A bail-in is the conversion of deposits (bank liabilities) to bank equity (assets).  Instead of having "money in the bank" depositors will have equity ownership.  Coppola says this will cause great damage to the Greek economy because these "vanished" deposits constitute,to some extent, the working capital of smaller businesses in Greece.  When this was done in Cyprus in late 2010 the GDP growth rate there dropped by 8% (from +2% to -6%) over the next two years.  Coppola says the impact in Greece will be greater because the bail-ins in Cyprus fell primarily on foreign depositors and did not hit Cyprrus depositors the way Greek depositors will be affected.
  • Why debt sustains corruption in Greece and vice versa (Voxeu.org)  

The way out is to sign a new agreement that combines debt restructuring and radical transparency reforms, including naming-and-shaming practices, to block clientelism in the medium and long run.

Turkey

  • Suruc massacre: At least 30 killed in Turkey border blast (BBC News)   A bomb attack in the Turkish town of Suruc has killed at least 30 people during a meeting of young activists to discuss the reconstruction of the neighbouring Syrian town of Kobane.  Around 100 others were wounded in the explosion, which may have been caused by a female suicide attacker from the Islamic State group

Iran

Russia

China

  • China's Gold Reserves: A Strong Dose Of Reality (Seeking Alpha)  Gold bugs cite China's "massive" gold purchases to support the idea that gold will soon rally and China will use a 'hard currency" to undermine the fiat currencies of the West.  The author says:
  • China is not very interested in gold; it owns little of it, and has actually shown proportionately more interest in accumulating paper bonds denominated in fiat currency.
  • The days of China's massive FX reserve accumulation are essentially over. Consequently, it is likely that the days of significant official gold accumulation in the country are past.
  • The evidence makes it extremely clear that China has no interest in tying its currency to gold.

Cuba


Here's how much you could make as an Uber or Lyft driver in 20 major US cities (Rachel Gillett, Business Insider)  Data is from SherpaShare, a financial-analytics site that allows drivers who work for on-demand companies to track their earnings.

According to Uber, in 2014 the median wage for an UberX driver working at least 40 hours a week in New York City averaged to about $43 an hour. A more recent report from Uber, however, put that number closer to $30 an hour.

By aggregating data from more than a million drivers tracking their trips between January and May 2015, SherpaShare was able to average fare per trip in 20 major US cities.

While SherpaShare didn't reveal the average number of trips per hour drivers could make, we now know that the average fare for a New York City Uber or Lyft driver is close to $29. 

uber.lyft.drivers.earn 


Is Uber really cheaper than a taxi? (Business Insider)

Other Economics and Business Items of Note and Miscellanea

  • Is It Worth It? (Dave Trott's Blog)   Hat tip to Alun Hill.  A "cute" story to remind us of a common failing:  the emotional side of our brain overrides the rational side.  That’s Kahneman’s ‘Type One’ thinking overriding ‘Type Two’ thinking:  the instantaneous reaction overriding the slow incremental logic.

The next three articles are about two technology investment moguls with highly opposed philosophies.  Econintersect asks:  What if both are right?  If you think there is even a remote possibility that could be the case, give some more thought to the preceding article.

  • Peter Thiel disagrees with you (Fortune)  Strident libertarian Peter Theil has made billions as an individualistic entrepreneur and believes that is the way progress is made for humanity.  He is an outspolen critic of "collectivism" and the state as a power for advancement of humankind.  This article is light on philosophy and long on accomplishmnent and how Theil has chisen to invest.  But his philosophical roots do shine through.

  • The State and the Innovation Economy (The BreakThrough)  Hat tip to Roger Erickson.  William Janeway is interviewed in this article.  Janeway has ideas quite opposed to thise of Peter Theil:

The public sector has been indispensible in advancing transformative innovations, and must remain so by making massive investments in science and technology, often sustained over decades, and using its power of procurement to create new markets for nascent products.


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