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What We Read Today 07 August 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


  • Gross Sees Global Economy Dangerously Close to Deflation (Bloomberg Business)  Bill Gross, money manager at Janus Capital Group Inc., keys off commodity prices and lack of wage growth in developed countries to conclude that deflation is still a global risk.  Among the things he said Friday during an interview with Tom Keene on Bloomberg Radio, excerpted from this article:

Once there is a “whiff of deflation, things tend to reverse and go badly". He pointed to how the CRB Commodity Index isn’t just at a cyclical low, but lower than in 2008 when Lehman Brothers Holdings Inc. went bankrupt.


The debt ceiling should automatically be increased when a budget resolution, which accurately reflects the estimated debt limit, is approved by Congress and goes to the president for signature.


  • Why American Teens Aren't Working Summer Jobs Anymore (Bloomberg Business)  The reasons include: (1) More teens are "doing other stuff" during their summers; (2) There are fewer teen jobs available as former work is repalced by technology rather than untrained youth; and (3) There is more competition for work from unemployed adults.  Looking at the history (graph below), the decline in summer jobs is not new - it began in earnest in the early 1990s.


  • Migrant 'chaos' on Greek islands - UN refugee agency (BBC News)  Crippling austerity is not the only disaster in Greece.  In July alone the country received around 50,000 refugees from Mediterranean flotillas.  The worst concentration of migrants is on the Greek islands of Kos, Chios and Lesbos where there is "total chaos", according to the UN refugee agency UNHCR.  The crisis includes inadequate accommodation, water and sanitation. 

Saudi Arabia


  • US Releases First ISIS Detainee to Iraq, Setting Precedent for a New War (Defense One)  On Thursday,  following what National Security Council officials called “unanimous interagency consensus”, the Defense Department transferred Nasrin As’ad Ibrahim, an Iraqi woman also referred to as Umm Sayyaf, to Iraqi custody.  In turning the prisoner over to the Government of Iraq and Iraqi Kurdistan Regional authorities, the U.S. abandoned consideration of trying her in  American courts.


  • Will the Iran nuclear deal create a more stable Middle East? That all depends—on the United States (Brookings)  What could potentially cause Iran to change its behavior, for good or ill, are the policies the United States pursues in the region going forward. If the United States uses the JCPOA (Joint Comprehensive Plan of Action) nuclear agreement as an excuse to further disengage from the region, it is highly likely that Iran's goals will become more expansive and its policies more aggressive, believing that the United States no longer has the will or the capability to stop it. On the other hand, if the United States reacts to the JCPOA by stepping up its engagement in the region and acting decisively—providing real, meaningful assurances to its Gulf allies that it truly is concerned with protecting their security interests and pushing back hard on Iran in other areas, particularly in Syria—then it is very likely that the Iranians will respond in the same way they always have the United States has flexed its muscles: by backing down.


Market Data Highlights (Moody Analytics)  Corporate and financial credit issuance is less in euros this year than in recent years (except 2013) and more in the dollar.  For 2014 the cumulative issuance in the dollar was about 1.8x that issued in the euro.  This week the ratio has increased to approximately 2.2x.  This is an increase of about 22% which is largely accounted for by the devaluation of the euro vs the dollar by 21%.  Thus the "big" change has little reflection on the relative strength of the economies in the two currency "zones".



Other Economics and Business Items of Note and Miscellanea

  • What If Moody’s Is Too Generous on Even Lower Oil Price Assumptions? (24 Wall Street)  Moody’s lowered its price assumption in 2015 for Brent crude to $55 from $60 per barrel. For WTI, Moody’s cut its target to $50 from $55 per barrel for 2015. The 2015 assumptions seem more or less in line with average pricing seen this year, but the real issue is whether Moody’s assumptions for 2016 and beyond are too generous given the current price and supply climate for oil.  For 2016 Moody's says they expect the supply-demand equilibrium will eventually be reached at around $75 per barrel for Brent and $70 for WTI. That is far higher than the last rally that petered out at in June.  If Moody's expectation is too high that has severe negative implications for credit ratings for all those oil and gas bonds (junk bonds particularly).


  • The Retirement Expert Who Got Death Threats For Her Ideas (Bloomberg)  In 2008, Teresa Ghilarducci, an economics professor at the New School for Social Research, proposed replacing 401(k) plans and their income tax break with a mandated government savings plan for all workers. The blowback was so intense that the school's chief of security gave her his cell phone number, The plan called for mandatory savings of 5% of pay, with the government handling all investment decisions, guaranteeing a rate of return above inflation, and ultimately paying out the retirement money in a lifelong annuity. It's pretty radical. Conservatives hate it.  But Bloomberg says that they have not identified who specificaly made the death threats.

The United States' regulatory bureaucracy has vast power. Regulators can ruin your life, and your business, very quickly, and you have very little recourse. That this power is damaging the economy is a commonplace complaint. Less recognized, but perhaps even more important, the burgeoning regulatory state poses a new threat to our political freedom.

What banker dares to speak out against the Fed, or trader against the SEC? What hospital or health insurer dares to speak out against HHS or Obamacare? What business needing environmental approval for a project dares to speak out against the EPA? What drug company dares to challenge the FDA?

Our problems are not just national. What real estate developer needing zoning approval dares to speak out against the local zoning board?

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