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What We Read Today 03 September 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

U.S.

  • Shrinking U.S. trade gap shows economy's underlying strength (Reuters)  The U.S. trade deficit fell in July to its lowest level in five months as exports rose broadly, signaling underlying strength in the economy amid concerns about a global growth slowdown.
  • Inflation - It Will Get Worse (Advisor Perspectives)  The author says "[d]espite the free-falling oil prices and inflation breakeven rates approaching the January low, there are still plenty of market professionals expecting higher inflation in the near to intermediate future".  The author reviews market data to show why the expectations appear to be wrong for the foreseeable future.
  • Tom Brady Deflategate Suspension Ruling to Be Appealed by NFL: Details, Comments (Bleacher Report)  NFL Commissioner Roger Goodell announced Thursday the league plans to appeal a ruling by U.S. District Judge Richard Berman that wiped out a four-game suspension given to New England Patriots quarterback Tom Brady in relation to Deflategate. Goodell released a statement shortly after Berman's decision was made public which confirmed the NFL was planning to appeal in an effort to "protect the integrity of the game".
  • Kentucky clerk jailed for denying same-sex marriage licenses (Reuters)  A county clerk in Kentucky who refuses to issue marriage licenses to same-sex couples on religious grounds was held in contempt of court by a U.S. federal judge on Thursday and sent to jail.  Rowan County Clerk Kim Davis, 49, was led away by U.S. marshals who confirmed she was under arrest.
  • Syrian refugee crisis: senators call on US to take in thousands more (The Guardian)  Aid groups and at least 14 senators have called on the US government to take in thousands more Syrian refugees by the end of 2016, recommending at least five times more than the approximately 1,500 Washington has admitted since the conflict began in 2011.  Econintersect:  And this will be a significant factor in handling the large number (upt to 350,000) of refugees expected this year?

EU

Europe, harassed by its xenophobes and consumed by self-doubt, has turned its back on its values. Indeed, it has forgotten what it is. The bell tolls not only for the migrants, but also for a Europe whose humanistic patrimony is crumbling before our very eyes.

UK

  • New economic thinking could help tackle the planetary and housing crises (The Guardian)  Jeremy Corbyn’s ‘people’s quantitative easing’ for house building was derided by many, but to keep a roof over all our heads in the face of climate change it is time for fresh economic thinking.  Andrew Simms of the New Economics Foundation pretty brutally cuts up the sucessful political economic arguments of the past 3-4 decades.

Hungary

  • Hungarian PM: We don't want more Muslims (Al Jazeera)  Viktor Orban's comments come as refugees are forced off train headed towards Austria and taken to refugee camp.  The refugees had bought tickets for the train.  Hungary was ruled by the Muslim Ottoman Empire for 150 years in the 16th and 17th centuries.

Russia

  • Corruption eats Russia-annexed Crimea from within (Al Jazeera)  Residents of Crimea have struggled with corruption and land-grabs since the Russian takeover of the region.   A top Russian security official was very clear about the dangers Crimea is facing.  "Terrorism and corruption threaten Crimea," Nikolai Patrushev, head of the Security Council and a close ally of Russian President Vladimir Putin, reportedly said in the southern city of Sevastopol in early August, during a meeting with local officials.

China

  • Is a China Economic Crisis on the Horizon? (Advisor Perspectives)  China has just gone through their own intense industrial revolution.  But it is now trying to transition from an investment led economy to one where consumption is dominant.  That creates many stresses, especially when the process is attempted quickly, which is the "Chinese way".  The author says that attempts to mitigate these stresses (he calls the effects "pain") may mitigate problems now but pose risk down the road.  He concludes:

[J]ust because the Chinese government thinks it’s necessary to ease the pain doesn’t make investments any more attractive. If we’re right about pain threshold, China could be throwing good money after bad to “sleep better” tonight. The short-term cost likely makes future problems bigger and could potentially lower the standard of living going forward. This should not come as a surprise because it is almost always the case that everything you do to make it easier to sleep better tonight, creates a problem in the future—a lesson that applies to individuals and governments alike.


Inflation, the Fed, and the Big Picture (Carmen Reinhart, Project Syndicate)  Econintersect:  We cannot make sense of this article.  First it is contains a graph that we cannot interpret quantitatively.  What is the y-axis?  Is it "share" as stated (implying fraction or percent)?  Recognize that there are about 25% of the countries in the world that are in the remaining inflation range 2% < inflation rate < 10% in 2015 with this interpretation.  Okay, that sounds reasonable.  But that interpretation doesn't square with the more than 180% of all countries with the inflation rates classified in the early 1930s.  WTF - How can there be more that 100% of all countries?  (Oh, maybe another spreadsheet error?)

inflation.global.1925.2015


Threat of ‘regime’ change hits Wall Street (CNBC)  Are the "glory years" for stocks ending?


Is This Where The US Recession Is Hiding? (Zero Hedge)  While industrial production does suggest the recovery is stable, the ratio of US inventory to sales has tumbled to levels indicative of recession, which also means that while US factories are humming, their output is accumulating in warehouses, overflowing parking lots and storage facilities.

us.manufacturing.recession.risk


Inequality and Productivity (Evan Soltas, economics & thought)  Soltas finds that productivity improvement accounts for 74% of wage growth.  See first graph below.  But that doesn't seem to square with the widely circulated graph showing productivity continuing to increase after wage growth leveled off about 40 yeras ago.  See second graph below.  Econintersect:  If you haven't guessed the difference between the two analyses, in the first case total (which is proportional to average) compensation is used, but for the second graph median hourly wage is used.   In other words the difference reflects a change in the distribution of wages since the 1970s.  Does everything end up reduced to an inequality debate?

productivity.compensation

profuctivity.median.wage

Other Economics and Business Items of Note and Miscellanea

  • Why 4% Could Fail (Financial Advisor)  Twenty years ago it was common to consider 6% investment returns and 5% withdrawal rates in retirement for making long-range plans.  In the 21st century the accepted benchmark has been 4% for withdrawal rates as investment returns came down.  It now appears that is way too aggressive.  From this article about a new research white paper:

New research shows that Americans retiring in 2015 need to be far more conservative in their withdrawal rates during retirement. The historic 4% annual withdrawal rate is over two times the level that Americans can safely withdraw without expecting to outlive their assets. The real safe withdrawal rate, accounting for fees and today’s stock and bond market levels, is under 2% per year.

  • Want to Study Economics? (The Freeman)  An economics professor discusses the objective of teaching students to question, inquire and interact with criticism of their work.  He proposes that professors need to do the same for themselves and thus research is an important part of being a teacher.  So far, so good.  But then the author starts talking about teaching the "economic way of thinking" and in so doing walks into a trap common for economists.  The biggest shortcoming of the profession, especially academic, is to allow a distinction between "the economic way of thinking" and all other logical pursuits.  If economics were subject to the same rules of logic as all other quantitative intellectual pursuits then there would be no "economic way of thinking".

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