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What We Read Today 16 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


  • Tracking the Curse of Global Drought (Bloomberg)  The big dry spell is only getting worse, from rural Australia to inland California to mega-city Brazil.
  • Where Will Crude Oil Go From Here? (Advisor Perspectives)  Around the world, even in the United States, production efficiency is improving, according to data accessible via Bloomberg. This is why, despite the collapse in prices, production is still 1 million bpd higher than it was at the start of 2014.  On the demand side, while lower oil prices have resulted in a modest pickup in usage, economic growth, particularly in emerging markets, simply isn’t strong enough to produce a sharp increase in demand.  What could cause oil prices to break out of the expected range? A major risk to the downside is that the slowdown in emerging markets infects developed markets, leading to a global recession. On the other hand, given the ongoing security issues in the Middle East, it’s still possible that a significant supply disruption (one measuring at least 2 million bpd) could push oil back to, or through, the upper end of its range. In the absence of either scenario, investors should expect continued range bound volatility.


  • The only certainty is more Fed uncertainty (CNBC)  Whatever the Federal Reserve does Thursday, it won't end "uncertainty."  That raising rates will somehow "end the uncertainty" for markets and for the broader public is a claim that has lately become commonplace.  Econintersect:  A characteristic of "flying by the seat of your pants" is lack of predictability.
  • An Obamacare Change to Medicare Is Backfiring (The Fiscal Times)  A provision in the Affordable Care Act requires Medicare to reduce payments to hospitals that have high readmission rates. The goal was to improve patient care and cut the costs of avoidable hospitalizations. Instead, the new study finds that the Obamacare change unfairly affects hospitals based on the patients they treat.  The result is that hospitals that admit the sickest patients are receiving the lowest reimbursement of expenses.  It turns out that the hospitals doing the least amount of good are reaping higher benefits and vice versa.  The calculations that Medicare uses in determining its readmission penalties only adjust for certain demographic information, such as age, sex and the sickness of patients, but leave out socioeconomic and medical aspects of a hospital’s patient population, the authors of a new study (see below) write. Hospitals with the highest readmissions rates had patients who suffered from more chronic conditions, were poorer and had less education.  For more see Patient Characteristics and Differences in Hospital Readmission Rates (JAMA Internal Medicine)
  • The Fed Can Blame Amazon for Keeping Inflation Too Low (Bloomberg)  Well, not Amazon exactly but the technology advances that have reduced prices for many goods and services over the past two decades have changed the infltion dynamic, according to this article.  The Fed's 2% inflatuion target may just not be acheivable any more without severe economic distortion.  The evidence?  The target has not been reach 74% of the time over the past 20 years.



  • EU-bound migrants at risk of land mines in Croatia (EU Observer)  People trying to walk to the EU via Croatia, after Hungary sealed its border, risk straying into old minefields, a Facebook group has warned.  (Subscription required.)
  • Fortress Europe reinforced in Hungary and Austria (EU Observer)  Buses in Serbia are reportedly preparing to take refugees to the Croatian border after Hungary completely sealed its border on Tuesday (15 September) with a razor-wire fence.  Several buses were due to leave Presevo - in the far south of Serbia - heading for the border town of Sid, Serbian media reported on Wednesday (16 September).    (Subscription required.)
  • DHS Secretary Jeh Johnson Fudges Facts at Rice University (Federation for Fedreal Immigration Reform)  This reference is for graph shown below.  Econintersect:  The population of the 19-nation Eurozone is larger (338 million) than that of the U.S. (323 million) yet it is finding it difficult (impossible?) to receive less than 1 million refugees in a year.  The U.S. received comparable amounts of migrants (500,000 to 1 million) most years between 1995 and 2006 with little disruption.  During those years the U.S. population was smaller than today, growing from 261 million in 1995 to 299 million in 2006.


  • Jeremy Corbyn: Labour won't back EU exit (BBC News)  Labour leader Jeremy Corbyn has told the BBC that he will not campaign for Britain to leave the European Union.  Mr Corbyn said that while policy was "developing" he could not foresee a situation where Labour would campaign for a "Brexit" under his leadership.
  • U.K. Wage Growth Hits Six-Year High as Labor Market Tightens (Bloomberg)  U.K. wages grew at their fastest pace in more than six years and the unemployment rate unexpectedly fell, suggesting inflationary pressures are building in the labor market.  Pay excluding bonuses rose an annual 2.9% in the three months through July, the most since early 2009, the Office for National Statistics said Wednesday in London. The jobless rate fell to 5.5%, matching the lowest since 2008.  Econintersect:  Wage growth was actually higher earlier in the year according to a graph received by us from Bloomberg in an email today.


  • Refugees Seek Other Routes to West as Austria Halts Border Trains (NBC News)  Passenger trains between Austria and Germany were halted "until further notice" Wednesday as border restrictions tightened, forcing migrants and refugees to seek alternative routes into western Europe - including through Croatia.  No trains departed from Salzburg towards Germany after 11 a.m. local time (5 a.m. ET), a spokeswoman for the country's national rail service told NBC News. It was unclear when the Osterreichische Bundesbahnen (OBB) would resume services that been inundated with migrants in recent days.



  • New Study: We're Nowhere Near Peak Coal Use in China and India (Frank Holmes, U.S. Global Investors)  FH has contributed to GEI.  Resource investors, take note: By 2025, just 10 years from now, energy consumption in Asia will increase a whopping 31%. A whole two-thirds of that demand, driven largely by China and India, will be for fossil fuels, most notably coal.  That’s according to a new research piece by financial services group Macquarie, which writes that the estimated rise in fossil fuel demand is equivalent of “three times Saudi Arabia’s current (all-time-high) oil production.”

How much water do U.S. fracking operations really use? (R&D)  Water usage ih fracking varies by an order of magnitude depending on geographic region.  Fracking uses less than 1% of total industrial usage of water in the U.S.  Research shows that fracking uses more water than conventional oil and gas drilling but much less water than some other energy production activities:

...underground coal and uranium mining, as well as enhanced oil recovery, use about two-and-a-half to 13 times more water per unit of energy produced.


Correlations Have Spiked In The US, Less So Around The World (Eric Bush, GavKal Capital, Advisor Perspetives)  High levels of correlation are a condition that raises a caution flag for possible higher market risk, since normal levels of diversification are reduced.  This article shows the current spike in correlation of U.S. stocks with the MSCI World Index (graph below) and then goes on to show that most other larger markets are showing much less of an effect.  Does this imply a higher risk for U,S, stocks than for other markets?  Perhaps but there are many correlation spikes that are not followed by significant declines.  So that is why we used the word "caution" above.  There could be an effect but sometimes there is not.

Other Economics and Business Items of Note and Miscellanea

  • Is This America's Biggest Problem... And Why It Wasn't Always Like This (Zero Hedge)  The inflation-adjusted household income for half the US population is back at 1989 levels. Meanwhile the S&P500, which impacts the net worth, confidence and spending habits of about 10% of the US population is six times higher than where it was in 1989. America has a problem.  ZH suggests that this was a result of leaving the gold standard on 1971.  Econintersect:  Wouldn't a better correlation be too change of tax policies starting in the early 1980s?  How does the gold standard removal effect square with the growth of income inequality in the late 19th and early 20th centuries when we had a gold standard based currency?  If you are a hammer does everything look like a nail?


  • Don’t Fall for These 5 Common Tricks by Credit Card Companies (Money Talks News)  Separate the real credit card deals from the duds.  Some offers that sound too good to be true probably are. The amazing benefits you see in the bold lettering aren’t always what you get once you understand the fine print.  Five common "hoaxes" are described in this article.

Frustrated by a Times Square clogged with aggressive street performers, renegade Elmos, and women in body paint who offer to pose with tourists for authentic New York City selfies, Mayor Bill de Blasio has drifted back to a solution he floated during the campaign season — rip out the pedestrian plazas. His plan — one of several being considered by a new Times Square livability task force — would clear out the undesirables by also evicting everyone who happens to be lounging or strolling or snapping photos. Instead, it would return the bow tie to its old denizens: cars. Because what could be more wholesome, more progressive, indeed more transcendent, to use the mayor’s favorite form of self-praise, than to favor carbon monoxide over irritating hucksters? The strategy has the added benefit of tossing a spadeful of dirt on the legacy of his predecessor Michael Bloomberg.

  • Progressivism Is Illiberal (The Freeman)  To this author, being liberal should mean being tolerant.  And he uses the Mayor DiBlasio proposal as an example.  The mayor was elected as a self-proclaimed progressive but is not being liberal (tolerant) in his plan to remove the pedestrial mall staus of Times Square and return it use by motorized vehilce traffic.

Progressives have a low tolerance for opposing points of view. Unfortunately, so do some libertarians, but for the most part libertarians do not endorse using political power to eradicate what they believe are disagreeable public activities. Libertarians are much closer to genuine liberals than progressives are.

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