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What We Read Today 19 October 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


  • Capital Economics claims Asian deflation ‘to prove temporary’ (Financial Times)  Forecaster Daniel Martin, senior Asia economist at Capital Economics, sees rebound in inflation when commodity prices stabilize.  As Mr Martin points out, worries over deflation are primarily centred on producer price inflation, which measures prices that the likes of farms, mines and manufacturers charge for their output.  These prices have commodities prices as a significant input.


  • Suppliers feel the squeeze as Walmart's earnings drop (Al Jazeera)  Vendors, already wary of cost sharing by the retail giant, brace for more pressure after a shock earnings warning.  Last Wednesday, Walmart stunned Wall Street by forecasting that its earnings would decline by as much as 12% in its next fiscal year as it struggles to offset rising costs from increases in the wages of its hourly-paid staff, improvements in its stores and online sales investments.

  • Gowdy’s pleas to keep Benghazi probe above politics have gone unheeded (The Washington Post)  Upon being named chairman last year of the House investigation into the 2012 attacks on U.S. diplomats in Libya, Rep. Trey Gowdy (R-S.C.) said he would insist on keeping his probe above the fray.  In the 17 months since, those pleas have repeatedly fallen on deaf ears, deeply complicating Gowdy’s task as he prepares for the most closely scrutinized moment of the investigation: Thursday’s hearing featuring former secretary of state Hillary Rodham Clinton.

  • GOP Congressman Already Floating Impeachment For Hillary Clinton (Huffington Post)  The presidential election is still over a year away but congressman Rep. Mo Brooks (R-Ala.) is already getting ready for the opportunity to impeach her -- on the first day of her hypothetical presidency.

  • Federal regulators to require registration of recreational drones (The Washington Post)  Faced with rising safety and security risks from a surge in unauthorized drone flights, the U.S. announced a new task force to develop recommendations for setting up a federal drone registry. 


  • Migrant crisis: Croatia opens Serbia border (BBC News)  Croatia has opened its border with Serbia, removing one of the bottlenecks for thousands of stranded migrants trying to make their way north.  About 3,000 people had been stuck in cold and wet weather in the Serbian border village of Berkasovo, after Croatia moved to curb new arrivals.  The UN refugee agency (UNHCR) had described conditions there as "dire".


  • Iran backs battle for Syria's Aleppo with proxies, ground troops (The Washington Post)  In a striking sign of Iran’s growing regional influence, a major assault on Syria’s most populous city is being coordinated by an Iranian military commander using Shiite forces from three countries to back President Bashar al-Assad’s beleaguered troops, militia officials said.  Maj. Gen. Qasem Soleimani, the leader of Iran’s elite Quds Force, has ordered thousands of Iraqi Shiite militia allies into Syria for the operationto recapture Aleppo, according to officials from three of the militias. The militiamen are to join Iranian troops and forces from Hezbollah, the Iranian-backed Lebanese militia, the officials said.


  • US Treasury: capital outflows from China top $500bn (Financial Times)  Capital outflows from China topped $500bn in the first eight months of this year, according to new calculations by the US Treasury that highlight the shifting fortunes in the global economy.  The outflows, which peaked at some $200bn during the turbulent month of August according to the new estimates released on Monday, have also contributed to a shift by Washington in its assessment of the valuation of China's currency, the renminbi.  Econintersect:  Contrary to what you may read elsewhere, this selling of U.S. Treasuries is much more of a problem for China than for the U.S.  It reflects that the yuan renminbi is no longer severely undervalued and China is not able to "hoard U.S. debt securities".

  • China's economic growth falls to six-year low as rebalancing takes hold (The Telegraph)  Official GDP numbers show growth fell to 6.9% in the third quarter, the lowest since the Great Recession in 2009.  For a longere view see next article.  A quote from Chris Scicluna at Daiwa Capital Markets:

 "Overall, the economic data seem to suggest that the authorities continue just about to muddle through the major economic adjustments ongoing in China and that there is no sudden cause for panic." 


  • You're on (The Economist)  Beijing University professor Michael Pettis (a GEI contributor) has suggested that China's GDP will fall in the decade starting 2012 to a value below 3%.  The Economist has made a bet that it won't.  The bet (as described in this article):

Mr Pettis reckons China's “average growth in this decade will barely break 3%.” He is definitely smarter than your average bear, but that prediction looks aggressively pessimistic to us. We'd like to bet that growth will break 3%. (Let's say we win if it exceeds 3.5% on average in constant yuan over the decade.)


Other Economics and Business Items of Note and Miscellanea

  • A Lesson in Economics: California School District Goes Solar with Storage (Inside Climate News)  A Southern California school district will soon become one of the first in the nation to get most of its electricity from on-campus solar panels and giant batteries.  The Temecula Valley Unified School District partnered with the San Mateo-based solar provider SolarCity to install a network of 20 solar arrays and five batteries for energy storage systems across 19 schools and one administrative building. The district's total capacity will be 6 megawatts—that's enough electricity to power nearly 1,000 homes—and is among the largest school solar projects in the country.  From Janet Dixon, the district’s director of facilities development:

Temecula district hired an energy consultant from Sage Renewables last fall to assess the feasibility and he recommended a solar-plus-storage system. The proposals from different companies made it clear a joint program could save more than $20 million over a 20-year period; the school's board signed off on the decision in March.

The more than 20,000 solar panels were installed over the summer and are waiting to be connected to the grid. At 18 schools, the sleek, black panels double as carports. The remaining two sites have solar arrays set up on the ground. At five of the sites, batteries will be installed next to the solar panels by the end of the year.

Solar panels convert energy from the sun into electricity. But due to the change in the sun's energy throughout the course of the day, the solar panels do not generate electricity consistently over time. That's where battery storage systems come in handy. The batteries allow users such as Temecula's district to save some solar power for use later, when the district's electricity demand is greater than the real-time output of the panels.

The core of his work deals with poverty, and how it is crucial to understand individual consumption choices if we ever hope to make progress in reducing poverty. Dr. Deaton went beyond study of overall outcomes, looking instead at the detailed individual information. At the individual level, it is possible to see patterns that get lost in the summary form, and his work has transformed several areas of economics. 

  • Econintersect comment:  On the surface the process of looking at the individual level "to see patterns that get lost in the summary form" appears to run the risk of running into a defect in logic that has trapped many macroeconomists:  Extrapolating micro functions to describe macro systems.  To mention one example of the defective thinking is to consider the use of "representative agents" to describe systems of many, many agents.  We have not studied Deaton's work; we hope (and expect) that he has avoided the problem just described.  It is represented that he started with macro observations and then went to examine various micro details that exist within the macro"community".  If our limited understanding is correct then Deaton has done a process of deconstruction within macro to examine micro elements.  This is entirely different than the improper construction of a macro description form any selected set(s) of micro data.  Let's put this in terms of a simple example:  It is possible to describe lettuce by looking within the salad; but it is not possible to describe the salad properly by starting only with knowledge of the lettuce.

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