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 dayin the early am at GEI News (membership not required for access to "The Early Bird".).
Puerto Rico considers simple solution to debt crisis: Don’t pay (Al Jazeera) Lawmakers, including U.S. presidential hopeful Bernie Sanders suggest some of island’s debt could be unconstitutional. Because of this, while Puerto Rican leaders look for ways to address the island’s $72 billion debt, some say the solution may be simple: Don’t pay it.
Auto Workers Set Strike Deadline in General Motors Negotiations (Bloomberg) The United Auto Workers said it informed General Motors Co. that it will terminate its contract with the automaker at 11:59 p.m. on Sunday, effectively setting a strike deadline for talks to reach a four-year agreement. The Detroit-based company confirmed in a statement that it had received the deadline from the UAW, saying it was “working with them to address the issues and remain committed to obtaining an agreement that is good for employees and the business.” The move follows the union’s agreement with Fiat Chrysler Automobiles NV that may add almost $2 billion in costs.
Obama warns over test 'obsession,' calls on schools to set limits(Al Jazeera) The President said on Saturday that standardized testing should be capped at 2% of overall class time. Administration officials said that in many cases, testing is redundant, poorly aligned with curriculum or simply overkill. Both the House and Senate versions of an update to No Child Left Behind would preserve annual reading and math exams, although the House version would diminish their significance in determining whether schools are up to par. The legislation is in limbo while House and Senate negotiators figure out how to reconcile the competing versions.
What Will It Mean If the Yuan Gets Reserve-Currency Status? (Bloomberg) International Monetary Fund representatives have given Chinastrong signals that the yuan is likely to soon join the fund’s basket of reserve currencies, known as Special Drawing Rights, Chinese officials with knowledge of the matter told Bloomberg News this week. Here’s a primer on what that means: (1) At least $1 trillion of global reserves may migrate to yuan. (2) A successful bid would boost President Xi Jinping's economic reform efforts.
Hurricane Patricia: Flood Threat for Millions But Winds Weaken to Depression (NBC News) After Hurricane Patricia menaced Mexico as one of the strongest storms to ever make landfall, officials said early reports showed no major damage Saturday as the once-ferocious system deteriorated into a post-tropical cyclone. Howling winds had battered trees, flooded streets and ripped down power lines overnight Friday in coastal areas of southwestern Mexico — but the posh tourist resorts, bustling ports and fishing villages dotting the Pacific Coast region appeared largely unscathed as the storm soaked mostly sparsely populated stretches. For weather details see Patricia, Daughter Of Two Oceans.
The US is on a fast track to deflation (Business Insider) Harry Dent points out that during World War II, the Fed "bought its own bonds to keep interest rates low and demand high enough to finance the war effort". Back then, the Fed’s efforts did what you’d expect: they caused a modest level of inflation. But doing even more of that now is not accomplishing the same kind of result. He says that "money the Fed printed has largely gone into financial speculation". Because of excess "financialization" there is a paucity of "utilization" of Money (Econintersect terms) and the problem (according to Dent) is the velocity of money falls. This is why Dent foresees a future of deflation. Econintersect: Dent is correct (in our opinion) as far as he goes. But falling velocity of money is not the cause, it is a symptom. The cause is seen by comparing the use of QE in WW II with that of the current era. The reason it worked in the 1940s was it was a period of full employment with labor shortages. Money created went to increase employment which produced a vast surge in personal savings (goods for consumption were scarce and rationed while price controls kept high inflation away) as virtually all production went into the war machine. In the current era there is slack in the labor market and no wage push inflation results. So low velocity of money is merely a result of the economic environment of low demand for labor.
Other Economics and Business Items of Note and Miscellanea
Professor Claims Women 'Don't Understand' Fracking (Huffington Post) Averil Macdonald, a professor of science engagement at the University of Reading claims women don't support fracking because they "don't understand" the science behind the oil extraction procedure. She says women "haven’t had very much in the way of a science education because they may well have dropped science at 16". This is her reasoning for 58% of men in the UK supporting fracking while only 31.5% of women do. Econintersect: Oh, by the way, Prof. Macdonald is also the chairwoman of the United Kingdom's leading shale gas lobby. Read more at The Times: Fracking? Women ‘don’t understand the science’.
Why L.L. Bean's Boots Keep Selling Out (The Atlantic) The business founded by Leon Leonwood Bean over 100 years ago built a following on functionality of its products. It is now thriving on form over function (although some high level function remains).
How Ignorant Are Americans? (Newsweek) A Jan. 25 CNN poll, meanwhile, discovered that even though 71 percent of voters want smaller government, vast majorities oppose cuts to Medicare (81 percent), Social Security (78 percent), and Medicaid (70 percent). Instead, they prefer to slash waste—a category that, in their fantasy world, seems to include 50 percent of spending, according to a 2009 Gallup poll. But, Americans are not stupid - they are ignorant:
For years, Stanford communications professor James Fishkin has been conducting experiments in deliberative democracy. The premise is simple: poll citizens on a major issue, blind; then see how their opinions evolve when they’re forced to confront the facts. What Fishkin has found is that while people start out with deep value disagreements over, say, government spending, they tend to agree on rational policy responses once they learn the ins and outs of the budget. “The problem is ignorance, not stupidity,” Hacker says. “We suffer from a lack of information rather than a lack of ability.” Whether that’s a treatable affliction or a terminal illness remains to be seen. But now’s the time to start searching for a cure.
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