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What We Read Today 04 November 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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Today's post includes an extended discussion on growth in China and comparison to India.

Articles about events, conflicts and disease around the world

Global

  • ASEAN defense chiefs cancel joint statement over South China Sea row (Reuters)  China has forced a statement at the end of a Southeast Asian regional defense forum to be dropped.  It has been reported that China objected to a statement of concern about it's island building activities in the South China Sea.  Officials from Malaysia, which is hosting the Association of South East Asian Nations (ASEAN) defense chiefs meeting, did not immediately comment on reasons for the cancellation.

U.S.

  • Yellen and Dudley Signal December Is Still ‘Live’ for Rate Hike (Bloomberg)  Federal Reserve Chair Janet Yellen and New York Fed President William Dudley both said the central bank could boost interest rates as soon as next month.  Yellen told Congress that liftoff hinges on continued economic improvement.

  • Facebook revenue, profit beat forecasts; shares hit all-time high (Reuters)  Facebook Inc (FB.O) posted a surprisingly strong 40.5% jump in quarterly revenue as new advertising services and its mobile app boosted ad sales at the world's largest social network. The stock rose about 5% to an all-time high of $109.34 in extended trading on Wednesday, before paring gains to about 2%. It closed earlier at $103.94.  Third-quarter profit also beat Wall Street's average estimate despite increased spending on Facebook's Messenger and WhatsApp apps and Oculus, its virtual reality business.  Ad revenue grew 45.4% to $4.30 billion, with mobile ads accounting for 78% of the total versus 66% in the same quarter last year.

EU

  • The Latest: Luxembourg says walls for migrants un-European (Associated Press)  Luxembourg's Foreign Minister Jean Asselborn says the symbolic gesture of Wednesday's relocation of the first 30 refugees from Greece to his country is "only a start, but a very, very important start."  He and other EU officials say that the practice of some EU countries to erect barbed wire fences at their borders trying to keep refugees out was not in line with European values.

Russia

India

  • Once near equals, China and India have radically diverged in the past two decades (Quartz)  Many things about India and China were practically equal 25 years ago - their GDP per capita were among the world’s lowest, they attracted a similar (nearly non-existent) amount of foreign direct investment, even the countries’ sanitation situation was equal.  But since then ( sampling of the excellent graphics from this article):

china.india.gdp.per.capita

infrastructure.global.1992.2015

China

  • Growth in China's huge services sector is accelerating -- but companies are worried about the future (Business Insider)  Despite the acceleration in activity across the service sector, sentiment among firms tanked, sliding to the lowest level in the decade-long history of the survey.  Declining sentiment is not confined to the purchasing managers in the service sector.  Based on the latest survey of banks, companies and households conducted by the People’s Bank of China at the end of the September quarter, sentiment towards the economy deteriorated sharply despite relative stability in business profits, orders and labour market conditions.  Here is the recent PMI (Purchasing Managers' Index) data for the service sector: 

  • Six Ways to Gauge How Fast China's Economy Is Actually Growing (Bloomberg)  There are many ways to analyze China's GDP, and all the ones presented here show it trending below the government's official statistics for the third quarter.  See also next article.

  • China's Economy Is Worse Than You Think (Noah Smith, Bloomberg View)  As discussed in the viseo in the preceding artcile, virtually all independent estimates of growth in China are less than the official GDP measurements reported:

china.gdp.estimates.2015.nov.03

  • These four charts explain why Australia shouldn't fear China's slowdown (Business Insider)  A significant factor in confusion about how fast China is growing is the changing nature of the economy.  While the nation’s industrial sector – responsible for most investor angst this year – is languishing, weighed down by overcapacity, weak demand and high real interest rates, it is no longer the largest sector in the Chinese economy. As the chart below reveals, services replaced secondary industries back in 2012.  Ecoinintersect:  For reference, the Primary Sector is materials extraction (agriculture, mining, lumbering, fishing, etc.); the Secondary Sector is use of primary outputs, primarily manufacturing; the Tertiary Sector is comprised of services.

china.sectors.growth

Afghanistan

Mexico

  • Mexico Supreme Court rules pot use is constitutional right (Al Jazeera)  Smoking marijuana is a basic human right. That extraordinary argument swayed Mexico’s Supreme Court on Wednesday, when it ruled that a federal health law prohibiting cannabis cultivation and personal use violates the constitution — an unprecedented decision that may trigger similar court appeals and pressure the country’s congress to weigh widespread legalization of the drug.

Canada

  • The Only Place in America Still Burning More of Canada's Gas (Bloomberg)  When it comes to importing natural gas from Canada, the U.S. Northeast is the exception to the rule.  The region’s appetite for supply from the Great White North hasn’t diminished, even as shale output pushes U.S. gas production to a fifth straight annual record. Canadian gas deliveries to the Northeast will climb 16%  in the seven days ending Nov. 6 from a week earlier, while shipments via pipeline to the Midwest and Northwest will drop, according to Energy Aspects Ltd.


States Expecting Most Growth in Home Prices (Realtor Mag)  Realtors do not expect price drops in any state in 2016.

house.prices.expected.2016

Other Economics and Business Items of Note and Miscellanea

  • Agrarian Justice: Excerpt (Thomas Paine)  Hat tip to Roger Erickson.  Thomas Paine is considered an early libertarian by some but he had some very unlibertarian ideas.  In his proposals for agrarian reform he suggests that land taxes should be imposed to fund a basic income for all citizens.  In this regard he could be considered a predecessor to Henry George.

  • What Drives Inequality (John D. Wisman)  The thesis of this article is that inequality is a political phenomenon through and through. The author proposes that other forces, such as the economic ones typically offered by economists, are not without importance, but they are proximate causes. They all take place within a political framework in which what enables them to increase inequality could be altered, or their effects could be neutralized.  Econintersect:  Contrary to what some might argue, there are no a priori economic principles that explain (or justify) inequality.  We feel Wisman has presented some very good logic here. 

  • The Fed’s corruption of the economics profession (Real World Economics Review)  Hat tip to Roger Erickson.  This ia a discussion of a long article that initially appeared six years ago in the Huffington Post.  The thema is that the Fed has essentially captured the economics profession by employing so many hundreds of economists.

  • The Barbarian Invasion of Europe (Michael Clark, Seeking Alpha)  MC contributes to GEI.  This is an excerpt from MC's epic novel (in process for 8 years now) with the title "Cross Examination".  This discussion is super wonkish and reveals some of the elements of mysticism that the author invokes in his writing, leaning on the medium of gematria, combined with cyclical patterns in history.  This structure is being applied to the life experiences of a fictional character forged in the world from 1983-2001 and living in the period 2001-2019.

  • 12 Medicare facts you need to know for the current open enrollment period (LifeHealthPro)  This article is aimed at insurance professionals on how to help clients deal with choices they will be making during Medicare open enrollment (this year 15 October through 07 December).  If you are on Medicare, have family that is or anyone who will be registering for Medicare in the next few years this is a worthwhile review.  By the way, this article does not say what the open enrollment period dates are for this year and we did not find them specified on several government and insurance company web sites we checked.  But we did find them on a government provided video on YouTube:

  • Why Condo Loans Can Be So Hard to Get (Realtor Mag)  For many first-time home buyers, condominiums are an affordable way to get on that first rung of home ownership. Yet financing for condos can be a challenge to get. That’s because condo financing has two sides that must be squared in a way that single-family financing doesn’t. On the one side of this financial equation, you have the household that wants to buy the condo unit.  On the other side, you have the condominium project, and it’s on this side that constraints can come into play beyond the buyers’ financial picture. How many units in the condo project are owned and how many are rented? Is there retail or other commercial space on the ground floor of the building? If so, what percentage of the project is taken up by this non-residential use? And what about the board that governs the condominium project? This board has to sign certifications about the project. And there are other hurdles on the condo side of the equation.  This is discussed in part of the following monthly news (i.e., propaganda) from the National Association of Realtors.


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