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What We Read Today 11 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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Articles about events, conflicts and disease around the world


  • Apple in talks with U.S. banks for person-to-person payment service: WSJ (Reuters)  The service, which would compete with PayPal Inc's (PYPL.O) popular Venmo, would allow users to transfer funds from their checking accounts through Apple devices, the Journal reported on Wednesday.

  • GOP 'simple' flat tax proposals simply don't add up (CNBC)  It's such a simple idea: A single tax rate for individuals, rich and poor, and companies, big and small.  But like everything else in the sprawling, $18 trillion U.S. economy, the math isn't quite that simple. And, while the idea is hardly new, the current round of proposals simply don't add up.  Aside from their obvious simplicity, the latest flat tax proposals are being pitched as a broad tax cut for the middle class. But, in fact, most Americans would end up paying a greater share of their income — except the very rich.


  • Cruz's Criticism Underlines Fed's Politics Problem This Election (Bloomberg)  It was open season on the Federal Reserve at Tuesday’s Republican presidential debate. Candidates blamed Fed officials -- "philospher kings" in Texas Senator Ted Cruz’s words -- for everything from the financial crisis to income inequality.  Their criticism highlights how much the central bank remains a lightning-rod for popular angst toward Washington as the candidates vie for conservative support.  Ted Cruz accused the Fed of tightening money in the third quarter of 2008 causing the the financial crisis.  But he needs to explain what he means because the Fed cut the fed funds rate from 4.25% in early January to 2% in April, where it held rates until an emergency 50 basis point cut in mid-October. They then kept easing until rates were near zero in December, where they have stayed ever since.  Does Cruz equate no cuts in the third quarter to tightening? 


  • Recapitalization of Battered Greek Banks Entering Critical Phase, New Levy Economics Institute Report Says (Levy Economics Institute)  Battered Greek banks will soon face yet another round of recapitalization this November and December. For the banks to have any prospect of returning to their precrisis role as liquidity providers to the Greek economy, it is imperative that the country’s EU creditors and supervisors avoid the pitfalls of previous recapitalizations.  In the past Greek banks have "cut back sharply on lending, while the country’s economy continued to shrink" instead of addressing "a ticking time bomb of nonperforming loans (NPLs)".


  • Global push for end to Syria war seen as most serious yet (Associated Press)  The international community is mounting its most serious effort yet to end the nearly 5-year-old Syrian war, rallying around a second round of talks in Vienna this weekend amid the emergence of a Russian proposal that calls for early elections.  But the global push for peace so far excludes any of the Syrian players, and experts say any hasty decisions risk leading to even greater bloodshed.  While world leaders seem to be in agreement that the time has come to put an end to the carnage in Syria that has killed more than 250,000 people, there is still no clear roadmap on how to get there.

  • Free Syrian Army decimated by desertions (Al Jazeera)  In Aleppo, the rebel group has weakened as fighters leave due to low pay, poor conditions and fragmentation.  Formed in August 2011 at the start of the Syrian civil war, the FSA comprises mainly defectors from the Syrian military. The group is viewed as moderate compared with the Islamist rebel groups that later emerged.


  • The Latest: Putin orders investigation into doping claims (Associated Press)  Russia President Vladimir Putin has ordered an investigation into allegations of widespread doping among the country's sports figures.  Putin called for the investigation in a late-night meeting Wednesday with the heads of Russia's sports federations. The meeting comes in the wake of Monday's report by a commission of the World Anti-Doping Agency that said Russian sports is plagued by extensive, state-sanctioned doping.  The allegations have raised the prospect of Russia's track and field athletes being denied participation in next year's Olympics in Rio de Janeiro.


  • Regional Estimates of Multidimensional Poverty in India (Economics)  This paper estimates and decomposes multidimensional poverty in 82 natural regions in India using unit data from the Indian Human Development Survey (IHDS), 2011–12. Multidimensional poverty is measured in the dimensions of health, education, living standard and household environment using eight indicators and Alkire-Foster methodology.  Results indicate that 43% of India's population are multidimensional poor with large regional variations. The average intensity of poverty was 45.5% with a MPI value of 19.3. Six states in India—Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha and West Bengal who have a share of 45% of the total population—account for 58% of the multidimensional poor. Across regions, more than 70% of the population are multidimensional poor in the southern region of Chhattisgarh and the Ranchi plateau, while they comprise less than 10% in the regions of Manipur, Mizoram and Chandigarh. The economic poor have a weak association with health and household environment dimensions. The decomposition of MPI indicates that the economic dimension accounts for 22%, the health dimension accounts for 36%, the education dimension accounts for 11% and the household environment accounts for 31% of the deprivation. Based on these analyses, the authors suggest target based interventions in the poor regions to reduce poverty and inequality in India.


  • Alibaba Singles’ Day Sales Reach $14.3 Billion, Smashing Record (Bloomberg)  Alibaba Group Holding Ltd. logged a record 91.2 billion yuan ($14.3 billion) in sales on Singles’ Day, turning a sweethearts’ holiday dreamed up two decades ago into a major online shopping event.  Transactions had passed last year’s record of $9.3 billion before midday in China, according to the company. The top-selling items by retailers using Alibaba’s platform included baby-related and nutritional products, Nike sneakers and Levi’s jeans, the company said.  Noteworthy: 69% of transaction came fromm mobile phones.

Other Economics and Business Items of Note and Miscellanea

“So economists build models and it looks like the prediction is right, sometimes the prediction is wrong but data contradicts old theory. People say ‘let’s go back until we end up with data that confirms the theory’.

“The conventional economics model makes simplifying assumptions that assume away the importance of particular incentives and characteristics within the co-operative that can make co-operatives competitive and even more productive than investor-owned firms. We need theory that better predicts reality. Behavioural economics applies to all types of co-ops.”

“Co-operatives can be successful even if they are higher cost producers because this leads to higher productivity. They are also more flexible by their nature if they follow co-op principles and this helps them overcome crisis in a fairer more just manner.”

“If co-op prices rises above non-co-op prices, then the conventional model predicts that demand will collapse, especially for those people that are not members. But this is not true. There is a co-operative advantage on the demand side – most people are sympathetic towards co-ops unless they behave in an anti-social manner. So educating people about co-operatives is crucial. There is not enough emphasis in co-ops on co-op education.”

“We need to be careful not to treat co-operatives as religious cult. They can fail and we need to understand why.”  

  • There Are No New Eras In Economics (Forbes)  The author says that what is going on today in global economics has precidents - this is not a new era.  Economic activity is cyclical and and our memories are deficient.

  • Ron Fink: Trickle-Down Economics Works Every Time (NoozHawk)  A local argument for Santa Barbara County, California.

  • The Case for Buying a Home You Can't Afford (Bloomberg)  If you are young and have good prospects stretching to buy a home can make sense.  Here’s a happy reminder if you're someone who finds escape by perusing real estate listings for  unobtainable homes: A mortgage that strains your budget now will be a lighter burden a few years, and a couple of job promotions, down the line.  Young professionals willing to stretch their budgets now should consider Boston, Seattle, and Washington, D.C., among other cities, according to a new report from Trulia. In New Haven, Conn., the typical millennial (defined by Trulia as an adult between ages 25 and 34) can expect to spend 37% of her income on housing in the first year of her mortgage. Three years later, though, the same homebuyer’s monthly payments will fall below 31% of her income, according to Trulia’s estimates. By the last year of her 30-year mortgage, she’ll be spending 11% of her income on housing.

  • See consumer-led recovery: SocGen head of economics (CNBC)  Michala Marcussen, global head of economics at Societe Generale discusses why the consumer will lead a glovbal recovery.

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