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What We Read Today 13 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.

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Articles about events, conflicts and disease around the world

Global

  • Why Oil Prices Are Headed Lower Again (The Fiscal Times)  Oil futures are down more than 10% in the past month and took another leg lower this week on American Petroleum Institute reports of more U.S. supply. The U.S. government reported Thursday that oil stockpiles rose by 4.2 million barrels last week due to higher imports. That was about four times what analysts had expected.  Production remains high and demand is softening.  Some think the low prices are unsustainable and others think they could last for years.  See next article.

  • Oil glut to swamp demand until 2020 (Financial Times)  The excess of oil is expected to last up to 5 years and then production will start to come in line with lower demand growth.  The IEA (International Energy Agency) does not expect crude oil to reach $80 a barrel until 2020 under its “central scenario”, as excess supplies are slowly soaked up. After 2020, oil demand growth is expected to grind almost to a halt, increasing just 5% over the next 20 years (just 0.25% a year), the IEA says.

U.S.

  • Ernst & Young Loses Trial Over Audits Linked to Madoff (Bloomberg)  Ernst & Young LLP was found liable by a jury for its failure to vet financial audits backed by con man Bernie Madoff’s accountant in the first trial of an auditor over losses tied to the biggest Ponzi scheme in U.S. history.

  • The Economics of Compassion: Can This City Wipe Out Debt by 2019? (Yes! Magazine)  A "Jubilee" initiative in Cincinnati aims to wipe out the debts of the city's poorest people. Theologian Walter Brueggemann explains the idea's biblical foundations. n 

  • Cincinnati, Ohio, is among the fastest growing cities in the Midwest. It hosts corporate giants like Procter & Gamble and Kroger, and some of its close-in neighborhoods have become chic, with coffee shops and new condominiums.  But prosperity is not trickling down to the poorest residents, predominantly African American, who are more likely to get displaced by the new condos than to own one. The difference in life expectancy between the rich and poor neighborhoods can be 20 years.  It is in this context that the Economics of Compassion Initiative, a new interfaith effort in Cincinnati, is working to go beyond charity and hand wringing about poverty. The group is leading a citywide exploration of alternative economies “in which workers and owners share benefit, in which the community is enhanced and not harmed … marked by justice, community and relationship.” The group supports cooperatives and is exploring ways to finance local enterprises. But its main focus is to declare a “Jubilee Year” in Cincinnati that would forgive the debts of the poorest by 2019. Author and Cincinnati resident Peter Block is heading up that effort, which is based on Jubilee ideas of the Old Testament referenced by Christians, Jews, and Muslims. The Jubilee year in the Old Testament was a time for forgiving debts, freeing slaves, and returning land.

  • The Mega-Danger of Mega-Deals: Monopolies Are Crushing U.S. Workers and Consumers  (Fiscal Times)  Undermining of competition has severely negative effects for consumers and workers. Large outsourcing firms can dominate the H-1B visa program, preventing startups from a crack at skilled workers and driving well-paying jobs overseas. Prices rise when monopolies go unchecked, as groundbreaking research by Northeastern University’s John Kwoka has shown. This also affects quality of service: Why should United Airlines or Comcast or AT&T bother to deliver a good product if consumers have no real alternative?  The stratification between big and small companies has impacted inequality. Several studies show that the gap between the most-profitable and least-profitable companies can explain much of the increase in inequality over the past couple decades. Big companies that dominate markets can extract more profits relative to smaller companies fighting it out amid competition, and those profits inevitably go to high-paid workers and executives, accounting for much of the income gap.

EU

  • labour mobility in the European Union (Dictionary of Economics)  This article describes trends in labour mobility within the European Union since the Treaty of Rome and the resulting economic impacts, particularly since the accession of ten new Member States in 2004. It concludes that, half a century after ‘free movement’ was first incorporated into the founding treaties of the European Union, it is finally beginning to become an important factor in European economic integration. (Subscription required.)

France

Greece

  • Recapitalization Of Battered Greek Banks Entering Critical Phase, New Levy Economics Institute Report Says (Investor Ideas)  The 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.  Despite direct cash infusions to Greek banks that have so far exceeded €45 billion, with corresponding guarantees of around €130 billion, credit expansion has failed to pick up.  The authors give two reasons:

(1)  Following the 2012–13 recapitalization, creditors allowed the old, now minority, shareholders and incumbent management (regardless of culpability) to retain effective control of the banks—a decision that did not conform to accepted international practices. Sitting on a ticking time bomb of nonperforming loans (NPLs), Greek banks, rather than adopting the measures necessary to restructure their portfolios, cut back sharply on lending, while the country’s economy continued to shrink.  As a result deposits have suffered a massive exodus. 

(2)  The has ensued a continuous recession—mainly the product of strongly deflationary policies dictated by international lenders.

Dubai

  • Smart policing to come Dubai with robo-cops (Yahoo News)  Hat tip to Roger Erickson and Carlos Mucha.  In the next two years robots will be used to bolster police forces patrolling malls and other public areas.  Roger says he has heard (off the record) that "lobbyists would like to automate politicians too".

Japan

  • Japan issues tsunami alert after powerful earthquake (BBCNews)   A tsunami warning has been issued for parts of Japan after a magnitude 7.0 earthquake struck off the country's south-western coast.  The Japan Meteorological Agency said waves could hit the western coast of Kagoshima prefecture and Satsunan islands further to the south.  It said the quake happened at the depth of about 10km (six miles).

India

  • His Economics (Swarajya)  Deep economic thinkers like John Kenneth Galbraith were not impressed by Jawaharlal Nehru’s grasp of economics. Nehru had studied natural and social sciences at Cambridge and trained to be a lawyer. But the outrage of the Jalianwallah Bagh massacre in 1919 pushed him at the age of 30 into active nationalistic politics. He never looked back.  This is a recounting of the way that social idealism shaped India for decades as a result of Jawaharlal's dominance in India's government.


U.S. Shale Liquids Production: What Have Another 12 Months Taught Us? (PIRA Energy Group)  This is the forecast for U.S. shale oil production as of 3Q 2013 when oil was priced above $100..

shale.oil.production.forecast.2013


Recent Updated Forecast (URL misplaced)  Note that under $50 shale oil production is predicted to have peaked.  If prices are between $50 ans $60 shale production is predicted to peak by 2018.  But above $60 production will increase for another decade, and the higher the future price the faster and higher the increases will go.

shale.crude.production.projections

Other Economics and Business Items of Note and Miscellanea

  • America's 50 most livable cities (24/7 Wall St., MSN Money)  Slide show presentation.

  • The 11 States with the Hottest Housing Markets (Fiscal Times)  Slide show presentation.

  • Social Security: The Long Slow Default (ValueWalk)  A technical presentation of how social security (SS) operates under the assumption that it is equivalent to "insurance" as that operates in the private sector.  Econintersect:  Although it is mentioned, not enough emphasis is paid to the fact that SS is not a contractual arrangement as is insurance.  It is a government paid benefit supported by taxes - and it can be adjusted at any time.  Even without getting into the technicalities of monetary solvency, the government can change benefits paid at any time it is appropriate.

  • Is Wall Street Beneath Business Students' Standards? (Bloomberg)  Business school deans say some students who consider themselves "highly ethical" are avoiding careers in finance because they consider the field beneath their standards.


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