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What We Read Today 17 December 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

Global

  • A White-Hot Christmas Wraps Up Earth’s Hottest Year on Record (Bloomberg)  This has been by far the hottest year on record, and it’s ending with an exclamation point. Holiday shoppers in New York’s Rockefeller Center have been checking off their lists in weather that’s an eerie 20 degrees warmer than normal. Meanwhile, another stack of global temperature records has fallen.  Last month was the hottest November in 136 years of data, according to U.S. figures released on Thursday, making it the ninth record-breaking month of 2015. This year has been so far off the charts, it’s certain to go down as the hottest year on record even if December turns out to be unusually cool (it won’t).  El Niño is largely responsible for this year’s extremes, but make no mistake: This is what global warming looks like. Before this year, 13 of the 14 hottest years fell in the 21st century. The thermometer creep is relentless.  Econintersect:  We still see people saying the climate is actually cooling.  See next article.

  • America’s Most Advanced Climate Station Data Shows US In A 10-Year Cooling Trend (The Daily Caller)  This article asserts that data from America’s most advanced climate monitoring system shows the U.S. has undergone a cooling trend over the last decade, despite recent claims by government scientists that warming has accelerated worldwide during that time.

    Econintersect: The cooling trend?  Look at the graph below to which this article linked (above) and let us know if you can see a cooling trend.  Also, did you catch the the logical slight of hand in what the article stated?  "... U.S. has undergone a cooling trend over the last decade, despite recent claims by government scientists that warming has accelerated worldwide during that time."   The slight of hand comes from the implication that local temperature trends must always track the global trend. 

[iframe width="560" height="315" src="https://www.youtube.com/embed/hbYfpLJdy_4" frameborder="0" allowfullscreen][/iframe]

temp.trend.us.2005.2015

  • The Economics of Terrorism in Africa (Project Syndicate)  Terrorism risks derailing Africa’s economic and political development in six important ways.  For starters, there is the sheer scale of the humanitarian catastrophe. Since 2009, Boko Haram alone has killed more than 10,000 people in Nigeria and has driven nearly a half-million from their homes.  Other factors include diversion of finacial resources, discouragement of entrepreneurship and the diminishment of stable government formations.

U.S.

  • Shkreli, CEO Reviled for Drug Price Gouging, Arrested on Securities Fraud Charges (Bloomberg)  Martin Shkreli, the boyish drug company entrepreneur, who rocketed to infamy by jacking up the price of a life-saving pill from $13.50 to $750, was arrested by federal agents at his Manhattan apartment early Thursday morning and charged with securities fraud. After pleading not guilty in Brooklyn federal court he was freed on a $5 million bond.

  • Where There’s Distress in the U.S. Economy (The Wall Street Journal)  The vast majority of large U.S. counties saw employment and wage growth in the past year, but the economy is still dotted with pockets of distress.  More than 93% of the nation’s 342 largest counties posted job growth between June 2014 and June 2015, the Labor Department said Thursday. Each of these counties had at least 75,000 jobs during that period. Of the 20 counties posting job losses in that period, five were in Texas or Louisiana, two states heavily reliant on the energy industry, which has been slammed by low oil prices.  But Texas and Louisiana also had three of the top 10 fastest-growing counties, including counties in suburban Dallas and Houston, where employment climbed by 5% or more in the period, compared with nationwide job growth of 2%.  Another sign that the nation’s economic growth is spreading unevenly: Of the top 10 counties with the fastest employment growth, none ranks in the top 10 for wage growth, suggesting that many of the new jobs may be lower- or middle-wage.

  • The Fed and Wall Street Differ on How High Rates Will Go (Bloomberg)  In the forecast that was released on Dec. 16, the median FOMC member—i.e., the one whose dot was in the center of the cluster—predicted a federal funds rate of 1.25% to 1.5% at the end of 2016. That amounts to four hikes, assuming each is a quarter point.  That range is significantly higher than what the market is expecting. The market is looking for the federal funds rate to be a little under 1% a year from now.  The Fed is more optimistic about the economy than is the market.

rate.outlook

France

  • IMF chief Lagarde to stand negligence trial in France (BBC News)   IMF chief Christine Lagarde is to stand trial in France for alleged negligence over a €404 million ($438 million; £294 million) payment to a businessman in 2008.  She was finance minister in President Nicolas Sarkozy's government at the time of the compensation award to Bernard Tapie for the sale of a firm.  Mr Tapie supported Mr Sarkozy in the 2007 presidential election.  Ms Lagarde's lawyer described the court's decision as "incomprehensible", and said the IMF boss would appeal.  In a statement she said she had "always acted in this affair in the interest of the state and in respect of the law", according to AP.

Turkey

Russia

"The Turks decided to lick the Americans in a certain place".

Vietnam

  • Landmark EU-Vietnam Trade Deal Seen as Model for SE Asia (Voice of America)  Hat tip to Rob Carter. Negotiations ended early this month on the prospective trade pact which offers strategic potential on both sides. For Vietnam, it would diversify ties beyond those with regional powers, China and the United States. For Europe, it would stake a bigger claim in Asia at a time when more attention has centered on the U.S.-driven Trans-Pacific Partnership.  EU officials have touted the Vietnam deal, which eliminates 99% of tariffs, as their first with a developing country and a possible model for future free trade agreements.


Comments on November Housing Starts (Bill McBride, Calculated Risk)  Bill says that total housing starts in November were above expectations, however some of the strength might be related to the relatively warm weather in some parts of the country.  Perhaps the most interesting part of this report are two of the graphics which show the divergence between multi-unit construction and single family.  The first graphic shows the high (by historical standards) multi-family residential construction.  Multifamily housing starts last exceeded the current level 27 years ago (1988).  However, population has grown over the years so it is important to recognize that housing starts per million people tells a different story  Looking at previous peak years the multi-family starts per million are 1226 for 2015 (November), slightly higher than the 2004 number of 1136.  But the comparisons to 1987 (2479 starts per million) and to 1973 (4292 starts per million) are dramatically stronger than the data not normalized for population.

The second shows the historically low single family construction.  In this case, current data is comparable with values in late 1982 - early 1983.  But normalizing for population, current values are 16% lower. Click either graphic for large image.  See GEI Econmetrics for latest detailed analysis of U.S. housing data.  

StartsMultiNov2015

StartsSingleNov2015

Other Economics and Business Items of Note and Miscellanea

  • Top 10 challenges facing physicians in 2016 (Medical Economics)  Working on better treatments for disease?  Nothing in the top ten listed by this author have disease issues involved.  The issues are all administrative and economic.

  • Another GOP presidential debate, another battle with facts (Personal Liberty)  The Republican presidential candidates negotiated a minefield of national security and foreign policy concerns and dilemmas in their latest debate Tuesday night.  But it was rocky terrain for many as they slid, slipped and suffered stubbed toes in their encounters with the facts.  Econintersect:  How do they get away with it?  They are p[laying to the "my mind is made up, don't confuse me with facts" (correct or incorrect) crowd.  Only the core matters right now.

  • Leftists Are The Economic Science Deniers (The Federalist)  Econintersect:  We agree that the economics of many Obama administration actions may not have been optimal for the economy.  (Coddling instead of forcing restructuring of TBTF banks comes to mind; for just one example.)  But we strenuously disagree with the premise from which this article proceeds - see quote from Obama, below.  We would suggest that the classical quotation about the mechanism of capital markets is improperly stated.  To make the statement correctly, in our opinion, it is necessary to change the word "productive" to "profitable".  It is a fallacious assumption to assume that maximizing profit maximizes productivity within a macro economic context.

Several major economic policy positions of the Obama administration fly in the face of widely accepted economic theories, even those taught in Economics 101. Just as Obama said in his press conference last week, “The market is very good about… allocating capital towards its most productive use.”

  • What’s the impact of Joseph Stiglitz’s work on economics? (World Economic Forum)   John Maynard Keynes and Arthur Lewis, who recognized the reality of involuntary unemployment, never managed to explain why wages and interest rates so often resisted the pressures of supply and demand.  Columbia University’s Joseph Stiglitz, who celebrates 50 years of teaching this year, solved the puzzle. In a series of innovative papers, Stiglitz picked up some elementary facts about the economy that lay strewn about like jigsaw pieces, put them together, and proved why some prices were naturally sticky, thereby creating market inefficiencies and thwarting the functioning of the invisible hand. In Stiglitz’s words, the invisible hand “is invisible at least in part because it is not there.”  Stiglitz set out his argument over a remarkable ten-year period. In 1974, he published a paper on labor turnover that explained why wages are rigid. His analysis has important implications for development economics, and I have used it often. This was followed by other important work, including a paper on credit rationing and interest-rate rigidity (co-written with Andrew Weiss) and another paper on efficiency wages. And then, in 1984, with Carl Shapiro he published the definitive work on endogenous unemployment.  The ridiculous idea (which still persists today for some) that people were only unemployed because they preferred leisure to work was thoroughly dispensed with through Stiglitz's work.

  • Why I Majored in Economics (Pomona College)  This is an idealistic short essay by a college senior explaining why she majored in economics.  We are reminded of how idealistic many college seniors and fresh graduates can be.  The real challenge is ahead of them - remaining productive as idealism is replaced with reality.


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