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What We Read Today 18 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

  • U.S. Eases 35-Year-Old Real Estate Tax on Foreign Investors (Bloomberg)  President Barack Obama signed into law a measure easing a 35-year-old tax on foreign investment in U.S. real estate, potentially opening the door to greater overseas purchases.  Contained in the $1.1 trillion spending measure that was passed to avoid a government shutdown is a provision that treats foreign pension funds the same as their U.S. counterparts for real estate investments.

  • Prospects still slim for major global economic pickup (Reuters)   The world economy may be set for another year like 2015, with modest growth in developed economies offsetting persistent weakness elsewhere but generating very little inflation and keeping interest rates low.  The U.S. Federal Reserve's long-awaited rise in rates from zero showed confidence in the world's largest economy, but rival China is still struggling for a foothold with rate cuts.  Although some countries, such as Brazil, have mainly home-grown inflation troubles, the Fed's first post-crisis rate hike is an unlikely cure for what ails the rest of the world.

U.S.

EU

  • Migrant crisis: EU needs 'massive' resettlement programme (BBC News)   The head of the UN refugee agency, UNHCR, has urged European leaders to set up a "massive" refugee resettlement program.  Antonio Guterres said moves to speed up the processing of asylum seekers in Greece was welcome but "not enough".  He was speaking as a new UN report warned that the number of forcibly displaced people worldwide would "far surpass" a record 60 million this year.  The EU is grappling to deal with an huge influx of migrants.

Syria

India

  • Counting the cost of Chennai floods (BBC News)   More than 300 people were killed when devastating floods hit the Indian state of Tamil Nadu.  The rains have now stopped but businesses have been decimated, with factories, shops and offices destroyed.  There is an autoplay video when you open this article.


This Junk Bond Derivative Index Is Saying Something Scary About Defaults (Bloomberg)

junk.default.risk

Other Economics and Business Items of Note and Miscellanea

I’m neither a liberal nor a conservative. I’m a biologist. A biologist must use the word regulation because life depends on it. The processes that cause such things as our hearts to beat, our lungs to breathe, and our brains to think are regulated in a thousand different ways. No regulation means dying for an organism. But it’s not a matter of “more” or “less” regulation. It’s a matter of just the right kind of regulation for each and every process.

Politics has become pathological to use the word regulation as it does.

Regulation is one of the most charged words in politics. If you’re a conservative, then you’re likely to think that regulation is a bad thing that erodes personal responsibility and prevents the free enterprise system from working its magic. If you’re a liberal, then you’re likely to think that regulation is essential to prevent the inefficiencies and abuses that pervade modern life.

Actually, if you’re a liberal, you’re unlikely to use the word regulation at all. Conservatives have largely won the battle over its meaning, stigmatizing it for everyone. Conservatives will get votes by calling for less regulation. Liberals won’t get votes by calling for more regulation, so they are forced to tiptoe around the word to make their arguments.

For years, the union-backed Fight for $15 campaign has argued that raising minimum wages will curb low-wage workers’ reliance on government assistance programs—saving taxpayers money.

Not so, says a new study that found federal and state minimum-wage boosts have had no statistically significant impact on working-age adults’ net use of several such programs, including Medicaid and the Supplemental Nutrition Assistance Program formerly known as the food-stamp plan.

The study, partly funded by the right-leaning Employment Policies Institute, contends a $15 minimum wage is poorly targeted to recipients of these programs. Among those who would be affected by a $15 minimum wage, just 12% are SNAP recipients and just 10% are Medicaid recipients.

  • A high level of correlation exists between success in a hunter-gather society and in a modern economy.  Many of the factors are opposed to the idea of optimization of society through individual self-maximizing.

  • There are many factors of competition that can create inefficiency.

  • There is a higher (yet unnamed) natural principle that “survival of the fittest” must yield to.

  • Interest Rate Increase Reflects Economy’s Resilience, TD Economics (ABL Advisor)  This forecast sees unemployment falling throughout 2016, reaching a bottom of 4.7% in 2017.  GDP will grow 2.4% in 2016, led by higher consumer spending as employment continues to increase.  Even when employment gains slow in 2017 this forecast calls for 2.3% GDP growth.  Econintersect:  If this forecast is correct, the result will be 8.5 years without a recession, tying the longest period without recession since WW II, which occurred from 1982-1990.

  • Fed rate rise comes too late to reverse economic inequality (The Irish Times)  The Fed has been accused of exacerbating inequality. Seven years of near-zero interest rates have hurt Americans looking to put money aside for retirement (effectively losing money in deposit accounts when inflation is taken into account), but helped the wealthiest by propping up the value of share prices and other assets. 

  • Who Created the Economy? (evonomics)  This article is an excerpt The Evolution of Everything: How New Ideas Emerge by Matt Ridley.  This is discussion of how the modern economy came about.  Over the past 200 years income for the average person alive in the world has risen between 10 and 20 times, in real terms.  This has been called the 'great enrichment' and benefits have flowed substantially to the working classes, current short-term trends notwithstanding.  The author says the causes of the great enrichment are not adequately explained by economic theory and therein lies another documentation of the shortcomings of economics.


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