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What We Read Today 19 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





Hong Kong

  • Monetary policy torn between dollar peg and Chinese slump (Nikkei Asian Review)  Hong Kong faces a dilemma as it needs to follow the U.S. in raising interest rates despite a weak economic outlook resulting from the slowdown in the mainland.  With Hong Kong's currency pegged to the U.S. dollar, monetary authorities in this special administrative region of China are expected to boost interest rates to stay in sync with the U.S. Federal Reserve, which ended its near-zero rate policy Wednesday.  But leading Hong Kong banks said the same day that they will hold interest rates flat, because of a weak economy on the Chinese mainland..


  • Macri-economics: Argentina in shock of new president's drastic reforms (e NCA)  Argentina's president, conservative Mauricio Macri, says a sharp adjustment is needed to make the country competitive, though economists as well as his political opponents warn it will hurt Argentines' purchasing power in the medium-term.  The so-called "Macri-economic" shock treatment in Latin America's third-biggest economy saw the peso currency plunge by a third after he scrapped his leftist predecessor's dollar exchange controls.  He is drawing praise from foreign investors but angry protests from citizens afraid for their salaries.


  • In Talks Over Seized U.S. Property, Havana Counters With Own Claim (The New York Times)   Some of the thorniest conversations in the long road toward full relations between Cuba and the United States have only just begun in recent days: The two sides are sitting down for the first time to discuss the American properties Cuba confiscated decades ago.  The very idea of compensation for property and businesses seized in the wake of the Cuban revolution sent a quiver of excitement down the backs of the thousands of people who lost everything from sugar mills to family homes to oil refineries.

    People started dusting off yellowing deeds. Lawyers were called.  

    But what if Cuba approaches these historic talks with a rather different unsettled claim in mind?  In 1999, a Cuban court found the United States government liable for deaths and damages caused by America’s “aggressive policies” against the island — namely, the Bay of Pigs invasion and the trade embargo prohibiting American citizens and companies from doing business in Cuba.  Arguing that the United States had strangled Cuba’s economy and caused irreparable harm, the court ordered the United States to pay $181 billion in damages.

This Year's Worst Commodity Is One You Probably Can't Pronounce (Bloomberg)  An obscure metal used to make steel has become this year’s worst-performing commodity, after China’s stumbling economy and a collapse in the energy industry drove outsized losses.  Molybdenum is bear market's `poster child' after tumbling 49%.  In familiar raw-material lament, glut seen lasting into 2020.  Click either graphic for large image.


Other Economics and Business Items of Note and Miscellanea

  • Statin Therapy and Risk of Acute Memory Impairment (JAMA Internal Medicine)  This study concludes that use of statins cannot specifically be correlated with memory loss when compared with other lipid lowering (LLD) drugs.  The conclusions statement (below) does not mention the possibility that higher cholesterol levels might be associated with better memory retention, an obvious alternative to the drugs themselves causing memory loss effects.  The conclusion statement:

Both statin and nonstatin LLDs were strongly associated with acute memory loss in the first 30 days following exposure in users compared with nonusers but not when compared with each other. Thus, either all LLDs cause acute memory loss regardless of drug class or the association is the result of detection bias rather than a causal association.

  • Health-Care and Education Jobs Bolster States’ Employment (The Wall Street Journal)  Health care jobs are rising across the country, as an aging population demands more nurses, doctors and home health aides. The economy added 638,000 jobs in the education and health services industry sector between November 2014 and November 2015, the bulk of them in health care.  The driving force in this is an aging demographic.

    Econintersect:  This is largely an expenditure that does not show up in GDP.  Therefore it is considered by some to be a drain on the economy.  In order to subscribe to that proposal one must ignore two questions:

    1. What would the the counterfactual cost (expenditures) if less health care were provided?

    2. What is the value of better quality of life for an aging population?  It likely has only a minor contribution to GDP.  But should economic success be measured in "productivity" and ignore human suffering?

  • It'll Be A Rough Ride...But Deepwater Works At $30/bbl (Sort of) (OilPro)  Costs for new deepwater production have fallen about 50% so that makes $30 a barrel the new $60.  As long as prices are (or can be anticipated to be) at $40 or higher new deep water drilling can proceed.

  • Are Oil Companies Cooking Their Books? (Robert Rapier, Forbes)  RR contributes to GEI.  Some petroleum companies are reporting solid free cash flow despite the plummet in commodity prices.  Free cash flow (FCF) is a measure of the amount of cash generated by a company that is available for reinvestment or distribution to shareholders. It is one measure of a company’s overall financial health. Oil and gas companies that have been slashing capital expenditures over the past year, and have managed not to spend all of their cash flow should be among those best able to withstand several more months of low oil prices.  There is no chicanery here.  What is happening is that billions of barrels of "proven" reserves have been taken off the books because they are not recoverable at current low prices.  These are booked as impairments and are added to net income, increasing (apparent) free cash flow.  The books are honest.  But the impairments taken today will come back as charges against future income and therefore can make the high free cash flow stock actually of less value today than it would be otherwise.

  • Schiff: Rate Hike Means Fed Has No Confidence (Daily Reckoning)  A common interpretation of the Fed rate hike this week was that it reflected an increase of confidence in the strength of the U.S. economy.  Peter Schiff says it indicates just the opposite:

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