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What We Read Today 23 January 2016

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".).


Every day most of this column ("What We Read Today") is available only to GEI members.

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Topics today include:

  • Snowstorm Pics

  • Money Returning Home

  • Resident Bloomberg?

  • Emerging Market Growth Miracle is Over

  • Relief Rally

  • Temporary Bottom for Oil

  • Japan Slow with Solar

  • Saudi Arabia's U.S. Treasury Hoard

  • Minsky Hypothesis Assumptions

  • Forgotten Lessons from the 1930s

  • And More

Articles about events, conflicts and disease around the world


  • A Scared World Is Taking Its Money and Running Back Home—and to the U.S. (Bloomberg)  A tide of money went out to emerging markets for more than a decade, pushed by accommodative monetary policy in the U.S. and pulled by the promise of robust growth.  Now that tide is coming back in as investors seek to repatriate funds or flock to U.S.-dollar denominated assets as a safe haven amid sluggish economic growth and global market turmoil.  The emerging market growthy miracle has ended.



  • Bloomberg takes early steps toward entering presidential race (Al Jazeera)  Former New York Mayor Michael Bloomberg is taking early steps toward launching an independent campaign for president, seeing a potential path to the White House amid the rise of Republican Donald Trump and Democrat Bernie Sanders.

  • Relief rally is here. Enjoy it while it lasts: Technician (CNBC)  The S&P 500 Index and the Dow Jones Industrial Average closed their first positive week in the last three, renewing confidence in the otherwise gloomy market environment. According to one technician, a bottom could be in place for the very near-term—at least for the time being.

  • Space shuttle's piggyback plane unveiled (CNN)  It may sound impossible to some, but once upon a time, airplanes regularly took off and landed with 83-ton spaceships on their backs.  Someone has wisely decided to put one in a museum.  On Saturday, Space Center Houston in Texas unveiled an exhibit featuring one of two powerful Boeing 747s that NASA used to piggyback space shuttles thousands of miles across the country for decades. They called this particular plane NASA 905


  • Blizzard brings much of East Coast to a standstill (Associated Press)  A blizzard with hurricane-force winds brought much of the East Coast to a standstill Saturday, dumping as much as 3 feet of snow, stranding tens of thousands of travelers and shutting down the nation's capital and its largest city.  A total of 80 million people are now in the path of the storm.  The potential snowfall in New York City has been increased to 30 inches.  Picture below are from northern Virginia.  The first is a street scene in Alexandria; the second is from Leesburg.  The woman clearing the driveway is 5' 4" tall.



Saudi Arabia

  • Saudi Arabia's Secret Holdings of U.S. Debt Are Suddenly a Big Deal (Bloomberg)  It’s a secret of the vast U.S. Treasury market, a holdover from an age of oil shortages and mighty petrodollars: Just how much of America’s debt does Saudi Arabia own?  But now that question -- unanswered since the 1970s, under an unusual blackout by the U.S. Treasury Department -- has come to the fore as Saudi Arabia is pressured by plunging oil prices and costly wars in the Middle East.  In the past year alone, Saudi Arabia burned through about $100 billion of foreign-exchange reserves to plug its biggest budget shortfall in a quarter-century. For the first time, it’s also considering selling a piece of its crown jewel -- state oil company Saudi Aramco. The signs of strain are prompting concern over Saudi Arabia’s outsize position in the world’s largest and most important bond market.

A big risk is that the kingdom is selling some of its Treasury holdings, believed to be among the largest in the world, to raise needed dollars. Or could it be buying, looking for a port in the latest financial storm? As a matter of policy, the Treasury has never disclosed the holdings of Saudi Arabia, long a key ally in the volatile Middle East, and instead groups it with 14 other mostly OPEC nations including Kuwait, the United Arab Emirates and Nigeria. For more than a hundred other countries, from China to the Vatican, the Treasury provides a detailed breakdown of how much U.S. debt each holds.


  • Despite nuclear fears, Japan solar energy sector slow to catch on (Al Jazeera)  A survey of the complex landscape of Japan’s power industry reveals a complicated picture remains following the Fukushima nuclear disaster, with entrenched corporate and government interests resisting a full embrace of renewable energy sources. 

Other Economics and Business Items of Note and Miscellanea

  • Economics Of A Blizzard: Winter Storm Jonas Is A Win For Whole Foods But A Loss For Hourly Workers (Forbes)  Grocery stores will have a good few days. So will  building material suppliers like Home Depot or Lowe’s Cos as people nervously hoard salt and shovels. Restaurants won’t do as well. If the storm is as bad as expected people will eat at home and, unlike if they are planning to buy cars or televisions, they probably won’t eat out extra in the future since they skipped this weekend. In the long run though, it will smooth out. (Keep this in mind when any company cries weather in a lackluster earnings report.)  Hourly workers are most  likely to be hit on personal economic level. A salaried desk worker will be paid in either case and even if transpiration to the office is a problem many are likely to be able to do some work from home. That is not the case for hourly retail or restaurant workers who are likely to have weekend shifts meaning wages will be lost.

  • Learning, Expectations, and the Financial Instability Hypothesis (INET Economics)  If certain widely accepted assumptions are used, Minsky's Financial Instability Hypothesis is invalid.  But when learning by agents is included in models then the results are consistent with Minsky's hypothesis that a period of apparent stability leads to over-acceptance of transient stability as permanent.  Conclusions of this paper:

Modeling endogenous financial fragility and understanding its determinants remain as key issues in macroeconomics. There have been some progress over these themes in recent years6, as there was much progress in older times as well, 7  but there is still much to learn about them.

This paper focused on Minsky’s Financial Instability Hypothesis, and analyzed the consistency of di↵erent commonly used assumptions on expectations formation  with such hypothesis.

We firstly showed that under the full information rational expectations (FIRE)  hypothesis, that mechanism is not valid. The intuition is simple: under FIRE there  is nothing to learn, and a stream of consecutive similar signals says nothing about the perceptions of stability for the future. We then showed how this mechanism
is valid under hypotheses that contemplate learning, either in a Bayesian or non-
Bayesian fashion. In models with learning, changes in agents’s output growth
expectations are smaller when they believe that observed changes in output growth  are mostly of a transitory nature, or when forecast errors are smaller, which is  more likely in a more stable economy. Furthermore, the smaller updates reinforce the general perception that the share of output variance that is due to transitory  shocks has increased, which in turn leads to even smaller updates of forecasts, i.e.  to more stability of expectations.

  • Lessons Ignored from the 1930s (INET, YouTube)  A history lesson from Walker Todd, from the Institute of New Economic Thinking and the Cato Institute about the forgotten history of banking from the Greta Depression.  Todd has 20 years of experience with the Federal Reserve Bank of New York and the Federal Reseve Bank of Cleveland.  The interview in this video is conducted by Mardhall Auerback, who has contributed to GEI.  In Todd's view, an opportunity to restructure the banking system along less dangerously systemic lines was lost when Dodd-Frank was adopted. One of the biggest flaws, in Todd's view, was the reluctance to stress test the banks properly and "get real" as far as the underlying value of their assets were concerned as was done in the 1930s.

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