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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Topis today include:
Keynes in a Nutshell
Paradox of Thrift
Increased Savings Threatens the Economy
Time to Invest in Energy?
Executives of Thin Ice
The New Social Security
Zika Declared a Global Health Emergency
China on the Moon
Articles about events, conflicts and disease around the world
WHO declares Zika virus an 'international health emergency' (Al Jazeera) The World Health Organization (WHO) announced Monday that the Zika virus outbreak in the Americas is an "international health emergency”. The announcement comes after warnings by the U.N. health agency that the mosquito-borne virus, which is linked to potential birth defects that have affected thousands of infants across Latin America, was “spreading explosively”. The WHO is expecting up to 4 million cases in the region this year.
New York-Area Ports Shut Down as Longshoremen Walk Off the Job (The New York Times) The East Coast’s busiest port system ground to a halt on Friday as thousands of longshoremen in New York and New Jersey walked off the job, threatening to disrupt the delivery of goods throughout the region. The walkout caught many people involved with port operations by surprise, and the reasons behind the action remained shrouded in intrigue, with even officials at the Port Authority of New York and New Jersey, which acts as a landlord for the ports, struggling to understand the situation. See next article.
Investigation begins into N.J., N.Y. port walkout, as dockworkers return (nj.com) Cargo operations at the region's ports resumed over the weekend, as the Waterfront Commission of New York Harbor said it was opening an investigation into who orchestrated what it called an illegal walkout on Friday. Port officials expect a normal workday today, after dockworkers walked off the job without warning on Friday, shutting down the busiest waterfront on the East Coast. The longshoremen came back Friday night and worked over the weekend, said Steve Coleman, a spokesman for the Port Authority of New York and New Jersey, which serves as the landlord for the New York Harbor terminal areas in the two states.
Greek ferries tied up for 3rd day over pension reform (Atlanta Journal Constitution) Greek ferries were tied up in port for a third day Friday after seamen extended a two-day strike for a further 48 hours, while farmers continued temporary highway blockages to protest the left-led government's planned pension reforms. No ferries were running between islands and the mainland, while farmers blocked a road near Athens' international airport for about an hour. They also announced the closure of Greece's northern border crossing with Bulgaria to trucks, saying only private cars and buses would be allowed to cross. Farmers have been blocking highways across the country for hours at a time to protest the reforms that are part of Greece's third international bailout. Econintersect: "Reforms" = increased austerity.
UPDATE 1-Iraq will cooperate with any production-cutting decisions -oil minister (Reuters) Iraq's oil minister said on Saturday his country was ready to accept a decision by OPEC and non-OPEC members to cut crude production and was preparing to revive its national oil company, moves aimed at boosting profits amid dropping prices. Cash-trapped Venezuela has called for a meeting in February to discuss steps to prop up global oil prices, which have plunged to 12-year lows around $30 a barrel.
Vietnam’s latest political turnover made one thing abundantly clear: being a strong, charismatic leader with a high domestic and international profile will only lead to your downfall. To be successful in Vietnamese politics, you have to work with consensus — and be, for the most part, faceless.
Vietnam’s Communist Party ended a weeklong congress on Wednesday sticking with the status quo by re-electing Nguyen Phu Trong as party general secretary, the country’s No. 1 leader, for a second five-year term. A contender, reform-minded Prime Minister Nguyen Tan Dung, was cut to size and ousted from the collective leadership because he was seen by party bosses to have become too big for his boots.
The Bank Of Japan - Ringing In The Endgame? (Seeking Alpha) This author has an apocalyptic view of the current central bank monetary policies. He bases his discussion on assumptions not stated as such but obviously accepted as facts. Central among these is that there will at some point be uncontrollable inflation once the Bank of Japan (BoJ) "prints" too much money. Econintersect: What is actually happening is the Bank of Japan is monetizing debt. This is the act of exchanging one form of "money" (government bonds and other securities) for fiat money. It is not printing money, it is exchanging one type of negotiable device with another. The only change is that interest is not paid on the new fiat so the exchange is actually deflationary because interest that formerly was paid by the government into the economy is removed. We have asked the question before: Is there any point at which this exchange could be too much? The answer is not clear. Could Japan totally monetize its debt and still have a viable economy? Perhaps. Or perhaps not. We live in interesting times but for reasons beyond those considered by this author. An excerpt:
It appears to us that the ever more desperate monetary policy measures adopted by the BoJ are coming closer and closer to crossing a point of no return. In other words, the BoJ seems to be entering what is popularly known as the "Keynesian endgame". Once the threshold beyond which confidence is finally lost is crossed, the long maintained sophisticated fiat money Ponzi scheme and the associated three card Monte played between central banks, commercial banks and government treasuries will come to a screeching halt.
Naturally, we cannot tell you where this threshold precisely lies or how quickly said "endgame" will be playing out. Nor do we know with any precision what gyrations we may yet see as the situation evolves. We do, however, know that Kuroda's decision has brought the world another step closer to the end. It would be a dangerous error to believe that such policies can be adopted without inviting severe consequences.
Kuroda is a member of a small coterie of central planners running the world's currency systems, who are completely divorced from reality and are playing with the savings and lives of millions. They are implementing extremely risky experiments and evidently haven't even the faintest inkling of what the ultimate outcome will be.
Chinese photos show moon's surface in vivid detail (CNN) China has released hundreds of high-resolution photos taken by its Chang'e-3 lunar lander and rover, showing the moon's surface in vivid detail. The moonlanding took place in 2013 as the middle kingdom joined Russia and the U.S. in the moonlanding club.
This chart poses the single-biggest risk to the US economy (Miles Udland, Business Insider) The rising U.S. savings rate has not yet increased rapidly enough to cause alarm but it is rising with positive acceleration. During and following the Great Recession personal savings rates were higher, driven significantly by debt default and repayment. After declining sharply in late 2012 and 2013 the savings rate has again been rising. But, with a continuing fragile recovery, up from a low below 4.5% to 5.5% in December, the savings rate represents reduced spending and is a drag on GDP.
Keynes stated that if Investment exceeds Saving, there will be inflation. If Saving exceeds Investment there will be recession. One implication of this is that, in the midst of an economic depression, the correct course of action should be to encourage spending and discourage saving. This runs contrary to the prevailing wisdom, which says that thrift is required in hard times. In Keynes’s words, “For the engine which drives Enterprise is not Thrift, but Profit.”
The paradox of thrift (or paradox of saving) is a paradox of economics. The paradox states that if everyone tries to save more money, then aggregate demand and therefore income will fall and will in turn lower total saving (the autonomous portion that changed initially plus the portion induced by the level of income[clarification needed]) in the population, because the tendency to save is directly related to the amount of income received. The paradox is, narrowly speaking, that total saving may fall even when individuals attempt to increase their saving, and, broadly speaking, that increase in saving may be harmful to an economy. Both the narrow and broad claims are paradoxical within the assumption underlying the fallacy of composition, namely that what is true of the parts must be true of the whole. The narrow claim transparently contradicts this assumption, and the broad one does so by implication, because while individual thrift is generally averred to be good for the economy, the paradox of thrift holds that collective thrift may be bad for the economy.
Is Saving Money Bad for the Economy? (Gregory Bresiger, Mises Daily) The value of savings in excess of investment is that it represents deferred consumption, according to this article which quotes Benjamin Anderson, Detley S. Schlichter and Ludwig von Mises. The argument here is that savings is an ultimate good and Keynes is soundly criticized for his paradox argument. Econintersect: While it is valid that lack of personal savings reduces individual financial security, the discussion here does not consider the value to the commons of all income being spent. Thusly, all money remains "in use" and supports increased economic activity overall. Money saved in excess of investment in production of new goods and services is essentially "hoarded" and is not maintaining as much economic activity as would be otherwise. As in many economic arguments like this, the core centers on conflicts between individual interest and common interest. It is in analysis of arguments like this that the weakness in the argument that all problems are resolved by "the market" are exposed. While we would agree that truly free markets are the best arbiter of price, we suggest that price may not be the best measure of value. Price represents the competitive opinions of individuals and, using the paradox of savings concept (and our comments just stated here), we maintain that competitive values of individuals may be in conflict with present and future value of the commons.
Other Economics and Business Items of Note and Miscellanea
Social Security Savvy Still Pays (Financial Planning) Even though changes in the law have eliminated two widely used Social Security planning options, there are still many variables in how benefits are claimed that are worth evaluating. The strategies still available into the future are complicated for the next three months for those applying for benefits during that time because the eliminated options are not ending until 30 April. This article is written for advisors and does not detail Social Security claiming options but is still worthwhile, especially for anyone filing claims before 30 April.
Now May Be The Time To Invest In Energy (Trust Advisor) Collapsing crude prices have vaporized energy-company profits, pushing down stocks in the sector by 12 percent in the past year. But the sell-off may have gone too far. Even if the price of crude oil doesn’t recover, some energy companies can fare well. Two companies are mentioned specifically: ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX).
“The idea of computing a body’s displacement as an area in time-velocity is usually traced back to 14th century Europe. I show that in four ancient Babylonian cuneiform tablets, Jupiter’s displacement along the ecliptic is computed as an area of a trapezoidal figure obtained by drawing its daily displacement against time. This interpretation is prompted by a newly discovered tablet on which the same computation is presented in an equivalent arithmetical formulation.”
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