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What We Read Today 03 April 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".).

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Topics today include:

  • Unintended Consequences of Negative Interest Rates

  • How Negative Interest Rates Can Increase the Cost of Credit

  • How Some Middle Income Americans Pay No Income Tax

  • Five Good Mutual Funds for the Second Quarter

  • Is Marriage Disappearing from the American Scene?

  • Is Dollar Bull Dead?

  • Why Increasing the Unemployment Rate is a Good Thing

  • Bankrupt Coal Companies Leave Huge Bill for Taxpayers

  • New Migrant Route Through the Arctic

  • Economic Uncertainty of Brexit

  • China Takes Next Step in Steel Trade War

  • Is the Canadian Economy Looking Up?

  • And More

Articles about events, conflicts and disease around the world

U.S.

  • Are millennials early adopters of a marriage-free future? (MarketWatch)  The millennial generation is far less likely to be married than Gen X and boomers were at same age.  Just 26% of millennials are married, according to a landmark Pew Center report, compared to 36% of Gen X-ers 20 years ago — and 48% of boomers back in 1980. Millennials are also among the least religious Americans ever — with a full third unaffiliated with any single faith.  A recent study found that 43% of millennials supported a form of marriage that allowed couples to easily split up after two years, while a full third were open to “marriage licenses” valid — like mortgages — for set periods of time. It’s an impressive figure, especially when you consider just a third of respondents still believe that marriage is “till death do us part.”

  • Pioneer Abandons Bullish Dollar Bets on Yellen's Rates Caution (Bloomberg)  The director of currency strategy at Pioneer Investments is no longer betting on greenback strength, for at least the next three months. That’s because Federal Reserve Chair Janet Yellen said March 29 the central bank will “proceed cautiously” due to heightened risks in the global economy, helping the dollar to cap its biggest quarterly loss in more than five years.

  • The unemployment rate rose — here’s why that’s a good thing (New York Post)  More people are employed and the unemployment rate went up.  That's because more people are looking for work, increasing the size of the labor force more than the number of new jobs.  That keeps some slack in the employment situation and tamps down inflation pressures.  In March the number of people looking for work increased by 2.5 million and this could portend higher future economic growth.

  • Can coal companies afford to clean up coal country? (The Washington Post)  With some of the country’s largest coal companies in bankruptcy, about 120,000 retired miners and their families in West Virginia could lose their pension and health care accounts. For many families in this region, this means losing their only regular source of income.  On top of that, who will pay for the environmental mess left behind?  WP suggests that private enterprise has left behind another big bill that taxpayers will have to pick up.

EU

  • E.U. Suspects Russian Agenda in Migrants’ Shifting Arctic Route (The New York Times)  Earlier this winter hundreds of African and Middle Eastern migrants have been ferried through the Russian arctic to entere Europe through Finland.  The EU suspects that they have been receiving Russian government support for their trek.

UK

The UK government is so averse to paying for stuff that it would rather pay other governments a higher price with more risk to build our infrastructure for us.

The government prefers big, centrally-directed, silver-bullet solutions to problems, instead of more complex local ones.

... saving face is not a sensible motivation for national energy policy, ...

  • Uncertain Economics Influence ‘Brexit’ Talk (The New York Times)  Those campaigning for Britain to leave the European Union in a national referendum 23 June focus their arguments on reclaiming national sovereignty and reasserting national identity in the face of immigration. But proponents of exit are also now confronting the challenge of convincing the country that any freedom it gains from divorcing the Continent would not be offset by the risks to Britain’s prosperity.

  • Pound to Dollar: Capital Economics Warn of a Decline to 1.22, Warn on Brexit Complacency (PoundSterling Live)  A severe weakening of the British pound is possible with a yes vote for Brexit, according to Capital Economics.  Others have suggested that the pound could strengthen regardless of the outcome once the uncertainty of the impending referendum vote is past.

Russia

  • Mikhail Lesin’s Strange Death in U.S. Follows a Fall From Russia’s Elite (The New York Times)   Once an influential player in Mr. Putin’s rise to power, Mikhail Y. Lesin was abruptly dismissed from his position in the Kremlin’s powerful media apparatus. Perhaps sensing that things could get worse, he seemed to be preparing for a new life in America.  The trappings of a comfortable exile were already in place. He had created a corporation in Los Angeles to buy expensive homes. His son and daughter had lived there. Mr. Lesin, 57, traveled regularly to the United States with a new girlfriend, who gave birth in September.  On the morning of Nov. 5, Mr. Lesin was found dead (of undefined “blunt force injuries”) inside a hotel room in Washington, where he had been invited to attend a fund-raising dinner for the Woodrow Wilson International Center for Scholars at the Ritz-Carlton hotel in the city’s West End two nights before.

China

  • The Trade Wars Begin: China Retaliates To Steel Tariffs With Global Anti-Dumping Duties (Zero Hedge)  When looking back in history, December 23, 2015 may be the date the global trade wars officially began. On that day the U.S. imposed a 256% tariff on Chinese steel imports.  It did so perhaps with good reason: with its local end markets mothballed, China was desperate to dump as much excess capacity as possible offshore with shipments of steel, oil products and aluminum all reaching new highs according to trade data from the General Administration of Customs, and the result was a dramatic drop in US prices.  Now China has answered with a volley of their own:  China imposed its own anti-dumping duties as high as 46.3% on electric steel products imported from Japan, South Korea and the European Union.

Canada

  • CANADA ECONOMICS: Action Economics’ BoC Outlook Survey Preview (TSE:BMO) (Sonoran Weekly Review)  According to Action Economics, the Q1 (Spring) outlook survey is expected to show an improvement in the outlook for Canadian firms. AE expects the measure of future sales to move to 20.0 from 16.0 in Q4. Inflation expectations are seen remaining well centered in the BoC’s 1-3% band, however, while capacity pressures remain muted. AE said the M&E investment outlook will be of considerable interest, as the balance of opinion fell to -3.0 in Q4. A return to positive territory for the M&E investment outlook alongside an improvement in future sales would add to the run of upbeat news for the first quarter of this year, consistent with an economy enjoying considerable momentum after a difficult 2015, AE added.

Other Scientific, Health, Political, Economics and Business Items of Note - plus Miscellanea

I have long thought that negative interest rates didn’t make sense, but monetarists argue that they are just low interest rates carried further. The theory is that if consumers and corporations have to pay a price to store their cash at banks, they will go out and spend and invest, but it is not clear that is what happens when deposit rates fall below zero. What is clear is that the outcomes vary by the size and importance of the central bank involved. In any case, the effects seem to be more temporary than long-lasting. Perhaps more worthy of examination are the reasons behind the negative rates and what these conditions mean for the long-term economic performance of countries and regions and returns in their financial markets. 

In a survey by ING, more than three-quarters of the respondents said they would withdraw some of their funds rather than incur a charge by the bank for holding them. One-third said they would keep the cash in a safe place instead of spending. Strategas Research has taken a look at the impact of negative rates in the places that have used them, like Denmark, Switzerland, Sweden, the Eurozone and Japan. The performance of the equity markets in those places, and particularly the performance of the financial sector, is almost universally negative after three and twelve months. 

  • This Explains $0 Federal Income Tax for Millions (Investopedia, MSN Money)  The earned income tax credit (EITC) is a refundable credit against federal income taxes. Refundable means that you can receive the credit even if it is more than the taxes you owe.  In 2013 the most recent year for statistics), more than 29 million taxpayers out a total of 147.7 million individual filers (almost 20%) claimed the EITC. Of those claiming the credit, more than 25.5 million (17.3% of all tax returns) received refunds. In other words, rather than paying into the Treasury, they received funds from the Treasury. The EITC is one big reason that millions of working Americans do not pay any federal income tax.  The EITC is largest for those with three or more dependent children.  It is possible to be "middle income" (i.e. near the median household income) and receive an EITC.  Here is a summary from 2015 EITC Income Limits, Maximum Credit Amounts and Tax Law Updates (IRS):

eitc.2015

  • How To Invest Your Money In 2nd Quarter: 5 Best Funds To Buy Now (Ky Trang Ho, Forbes)  KTH has contributed to GEI.  Where should mutual fund investors put their money in the second quarter? Ky asked a panel of financial services pros to explain their read on the stock market and give their best mutual fund investing idea.  The sectors selected included emerging markets, health and floating rate funds. 

  • The 25 best small college towns (Schools.com, MSN News)  Number 1 is Fargo, North Dakota and number 25 is Erie, Pennsylvania.  Dividing the country into 8 regions, the winner going away is the Midwest with 10 towns.  The Plains and Mountain West are tied for second with 4 towns each, followed by 3 each for the Northeast (New York plus New England) and Mid-Atlantic (Pennsylvania to Virginia), with the Southwest with 1 town.  The Pacific region (inlcudes Alaska and Hawaii) and the Southeast were shut out.

  • What Do Negative Interest Rate Policies Mean for Investors? (Pimco)  Unintended consequences of NIRP (negative interest rate policy) are discussed.  Lowering interest rates traditionally increases incentive to borrow for investing and expanding business.  But when the lowering continues into negative territory there are indications that the cost of borrowing may actually increase.  This is just one of the "surprises" possible with NIRP.  See also Clearing Up Negative Interest Rate Confusion. Kocherlakota Weighs In (Gary Anderson, Talk Markets).


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