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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Topics today include:
Implications of the New Fiduciary Rule
Fiction with a "Message" Can Be Boring
Is Tesla of the Early 21st Century Following Ford of the early 20th Century?
Harry Dent Claims Trickle Down Economics Works for the Middle Class
How Can Development Economics Undermine Development?
Oil Prices Surge
U.S. Oil Bankruptcy About to Surpass that of the Telcom Bubble Bursting
Why Trump Will be the Next President
Why Clinton Will Crush Trump
Watch a California Reservoir Refill for First Time in 4 Years
UK Manufacturing Contraction
New Record Low Price for Solar
China Devalues Yuan
China's Coming Debt Bust
Articles about events, conflicts and disease around the world
Oil Prices Surge Above $45 As Canada, Libya Supply Threats Weigh (Oil Pro) Raging wildfires in the heart of Canada's oil patch and escalating tensions in Libya drove oil prices higher early Thursday. WTI was up $1.91, or 4.4%, to $45.69/bbl, after rising as high as $46.07 earlier Thursday, and after gaining $0.13 Wednesday. Brent rose $1.64, or 3.7%, to $46.26/bbl, after closing down 0.8% to $44.62 in the previous session. Also supporting prices was the EIA's weekly report yesterday, showing that US oil production saw its largest weekly drop since last August- falling by 113,000 bpd to 8.83 million. But U.S. oil stockpiles rose by 2.8 million barrels to 543.4 million, the most since 1929.
U.S. oil industry bankruptcy wave nears size of telecom bust (Reuters) The rout in crude prices is snowballing into one of the biggest avalanches in the history of corporate America, with 59 oil and gas companies now bankrupt after this week's filings for creditor protection by Midstates Petroleum and Ultra Petroleum. The number of U.S. energy bankruptcies is closing in on the staggering 68 filings seen during the depths of the telecom bust of 2002 and 2003, according to Reuters data, the law firm Haynes & Boone and bankruptcydata.com. The telecom number could be well exceeded in the current quarter.
Old Vermont Furniture Factory Repurposed as Maple Sugar Factory Scares Locals (Revitalization News) Deep in the heart of Vermont's Northeast Kingdom, the village of Island Pond has been looking at a 78,000 square foot factory abandoned by Ethan Allen Furniture in 2001. Now the plant is filled with shiny stainless steel equipment and is starting operation of the largest maple syrup production facility in the U.S., funded by a Massachusetts insurance company. But northern New England farmers who own family run "sugar houses" processing sap from "sugar bushes" of many hundred up to few thousand hard maple trees on their farms fear that the new facility may negatively impact their businesses. For most of these operations the annual income ranges from several thousand dollars up to $10,000 or more for larger operations. This is hardly enough to support a family on its own but is often one of the marginal parts of the farming operation, which, combined with the other farm activities, keeps the entire operation financially viable.
The Surprising Modern Origins of Trump’s Ideology (Foundation for Economic Education) Donald Trump says government should make the nation great. Where did he get this language? He didn’t make it up on the spot. There is a deeper modern history here. “National Greatness Conservatism” was first advanced by the Weekly Standard in 1997. At the time, this revision of traditional conservative thinking set off a huge controversy on the right side of the political spectrum.
The primary dividing line of this election is globalization, specifically neoliberal globalization, and more specifically: the plight of the working class in the wake of free trade. In more traditional terms if you like, the contest is Hillary Clinton vs. Sanders plus Trump—two out of the three remaining major candidates have emerged as a protest against trickle-down economics, free trade, the dominance of financial elites, and “the establishment” more generally.
Forecast: Clinton will crush Trump in November(Fabius Maximus) FM has contributed to GEI. FM says that (paraphrased) familiarity breeds contempt and Hilliary has already reached high familiarity but The Donald has a way to go down that path.
Millions like him as a fun fantasy football-like candidate, but not as a potential president.
Shasta Lake refills (Jon Bruner / Quantified) The California drought may not be over, but reservoirs are refilling for the first time in 4 years. The following two images show a time-lapse views of the Shasta Lake Reservoir from January to April.
Eurozone remains in low gear at start of second quarter (Markit) The rate of eurozone economic expansion remained only modest in April. Output rose at a pace slightly below the average seen in the opening quarter of the year, with only moderate growth seen in both the manufacturing and service sectors.
Greece rules out "what if" austerity measures sought by IMF (Associated Press) Greece will not approve contingency savings measures that the International Monetary Fund is demanding in case the country does not meet budget targets set out by bailout lenders, an official said Wednesday. Deputy Defense Minister Dimitris Vitsas said the contingency spending cuts could not be approved under Greek law, and argued the action would undermine international confidence in Athens. Disagreements between Greece, the IMF, and eurozone lenders have for months held up approval of the country's next batch of bailout loans. The IMF and lead bailout lender Germany are at odds over the extent of debt relief Greece should receive to revive its battered economy. Eurozone finance ministers are due to hold a special meeting on Greece on Monday, and are under pressure to break the deadlock this month.
United Arab Emirates
New Record Set for World’s Cheapest Solar (EcoWatch)The price of solar power dipped to another record low on May 1 when five international companies bid as little as 2.99 cents per kilowatt-hour (kWh) to develop the latest phase of work at Dubai’s enormous Mohammed bin Rashid Al Maktoum solar park, which will be one of Earth’s largest solar plants when complete. At less than 3 cents per kWh, that’s 15% lower than the previous record-low bid of 3.5 cents per kWh from Italy’s Enel Green Power for a solar project in Mexico, according to Bloomberg New Energy Finance. The latest bid is also nearly 50% cheaper than last year’s winning bid of 5.84 cents per kWh for developing the 200-megawatt second phase of the same solar park, which already broke records then. The comparable costs in Dubai for coal fired power is 4.5 cents and for natural gas 7 cents. From Bloomberg: New Record Set for World's Cheapest Solar, Now Undercutting Coal.
China cuts yuan fix in biggest move since devaluation (Channel News Asia) China's central bank on Wednesday (May 4) fixed the yuan currency nearly 0.60% weaker against the US dollar, according to the national foreign exchange market, the biggest downward move since devaluing the unit in August last year. The People's Bank of China set the value of the yuan - also known as the renminbi (RMB) - at 6.4943 to US$1.0, weakening 0.59% from the fix of 6.4565 the previous day, according to data from the Foreign Exchange Trade System. The yuan is currently almost 5% weaker against the dollar than it was 9 months ago.
The coming debt bust (The Economist) This piece argues that China's debt is unsustainable and the recent boom produced by that debt must necessarily go bust.
Problem loans have doubled in two years and, officially, are already 5.5% of banks’ total lending. The reality is grimmer. Roughly two-fifths of new debt is swallowed by interest on existing loans; in 2014, 16% of the 1,000 biggest Chinese firms owed more in interest than they earned before tax. China requires more and more credit to generate less and less growth: it now takes nearly four yuan of new borrowing to generate one yuan of additional GDP, up from just over one yuan of credit before the financial crisis. With the government’s connivance, debt levels can probably keep climbing for a while, perhaps even for a few more years. But not for ever.
Other Scientific, Health, Political, Economics and Business Items of Note - plus Miscellanea
A close reading of the fiduciary rule sends a clear, if unstated, signal to plan sponsors, financial advisers and recordkeepers: Absent a compelling reason to roll over to an IRA, keep participants invested in a qualified defined contribution plan throughout their working lives.
When changing jobs the best option in many cases is to consolidate all retirement accounts into the new employer's 401(k) to the extent permitted by the new employer's plan.
Ayn Rand, John Steinbeck, and Fiction with a "Message" (Foundation for Economic Education) While there is nothing intrinsically wrong with writing a work of fiction that is intended to teach a lesson, didactic literature is often … unexciting. And therein lies a major shortcoming, in terms of effectiveness, of works like Ayn Rand’s Atlas Shrugged or John Steinbeck’s Grapes of Wrath: they are tedious and boring.
Tesla's Wild New Forecast Changes the Trajectory of an Entire Industry (Bloomberg) Tesla just took the most ambitious automotive production timeline since the Ford Model T and moved it up two years. The company now plans to produce 500,000 electric cars every year starting in 2018. That's 10 times the number of vehicles it produced in 2015, and enough to ensure that all 400,000 customers who put down a $1,000 deposit on the forthcoming Model 3 will qualify for a significant U.S. subsidy. Talk about doubling down—even the original 2020 goal was considered a long shot by Wall Street. This new target would pledge the carmaker to a faster production growth rate than Ford Motor Co. managed in the early 1900s. That's when Henry Ford pioneered the production line with the Model T, the first mass-market combustion-driven car. A century later, Tesla Chief Executive Officer Elon Musk wants the Model 3 to be its electric grandchild. He's now aiming for close to a million sales by 2020.
Trickle-Down Economics Works: Just Ask the Middle Class! (Investor Place) In this rather confusing short piece, Harry Dent explains why trickle down economics works. It sounds something like the trickle down comes because the job creators have the means to hire people. But then at the end he implies that income inequality is remedied when the bubble bursts and and the wealthy lose their money. Well, it may be working, but this just doesn't seem like something that is working very well.
Assortative mating patterns are multi-generational.
The rise of single parent family households (biggest factor correlating with poverty and income inequality).
When development economics undermines development (Brookings) Economic assessments require good data to be more successful. Absent good measurements data is replaced with models, which have, of course, assumptions. In such cases the assessment may be worse at times than no assessment at all. An example of the problem is presented with the rather straightforward data of maternal mortality:
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