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What We Read Today 29 August 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:

  • Examples of Poor Olympic Coverage by NBC

  • Milton Friedman's Pseudo-science

  • Where is the Silicon Valley Crash?

  • Have You Seen the Worst Stock Tip in History?

  • Flows into Yield-focused Investments Turned Down and Then Resumed Recently

  • High Yield Corporate Bonds are Outperforming Stocks

  • The Anthropocene Started about 1950

  • How Double Taxation of Corporate Dividends Was Reduced

  • Carfentanil is Killing Cincinnati

  • Split in GOP House

  • The Fed Will Move like a Snail

  • Vote Against Obama and Get More Federal Money

  • Boomers' Fading Political Clout

  • Will Brexit Lead to a 'Reverse Versailles Treaty'?

  • Strong Earthquakes at One of Iceland's Largest Volcanoes

  • Rousseff Says Her Impeachment Conviction Would be the End of Beazilian Democracy

  • And More

Articles about events, conflicts and disease around the world

Global

  • The Anthropocene epoch: scientists declare dawn of human-influenced age (The Guardian)  Humanity’s impact on the Earth is now so profound that a new geological epoch – the Anthropocene – needs to be declared, according to an official expert group who presented the recommendation to the International Geological Congress in Cape Town on Monday.  The new epoch should begin about 1950, the experts said, and was likely to be defined by the radioactive elements dispersed across the planet by nuclear bomb tests, although an array of other signals, including plastic pollution, soot from power stations, concrete, and even the bones left by the global proliferation of the domestic chicken were now under consideration.

geologic.periods

U.S.

  • U.S. Stock Ownership Trends (Tax Policy Center)  The usual story we tell is that corporate earnings are generally subject to two levels of tax: first, the company pays the corporate income tax; second, the shareholders pay individual income tax on dividends and realized capital gains. Yet reality may differ from that simple story. Many commentators have noted the sharp decline at the first level: corporate tax receipts fell from 3.6% of gross domestic product in 1965 to 1.9% in 2015. However, observers have overlooked the substantial erosion at the second level of taxation of corporate income. Over the same 50-year period, US retirement accounts and foreigners have largely displaced taxable accounts as the owners of stock issued by US corporations (figure 1).  As a result, corporate earnings are significantly exempt at this level.

us.corp.stock.ownership.1965.2016

  • ‘This is unprecedented': 174 heroin overdoses in 6 days in Cincinnati (The Washington Post, MSN News)  And at the end of last week, after a six-day stretch of emergency room visits that exhausted first responders and their medical supplies, the overdose tally soared to a number health officials are calling “unprecedented”: 174.  On average, Cincinnati sees four overdose reports per day, the Cincinnati Enquirer reported, and usually no more than 20 or 25 in a given week.   The culprit responsible for the staggering number of 174 was likely heroin cut with the latest opioid boost meant to deliver consumers a stronger, extended high — carfentanil. That’s a tranquilizer for, among other large animals, elephants. And it’s 100,000 stronger than morphine.

  • Freedom Caucus members consider leaving the RSC (The Hill)  Some members of the hard-line Freedom Caucus are considering leaving the Republican Study Committee in the next Congress, potentially creating a split between two influential groups of House conservatives.  The House Freedom Caucus and its roughly 40 members have long clashed with the RSC over what tactics to use when pushing for conservative legislation.

  • Fed Is Headed for Shallow Rate Path This Decade, Study Shows (Bloomberg)  Some at the U.S. central bank may still be too optimistic about how high interest rates can rise in the longer run, based on new Federal Reserve Bank of San Francisco research.  San Francisco Fed economist Kevin Lansing started with a simple premise: estimates of the inflation-adjusted neutral interest rate -- the one that neither stokes nor slows growth -- track pretty well with the U.S. Congressional Budget Office’s four-quarter growth rate of potential GDP estimates. Looking at the CBO’s projections for the next decade, he predicts “a very gradual rise” in the neutral rate, referred to as r-star in standard economic models, from near-zero in 2016 to about 1% in 2026.  Econintersect:  That would be three more 25 bps hikes over the next 10 years (and four hikes over 18 years).

  • States opposed to Obama more dependent on federal government (The Hill)   States that voted against President Obama twice are more dependent on the federal government, according to an analysis of new data released by the Pew Charitable Trusts on Monday.  All told, the average state that voted against Obama twice relied on federal funding for an average of 33.8% of its budget, the report found.  Among the 27 states that voted for Obama twice, federal grants made up 29.9% of the average state budget.  The report shows that seven years after the beginning of the economic recovery, states across the country are more reliant on federal dollars to cover their costs than before the recession.

  • This may be the last presidential election dominated by Boomers and prior generations (Pew Research Center)  For the past few decades, presidential elections have been dominated by voters of the Baby Boom and previous generations, who are estimated to have cast a majority of the votes. But their election reign may end this November, according to a new Pew Research Center analysis of census data.

us.voter.demographics.1980.2016

EU

  • European experts float post-Brexit 'partnership' with Britain (Reuters)  A senior German lawmaker, an adviser to the French prime minister and a former deputy head of the Bank of England have proposed that a post-Brexit Britain form a new "continental partnership" with the EU.  In a paper published on Monday by the Brussels-based Bruegel think-tank, five experts argue that Britain be given a say in the affairs of a more closely integrated European Union in return for contributing to shared security and budgets as well as accepting a degree of easy immigration for European workers.

  • Europe is out to shaft Brexit Britain. Here's how Theresa May can prevent it (The Guardian)  When Theresa May calls the cabinet to order on Wednesday morning, amid the chintz of Chequers, the roses will be past their best and the lawn covered with dew. After Britain’s mad summer, the May administration will convene in Buckinghamshire finally to face the chill autumn reality: Britain voted for Brexit without a plan and the Europeans intend to shaft us.  May’s administration goes into this critical negotiating process with an obvious weakness. It does not know whether it wants to remain in the single market.  Both the Tories and Labour are trapped between what is possible and what the British people voted for.  Econintersect:  Some in Europe want to extract a pound of flesh, a 'reverese Versailles Treaty, so to speak.  See Harald Malmgren.

Germany

  • Merkel underestimated migrant challenge, says German vice chancellor (CNBC)  German Vice Chancellor Sigmar Gabriel said in an interview on Saturday that Chancellor Angela Merkel's conservatives had "underestimated" the challenge of integrating record numbers of migrants.  Gabriel leads the Social Democrats (SPD) -- the junior coalition partner in Merkel's government -- and his comments come as campaigning kicks off for a federal election next year and regional elections in Berlin and the eastern state of Mecklenburg-Vorpommern.

German Vice Chancellor Sigmar Gabriel said in an interview on Saturday that Chancellor Angela Merkel's conservatives had "underestimated" the challenge of integrating record numbers of migrants.

Iceland

  • Strongest earthquakes in decades at one of Iceland's largest volcanoes (CNBC)  Two strong earthquakes hit one of Iceland's largest volcanoes on Monday morning, and scientists are monitoring for an eruption, which would be its first in 98 years.  A 2010 eruption at another Icelandic volcano produced a giant ash cloud that shut down much of Europe's airspace. Airlines canceled 17,000 flights, and lost millions of dollars.  The Katla volcano shook in two separate events on Monday, measuring magnitudes 4.6 and 4.5, according to the Icelandic Meteorological Office.  There are no indications of an eruption, but Icelandic scientists are watching the volcano, according to Icelandic news organization Iceland Review.  Although Katla has not erupted since 1918, the Icelandic Meteorological Office considers it one of the country's most active volcanoes. The Catalogue of Icelandic Volcanoes says Katla has erupted 21 times in the last 1,100 years, and 18 have broken through the massive ice cap that sits in the volcano's central crater.

Brazil

  • Rousseff Says Her Impeachment Amounts to Death Penalty (Bloomberg)  Dilma Rousseff made an impassioned, personal plea to lawmakers preparing to vote on the suspended president’s ouster, calling her impeachment a political “death penalty” that puts the country’s democracy at risk.  In her first appearance in Congress since she was suspended in May, Rousseff recalled her fight against dictatorship and highlighted her social welfare policies. She repeated that the charges against her were manufactured by the country’s elite to take power after losing the 2014 presidential election and warned of more inequality if her successor, Michel Temer, were to be confirmed in office.

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

  • Muzzled! (Joe Bob Briggs, Taki's Magazine)  (Econontersect:  This is not put under U.S. news even though it discusses coverage of the Rio Olympics by NBC, an American network.  It represents journalistic shortcomings that occur in other countries as well.)  There were three monumental achievements in Rio that were never mentioned.  There may have been more, but this article discusses three.  The first is that a six-for-six medal Olympics veteran who was competing with injuries at the age of 37 this year when she won her 6th medal was not asked to carry the American flag for the Closing Ceremonies.  Not to take anything away from Michael Phelps who carried the flag for the Opening Ceremony or spectacular gymnast Simone Biles, but other countries did not choose their top medal winners but senior veterans with long multi-Olympic records.  And the injury difficulties she had to overcome in Rio to capture her medal in a most suspenseful manner is a second story not covered.  The reason, according to the author is anti-gun bias in the press - the 6 medals in 6 Olympics is a record (shared with only one other Olympian in history) belonging to shotgun target shooter, Kimberley Rhode from San Gabriel, California.  The third story not covered by NBC was the historic gold medal for unheralded Venuste Niyongabo of Burundi in the 5,000 meter run.  He beat all the favorites and won the first medal ever for Burundi, even though his experience was racing in shorter distances.  The author points out that instead of covering historic events like the ones above, NBC devoted time to things like interviews with snowboarder Shaun White who bombed out of the 2014 Soshi Winter Olympics with no medals.

  • Economists Should Stop Defending Milton Friedman’s Pseudo-science (Evonomics)  Hat tip to Rob Carter.  This essay attacks Friedman's central operating assumption:  Scientific theory (hypothesis or formula) cannot be tested by testing the realism of its assumptions.  All that matters is the accuracy of a theory’s predictions, not whether or not its assumptions are true.  This is one of the most fallacious assumptions ever foisted on economics.  And yet it served to guide about half a century of economic thinking.  Econintersect strongly recommends reading this essay in its entirety.

  • Warned of a Crash, Start-Ups in Silicon Valley Narrow Their Focus (The New York Times)  See also next article. Here is an optimistic assessment of ethereal Silicon Valley ventures:

Silicon Valley start-ups were set to face a great reckoning in 2016. Yet the crash hasn’t happened.

Last year, many tech executives, venture capitalists and entrepreneurs were convinced that a multiyear boom that had propelled young companies to great heights could no longer sustain itself. Some said it would end apocalyptically. Michael Moritz, an influential start-up investor at Sequoia Capital, declared many of the companies “the flimsiest of edifices.” Bill Gurley, a venture capitalist at the Silicon Valley firm Benchmark, proclaimed that the start-ups would bite the dust. “Winter is coming,” others intoned.

The worst fallout may yet come, but many of the start-ups have hung on. Across Silicon Valley, engineers are still commanding annual salaries that average $136,000, according to Hired, a recruiting firm. Demand is brisk for $4 buttered toast, and office space rents remain near record highs. The biggest start-ups, like Uber and Airbnb, continue to land billions of dollars in funding. And investors are shoveling money into venture capital funds, which raised so much cash in the first half of this year that it rivaled the amount raised in all of 2015.

For all of the hand-wringing, “there just hasn’t been much of a downturn,” said Paul Buchheit, a managing partner at Y Combinator, a prominent start-up incubator that nurtured companies including Dropbox and Airbnb. “I don’t even see many companies going out of business.”

  • The Worst Stock Tip in History (Time)  In early October 85 years ago, Yale economist Irving Fisher was jubilant. “Stock prices have reached what looks like a permanently high plateau,” he rejoiced in the October 16, 1929 pages of the New YorkTimes. That dry pronunciation would go on to be one of his most frequently quoted predictions — but only because history would record his declaration as one of the worst market readings of all time.  On Sept. 3, 1929 the Dow Jones Industrial Average reached an all-time high of 381.17 after an eight-year growth period during which its value ballooned by a factor of six.  Less than two weeks after Fisher's infamous stock tip, the Crash of 1929 was in full swing.  Now read the preceding article again.

  • Flows into "yield-focused" funds (Walter Kurtz,Sober LookTwitter

flows.yield.focused

hy.sp500.2016.aug


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