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What We Read Today 20 June 2017

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:

  • U.S. Healthcare Spending

  • NYC Mortgage Delinquencies Elevated, Again?

  • Bond Traders Double Down on 2017 Fed Bets Via Options Hedges

  • Components of U.S. Household Debt: 2007 and 2017 

  • Equity Market Returns and Volatility in 2017

  • Global Development History

  • If Africa is rich – why is it so poor?

  • These Are the World’s Most Dangerous Roads

  • McConnell: Healthcare bill to be revealed Thursday

  • Democrats search for GOP healthcare bill

  • It's Time For Wall Street To Stop Its Extraordinarily Wishful Thinking About Trump

  • GOP rep proposes allowing lawmakers to carry guns after baseball shooting

  • Some Local Economic Impacts of the Fracking Boom

  • New Report Looks at Six Key Impact Areas of Shale Development in Texas

  • Brexit and weak government: a drama lesson from the Greek economy

  • How President Macron’s parliament shapes up

  • 17-Month Bull Market in Germany

  • Trump: China 'has not worked out' on North Korea

  • Mexico’s corruption problems are still among the world’s deepest

  • And More


Special Notice:  Due to staff travel schedules, there will be no "What We Read Today" columns Wednesday 21 June and Thursday 22 June.


Articles about events, conflicts and disease around the world

Global

Dependency theory posits that resource flows are from periphery to the core rather than the other way around. The rich nations do not ‘invest’ in the ‘income poor’ nations to make the latter richer.

Rather, the rich nations set up processes (supported by international institutions such as the IMF and the World Bank) to ensure that resources flow to the benefit of the advanced world.

These processes, which include legal frameworks and tax rules, privatisation, and the imposition of fiscal austerity to suppress public good development, undermine the opportunities of the ‘income poor’ nations to use their own resource riches to their own advantage.

  • These Are the World’s Most Dangerous Roads (Bloomberg)  Road users in low- and middle-income countries are more than twice as likely to die in a traffic accident than their counterparts in developed nations, according to World Health Organization data for 2013. Thailand has the world’s worst drivers, with a road-traffic death rate of 36.2 per 100,000 population. The average for developed nations is 9.3, compared with 24.1 for low-income and 18.4 for middle-income countries.

U.S.

I've had enough of the very carefully worded, overly optimistic analyses coming from Wall Street and elsewhere about the many very positive things Donald Trump will soon be doing for the U.S. economy.

Business and the people who invest in it need to stop looking for that pony in the ever-growing pile of you-know-what that's inside the beltway these days. What it thought the day after Election Day Trump would do this year on the economy not only isn't going to occur as quickly as expected, it's increasingly unlikely to happen at all in 2017. And 2018 isn't looking that promising either.

  • GOP rep proposes allowing lawmakers to carry guns after baseball shooting (The Hill)   A Republican lawmaker introduced legislation on Tuesday to allow trained members of Congress to carry guns for self-defense in the wake of last week’s shooting at a GOP baseball practice.  Rep. Brian Babin (R-Texas) wants to ensure all lawmakers can qualify for concealed-carry permits that could be used in any state, regardless of local laws.

  • Some Local Economic Impacts of the Fracking Boom (OilPro)  The major finding is that the shale boom lead to large increases in employment and wages. Feyrer et al (2017) found that the fracking boom created approximately 725,000 jobs. This reduced unemployment at the height of the Great Recession by 0.5 percentage points. A number of other studies find similar results, including Weber (2014), Brown (2014), and Maniloff and Mastromonaco (2017). The increase in jobs leads to an increase in wages, with wages in fracking counties going up by 2.4% to13.5%.

Figure 1 shows a map of shale boom counties according to one academic study which used Drillinginfo data (Maniloff & Mastromonaco 2017). Darker counties had more wells drilled into shale formations, while white counties had none.

Figure 2, from Maniloff and Mastromonaco (2017), shows the effect in percentages. The crossed line shows how much employment in fracking counties has grown since 1995, relative to non-fracking counties. A value of 0.05 means that employment in fracking counties has grown by 5% more than in non-fracking counties. We see that the difference is relatively stable until the mid-2000’s. After 2007, we see a large increase in employment, with fracking counties having about 5% higher growth by 2011.

  • LIKE the economic benefits to property values, schools and medical services.

  • DISLIKE the impacts on traffic, public safety, environmental concerns and noise. 

UK

  • Brexit and weak government: a drama lesson from the Greek economy (The Conversation)  The UK is not the first country to stand on the brink of leaving the EU. It may enjoy a far bigger and more productive economy than that of Greece, but there are alarming structural similarities between the two economies that can’t be ignored. Just like the threat of Grexit, Brexit is predicted to hurt the UK economy. And now, after an indecisive election that weakened the government’s ability to govern, another similarity with troubled Greece is added. A critical one.

France

Germany

China

Mexico

  • Mexico’s corruption problems are still among the world’s deepest (The Conversation)  When corruption becomes truly entrenched in a state, it can seem impossible to uproot. But Mexicans are still fighting it.  Mexico has struggled with corruption for a long, long time, but recent events indicate that the situation is now at a truly intolerable pitch.

This spring, two fugitive state governors were arrested in a joint operation by Interpol and the Mexican police. Javier Duarte, who was captured in Guatemala, served six years as governor of the state of Veracruz, during which he allegedly misappropriated 233m pesos (US$12m) of public funds. Tomás Yarrington, onetime governor of the state of Tamaulipas, was arrested in Italy; he stands accused of co-operating with an extremely dangerous drug gang known as the Gulf Cartel. Both men are former members of the Institutional Revolutionary Party, now led by Mexico’s president, Enrique Peña Nieto.

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

  • U.S. Healthcare Spending (The Daily Shot)  Walter Kurtz, creator of The Daily Shot, calls the data below "food for thought".

  • NYC Mortgage Delinquencies Elevated, Again? (Keith Jurow, KCS Blog)  KJ has contributed to GEI.  Keith starts with the observation that pundits are more convinced than ever that the mortgage crisis is over because the Mortgage Bankers Association’s (MBA) monthly report has been continuously showing a decline in the delinquency rate.  The rest of this article describes how the "official" numbers of the MBA may not be revealing a deep problem, using the official pre-foreclosure data from the five counties of New York City and the two counties on Long Island.  KJ writes:

    Since February 2010, mortgage servicers have sent out a cumulative total of 1,034,876 pre-foreclosure notices to delinquent owner-occupants in New York City and Long Island. That’s right – more than one million. This does not include delinquent investor-owners because that was not required under the 2009 law. Approximately 85% of these notices were for delinquent first liens and the remainder were for second liens.

    For the last 18 months, nearly half of the formal notices of default filed in Suffolk County have been repeat notices. Why? In New York State, a default notice (known as a lis pendens) is only good for three years after which it expires. Hence lenders have had to file a new default notice for borrowers who have been delinquent for more than three years.

    The Suffolk County statistics reveal how terrible the serious delinquency situation has become in the New York metro area. Although 297,000 cumulative pre-foreclosure notices have been sent to deadbeat borrowers in Suffolk County, less than 1,000 formal default notices have been filed each month on these properties since late 2009.

    How is that possible? The answer is simple. Mortgage servicers have been compelled by statute to send out pre-foreclosure notices to all delinquent owner-occupants, but it is entirely up to the discretion of the mortgage servicer whether or not they file a formal default notice on the delinquent property to begin foreclosure proceedings. For almost seven years, the servicers have chosen not to foreclose.

    Keith suggests that the data from New York may not be an isolated situation.  One of his premises is that the reported delinquency numbers from the mortgage servicers in many metro markets are grossly understated and many properties are in serious (multi-year) arrears status, remain unforeclosed, and the mortgages are carried "on the books" at far greater value than is actually warranted.  Econintersect: A popular vernacular for this condition is "extend and pretend".

  • Bond Traders Double Down on 2017 Fed Bets Via Options Hedges (Bloomberg)  Bond traders are ramping up wagers that the Federal Reserve is done raising interest rates until December.  Open-interest data from the eurodollar options market in the wake of the Fed’s rate hike last week show traders are piling into a bet already popular in futures: that the central bank will skip a September rate increase and wait until the final policy meeting of the year to tighten again. That’s reflected in the buying and selling of call spreads on futures contracts.  The odds of a September hike as of Monday were about 13%, based on the current effective fed funds rate and the forward overnight index swap rate.

  • Equity Markets in 2017 (The Daily Shot)  This chart shows the year-to-date returns vs. the volatility for major asset classes.


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