Roadmap to a Banking Union (Jens Erik Gould, The Financialist) This article says the EU SRM (single resolution mechansim) for eurozone banks is a promising development. See GEI Opinion article by Nikolaos Karatsoris for a much deeper look at eurozone problems.
Retail Sales Cannibalization (Mike Shedlock, MISH’s Global Economic Trend Analysis) The retail sector is cutting employees and costs to drive to lower prices. MISH sees this as deflationary.
Exclusive: Bank of America’s trading practices have been probed, filing shows (Karen Breittell and Aruna Viswanathe, Reuters) It’s one of the oldest trading tricks used to short-change clients: front running. That is what Bank of America is being investigated for.
The next nine articles are about basic income, job guarantee and related issues. This is a philosophical issue, that situation represented by the fact there are no articles here with graphs or data tables.
The New Populism Needs to Get This Straight (Joe Firestone, New Economic Perspectives) Joe Firestone has contributed to Global Economic Intersection. The Left joins the Right in displaying ignorance of national sector accounting.
The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Rodger Malcolm Mitchell, Monetary Sovereignty) Rodger Malcolm Mitchell has contributed to Global Economic Intersection. Mitchell says don’t guarantee anything, just give people money.
Scrap the Welfare State and Give People Free Money (Matthew Feeney, Glom Social Networking) Switzerland will vote of a basic national income of $2,800 a month for every adult. Feeney says:
“A guaranteed income would reduce the humiliations of the current welfare system while promoting individual responsibility.”
Hayek’s Road to Serfdom (Walter Block, mises.org/journals)
There is no reason why in a society which has reached the general level of wealth which ours has attained . . . security against severe physical privation the certainty of a given minimum of sustenance . . . should not be guaranteed to all without endangering general freedom. . . . There can be no doubt that some minimum of food, shelter and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody. -Friedrich A. Hayek, The Road to Serfdom, p. 37
F. A. Hayek: Enemy of Social Justice and Friend of a Universal Basic Income? (Kevin Vallier, Bleeding Heart Libertarian) Vallier discusses some inconsistencies with Hayek’s various related arguments, especially regarding “denationalizing” money and smaller government. For a good rationalization of Hayek’s social concerns and his minimal government philosophies read John Tomasi, F. A. Hayek, Spontaneous Order, and the Mirage of Social Justice (American Enterprise Institute).
The Libertarian Case for a Basic Income (Matt Zwolinski, Libertarianism.org)
Negative Income Tax (Jodie T. Allen, Library of Economics and Liberty) Discusses the work of Milton Friedman, Daniel Patrick Moynahan, Richard Nixon, Gerald Ford and many others in this area. For some of these plans it was simply based on the idea of income redistribution from higher incomes earners to lower incomes. The redistributive ideas ended with the “Reagan Revolution”.
Basic Income (Wikipedia) At the core this idea is one creating debt free money and has been supported by many notable political figures and famous economists for hundreds of years. It encounters opposition from some who feel it violates the Puritan work ethic and from those whose livelihood is derived from usury and other lending-at-interest practices.
Over 1 in 6 Men in Prime Working Years Don’t Have a Job (Yves Smith, Naked Capitalism) Excerpt from About.com Job Searching:
ERE reports that “Although it varies with the company and the job, on average 250 resumes are received for each corporate job opening.” In addition, out of every 1000 people who view an online job posting, 100 people will apply, 4 – 6 will be selected for an interview, 1 – 3 will be invited for a final interview, 1 will be offered the job, and 80% of those who get a job offer accept it.
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Economic growth
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NAFTA’s Economic Upsides (Carla A. Hills, Foreign Affairs) The primary argument by Carla Hills centers on the increase of cross-border sourcing of raw materials and sub-assemblies, an increase in cross-border investment and a 400% increase in intraregional trade flows. She does not mention the negative impacts on “Main Streets” in the regions that were discussed in the GEI News post earlier this week.
A Most Dangerous Era (John Mauldin, Advisor Perspectives) This article was listed before in a discussion about Obamacare. This time we are focused on the section about under-performing U.S. GDP growth. Mauldin says his calculation shows GDP even farther below trend than does the CBO (Congressional Budget Office).
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Chinese credit bounces as inflation abates (Leith van Onselen, Macro Business) “Chinese credit data released today shows that total lending has roared back, with the broadest measure of new loans, total social financing, surging in January.” This is happening even as more credit defaults and bailouts are occurring, witnessed by sitations in “What We Read Today” in recent weeks.
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5 Things To Ponder: Cash, QE, Investing & 1929 (Lance Roberts, STA Wealth Management) Lance Roberts contributes to Global Economic Intersection. The graph below shows how the balance sheet recession (depression?) has produced a destructive distortion in the historical cyclical pattern between velocity of money and GDP growth.
Click on graph for larger image.
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Carworker wages fall despite rise in profits (Henry Foy, Financial Times) 16 feb
http://i2.cdn.turner.com/cnn/2014/images/01/06/cnn.orc.poll.marijuana.pdf
- » The US Economy: Does Money Grow on Trees – Part 1 – Thu, 29 Aug 2013
- » The US Economy: Does Money Grow on Trees – Part 2 – Thu, 29 Aug 2013
- » The US Economy: Does Money Grow on Trees – Part 3 – Thu, 29 Aug 2013
- » The US Economy: Does Money Grow on Trees – Part 4 – Thu, 29 Aug 2013
Supreme Court citations are falling apart as web links begin to change and disappear (Jacob Kastrenakes, The Verge) Two law school studies have found that more than half the hyperlinks cited in Supreme Court decisions are broken. Broken links on the SCOTUS are often to blame. In some cases the key evidence upon which the decision was based, without any other documentation, is missing. Researching many SCOTUS decisions may now be impossible. One of the studies suggests that the court should make permanent copies and archives for all cited webpages to allow access by future legal scholars. GEI News published.
Articles?
Macro discussion of debt: http://www.mauldineconomics.com/ttmygh/quoth-the-maven-evermore
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Fed or not to Fed?
http://agorafinancial.com/2013/12/23/resisting-progress-since-1913/
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Is UK austerity a success?
http://www.marketwatch.com/story/austerity-vs-growth-uk-has-settled-argument-2013-09-18
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ACA policies
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http://www.lifehealthpro.com/2013/12/20/cms-sees-500000-stranded-health-policyholders
http://www.mcclatchydc.com/2013/11/07/207909/analysis-tens-of-millions-could.html
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Big banks are bad and size of shadow banking
https://medium.com/the-physics-arxiv-blog/5e1dd9d1642
http://arxiv.org/abs/1309.2130
http://arxiv.org/pdf/1309.2130v3.pdf
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Bank of England data and UK GDP back to 1790
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/qb100403.pdf
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/qb100403.pdf
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http://dailyreckoning.com/the-path-to-10000-an-ounce-gold-revisited/
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http://www.businessinsider.com/stan-druckenmiller-on-generational-theft-2013-9
Do the return on investment of the older generation.
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The East is Red China’s mounting debt problem
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Arctic shipping set for record as sea ice melts (Richard Milne, Financial Times, 21 July 2013) Global warming will open unexpected new shipping routes in Arctic, UCLA researchers find (Meg Sullivan, UCLA Newsroom, 04 March 2013) Maps, now and 2040-59. Short and sharp (The Economist, 16 June 2012) Maps for 2011. The Future of Arctic Shipping (Malte Humpert and Andreas Raspotnik, The Arctic Institute Center for Circumpolar Security Studies, 11 October 2012) Past and projected ice extents. The Cold, Hard Realities of Arctic Shipping (Stephen M. Carmel, Proceedings magazine, U.S. Naval Institute, July 2013)
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Japan Sustains Export Growth on Yen as EU Shipments Increase (Alan Wong and Mayumi Otsuma, Bloomberg, 23 July 2013)
India’s Central Bank Acts to Halt Rupee Drop rel=”nofollow” (Video, Bloomberg TV, 24 July 2013) Embed code: <script src=”http://player.ooyala.com/player.js?embedCode=A0azFrZDrxW1yBypkRZhP0ayYdnUZn_G&playerBrandingId=8a7a9c84ac2f4e8398ebe50c07eb2f9d&width=640&deepLinkEmbedCode=A0azFrZDrxW1yBypkRZhP0ayYdnUZn_G&height=360&thruParam_bloomberg-ui[popOutButtonVisible]=FALSE”></script>
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This guide describes the growth fundamentals of master limited partnerships and is published in partnership with the National Association of Publicly Traded Partnerships.
http://list.summitbusinessmedia.com/t/4749443/113882299/577307/142/ rel=”nofollow”
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http://money.msn.com/health-and-life-insurance/global-medical-costs-how-the-us-stacks-up
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http://media.prnewswire.com/en/jsp/latest.jsp?resourceid=7159368&access=EH rel=”nofollow”
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Just set fire to Japan’s quadrillion debt http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100025346/just-set-fire-to-japans-quadrillion-debt/ rel=”nofollow”
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The National Association of Realtors (NAR) Housing Affordability Index, while plunging sharply this year, is still at levels not seen before the Great Recession. Of course, affordability does little to help all those who do not have the resources to buy.
Crash Course in Disequilibrium Economics – five videos
J.P. Morgan banker joked that Madoff’s accounting firm might be a car wash (Christina Rexrode, The Wall Street Journal) Hat tip to Roger Erickson. Dozens of JPMorgan executives appeared to have know Madoff was a fraud but blew no whistles. They got their money out and kept quiet. Isn’t that aiding and abetting?
The Real Belfort Story Missing From ‘Wolf’ Movie (Joel M. Cohen, The New York Times) This is written by the Jason Belfort prosecutor. He thinks the movie made one big mistake.
The Myth of Health Care’s Free Market (David Cay Johnson, Newsweek) David Cay Johnson has contributed to Global Economic Intersection. Wildly varying prices for identical services (sometimes 3-4 times difference) is exactly what would be expected from an inefficient market. Johnson cites 2012 Pricing Report of the International Federation of Health Plans
Nassim Taleb used to be my hero. But today, he’s just plain wrong. (John Aziz, The Week) Aziz sees Taleb impaled on the petard of 2009 and 2010 predictions of imminent hyperinflation from stimulus and loose moeny policies.
Treasuries Rise as 3% Yield Attracts Demand Amid Uneven Recovery (Susanne Walker and Lukanyo Mnyanda, OnWall Street, Bloomberg)
Treasuries rose as 10-year yields above 3% attracted demand amid an uneven economic recovery and bets the Federal Reserve will maintain its pledge to keep its interest-rate target at record lows.
Income Growth Has Stalled for Most Americans (Dave Gilson, Mother Jones) Same old data with new views. The first graph shows no growth in median household income compared to 23 years ago. The second graph shows we have exceeded the previous 100-year high for polarized income distribution, which occurred just before the Great Depression.
Japan’s Coming “Wage Surprise” (Shinzo Abe, Project Syndicate) Hat tip to Roger Erickson. The Japanese prime minister explains how his programs are leading to a reversal of fortune for Japan’s wages which have declined by 12.5% over the past 15 years.
The Biggest Myths in Economics (Cullen Roche, Pragmatic Capitalism) There are only ten listed. Cullen must have had a busy day and had to stop.
What Alan Greenspan Has Learned Since 2008 (Justin Fox, Harvard Business Review) This great interview article could have been entitled “What Greenspan Has Yet to learn”. One interesting topic was Greenspan’s suggestion that corporate structure protection should be removed from banks; executives and officers should be personally liable for the obligations of the institution to the full extent of their personal wealth. This was in fact how investment banking operated until the 1970s. See The Demise of Investment-Banking Partnerships: Theory and Evidence (Alan D. Morrison and William J. Wilhelm, Jr. July 2004) Greenspan thinks the incorporation of investment banks was a mistake.
What happened to US life expectancy? (Austin Frakt, Incidental Economist) There is something wrong with the combination of the two pictures below. The problem looks like bad arithmetic; something like 2+3 = 4. Or which of these things is not like the other?
Click on graph for larger image at Incidental Economist.
The U.S. started to lag shortly after health care costs started to increase faster than the rest of the OECD (Organization for Economic Co-operation and Development) countries. The following graph is also from The Incidental Economist (31 October 2011):
Tax Court Ruling Clarifies IRA Transactions (Ed Slott, Financial Planning) Be careful with holding stock of closely held corporations within an IRA and never loan money to your IRA. Read this horror story.
Ex-Morgan Stanley adviser claims firm fired him for running for office (Mason Braswell, Investment News) The $525,000 award Vincent Romano received from a FINRA arbitration panel is unusually large for such action where 95% of all claims are dismissed in favor of the firm. (See “In Bed With Wall Street” by Larry Doyle, Chapter 5) But the amount may be far less than the ultimate cost to Romano.
Thank Global Warming for Freezing You Right Now (Eric Holthaus, The Daily Beast) Lethal temperatures in Minnesota. A frost warning for the Everglades. The North Pole is moving south thanks to climate change. Meanwhile it’s so hot right now in Australia, they’re frying eggs on shovels as 2014 gets underway after a record hot 2013. The latest forecasts indicate that the “polar vortex” will be rotating around further to return the artic air to the north pole. Menawhile in Ontario you can have some fun with boiling water and a soaker gun, as seen in the one-minute video below.
Video
Mysterious Light Associated with Earthquakes Now Linked to Geologic Rift Zones (Alexandra Witze, Scientific American) A special case of the type of phenomenon discussed has been known for over 130 years: piezoelectricity.
Business Insider Turned Down $100M-Plus Buyout Offer: Source (Katie Roof, Fox Business) Blodgett wants $250 million? Business Insider gets more web traffic than Financial Times but less than The Wall Street Journal, according to Alexa.
Neutral – in Whose Favor? (Uri Avery, Counter Punch) Hat tip to Roger Erickson. Hey nonpartisan independent? Who do you favor?
Monetary versus Fiscal: an odd debate (Simon-Wren Lewis, mainly macro) Oxford economics professor is mystified by the tendency to “downgrade the usefullness of fiscal policy at the ZLB ” (zero lower bound). He says that the total dependency on monetary policy “does not come from the theory” that he knows.
“This Chart Is A True Representation Of The Employment Crisis In This Country” (Wolf Richter, Testosterone Pit) As the elderly are forced to “work ’til they drop” youth are squeezed out of the job market. Read also Yves Smith commentary on this article at Naked Capiatalism.
Is Life a Ponzi Scheme? (Mark Johnston, Boston Review) Does life have a lasting meaning or should we just live in the moment?
Perhaps the human future is a kind of Ponzi scheme where the value of our own lives is always dependent on the well-being of future generations.
We Cannot Predict the Many Ways Freedom Will Improve Our Lives (Gary Galles, austriancenter.com) Hat tip to John O’Donnell. Originally appeared at mises.org. Interesting that the argument could have cited Keynes whose greatest (arguably) contribution to economics was the proposition that the future is entirely uncertain in an economic sense, a proposition that has been largely ignored by many main stream economists since Keynes’ time.
Why Does the Minimum Wage Have No Discernible Effect on Employment? (John Schmitt, CEPR, February 2013) This is a comprehensive review of published studies.
“Economists have conducted hundreds of studies of the employment impact of the minimum wage. Summarizing those studies is a daunting task, but two recent meta-studies analyzing the research conducted since the early 1990s concludes that the minimum wage has little or no discernible effect on the employment prospects of low-wage workers.”
States Moving Beyond U.S. Minimum Wage as Congress Stalls (William Selway and Jim Efstathiou Jr., 12 November 2013) While Congress is stalled on considering an increase in the minimum wage, some states and cities have raised it on their own. Some are in excess of $10 an hour and one locale in Washington State has a $15 minimum wage in a zone including the Seattle-Tacoma International Airport.
Click on graph to view info graphic at Bloomberg.com.
Bank of America Merrill Lynch slashes gold call to $1,150 and warns it could get uglier (Barbara Kollmeyer, MarketWatch, The Wall Street Journal) Bank of America has cut its gold price estimate for 2014 by 11%. Other estimates mentioned by Kollmeyer are are for gold to end ther year at $1,050 and $960. But those cuts are nothing compared to BoA estimates for silver which has been cut from the late November estimate by more than 30%. Ouch!
A Silver Opportunity? (Chris Kimble, Advisor Perspectives dshort.com) It takes opposing views to make a market. Chris Kimble has a couple of fancy charts that explain why silver could be on the verge of a break-out (rally) or ready to break down through support (sell off).
Bond Tab for Biggest Economies Seen at $7.43 Trillion in ’14 (Anchalee Worrachate, OnWallStreet, Bloomberg)
The amount of bills, notes and bonds coming due for the Group of Seven nations plus Brazil, Russia, India and China is little changed from 2013 after dropping from $7.6 trillion in 2012, according to data compiled by Bloomberg. At $3.1 trillion, representing a 6% increase, the U.S. faces the largest tab. Russia, Japan and Germany will see refinancing needs drop, while those of Italy, France, Britain, China and India increase.
Why inflation threat could lead to a ‘panic taper’ (Jeff Cox, CNBC) Cox says that market talk “is intensifying that inflation will arrive in earnest in 2014“. Well that sounds like 2009, 2010, 2011, 2012 and 2013. One of these years this “market talk” may be correct. The point of the article is that inflation isn’t necessary – inflation expectations may cause a change in Fed policy. An early indication of a cahnge will be in commodity prices which have been falling for several years. Commodities is also an area that investors may do well in an era of increasing inflation or inflation expectations.
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The Fundamental Uncertainties of Climate Change (Garth Paltridge, Quadrant Online) Hat tip to Fabius Maximus. Understanding probabilities present challenges to a public accustomed to only black and white concepts.
Searching for Time Travelers, Scientists Look to Social Media (Denise Chow, Space.com) Sounds like science fiction. By the way, the experiment failed.
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China overtakes US as world’s largest goods trader (Jamil Anderlini and Lucy Hornby, Financial Times) Some historians say that China was the leading global trader previously, from 1644-1912 (end of the Qing dynasty), a total of 268 years, according to the Financial Times. If that is true then China returns to the top spot after 100 years of being held back as a result of internal revolutionary conflicts, war with Japan and post World War II communist missteps.
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Regulators to ease bank rule to help economic recovery (Huw Jones, Reuters) Hat tip to Roger Erickson. The Basel III bank regulatory standards will be eased to allow netting of short-term derivatives positions. This means if a Bank has a potential liability of $3.50 trillion toward several institutions and an asset position of $3.49 trillion for the same set of derivative instruments, then the only exposure shown on the books will be $10 billion. This type of accounting does not sufficiently recognize counter-party risks. If just $100 billion of counter-party coverage disappears (example is a bank like Lehman with relatively small derivative exposure) the bank suddenly has 10x the balnce sheet exposure that the accounting rule had recognized. This is the way avalanche cascades of balance sheet failures can bring down the global financial system.
Let’s all party like it’s 2008!
Obama administration to end contract with CGI Federal, company behind HealthCare.gov (Juliet Eilperin and Amy Goldstein, The Washington Post) Previously fired by Canada, now by the U.S. Even the CEO’s personal connection to Michelle Obama could save them from their incompetence. See also What went wrong with HealthCare.gov (WaPo) which has an infographic produced in late October.
Click on image for infographic at the Washington Post.
Jason Furman: ObamaCare Is Slowing Health Inflation (Jason Furman, The Wall Street Journal) A classic case of assuming causation when there is correlation. Actually just a political hack presentation. See also next article.
Obamacare Hasn’t Slowed The Growth of Health Care Costs – It’s The Economy, Stupid! (Tom Colburn, The Federalist) This is not much better than the Furman article immediately above. The decline for the three years before the Great Recession were declining along a trend line very similar to that for the entiel 2005-2013 time frame. See the following graph from GEI Analysis, trend line added for this post.
A longer time-frame makes it clear that the long-term trend in healthcare cost growth has been down, with shorter intervals of regression upwards. This decline in general follows the trend of long-term moderation of overall inflation, but is steeper (not shown on graph). The two graphs we have shown here make it clear that both Furman and Colburn are blowing political smoke (‘where the sun don’t shine’).
Even the Kaiser Foundation study cited by Colburn is guilty of taking a few economic cycles and projecting a generalization of those correlations to projecting a general condition. The Kaiser generalizations that inflation and GDP growth (both by fairly complicated relationships) are “highly predictive of the growth in health spending in any given year” is at best a hypothesis and not a proof. The data set is simply too small and the complex data arrangements used are too indirect for establishing an economic law.
Things we need to know about the Long War (Mike Few, Fabius Maximus) Some background and resource links about Al Qaeda.
Wall Street Predicts $50 Billion Bill to Settle U.S. Mortgage Suits (Jessica-Silver Greenberg and Peter Eavis, The New York Times) Based on JP Morgan Chase’s $13 billion settlement, banks will end up paying the government for mortgage securities fraud.
The World Economy’s Shifting Challenges (George Soros, Project Syndicate) Hat tip to Roger Erickson. Soros warns of gathering storms. Two quotes:
and
Why FDR Did Not End the Great Depression – and Why Obama Won’t End This One (Alan Nasser, Counterpunch) Neither the Great Depression president nor the Great Recession one have followed the Keynes prescriptions for public investment. Prof. Nasser discusses the secular stagnation postulate of Larry Summers and suggests that the hand wringing over that condition derives in part from the neoclassical theory that the “free economy naturally tends toward full-employment equilibrium“.
Nasser points out that a forgotten (by many) claim by Keynes that a steady state can be achieved at any level of unemployment. He discusses the example of 30% unemployment. Once that condition is acknowledged then the cure for secular stagnation is clear: there must be a demand stimulus. (A supply stimulus won’t work because it would fall on empty demand.)
The author doesn’t use the term “employer of last resort” but that is essentially what he proposes, along with the government as the “investor of last resort” – again an Econintersect supplied term.
If an unsatisfactory equilibrium is established then Nasser maintains the government must provide the shock to move away from the “secular stagnation” point in the desired direction (toward increased employment).
Quarterly national accounts – third GDP estimate (Eurostat, 10 January 2014)
The Loopholes In The Volcker Rule (Lee Sheppard, Forbes)
Even the dumbest banker can get around the Volcker rule. The regulators started with a weak statute, and managed to make it weaker. It’s as though they want to avoid offending the banks.
It took years of work and thousands of pages of banker whinges to achieve this dubious result in the final implementing regulations.
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Tobacco Companies, U.S. Agree on Ads Admitting Smoking Lies (1) (Andrew Zajac, Bloomberg Businessweek) Hat tip to Roger Erickson who wonders when the same admission and settlement will be reached with TBTF banks?
Confidence Abounds (John Hussman, Advisor Perspectives) Something to read while you wait for your first quarter investments report.
The Big Bang Theory (Mohamed El-Erian, Jared Bernstein, Lawrence Kotlikoff, Robert Reich, Menzie Chinn, Jeffery Frankel and Dean Baker, Politico) Seven economists, including four who have contributed to Global Economic Intersection) explain how they are reacting to the idea that the U.S. economy is about to leap forward. Read Menzie Chinn’s further analysis of his part at GEI Analysis.
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After Crunching Reinhart and Rogoff’s Data, We Found No Evidence That High Debt Slows Growth (Miles Kimball and Yichuan Wang, Confessions of a Supply-Side Liberal) “Done carefully, debt is not damning. Debt is just debt.” This is a review of the author’s own reflections and the comments of many others to their article in Quartz with the same title.
Kevin Drum annotations on K&W graph, from Mother Jones.
Budget Deficits: Rhetoric and Reality (Robert Eisner, The Journal of Economic Perspectives, Vol. 3, No. 2 (Spring, 1989), pp. 73-93) In the 1980s Robert Eisner was examining the flow of accounts data for measuring economic activity and was teaching many lessons that have still not been learned. The following two graphs from this 1989 paper would be news to many economists and almost all (if not every last one) politicians serving in Congress.
Time for a Quiz:
1. When the year n-1 had a smaller deficit or a larger surplus than year n-2, which direction did GDP move in year n? Which direction did unemployment move?
2. Eisner’s work and the analysis by Kimballl and Wang seem to disagree. Which one is wrong? Explain your answer.
Please leave answers in comments or, if you prefer anonymity, send them to [email protected] and they will be posted as anonymous. The Econintersect answers will be posted as a comment on this article ina day or so and a further discussion of all answers will be posted in another article next week if there aany answers worth discussing.
1 Thing Investors Are Forgetting About REITs (Jordan Wathen, The Motley Fool, Daily Finance) Hat tip to Patricia Baronowski-Schneider at Linked In. Do you know why you might want a REIT perferred stock rather than the common stock?
The corruption of Britain: UK’s key institutions infiltrated by criminals (Tom Harper, The Independent) The entire criminal justice system was infiltrated by organized crime gangs, according to a secret Scotland Yard report. But this news from the Independent is almost 150 years late. This state of affairs was documented by Charles Dickens in the 19th century.
Economists agree: Raising the minimum wage reduces poverty (Mike Konczal, The Washington Post) Mike Konczal has contributed to Global Economic Intersection. Research shows that raising the minimum wage increases incomes in the lowest 30%, which means that the median income level will not be changed. However, presumably, average income income will be increased, unless upper incomes are reduced to pay more to the poor.
The Rise of the Super-Rich: Power Resources, Taxes, Financial Markets, and the Dynamics of the Top 1 Percent, 1949 to 2008 (Thomas W. Volscho and Nathan J. Kelly, American Sociological Review) Hat tip to Roger Erickson. This study shows that increasing the number of Republicans in Congress means billions more for the top 1%. The rise of the super-rich is the result of rightward-shifts in Congress, the decline of labor unions, lower tax rates on high incomes, increased trade openness, and asset bubbles in stock and real estate markets. The paper would have benefited from better illustrative graphics.
The Rise and Fall of the Minimum Wage (Bill Marsh, The New York Times) The graph below shows a history that can be compared to the more familiar graph of income of the 1% over the same time period. It is part of an infographic at The New York Times.
Click on graph to view full infographic at the NYT.
U.S. veterans despondent over al-Qaeda’s resurgence in Iraq (Ernesto Londono, The Washington Post) Veterans ask if the Iraq war was worth it.
Europe Limps on in the Year Ahead (Chase Gummer, The American Prospect) “Don’t expect much change in 2014.”
Doug Kass: 15 Surprises for 2014 (Part 1) (Doug Kass, The Street.com) A video at The Street.com has the first five predictions which are also covered in the Part 1 article, along with a review of Kass’ 2013 predictions. Also available: Part 2 (no video) and Part 3 (another video).
Video
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Garden Catalogues 2014: Which One Is Best? (Elliott Morss, Morss Global Finance) All you need to know about quality, ratings and strengths of garden seed companies and about some of the supplies they also purvey, from a Global Economic Intersection regular.
Political vendettas ‘as American as apple pie’ (Leigh Ann Caldwell, Political Ticker, CNN) Hat tip to Alun Hill, MCIJ Daily. This was prompted by the New Jersey Governor Chris Christie “escapade” this week.
“Imagine if Vice President Joe Biden had killed Treasury Secretary Jack Lew because of deep-seated political disagreements. That’s what happened in 1804 during a long-running dispute between Vice President Aaron Burr and Treasury Secretary Alexander Hamilton. The final chapter between the two political foes turned deadly when Burr killed Hamilton in a gun duel.”
Bob Doll: 10 Economic Predictions for 2014 (ThinkAdvisor) The forecasts from Nuveen Investment chief equity strategist and senior portfolio manager look for “broader and strong but still moderate economic growth in the U.S. and globally in 2014“. You can check out his forecasts at the beginning of 2013 here.
Unconventional oil and gas will fry climate: ExxonMobil report (Barry Saxifrage, Vancouver Observer) Hat tip to Alistair Leyland, Newsana)
ExxonMobil’s influential global energy report, “The Outlook for Energy: A View to 2040”, says that new technologies like fracking and tar sands are unlocking a gusher of oil and natural gas.
Our ability to extract new sources of fossilized carbon is growing even faster than we can burn them up. ExxonMobil reports that the amazing surge in “unconventional” sources of oil and natural gas is so great that humanity can continue to burn ever increasing amounts of fossil carbon for well over a century.
How I made sure all 12 of my kids could pay for college themselves (Francis L. Thompson, Quartz) Home sounds like part boot camp and part nurturing care.
In 2013, the Fed Showed Why Fiscal Policy is Still Important (Mike Konczal, The Next New Deal) Mike Konczal has contributed to Global Economic Intersection.
I think the Federal Reserve should be doing more. I’d love to see Yellen enact a genuine regime change at the Fed. But we shouldn’t doubt that fiscal policy, at this moment, is making a difference in the giant slack that still smothers our economy and is collapsing our labor force.
Microsoft Will Reveal Next-Generation Windows Ideas in April 2014 (Nathanael Arnold, Wall St. Cheat Sheet) This will have integrated functions including phone and xbox functions.
Global Conflict Tracker: Mapping Global Conflict (Micah Zenko, Council on Foreign Relations) This presents the background on 24 conflict prevention challenges for the U.S. in 2014.
Click on map for interactive graphic at Council on Foreign Relations.
Good News and Bad News about Global Inequality (John Cassidy, The New Yorker) Even with many areas of rising inequality, the global standard of living continues to rise.
[Social Mood Watch] Disunity in the European Union (Robert Folsom, Socionomics Institute) Hat tip to John O’Donnell.
Baltic Dry Index Collapses 35% – Worst Start To Year In 30 Years (Tyler Durden, Zero Hedge) Historic data but what does it mean? That is certainly not clear, but maybe not much. Making judgments from two weeks of data reminds one of the old science joke about sampling: No one is so brilliant that they can take a sample of one atom and describe the universe.
50 years of warnings about the next industrial revolution. Are we ready? (Fabius Maximus) Fabius Maximus has contributed to Global Economic Intersection. The 3rd industrial revolution and the end of work. Are we like England at the time of William the Conquerer?
Good news! Health spending as a share of the economy is shrinking. (Sarak Kliff, The Washington Post) Good news may be a little bit of an overstatement. The decline is for only one year (2012) and it is a miniscule 0.1% (17.3% down to 17.2%). Since the size is probably in the noise level of the data and the duration is only one year, perhaps the headline should have said the data was not bad news.
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3 Reasons the Dollar Should Strengthen This Year (Russ Koesterich, Advisor Perspectives) The range-bound dollar of 2012-2013 will be gone in 2014.
DOE Plugs Energy Rating for Homes, Similar to MPG Rating for Cars (Susan Jones, cnsnews.com) Hat tip to Russell Huntley.
Top 15 Best Foreign Countries for Retirement: 2014 (Danielle Andrus, ThinkAdvisor) Nice slide show. Latin America claims the top two spots and 6 of the top ten. Overall, Latin America has 7 countries, Europe 5 and Asia/Pacific 3.
Stanley Fischer saved Israel from the Great Recession. Now Janet Yellen wants him to help save the U.S. (Dylan Matthews, The Washington Post) But Fisher is no outsider to the U.S. and global monetary scene. At MIT professor he was the Ph.D. thesis advisor to several who have become top economists including Ben Bernanke and Mario Draghi, the head of the European Central bank (ECB). He was also second in command at the IMF (International Monetary Fund) during the Asian financial crisis of 1998. His private sector experience includes a stint as vice chairman at Citigroup. The nominee for vice chair of the U.S. Federal Reserve is arguably one of the very top bankers in the world.
A Deconstruction Of Global Stock Market Returns In 2013 (Sam Ro, Business Insider) Many messages here. (1) Only Japan stock market was largely driven by earnings growth; (2) Europe was almost all driven by P/E expansion, but also had the highest dividends; (3) an annual rebalancing would involve selling some Japan and U.S. while buying some Asia ex Japan and emerging markets.
Federal Reserve Said to Probe Banks Over Forex Fixing (Keri Geiger and Caroline Satas Gage, Bloomberg) Is everything fixed?
Forecast 2014: The Killer D’s (John Mauldin, Thoughts from the Frontline) John Mauldin has contributed to Global Economic Intersection. The killer d’s are demographics, debt, deficits, deleveraging and deflation. Here’s the graphic for deleveraging. It’s still going on.
What’s behind China’s debt spiral? (Peter Cai, Business Spectator)
The collective debt of local governments increased 3.9 trillion yuan ($720 billion) to 10.6 trillion yuan within a short space of less than three years. The debt has grown about 20 per cent every year for the last three years, far outpacing the country’s GDP growth.
Will Commercial Space Travel Blast Off in 2014? (Leonard David, Space.com) Virgin Galactica’s sub-orbital manned vehicle completed its highest flight ever last Friday (10 January 2014) reaching an elevation of 71,000 feet. Richard Branson’s company plans to make “tourist” flights with paying passengers ($250k each) later this year. Yesterday (12 January 2014) an unmaned commercial space vehicle (Orbital Sciences Corporation) made a delivery to the International Space Station.
The Anti-Scientific Revolution in Macroeconomics (Paul Krugman, The New York Times) Krugman criticizes the concept of crowding out (government spending consumes resources otherwise available for the private sector) with:
…common sense says [according to the crowding out hypothesis] that the government and the private sector are in competition for scarce resources. Except if we look at the euro zone, where some countries were forced into severe austerity while others weren’t, we see this:
See also GEI Opinion: ‘Crowding Out’ is Coming to Get You; and The Picture That Quashes 50 Years of Economic Malarky.
Is Debt Dangerous? (John Aziz, Pieria) “Debt is more risky than no debt.” … “…crossing the road is also more risky than not crossing the road.” What is to be gained by crossing the road? That is the important question, Aziz says.
How global warming can make cold snaps even worse (Eric Holthaus, Quartz) Global warming affects jet stream patterns that can bring more arctic air south and and mid-latitude air north.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
How will conservatives save the poor? (Noah Smith, Noahpinion) Liberals have not eliminated poverty or solved the social problems of the poor and have probably caused some negative side effects, according to Smith. He suggests that conservatives should help improve this situation by doing more than saying “just get the government out of the way“.
What 5 Days of Trading Tell Us About 2014: Jim O’Neill (Jim O’Neill, Bloomberg, ThinkAdvisor) If the first five days of the year are up for the stock market there is a 75% to 83% probability for an up year. If the first five days are down the probability of an up year falls to near 50%. After the first five days of 2014 U.S. stocks were down 0.5%.
Don’t Believe The (Marijuana) Hype (Maia Szalavitz, The Fix) What most people think they know about marijuana-especially media columnists-is just years of unscientific, paranoid, and even racist government propaganda.
Note: This is the last day of complementary access to the Behind the Wall content.
Capitalism Redefined (Nick Hanauer and Eric Beinhocker, Democracy) A thorough discussion of the limits of capitalism. See next article for further discussion.
…prosperity in human societies can’t be properly understood by just looking at monetary measures of income or wealth. Prosperity in a society is the accumulation of solutions to human problems.
Capitalism Redefined? .. Not Really. (Roger Erickson Mike Norman Economics) Roger Erickson is a Global Economic Intersection contributor. He is disappointed that the discussion (previous article) did not go further:
Two capitalists list capitalism’s flaws … can’t make any plausible suggestions. For Democracy’s Sake! Can’t these guys just use ANY previously existing chemical system as a precedent model? How about the trillions of biochemical model systems already existing? Or the billions of physiological models? Or even mathematical models of closed-loop, ecological systems?
Long Term Bond Yields (Chart of the Day, 08 January 2014) Yes bond yields have risen sharply over the last several months, from a low near 1.4% in late July 2012 to 3% in the last few days. But similar spikes in interest rates have occurred repatedly over the past 28 years. The 10-year bond yield will have to get close to 4% to break the long-term trend channel.
http://www.chartoftheday.com/20140108.htm?H
How a Lousy Economy Can Make You Sick (Gil Weinreich, ThinkAdvisor) New studies show ill effects of the economy and market—ulcers, migraines, even hospitalization—on stressed investors.
Psychologist: Conservatives Should Play Politics To Win And Stop Playing Not To Lose (Ben Bullard, Personal Liberty Digest)
Conservatives need to stop apologizing and acting as though they’re in the ideological minority on every issue, and they need to begin demanding progressives justify their own views in the public eye.
Transcript: Jacob Appelbaum at 30c3: To Protect And Infect, The Militarization of the Internet (Lambert Strether, Naked Capitalism) This is the full transcript of Jacob Appelbaum’s one hour presentation, with more than 40 embedded links to the appropriate points in the talk. Yves Smith has said this presentation is a must watch event.
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Nest-ing Data (Jalak Jobanputra, The Barefoot VC) Google just spent $3.2 billion for Nest, a company that sells “smart” monitors (thermostats and smoke detectors). Was that smart? According to Mashable (Adario Strange) it is amove that should arouse fear.
What you need to know about the court decision that just struck down net neutrality (Matthew Ingram, GigaOm) Hat tip to David Sciacero, Newsana. Could be the start of ‘pay to play’ as ISPs (internet service providers) may be able to start charging extra for providing ‘preferred’ service and push non-paying traffic aside.
Dazed and Confused: Matt Yglesias on the Job Guarantee (Pavlina Tcherneva, New Economic Perspectives) Pavlina Tcherneva has contributed to Global Economic Intersection. Tcherneva says that Yglesias has confused ‘work for welfare’ with the proposal of a ‘Job Guarantee’.
Technical and Fundamental Arguments Against the Secular Bull Thesis (Joshua Brown, Reformed Broker)
…are we still mired in the Secular Bear that began in March of 2000, with the recent new highs serving as just a 2007-style headfake?
Brown draws on the analysis of two others (one technical analyst and one fundamental) to argue that we nedd one more significat drop before the secular bear market that started in 2000 can convert to the next secular bull market. He says we need something like the 27% decline 1980-82 ehich marked the final bottom of the last secular bear before this one.
Click on charts for larger image at The Reformed Broker.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Today there is a graphics-rich five article review of the state of U.S. employment, including an assessment of the impact of the Great Recession on employment.
Ten quotes on the question of financial bubbles (Tadas Viskanta, Abnormal Returns)
The Icelandic Chutzpah Prize is Retired: Portes and Baldursson Win by Losing (William K. Black, New Economic Perspectives) William K. Black has contributed to Global Economic Intersection. The activities described in this article sound too outlandish to be real, but, in this case, truth is stranger than fiction.
Why Norwegians Are Millionaires and Americans Are Paupers (Susanna Kim, ABC News) It’s a sovereign wealth fund for Norway making Norwegians nearly millionaires in krone and a lack of understanding of money (on the author’s part) that makes Americans paupers.
Bob Doll puts his money where his mouth is (Jeff Benjamin, Investment News) A few days ago we listed The Nuveen asset management chief’s ten predictions. (See slide show here.) Now we find Nuveen will offer a mutual fund that will invest according to the predictions.
What executives should know about open data (Michael Chui, James Manyika, and Steve Van Kuiken, McKinsey Quarterly)
The last seven articles are focussed on employment.
Public and Private Sector Payroll Jobs: Reagan, Bush, Clinton, Bush, Obama (Bill McBride, Calculated Risk)
Click on graph for larger image at Calculated Risk.
Click on graph for larger image at Calculated Risk.
Comments on the Disappointing Employment Report (Bill McBride, Calculated Risk) The prime work years have failed to see a significant recovery in employment, as shown by the red line below.
Click on graph for larger image at Calculated Risk.
The 37 Percent Mystery: Where Did All the Workers Go? (Derek Thompson, The Atlantic) The young and the old have made the biggest changes.
The biggest question facing the U.S. economy: Why are people dropping out of the workforce? (Brad Plumer, The Washington Post)
One theory is that the weak job market is causing people to simply give up looking for work – they’re crumpling up their résumés and going home. An recent study from the Boston Fed suggested that these “non-inevitable dropouts” might even account for most of the decrease. Among other things, the authors noted that the labor-force decline has been far sharper for all age groups than simple demographics would predict.
Inside the ADP Numbers: Evidence that Friday’s Job Report Was a Giant Outlier (Michael J. Casey, The Wall Street Journal) “ADP … could be telling us that Friday’s pathetically low jobs number was an especially big anomaly.”
Pre-recession study predicted historic labor market drop (Stephen Gandel, Fortune) The Great Recession has not created an employment participation rate problem? What has happened to date was largely ‘baked in the cake’ from before the crash? It appears that quite a bit of the decline was pre-ordained based on long-term demographic trends. A 2006 research paper by Federal Reserve economists projected that year-end participation for 2013 would be less than 64.5% (it was actually 62.8%). Thus more than half of the 5.2% decline since mid-2006 was projected by the study (2.7%). Read The Recent Decline in the Labor Force Participation Rate and Its Implications for Potential Labor Supply (Stephanie Aaaronson, Bruce Fallick, Andrew Figura, Jonathan Pingle and William Wascher, Board of Governors of the Federal Reserve System). Comment: The paper is 154 pages long.
The Employment Picture: Clear As Mud (Scott Brown, Raymond James, Advisor Perspectives)
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Today we have a four article section focused on banks and especially the “big four”.
Time for a rethink on monetary policy (Oliver Hartwich, Business Spectator)
Modern Money Theory and New Currency Theory (Joseph Huber, Real-World Economics Review, No. 66, January 2014) At the core of this excellent lengthy paper is a call for the separation of public banking and private banking, with public banking responsible for the creation of money and private banking the user. This is similar to discussion in two recent GEI Opinion articles, here and here. Huber represents NCT (New Currency Theory) as a bridge for and and an extension of the MMT and Austrian economics schools.
Gundlach Looks to ‘Giddily Despised’ Investments in 2014 (Janet Levaux, ThinkAdvisor) This extremely successful investment manager says that 2014 will be a great year to be a contrarian.
Everything You Need to Know About the Healthcare Slowdown (Matthew O’Brien, The Atlantic) A recent reading list had two articles that presented very political arguments about why healthcare cost growth has been declining. Here is an article which looks at the question without that bias. Some of the cause is slower economic growth (see first graph below for the weak correlation) but other factors include changes in Medicare reimbursment formulas to reward effectiveness of treatments* and increasing deductibles for private insurance, which forces more of the cost benefit decisions onto the consumer.
*One of the changes in Medicare in 2011 was to increase payment for lower hospital readmission rates by way of payment for coordinating care after hospital release. It appears to be working.
U.S. Inflation Outlook 2014: Signs of Life (Nicholas Johnson. Mihir Worah, PIMCO, Advisor Perspectives)
Moms in ‘Survival Mode’ as U.S. Trails World on Benefits (Kasia Klimasinska and Sandrine Rastello, Bloomberg) Of the 185 countries with data compiled by the UN International Labor Organization, only two do not have paid paid maternity leave: Papua New Guinea and the U.S.
With low inflation, verging on deflation, what’s the excuse now? (Rodger Malcolm Mitchell, Monetary Sovereignty) Rodger Malcolm Mitchell has contributed to Global Economic Intersection. Mitchell says the primary threat is deflation as monied interests benefit from financial repression.
The NSA Can’t Tell Bernie Sanders If It’s Spying On Him, Because That Would Violate His Privacy (Sam Stein and Matt Sledge, Huffington Post)
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Helping Inflation Reflect Housing Bubbles (Adam Ozimek, Modeled Behavior, Forbes) It is suggested that CPI should include housing prices rather than imputing housing costs from rents (owner-equivalent rent). Rent is very late in tracking the cost of housing.
The last four articles are focused on the banking sector.
How Washington beat Wall Street (Ben White, Politico) “Major banks are shells of what they were.” What a joke. The four largest banks are “shells” with 43% more assets than 9/30/08 and 46% more than 9/30/09. See here and here for data. (Note: The four largest were actually five in the earlier years before the merger of Wachovia and Wells Fargo was completed.) JPMorgan Chase and Bank of America combined control 1/3 of U.S. banking assets, up from 1/4 on 9/30/08. See the articles below for more on how Wall Street banks are beating Washington like a drum and doing less and less for Main Street.
US banks take on more risk as new rules bite (Tracy Alloway, Financial Times) Banks are cutting back on low risk and riskless assets in favor of riskier securities with higher returns.
TruPS CDOs now exempt from the Volcker Rule (Walter Kurtz, Sober Look) Step by step the Volcker rule is being gutted.
Growth in loans at US banks continues to weaken (Walter Kurtz, Sober Look) Loans are decreasing and M2 growth is collapsing. What will happen with tapering? Will this be a case of anticipatory over-reaction? Or will the fragile monetary system collapse?
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Astronomers Get a Clearer Look at Supermassive Black Holes at Galactic Centers (Ron Cowen and Nature Magazine, Scientific American)
Facts and Figures on Incarceration in America (John Light, Moyers & Company) Hat tip to Roger Erickson. The U.S. has 5% of the world population and 25% of the world prison population. If the $50 billion spent by states each year on prisons were spent on education (for 2.5 million prisoners, about 4 million more public school children could be educated. Or the amount invested in each of the 49 million public school students could be increased by almost 8%.
NSA Reforms: What Will Change, And What Won’t (Dustin Volz and Marina Koren, National Journal) Exactly what did President Obama say today?
Radioactive Plume in South Carolina Confirmed and it’s on the Move (YouTube) Hat tip to Roger Erickson. Nuclear waste storage site is leaking tritium and there is no plan to contain and remediate.
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Fed Sent $77.7 Billion in Profits to Treasury Last Year (Victoria McGraine, The Wall Street Journal) Before you cheer, this is the same as a tax increase. The government is receiving $77.7 billion that otherwise would have remained in the real economy had the Fed not expanded their balance sheet via QE.
Matt Yglesias Continues Weak Critique of Job Guarantee, Favors Inferior Basic Income Policy (Pavlina Tcherneva, New Economic Perspectives) Pavlina Tcherneva has contributed to Global Economic Intersection. Tcherneva says that Yglesias is not talking about a Job Guarantee (JG) program, but a Basic Income Guarantee (BIG) program. The former adds to production while the latter is essentially make-work welfare and does not. See a further follow-up: 16 Reasons Matt Yglesias is Wrong about the Job Guarantee vs. Basic Income. Note: A previous article of this topic was on a reading list earlier this week.
The Big Four Economic Indicators: Real Retail Sales and Industrial Production (Doug Short, Advisor Perspectives dshort.com) Steady as she goes.
Signs That It’s Time to Head for the Exits (Doug French, Casey Research) Hat tip to John O’Donnell. Doug French has contributed to Global Economic Intersection. No cheer here:
Eventually the jig will be up, and many will be trampled in a rush to the exits. Some won’t make it out. Be warned, be early, and move at least some liquid assets to friendlier climes.
The Dow 30: A Look Into the Last Five Recessions (Shauna O’Brien, Dividend.com) Only 8 members of the Dow Jones Industrial Average (Dow 30) have survived to this day. From the 1980-1982 recessions there are 20 survivors. How many will ultimately survive the Great Recession? After 28 years? After 80 years?
What’s behind China’s debt spiral? (Peter Cai, Business Spectator) The local government problem is related to tax revenue distribution which is imbalanced in favior of the national government.
Nobody Likes Bonds!: Ritholtz Chart (Barry Ritholtz, Bloomberg) Presented are two charts by J.C. Parets, Eagle Bay Capital LLC. Peak bearishness for bond indicators. Is it time to be a contrarian? Here is one of the charts:
Why economics gets a bad rap (Noah Smith, The Week) Macroeconomists spoil things for all the rest who do valuable microeconomic work.
3 Vital Steps to Protect Your Investments in Today’s Market (Eric McWhinnie, Wall St. Cheat Sheet) Perhaps the most important of the three steps is to have realistic expectations.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
China’s state-owned sector is strangling growth (Peter Cai, Business Spectator) Government subsidies prevent effective competiton by privately owned firms.
The many tragedies of Edward Teller (Ashutosh Jogalekar, Scientific American) One of the greatest scientists of the 20th century, if not of all time, Edward Teller’s memory is tarnished by personality flaws.
The Second Machine Age: Meet Your Computer Overlords (Thomas Claburn, Information Week) Book review: The Second Machine Age by Erik Brynjolfsson, director of the MIT Center for Digital Business, and Andrew McAfee, principal research scientist at the MIT Center for Digital Business. The economy will prosper while individuals either adapt or suffer.
“The robots are coming, and they’ll going to take jobs as well as create them. But we’ll manage.”
Matt Yglesias Continues Weak Critique of Job Guarantee, Favors Inferior Basic Income Policy (Pavlina Tcherneva, New Economic Perspectives) Pavlina Tcherneva has contributed to Global Economic Intersection. Tcherneva says that Yglesias is not talking about a Job Guarantee (JG) program, but a Basic Income Guarantee (BIG) program. The former adds to production while the latter is essentially make-work welfare and does not. See a further follow-up: 16 Reasons Matt Yglesias is Wrong about the Job Guarantee vs. Basic Income. Note: A previous article of this topic was on a reading list earlier this week.
Energy is gradually decoupling from economic growth (Izabella Kaminska, FT Alphaville) Since the 1970s GRD has grown approximately 125% while energy consumption has grown by less than 45%. That is almost a tripling of energy efficiency for a unit of economic production. And the growth of share of energy production since the 197s has been only for nuclear, natural gas and renewables. Of those only gas and renewables have continued to gain share since 2000.
Greece Will Default in May Without Another Bailout or Change in Terms (Mike Shedlock, MISH’s Global Economic Trend Analysis)
Cash flow analysis shows Greece is in serious trouble again in spite of having a current account surplus. Specifically, Greece needs a change in payback terms or another bailout or it will default in August, if not May. I use the words “will default” imprecisely. The only way Greece is making loan payments now is with money from the Troika.
Obamacare Enrollments Show Low Uptake by Uninsured, Hoisting Insurers on Their Own Petard (Yves Smith, Naked Capitalism) Yves Smith has contributed to Global Economic Intersection. It appears that enrollees in Obamacare thus far are disproportionately those with pre-existing conditions. The premium schedules have been based on on a broader base of insureds, including those who are healthy. Econintersect comment: Given a continuation of this deviation from plan someone is going to have to pay, and it is not likely to be all absorbed by the insurance companies. How about higher premiums costs to insureds and/or higher government costs?
A Few Reasons to Consider Annaly Capital (Christopher F. Davis, Wall St. Cheat Sheet) Would you invest in a stock that has cut dividends like NYSE:NLY? After reading this discussion also see the next article on the list, below.
Seeking Alpha‘s Alan Saltzman has recommended selling twice and buying twice in the last year. He has shared his SA posts in discussions at the John Lounsbury sponsored Global Economic Intersection Group at LinkedIn. After the latest dividend cut he changed to a buy recommendation. Disclosure: John Lounsbury has been accumulating Annaly Capital with purchases in February, August and end of December 2013. Average cost is $11.53 and the stock is trading at$10.16 as this is written. Adjusting for dividends received (before taxes), average cost is $10.65. Either way calculated this is a losing position so far.
The Safety Net: Don’t Count on This 11% Yield (Marc Lichtenfeld, Wealthy Retirement) Marc Lichtenfeld, Chief Income Strategist for Wealthy Retirement, points out that income has been less than the current dividend for several quarters.
Carney’s Legacy: Canada’s Credit and Housing Bubble (Pater Tenebrarum, Acting Man) Hat tip to Mike Shedlock, MISH’s Global Economic Trend Analysis. Two graphs tell the story.
Why Scientists Should Embrace the Liberal Arts (David J. Skorton, Scientific American) The president of Cornell University writes that liberal arts as well as science are needed to understand and address society’s problems. He also says that the basic numeracy of non-scientists needs to improve and the nature of the scientific method must be better understood by the general population. Econintersect comment: Science is a process composed of incremental development and does not come out of the box with completed devices that will not undergo continuing evolution.
Texas Public Schools Are Teaching Creationism (Zack Kopplin, Slate) These are actually charter schools and so, pressumably, the parents sending their children to them are supportive of the curriculum. Therefore, this cannot be considered indoctrination of children that would not receive similar opinion directly from their parents. The only question remaining is whether public tax dollars should support these schools. If the answer is yes, then why aren’t parochial schools supported the same way as public schools?
An explanation for persistent weakness in China’s stock market (Walter Kurtz, Sober Look) The Shanghai market is merely reflecting investor opinion. That opinion seems to be saying the high growth period is coming to an end. This article offers an explanation.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Blogs like Naked Capitalism Depend on Net Neutrality, So ISPs Should Be Common Carriers (or Their Pipes Turned Into Public Utilities) (Lambert Strether, Naked Capitalism) Lambert Strether has contributed to Global Economic Intersection.
U.S. super-snipers: ‘Smart’ rifles tested by military could be game-changer (Douglas Ernst, The Washington Times) People who can’t shoot hit the bulls eye at 1,000 yards. Rodger Malcolm Mitchell (Monetary Sovereignty) asks:
How long before our right wing, “originalist” Supreme Court approves this new rifle for gun nuts to carry in the streets, bars and schools for “self-protection” and “stand your ground”?
Housing Now Providing a Tailwind to Economic Growth (Chris Puplava, Financial Sense) Hat tip to John O’Donnell.
Click on graph for larger image at Financial Sense.
Why stopping the next financial crash is an impossible dream (John Aziz, The Week) Aziz discusses why the boom and bust cycle is just part of capitalistic life.
The Hows and Whys of Gold Price Manipulation (Raul Craig Roberts and Dave Kranzler, Institute for Political Economy) Paul Craig Roberts has contributed to Global Economic Intersection.
How Occupy Wall Street Won In One Chart (Linnette Lopez, Business Insider) Before Occupy Wall Street income inequality wasn’t on the top five list at Davos. Starting with 2012 it has held the number one spot.
Click on graphic for larger image.
Averting A US-China Economic Cold War (Yiping Yuang, Economy Watch) Hat tip to Sig Silber. Yiping Huang has contributed to Global Economic Intersection.
Will the Fed reverse taper on inflation? (Houses and Holes, Macro Business) What would a reverse taper be called? A “repat”? Inflation inflation continues a down trend and, although growth has been improving, surprises in growth data compared to expectations have remained to the downside.
Has The Natural Interest Rate Has Been Negative for the Past Five Years? (David Beckwith, Macro and Other Market Musings) There are a number of graphs in the article but none copied here. The graphs really need the full context of the article to be useful (and also the comment discussion as well).
Bubble Valuation Blues; GMO 7-Year Outlook for U.S. Stocks is Negative (Mike Shedlock, MISH’s Global Economic Trend Analysis) This analysis says that U.S. large caps will lose 12.5 over the next 7 years (adjusted for inflation) and small caps will lose 40%. U.S. inflation was assumed to average 2.2% over the seven years. There will be a little refuge from loss in bonds, as well as U.S. “high quality” stocks. For higher returns, GMO suggests buying timber.
Why You Should Consider Owning Treasuries (Ben Kramer-Miller, Wall St. Cheat Sheet)
What do negative interest rates do? (Andrea Terzi, Credit Writedowns)
James Galbraith on the Predator State and national solvency (YouTube) James Galbraith has contributed to Global Economic Intersection. Professor Galbraith’s interview is divided into two sections. The first lasts for 7 1/2 minutes. That is followed by a break with other material lasting 3 1/2 minutes. The entire program can be viewed clicking on the video image below. The start of the first section can be picked up by clicking here. The start of the second section at 16:10 can be picked up here.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Class divide on campus: Adjunct professors fight for better pay, benefits (Norma Willis Aronowitz, NBC News) An example used in the story: Two professors with similar education, experience and teaching loads find one making 10x the pay of the other. Disclosure: Econintersect Managing Editor worked as an adjunct professor for 11 years, mostly in the SUNY (State University of New York) system. The teaching load ranged from 10 semester hours credit to 24 for a 12 month period. The pay escalated with experience, starting at $800 per semester hour and rising to a maximum of $12 after the eighth year. There were no benefits.
James M. Cirona: In Memoriam (William K. Black, New Economic Perspectives) This tribute is in fact an explanation of how accounting control fraud can gut a corporation while the official reports show record profits.
Careful: Corporate credit card charges can kill a career (Mason Braswell, Investment News) If only FINRA would be as diligent in dealing with the transgressions of financial institutions.
Why banks aren’t lending to homebuyers (Felix Salmon, Reuters) Another aspect of financial repression – mortgage availability.
China to Allow up to 5 Privately Financed Banks, Tighten Reins on Shadow Banking (Marlene Y. Satter, ThinkAdvisor) This is an attempt to transfer more risk from the government to the private sector. However, it should be questioned whether banking risk can ever be transferred totally away from the government as long as the banking model for money creation is used.
Scientists Who Doubt Human-Caused Climate Change (Emily Gertz, Popular Science) See also GEI Analysis: Scientists Increase Efforts to Understand Global Warming Pause (Fabius Maximus).
The Rock ‘em Sock ‘em Fed Comes Out Swinging (Shah Gilani, Wall Street Insights and Indictments) Shah Gilani has contributrd to Global Economic Intersection. Is the Fed finally going to get serious about the systemic risk of having TBTF (too big to fail) banks with owbership positions in such things as commodity warehouses, production facilities. etc. Gilani writes:
“What would be the systemic risk to the system if a big bank owned something like the Deepwater Horizon (the BP well that blew out and cost almost $50 billion to date), or Japan’s Fukushima Daiichi nuclear power plant (which was destroyed by an earthquake-related tsunami and is costing god only knows how much) and the bank got sued, and their share price collapsed, and depositors fled, and that caused a run on other banks, and put the entire financial system at risk?”
Gauging Investor Sentiment with Twitter: New Update (Blair Jensen, Advisor Perspectives dshort.com)
Sector sentiment shows continued support for Financials [$XLF] and Technology [$XLK] and a move away from Industrials [$XLI], Energy [$XLE], and Basic Materials [$XLB]. The weakness in Consumer Discretionary [$XLY, also called Cyclical] sentiment along with modest strength in Consumer Staples [$XLP] suggests that some market participants are slowly adding some protection to their portfolios. This is a trend to watch over the next several weeks. [$XLV is Health Care and $XLU is Utilities.]
Defense Spending: Putting Toys Before Boys (Franklin Spinney, CounterPunch)
Mega Default In China Scheduled for January 31 (Gordon C. Chang, Forbes) Hat tip to Dan Flemming. We keep hearing reports of impending disaster with “Wealth Management Products” in China that cannot deliver on promised returns.
2014 Australian dollar forecast (House and Holes, Macro Business) Expect AUD to hit 80 in 2014 and ultimately 60 is possible.
16 Basic Principles for Avoiding Stupidity (Brent Beshore, LinkedIn)
The End Game for Democracy (Bill Moyers, YouTube) Hat tip to Russell Huntley.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Today we have a focus on the Trans Pacific Partnership (TPP).
The most influential woman in finance – Janet Yellen, a closer look. (JR Viglione, United Still) A very readable summary of the new Fed chair’s personal history and career, including a straightforward policy discussion.
Gary Webb, RIP (Marc Cooper, LA Weekly News) Hat tip to Roger Erickson. A ten-year old story very much worth reading. It’s about the corruption of self interest that can infect a media company, misinform the populace and destroy lives.
Aspen and the End of Snow (Nathaniel Rich, Men’s Journal) Hat tip to Naked Capitalism. The disappearance of snow on the lower reaches of Aspen Mountain by 2100 will have far more imprtant consequences than lost skiing.
The next five articles are about the TTP (Trans Pacific Partnership). See also GEI News: Wikileaks Releases Environmental Chapter of TPP
Everything you need to know about the Trans Pacific Partnership (Lydia Depillis, The Washington Post) This is a fairly straightforward description of what is known about the TPP. The map below shows the estimated trade volumes and the graph below that shows how the economic gains are likely to be distributed within the U.S.
Japan to US: You Can’t Railroad the Trans-Pacific Partnership (Clive, Naked Capitalism) Is TTP merely a tool of giant multi-national corporations? Clive thinks so and it is hard to argue with him.
The Trans-Pacific Partnership: Warnings From NAFTA (Dean Baker, Huffington Post) Dean Baker has contributed to Global Economic Intersection.
“The provisions in the agreement will overrule measures passed by national, state, and local legislative bodies, in effect stripping democratically elected officials of much of their authority. Since most of the text is still secret we can only speculate on what the final agreement will include.”
The TPP: A Dangerous Proposal Whose Time Has Gone (Joe Firestone, New Economic Perspectives) Joe Firestone has contributed to Global Economic Intersection.
People Pressure Is Making Fast Tracking the TPP Politically Toxic (Kevin Zeese and Margaret Flowers, Popular Resistance, TruthDig)
Currencies of natural resource exporters under pressure (Walter Kurtz, Sober Look) Commodity producing countries have lost face more currency value than the U.S. dollar has gained. Weakening demand for commodities is the primary cause.
David Bird, Wall Street Journal Reporter, Goes Missing After Reporting for Three Months on Oil Glut in U.S. (Pam Martens, Wall Street on Parade) Hat tip to Naked Capitalism. Another episode to attract conspiracy theorists.
Decline in the number of monetary financial institutions continued in 2013 (European Central Bank)
What Happens When the Poor Receive a Stipend? (Moises Velasquez-Manoff, The New York Times) Some well controlled experiments argue against moral hazard resulting from giving money to the poor with small children.
Thanks academia, soon I will join a generation of jobless PhDs (Amanda Chung, The Conversation) This is what a Ph.D. glut looks like:
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Today we focus on the lack of jobs in the U.S. and elsewhere.
Healthy, wealthy and wise: America’s fittest city is… (NBC Today Health) For the top 20 cities, 8 are in the west, 8 are in the north and 4 are in the south. This was determined by designating all states west of the states bordering the Mississippi as “the west” (except for Texas included in the south) and dividing the remaining states into north and south using the Ohio and Potomac rivers as the divider.
Conflicts Unchanged in Birthplace of WWI (Walter Mayr, Spiegel Online) Hat tip to Roger Erickson. 100 years later and so little has changed.
4 financial rules of thumb in need of upgrades (Chuck Jaffe, MarketWatch, The Wall Street Journal)
The remaining articles are about the problem of lack of jobs in the U.S. and globally (plus related economic problems).
Five Economic Reforms Millennials Should Be Fighting For (Jesse A. Myerson, Rolling Stone) Guaranteed jobs, universal basic incomes, public finance and more.
Let Us Now Praise “Full Communism” (David Weigel, Slate)
A millennial’s Rolling Stone rant offers up some tired old ‘solutions’ (Jonah Goldberg, Los Angeles Times) See also A lefty millennial activist takes on columnist Jonah Goldberg (Emmett Rensin, Los Angeles Times)
Experts see that the 3rd Industrial Revolution is upon us. How many jobs will be lost? (Fabius Maximus) Fabius Maximus has contributed to Global Economic Intersection. Technology, automation and robots are revolutions displacing manual labor. The process is in its infancy. Take retail for example: Less than 7% of retail is conducted onl;ine so far. There is still a lot of change coming.
Spot The Labor Force Collapse Culprit (Tyler Durdin, Zero Hedge)
Click on graph for larger image at Zero Hedge.
Five conservative reforms millennials should be fighting for (Dylan Matthews, The Washington Post) Frame the “communist” proposals a bit differently and they sound like a “conservative” wish list.
The robots are coming for white collar jobs (Unconventional Economist, Macro Business) A whole new wave of technological development means that even positions once thought to be safe from computerization are now under threat. See also The onrushing wave (The Economist):
Jobs for All: The Missing but Essential Element of Dr. King’s March on Washington (L.Randall Wray, New Economic Perspectives) See also L. Randall Wray article in GEI Analysis.
Are emerging markets like China the main reason for unemployment growth worldwide? (The Daily Journalist) GEI Publisher Steven Hansen was one of seven with commentaries included in this article. As the following graph shows, the U.S. has lost nearly 1/3 of manufacturing jobs over 20 years but has more than doubled the real value of manufacturing output.
Working for the Few (Oxfam) Subtitle: Political capture and economic inequality.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Today we focus on economic growth and related issues in China.
The Buzz About Myanmar’s Future Prosperity With Oliver Belfitt-Nash (Jon Springer, Forbes)
A shocking number of academic journals have accepted studies that are totally fake (Ritchie King, Quartz) A completely made-up story was accepted for publication last year by 157 of 304 peer-reviewed journals. The story purported to be a research article about a “cure for cancer”, hardly a subtle claim. This was hardly an isolated event. There appear to be serious flaws in academic publishing.
How to Manipulate the Entire IPO Market With Just $250 Million (Wolf Richter, Testosterone Pit) Technology IPO valuations are reminiscent of 1999.
The next six articles are about economic growth and related issues in China.
China’s GDP questioned; monetary conditions tighten once again (Walter Kurtz, Sober Look)
Is 7 per cent China’s new normal? (Peter Cai, China Spectator) Peter Cai says yes. In GEI Analysis Michael Pettis says no – the new normal will be closer to 3%. See here and here. According to Peter Cai half of China’s companies will be in the red if GDP growth goes under 7%. Would 3% growth create a Chinese depression?
Can China walk the reform talk? (Geoff Raby, China Specatator) Raby doesn’t think it will be a walk in the park but he sees China “settled into a high, but sustainable growth path“.
Westerners are so convinced China is a dystopian hellscape they’ll share anything that confirms it (Gwynn Guilford, Quartz)
Uh oh, China! (Houses and Holes, Macro Business)
China’s centrally planned jig is up. It can take the pain now and get on with rebalancing or it can delay again and make the ultimate reckoning a debt crisis. In a Western democracy one could be confident that the latter course of poor policy would be pursued. In a communist state, with the power to carry better policy in the national interest, the cost/benefit analysis may have shifted towards early action.
China Banks Get Greater Freedom on Small Loans (Grace Zhu, Shen Hong and Wynne Wang, The Wall Street Journal) China has been struggling with high and fluctuating short-term interest rates as liquidity concerns keep coming back to the forefront. The sustainability of debt is the issue. The government has now taken action to make writedowns of non-performing debt easier:
“China is moving ahead with reforms to overhaul its financial system by helping banks clean up their balance sheets and launching a trial program to give smaller lenders easier access to cash.”
We Haven’t Seen Wall Street Analysts Herding Like This Since 1986 (Sam Ro, Business Insider) Is too much agreement too good to be true?
Detroit Is Offered $350 Million by Governor to Ease Pension Cuts (Bloomberg, Employee Benefit Adviser) The Republican governor has made the proposal but the Republican legislature may not approve.
How bank reserves make the gap between deposits and loans disappear (Walter Kurtz, Sober Look)
“QE, which is directly responsible for the $2.4 trillion in excess reserves, was not helpful (and possibly harmful) to credit growth in the US.”
See the next article for a particularly lucid explanation of Sober Look’s observations.
Banks Don’t Lend Out Reserves (Frances Coppola, Forbes) Frances Coppola has contributed to Global Economic Intersection. This is an especially straightforward explanation of the significance of Sober Look‘s graphics in the preceding article. The most important statement comes more than half way through the article:
Loans + excess reserves = deposits
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Today we focus on income distribution and inequality.
Why We Fight (Philip Giraldi, AntiWar.com) Hat tips to Chuck Spinney and Roger Erickson. Issues of war as they relate to the economy, political economy and politics are showing up more and more frequently from several authors and guest contributors on Global Economic Intersection. This article is an especially good discussion of factors in all three areas.
Utah is Ending Homelessness by Giving People Homes (Nation of Change) Hat tip to Russell Huntley. This conservative state is giving free homes to the homeless to save the state money.
What most people get wrong about macroeconomics (Noah Smith, The Week) Most people think macroeconomics is politics, according to Smith.
The following six articles are about income distribution and related topics.
Rigged rules mean economic growth is increasingly “winner takes all” for rich elites (Joh Slater, Oxfam Blogs) “Wealth of half world’s population now same as that of group who could fit on a double-decker bus.”
What Does It Take to Be in the Top 1 Percent? Not As Much As You Think (Frank Holmes, U.S. Global Investors) Frank Holmes has contributed to Global Economic Intersection. The answer to the question is annual income of $521,411. But most of the article talks about taxes. Holmes ask if maybe the top 1% is now paying more than their fair share?
Trickle-down economics is the greatest broken promise of our lifetime (Alex Andreou, The Guardian) This theory falls into the category of fraud. If all economics frauds were held liable and the proceeds distributed evenly would income inequality extremes be avoided?
Bill Gates predicts there will be almost no poor countries by 2035 ( Ritchie King, Quartz) There are 35 countries officially designated as poor by the World Bank. Bill Gates says that all will move above that classification by 2035. What defines poor? Per capita income below $1,035 per year.
New Retirement Plan: Work Longer or Until You Die (Eric McWhinnie, Wall St. Cheat Sheet) Nearly 60% of those in the middle class say their biggest worry is just paying bills. Only 13% are saving for retirement. See also next article.
Gallup’s Report on Boomer Reluctance to Retire: Confirmed by My Research (Doug Short, Advisor Perspectives dshort.com) Labor force participation is going down below age 55 and rising for 55 and older.
Click on graph for larger image at Advisor Perspectives dshort.com.
The Inequality Problem (David Brooks, The New York Times)
If you have a primitive zero-sum mentality then you assume growing affluence for the rich must somehow be causing the immobility of the poor, but, in reality, the two sets of problems are different, and it does no good to lump them together and call them “inequality.”
David Brooks Is Wrong About Inequality (Josh Barro, Business Insider)
The thing is, while growing affluence for the rich isn’t causing low and moderate incomes to stagnate, they are to a large extent results of the same forces. There is a zero-sum tradeoff between the two, so a zero-sum mentality (primitive or otherwise) is called for.
- The income inequality debate is now in the mainstream (Michael Hiltzik, Los Angeles Times)
- The Evolution of Top Incomes in an Egalitarian Society: Sweden, 1903–2004 (Jesper Roine and Daniel Waldenstrom, IEHC 2006 Helsinki, Session 16) Hat tip to Brad DeLong. The last seven years of data are not included in this 2006 paper but this is a pretty good view of a century of income distribution.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
An untold story: What the Nest acquisition means for utilities (Adrian Tuck, Tendril, Gigaom, 24 January 2014) Hat tip to David Sciacero, Newsana. Some utilities will lose but those who compete as electrical service providers rather than just commodity providers will prosper.
11 Fast Facts About the Winter Olympics (Katherine Lagrave, Wall St. Cheat Sheet) One fact: These Winter Oplympics will cost Russia more than the cost of all the other Winter Olympics in history combined.
Gold bulls have something to say about tapering (Austin Kiddle, Futures Magazine)
A Mantra for Davos: Let Go (5 Min. Forecast) Companies whose executives regularly attend Davos underperform other stocks.
Global Cooling returns to the news, another instructive lesson about America (Fabius Maximus) Fabius Maximus has contributed to Global Economic Intersection.
Unhappy Europe (Kathleen Packard, The Gold Standard Now) Hat tip to John O’Donnell. Packard quotes Desmond Lachman of the American Enterprise Institute wrote in The Wall Street Journal:
“At the start of each of the past three years, European policy makers have confidently assured the world that the worst of the debt crisis was over and that their economies were finally on the mend. Yet, at the end of each of the past three years, Europe has been marked by higher unemployment, greater public debt and a more troubled political environment.”
Toyota Continues to Brush Off Hydrogen Criticisms (Justin Lloyd-Miller. Wall St. Cheat Sheet) Will you be buying the new Toyota hygrogen fuel cell car next year?
How Hegemons Fall (Samuel Lee, MorningstarAdvisor) Ray Dalio’s five-stage model on the birth and death of empires. Econintersect has annotated the graph from the article. (Okay, so calling the contraction the “Obama Contraction” has about as much validity as referring the the “Great Roosevelt Depression”.)
Sources of Performance Decay (Adam Butler, Mike Phibrick and Rodrigo Gordillo, Advisor Perspectives dhosrt.com) Adam Butler and Mike Philbrick have contributed to Global Economic Intersection. The authors address the question of why so often after a successful investment strategy is defined from historical data it fails to perform as well from that point forward.
Almost Everything in “Dr. Strangeglove” Was True (Eric Schlosser, The New Yorker) Hat tips to Chuck Spinney and Roger Erickson.
New Old Keynesianism (John Quiggin, Out of the Crooked Timber) For economists this is lucid logic in a very entertaining dissertation. For non-economists it may be a “tough slog”.
3 ETFs Poised to Dominate in 2014: Zacks (Marlene K. Satter, ThinkAdvisor)
GOLDMAN’S HATZIUS: Here Are 4 Key Reasons Why Corporate Profits Will Accelerate In 2014 (Sam Ro, Business Insider) Wage growth will remain anemic driving corporate profits higher.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
The Joke Is on Princeton After Highly Flawed Facebook Study (Jacqueline Sahagian, Wall St. Cheat Sheet) See GEI News: The Facebook Epidemic.
Dark skin, blue eyes: Genes paint a picture of 7,000-year-old European (Alan Boyle, NBC News) African skin and Nordic eyes?
Study: Vt. Should Allow VEDA to Be State Bank (Warren Johnston, Valley News) Hat tip to Public Banking Institute. The proposal is that the Vermont Economic Development Authority (VEDA) should be chartered to function as a state bank. To do so would add thousands of jobs in the state, save the state millions of dolars in interest costs and grow the state’s economy by hundreds of millions of dollars. Disclosure: The Econintersect Managing Editor was a paid intern at the Valley News when in high school.
Index Reversals at Resistance and Market Valuations (Chris Kimble, Kimble Charting Solutions, Advisor Perspectives dshort.com) Chris Kimble has contributed to Global Economic Intersection.
Click on chart for large graphic composite at Advisor Perspectives dshort.com.
Ignore the global elites and their Davos spectacle (Luigi Russi, The Conversation) The author says it’s time to start ignoring the entitled.
Attack of the killer rentiers (Izabella Kaminska, FT Alphaville)
But rentiers would rather cling to the entirety of the disproportional gain that deflation brings them. Most annoyingly, it’s not because they necessarily want to consume more, but rather because they want to preserve the option to consume more if they so wish. That means the entire thing is mostly about psychology, status and social hierarchy.
A Mantra for Davos: Let Go (5 Min. Forecast) Here is a metric exceeded only in the dot.com bubble.
Big Banks Are Now Technology Laggards (Dani Golan, Kaminaro, Wall Street and Technology) Banks are no longer looking at new technologies but are just staying with “things that work”.
Argentina – From Bad to Worse (Win Thin, Credit Writedowns) Currency devaluation is underway again and will only stoke further inflation, currently at 28% per annum.
Eric Holder Just Announced A Major Shift On U.S. Marijuana Policy (David Ingram, Reuters, Huffington Post) Why? It’s all about tax revenue.
Population distribution of the United States in units of Canadas
Rally or bust: Who knows the outcome of Fed tapering? (Anthony Lazzara, Futures Magazine) The author’s answer is: It depends (briefly paraphrased by Econintersect).
Why the Recent Lift in Junior Miners Will Likely Continue (Frank Holmes, U.S. Global Investors) The S&P TSX Venture Composite appears to be approaching a very bullish signal. This composite is a resources-heavy index, with more than 80 percent of the holdings in the energy and materials sector.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Today we are focused on the U.S. housing market.
As Promised, We Decode The Big Banks (Shah Gilani, Wall Street Insights & Indictments) Shah Gilani has contributed to Global Economic Intersection. He says that banks are susceptible to earnings disappointments in 2014 due to slowdown in wealth management business growth and mortgage originations and refis. He sees the 4Q collapse of mortgage originations as an ominous sign for housing in 2014.
Did you hear the one about the Fed preventing bubbles? (Greg Adamsick and Matthew Bradbard, Futures Magazine) You can relax! Bernanke says the Fed is on the lookout for bubbles.
A note from the time of WWI, lessons from The Great War for us fighting the Long War (Fabius Maximus) Fabius Maximus has contributed to Global Economic Intersection. Lessons from the Great War for the Long War on Terror.
“What experience and history teach is this — that people and governments never have learned anything from history, or acted on principles deduced from it.”
— Hegel’s Lectures on the Philosophy of History (1832)
There are ten articles following about the U.S. housing market.
All-cash home sales reach new high (Quentin Fottrell, MarketWatch, The Wall Street Journal) In December a new record for all-cash home purchases: 42%, up from 39% in November. Just one year ago only 18% of home purchases were all cash. Acording to Zero Hedge there are five states with more than 50% all-cash home purchases:
- Florida (62.5 percent),
- Wisconsin (59.8 percent),
- Alabama (55.7 percent),
- South Carolina (51.3 percent),
- Georgia (51.3 percent).
Buying a Home? Bring a Suitcase Full of Cash: Ritholtz Chart (Barry Ritholtz, Bloomberg) You need some help to quickly read the graphic below: The two line plots are read on the left axis and the bar graph uses the right axis.
Advantages & Disadvantages of Buying a House in Cash (Tony Guerra, Demand Media, SF Gate)
6 worst home fixes for the money (Dana Dratch, bankrate.com) Not all bathrooms are good investments.
Housing Starts (National Association of Home Builders, 17 January 2014) See also GEI Analysis Residential Building Sector Continues to Soften in December 2013.
Promising places to buy rental properties (Holden Lewis, bankrate.com) The best city (by far) is Detroit. Are any of the best places in the south or the west?
This 100-year-old idea could end San Francisco’s class war (Noah Smith, Quartz) Noah Smith proposes that the high housing costs in San Francisco derive from inefficient use of land. He then proposes instituting the 100-year old ideas of Henry George to tax land itself and not the improvements thereon. The current property tax laws are substantially levied on the improvements and relatively less on the land itself. This creates a disincentive for optimizing use of the land – the fewer improvements the lower the tax. See following article.
Land Value Tax Won’t Fix San Francisco (Matthew Iglesias, Slate) Matt likes the land tax idea but disagrees with the idea that it could solve the class tensions in San Francisco resulting from high hoiusing costs. Matt says the high costs are imposed by zoning and not by land “hoarding”.
Fred Graph MORTGAGE30US (St. Louis Fed, 24 January 2014) The 30-year mortgage rate average has shot up by more than 30% in the last seven months.
Freddie Mac: Mortgage rates lower; 30-year fixed averaging 4.39% (E. Scott Reckard, Los Angeles Times) Mortgage rates arestill evry low.
Note: There are some more housing articles being carried over to tomorrow’s “What We Read Today“.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Today we continue our focus on the U.S. and global housing markets.
China: From Making the World’s Stuff to Buying It (John Watling, The Financialist) Rebalancing in action?
Wagering America on an untested monetary theory (Fabius Maximus) Fabius Maximus has contributed to Global Econiomic Intersection.
After years of quantitative easing, with the Fed starting to slow the third great wave, officials are breaking their facade of confidence to admit what many of us have long said. They do not know how QE works, or the effects of ending it.
Stephen Hawking’s new theory offers black hole escape (Jacob Aron, New Scientist) In the general theory of relativity and in quantum mechanics physicists find conflicting descriptions of black holes. Physicists have been arguing about the nature of black holes within this context for decades. Stephen Hawking has published a new note which, while it doesn’t resolve the conflict, does provide an change in a position that he has held in debate. And when Hawking changes his mind it is an occassion of note. Click here for the complete note, “Information Preservation and Weather Forecasting for Black Holes“. Scientific American author Zeeya Merali writes that Stephen Hawking says: “There are no black holes“. Econintersect thinks that is an overstatement; Hawking says black holes may have properties different from traditional interpretations.
There are eleven articles on housing following.
Mortgage Rates compared to Ten Year Treasury Yield and Refinance Activity (Bill McBride, Calculated Risk) Yellow marker is for 24 January rate.
Click on graph for larger image.
The housing slowdown has already begun (New Deal Democrat, The Bonddad Blog)
Home Prices in 20 U.S. Cities Rise Most Since February 2006 (Jeanna Smialek, Bloomberg) Hat tip to John O’Donnell. You do remember 2006, don’t you? That was the top of the housing bubble. See further details at GEI Analysis.
Weekly Update: Housing Tracker Existing Home Inventory up 1.8% year-over-year on Jan 27th (Bill McBride, Calculated Risk) See also GEI Analysis: Why are Housing Inventories Low?
FHFA Home Price Index (Warren Mosler, Mosler Economics) “Just my imagination or have the price increases been decelerating?“
Black Knight: Mortgage Delinquency Rate increased in December, Down almost 10% year-over-year (Bill McBride, Calculated Risk)
According to the Black Knight (formerly LPS) First Look report for December, the percent of loans delinquent increased seasonally in December compared to November, and declined about 9.9% year-over-year.
Good News for Rental Markets as Prices, Renter Credit Quality Both Rise (Jann Swanson, Mortgage News Daily) In 2013 average rental prices have increased nearly 4% nationwide.
Most Germans don’t buy their homes, they rent. Here’s why (Matt Phillips, Quartz) The why is not so simple. It seems to be a combination of relatively low rents, higher quality rental housing and renter-friendly laws.
The Tale of a House, and an Entire Market (Shaila Dewan and Catherine Rampell, The New York Times) This article tracks multiple sales of six individual houses in six metro markets. Three markets were relatively satble over th past ten years (Atlanta, Denver and Raleigh) while three saw major price fluctuations (Phoenix, San Diego and Washington, DC).
Great Canadian real estate crash of 2013 (Chris Sorensen, MacLean’s)
Existing Home Sales Soaring Highs Deceptive (Robert Oak, The Economic Populist) In spite of headlines about a booming housing market existing home sales have been below year-ago levels the last two months (November and December).
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Today we on the U.S. and global employment and wage issues, plus credit and the economy in China and a deflation warning.
Roubini: Fear of Bond Market Rout Is Overblown (Gil Weinreich, ThinkAdvisor)
Speaking Wednesday [29 January 2014] at ETF.com‘s InsideETFs conference in Hollywood, Fla., the head of Roubini Global Economics and NYU business professor said 2014 was likely to be a good year for stocks and not a disastrous year for bonds, as many fear.
When Will Beijing’s Trust Bailouts End? (Anne Stevenson-Yang, The Wall Street Journal) So far every time a Chinese trust starts to fail, it is rescued at government behest. Stevenson-Yang says that China is simply shoring up moral hazard and supporting bad debt to mainatin the appearance of high growth. See also GEI Analysis for a detailed explanation of the problem by Michale Pettis.
Is China About To Plunge Into Financial Crisis? (Rana Foroohar, Time) Lot’s of worry from lot’s of sources. Here’s one that compares China to 2008 U.S. Is it really that bad?
The next seven articles are about employment and wages followed by two articles on the true condition of the Chinese economy and credit markets and concluding with the most ominous deflation/recession warning we have read in years.
The Myth of Industrial Rebound (Steven Rattner, The New York Times) Hat tip to John O’Donnell. Great data and discussion. This article clearly lays out the competition in global labor markets.
A crazy explanation for what is happening to workers (R.A., The Economist) Employment changes are tied to productivity changes in this discussion. When productivity rises above trend so will employment; below trend and employment increases lag. Until the mid-1980s productivity was pro-cyclical (falling in recessions, rising in recoveries). Since then productivity has been counter-cyclical and “jobless recoveries” from recessions have resulted. There is a lot more detail in the article but the above gives a simple summary.
The Future of Employment: How Susceptible are Jobs to Computerization? (Carl Benedikt Frey and Michael A. Osborne, Oxford University, 17 September 2013) Hat tip to Douglas Robb, Newsana. The disruption of the labor force by robots and computers is just beginning. As a rule of thumb, the impact will be greatest at the lower education and wage levels. Further growth in income inequality anyone? This paper has been discussed in several publications, including The Economist and The Atlantic.
No, micro is not the “good” economics (G.I., The Economist) This more about the minimum wage debate than any other issue.
What “wages explosion”? (Leith van Onselen, Macro Business) With the Australian Wage Price Index declining, is there a problem? van Onselen says there might be with because of a declining Australian dollar:
“… it is important that any further devaluation of the Australian dollar is not offset by rising wage claims, otherwise Australia’s non-mining economy will remain uncompetitive, leading to widespread job losses as the mining investment boom unwinds.”
Why real incomes must fall (Leith van Onselen, Macro Business)
… the strong real income gains experienced over the past decade were an aberration, juiced by the once-in-a-century surge in Australia’s terms-of-trade. Income growth going forward will be anemic, which is required to restore Australian competitiveness. Otherwise, Australia faces the prospect of more industry closures and rising unemployment.
Will robots steal our jobs? The humble loom suggests not. (James Bessen, The Washington Post)
Some Thoughts on Recent Chinese GDP Growth (Menzie Chinn, Econobrowser) Menzie Chinn contributes to Global Economic Intersection.
“The longer interest rate liberalization is put off, the harder it will to manage a successful move to a more price-oriented financial market.”
The Reliability of Chinese GDP, Again (Menzie Chinn, Econobrowser) Menzie Chinn contributes to Global Economic Intersection. Discussion: Can we really trust China’s GDP numbers?
World risks deflationary shock as BRICS puncture credit bubbles (Ambrose Evans-Pritchard, The Telegraph) The BRICS economies could see a breakdown into recession as the Fed taper removes liquidity upon which they have been depending. This would be just the shock that Christine Lagarde warned about last week in Davos:
“The deflation risk is what would occur if there was a shock to those economies now at low inflation rates, way below target. I don’t think anyone can dispute that in the eurozone, inflation is way below target.”
Credit inflows are drying up; outflows could spring the deflationary trap.
Evans-Pritchard describes China as having a a credit bubble problem comparable to the U.S. in 1928, Japan in 1990 and the UK in 2007. This situation is exascerbated, he says, by production costs in China that are now 10% higher for Airbus than in France.
And how is Europe doing?
“Europe has let its defences collapse behind a Maginot Line of orthodox monetary policy. Eurostat data show that Italy, Spain, Holland, Portugal, Greece, Estonia, Slovenia, Slovakia, Latvia, as well as euro-pegged Denmark, Hungary, Bulgaria and Lithuania have all been in outright deflation since May, once tax rises are stripped out. Underlying prices have been dropping in Poland and the Czech Republic since July, and France since August.”
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Everyone likes the idea of equal opportunity. This economist thinks it’s a fantasy. (Dylan Matthews, The Washington Post) Opportunity is not equal so to avoid extreme outcomes of distribution there must be some mechanism beyond an assumption that the “free” market will produce satisfactory income distributions.
Ten Ways to Get Serious about Rising Inequality (John Cassidy, The New Yorker) This list is a liberal’s wet dream but it shouldn’t be dismissed without discussion.
A Law Unto Themselves (Amar Bhide, City Journal, 30 January 2014) Amar Bhide has contributed to Global Economic Intersection. A powerful argument against the existence of control without accountability. Unaccountable control in public life and private has become an ever increasing problem.
Public Exchanges Competitive With Employer-Sponsored Plans (Michael Giardina, HIX Health Insirance Exchange)
Premiums for health plans on new state exchanges under the Affordable Care Act are comparable to – and in some cases lower than – those being offered by employers with similar levels of coverage, according to a study released Thursday by Price Waterhouse Cooper’s Health Research Institute.
Read the comments which disagree with the author. See the actual report (free registration required).
Economic Take-Off In 2014 Due To Lower Fiscal Drag? (James A. Kostohryz, JK Market Insights, Seeking Alpha) Author says fiscal drag arguments are fraught with possible errors of assumption, but, nonetheless, the governemnt sector will add to GDP in 2014 and both the economy and stocks should have a strong year.
The TSA Is a Fraud? We’re Shocked, SHOCKED! (William Anderson, Mises Economics Blog) Perhaps it is an economic stimulus program?
China’s sub-prime moment (House and Holes, Macro Business) The riskier tranches are collapsing (sse graph) but so far government is forcing banks to stand behind their products. But the author says China cannot continue to do this and also progress with rebalancing. See also Bloomberg News story.
Biggest Money Fund Shuns Companies on Default Risk: China Credit (Helen Sun, Bloomberg)
Former IMF Chief Economist, Now India’s Central Bank Governor Rajan Takes Shot at Bernanke’s Destabilizing Policies (Yves Smith, Naked Capitalism)
Video
Top 10 Most Competitive Housing Markets in America (Eric McWhinnie, Wall St. Cheat Sheet) The stories of the top ten markets is interesting but the real news is data showing a cooling housing market:
When Good Models Go Bad (Jeff Miller, A Dash if Insight) Jeff Miller’s weekly investing articles appear at GEI Investing, usually in the early am Sundays.
European Stocks Decline, Posting Worst January Since 2010 (Namitha Jagadeesh, Bloomberg)
CHART OF THE DAY: A Big Question Mark For Investors In US Stocks (Matthew Boesler, Business Insider)
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Mexico Surpassing Japan as No. 2 Auto Exporter to U.S. (Brendan Case, Bloomberg) Next year (2015) Mexico is expected to export 1.9 million autos to the U.S. and surpass the current number 1, Canada.
Half of Today’s 27-Year-Olds Are More Than $10,000 in Debt (Daniel Luzer, Washington Monthly) About 80% of today’s 27-year old Americans have some debt and 55% have more than $10,000. And in 2011 a 27-year old was more likely to earn less than $15,000 a year than to earn over $40,000.
NSA leaders split on giving amnesty to Snowden (CBS Evening News) Hat tip to Roger Erickson. See GEI News report containing a Snowden interview (in English) on German TV last week.
Japan’s economy improves sharply, data show (Takashi Nakamichi, Marlet Watch, The Wall Street Journal)
The Worst Unemployment Chart In The World (Joe Wiesenthal, Business Insider)
Click on graph for larger image.
The Incredible Shrinking Credit-Default Swap Market (Mary Childs, Bloomberg Businessweek) Regulation has made these irresponsible “insurance” products just too expensive.
Playing Chicken with Antibiotics (Carmen Cordova, Natural Resources Defense Council) Hat tip to Roger Erickson. Previously Undisclosed FDA Documents Show Antibiotic Feed Additives Don’t Meet the Agency’s Own Safety Standards.
Shaping our future cities: an art form (Planning Editor, The Planning Issue) Hat tip to Pedro B. Ortiz, Penn Institute for Urban Research.
Getting Ready for Asteroids (Space Situational Awareness, European Space Agency) Hat tips to Selva Tinnan and Roger Erickson.
Postal Banking: Maybe Not So Crazy After All (Adam Levitin, American Banker) See also GEI Opinion: A Nonpareil Public Bank: The Fed and also What We Could Do with A Postal Savings Bank: Infrastructure that Doesn’t Cost Taxpayers A Dime.
Locus of extremity (The Economist) Emerging markets are struggling. If the currency chart went back to cover the last year the Indian rupee would be on it, for sure, dropping by 27% vs. the U.S. dollar by August 2013 and then recovering more than 8% as of today.
ShotSpotter offers gunfire detection to Bay Area schools after mass shootings (Heather Sommerville, San Jose Mercury News) Hat tip to Roger Erickson. System automates the reporting of gunfire to neearest police stations.
Central Banker Throwdown (John Mauldin, Thoughts from the Frontline) We’ve had negative real interest rates before. The follow-on pain may be expressed differently this time.
No Wonder German Workers Drag Down Retail Sales – And Much Of The Economy (Wolf Richter, Testosterone Pit) Corporations get off easy, consumers get whacked and the german economy is drying up.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
The Myth of the “Self Made Man” (Cullen Roche, Pragmatic Capitalism) The message could be paraphrased by quoting John Donne: “No man is an island.”
Is America’s Retirement Crisis Fixable? (Eric McWhinnie, Wall St. Cheat Sheet) Cardinal sin is having a question for a headline and an article that does not answer the question. Unless you accept this statement as an answer: “Ultimately, the responsibility of retirement falls on individuals. “
Talking Troubled Turkey (Paul Krugman, The New York Times) Turkey may have problems, but Krugman says the entire world is in trouble.
Factors affecting 2014 Medical Cost Trend (PriceWaterhouseCoopers) Health care reform (ACA) and other factors deflating health care costs. For 2014, PwC’s Health Research Institute (HRI) projects a medical cost trend of 6.5%. The following video summarizes the report.
The Dead Forests of Antarctica (Darmon Richter, Atlas Obscura) Hat tip to Barry Ritholtz, Bloomberg.
Fewer Immigrants Came to U.S. Last Year (Neil Shah, The Wall Street Journal) Fewer immigrants last year? You’ve got to be kidding. The difference from 2012 was well within the noise level. Immigration is clearly down from 2000, 2001, 2004, 2005 and 2006 levels but the remaining eight years are varying within a narrow band (between 730,000 and 870,000)
Who Pays a 45% Estate Tax? Idiots Do. (Barry Ritholtz, The Big Picture.
Capitalism vs. Democracy (Thomas B. Edsall, The New York Times) Excellent review of Thomas Piketty’s new book “Capital in the Twenty-First Century”. This contains a complete discussion of the conflict between Capitalism and Democracy. See also GEI Opinion articles by Frank Li.
For the Past Few Years, It’s Paid to Do the Opposite Here! (Chris Kimble, Advisor Perspectives dshort.com) Only 24% bullish on bonds but look at them go. Is this May 2012 all over again?
Ponzi Or MLP? Linn Energy’s Unsustainable Distributions (James Kostohryz, JK Market Insights, Seeking Alpha) A case study in accounting control fraud (term created by William K. Black). An expanded version of this article is available at JK Market Insights (free subscription required).
Hybrid DB/DC plan getting play (Paula Aven Gladych, Benefits Pro) Retirment plans that are half defined benefit and half defined contribution split the risk between employer and employee.
What is the Real Price of Starting Another Cold War? (Franklin C. Spinney, Counterpunch) Hat tip to Roger Erickson. A unique deflator hides the real growth of military expenditures by the U.S.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Why Do Management Consultants – & Electorates – End Up Teaching – & Accepting – The Opposite Of What They Practice? (Roger Erickson, Open Operations Forum) Roger Erickson contributes to Global Economic Intersection.
As Walter Shewhart noted, 88 years ago, management consultants most often fail because they are hired BY executives, to help executives succeed, not BY aggregates, to make aggregates succeed.
Schwab’s Sonders: Today’s Market Is Best We’ll Ever See (Gil Weinreich, ThinkAdvisor)
MAINE COMPASS: Industrial wind power a catastrophe on every level (Mike Bond, Morning Sentinel) Hat tip to Naked Capitalism.
Much Of North Dakota’s Natural Gas Is Going Up In Flames (Jeff Brady, NPR) More than a quarter of North Dakota’s natural gas is being thrown away about $1 million a day.
Wright Patman’s Proposal to Fund Government Debt at Zero Interest Rates (Jan Kregel, Levy Economics Institute)
[The] debt can be financed at any rate the government desires without losing control over interest rates as a tool of monetary policy. The problem of financing the debt is not the issue. The question is whether the size of the deficit to be financed is compatible with the stable expansion of the economy.
Click on page image below to read the paper at levyinstitute.org.
Emerging Markets’ Victimhood Narrative (Dani Rodrik and Arvind Subramanian, Bloomberg) Dani Rodrik has contributed to Global Economic Intersection.
Having chosen to embrace financial globalization, emerging market countries then proceeded to follow economic policies that were bound to create volatility. The fragile five [Brazil, India, Indonesia, South Africa and Turkey] ran up large current account deficits; some of them also had high inflation and large fiscal deficits. These countries lapped up foreign funds instead of tightening lending regulations and imposing prudential controls.
China’s loan sharks circle in murky shadow bank waters (Jon Woo, Reuters)
China’s crackdown on risky lending has driven borrowers into an even darker place in their search for capital – underground banking.
The domain of loan sharks, underground lending is the least regulated area of China’s shadow banking, or non-banking, sector and for some it is seen as the biggest risk to China’s financial stability.
In defence of China’s shadow banks (David Keohane, FT Alphaville) Keohane reports that JPMorgan has calcluated the size of China’s shadow banking system and it doesn’t look very large.
HVS: Q4 2013 Homeownership and Vacancy Rates (Bill McBride, Calculated Risk) Home ownership rates are back to normal?
The “Impossible” But Inevitable Solution: Decentralization (Charles High Smith, Of Two Minds) Charles Hugh Smith contributes to Global Economic Intersection. This is a summary of an interview with Jeremy Leggett, author of The Energy of Nations. Leggett thinks that centralization is the ruination of our society. From his book:
“I’m now convinced that capitalism as we know it is torpedoing our prosperity, killing our economies, threatening our children with an unliveable world. It needs to be re-engineered root and branch.”
From the interview:
[T]he form of capitalism that’s evolved in the last few decades is basically suicidally dysfunctional and we have to turn our backs on it and introduce an alternative set of systems.
A Window Into the 1% (Justin Lahart, The Wall Street Journal) An NBER paper indicates that the top 1% have income cyclicity not mich different from the bottom 99%. (How Risky Are Recessions for Top Earners? by Fatih Guvennen, Grag Kaplan and Jae Song) Then why do the top earners save so much . And why do they save so much in highly volatile vehicles like stocks?
Is the Fed taper too little too late? (Paul Ziminsky, Futures Magazine) Is the third bubble of the past 15 years about to burst?
Old Mexico lives on (The Economist) Man-made borders are so artificial. See also GEI Opinion: The Nation of New Mexico.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Today our focus “behind the wall” is on emerging markets.
Rumor: Is Apple Developing Its Own Content Delivery Network? (Nathaniel Arnold, Wall St. Cheat Sheet) Will this be a move to reestablish Apple’s position against Google? What seemed unthinkable
It’s not just the NSA: local prosecutors can get your data without a warrant, too (Nashwa Gewaily, Privacy SOS) Hat tip to Roger Erickson.
“Climate change is slowly but steadily cooking the world’s oceans” (Fabius Maximus) Fabius Maximus has contributed to Global Economic Intersection. The author maintains that exagerations about data are a disservice to developing sound strategies to deal with cliamte change.
Today we have ten articles about emerging markets ‘behind the wall’.
Emerging marks (S.C., The Economist) “Marks” is a play on words (“markets”). The Economist reviews the question of “dollar imperialism” and the undesired effects of Federal Reserve actions on emerging markets.
Post-panic paranoia plotted (Dan McCrum, FT Alphaville)
Emerging Markets’ Unsettling Tune (Francesco Guerrera, MoneyBeat, The Wall Street Journal) Quote from Marc Chandler, global head currency strategist at Brown Brothers Harriman:
“This is a long-term unwinding of capital flows which will take two or three years to complete.”
Analysis – Emerging markets buffeted by bipolar world (Mike Dolan, Reuters)
“Ailing emerging markets are caught between a rock and a hard place – Washington and Beijing to be more precise.”
Emerging markets have much more to fear from China than from the U.S. taper. Quoting Crossborder Capital Managing Director Mike Howell, refering for a possible hard landing for China’s rebalancing:
“Emerging markets should be much more concerned about the ‘China taper’ than the Fed taper.”
Emerging markets risk repeating eurozone blunder of synchronized tightening (Ambrose Evans-Pritchard, The Telegraph) See GEI News. Emerging market countries as a group have had very loose monetary policy for years.
Capital Controls or Cooperation? (Frances Coppola, Pieria) Frances Coppola has contributed to Global Economic Intersection. The free flow of capital, long considered the ideal of a free market global system, may no longer be an unquestioned “truth”. Even the IMF has suggested that there may be times when capital controls are needed. What would help, according to the author, is the end of the U.S. “go it alone” monetary policy. Cooperation between central banks wiould be preferable to capital controls, according to Coppola.
It’s the hot money, stupid (Isabella Kaminska, FT Alphaville) The confusion of mistaking rent seeking “hot money” as legitimate foreign direct investment has instability. Kaminska doesn’t see this as destabilizing unless the U.S. (who created all the liquidity) “attempts to woo” the hot money back home.
End of an Era (Doug Nolan, The Prudent Bear) Nolan disagrees with the accolades Ben Bernanke has been receiving:
Chairman Bernanke has been widely lauded for his “courage”. Firemen entering burning buildings in search of trapped victims are brave. Our troops are courageous. I would see Bernanke and contemporary central bankers much more in terms of “daring.” And it was the Bernanke doctrine of inflationism that basically provided open checkbooks to central bankers (and governments) around the globe. It’s becoming a lot less thrilling now that the bills are starting to come due.
Emerging markets are badly served by ETFs (John Authers, Financial Times)
Is It 2007 Again? (5 Min. Forecast) Can an emerging market collapse take down the global economy?
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Behind the wall today are ten articles on the latest problems with Obamacare.
The lack of detailed information on this topic is indicated by the lack of tabular or graphic presentations in what is being published. This creates fertile ground for demagogs, which we have tried to avoid on this reading list.
UPDATE 2-Obamacare to cut work hours by equivalent of 2 million jobs -CBO (David Morgan and David Lawder, Reuters) See also GEI News.
CBO says ACA kills jobs — are you surprised? (Craig Davidson, Employee Benefit Adviser)
The hullabaloo about employers cutting the long-held standard 40-hour workweek to beat costs of the ACA has now hit the fan. According to the CBO, those lost work hours due to the ACA will amount to job losses equivalent to more than 2 million jobs by 2017.
Is Obamacare a Job-Killer After All? (David A. Ingraham, The Atlantic)
… be wary of overblown claims about what it means-Obamacare might be driving down employment, but the decrease is because American workers have reasons to stay home, not because their bosses have decided to cut them loose.
Hill Republicans Hammer Health Law’s ‘Risk Corridors’ (Julie Appleby and Mary Agnes Carey, Kaiser Health News) Republicans don’t like ACA provision that limits insurance company losses and limits their profits – a so-called “risk corrider”. It turns out that the governemnt actually profits by a net $8 billion from this provision while insurance companies do not have to add risk buffers to their premiums. See article at The Fiscal Times.
Humana ACA Enrollees Younger Than Expected (Jay Hancock, Kaiser Health News)
The ACA: Losing Jobs vs. Choosing Not to Work (FactCheck.org)
House Majority Leader Eric Cantor falsely claims that a new report confirms the long-held Republican belief that “millions of hardworking Americans will lose their jobs,” because of the Affordable Care Act. The nonpartisan Congressional Budget Office report says more than 2 million people will decide not to work, or will decide to work less, due to the law – not that they will “lose their jobs.”
Tim Scott’s Misleading Tax Claims (Factcheck.org)
Sen. Tim Scott claims that the Affordable Care Act’s taxes of $800 billion hit small businesses and families. But that’s misleading on several levels: It overlooks the tax credits available to both; much of the 10-year tax figure Scott cited affects individuals earning more than $200,000, a small fraction of all taxpayers; and there are few taxes directly affecting small businesses.
GOP Budget Revives ‘Obamacare’ Claims (FactCheck.org) Members of both parties accused of distortions. Those who want to keep score by political party can do that. Econintersect does not see that act does anything to move the discussion forward.
Obama Says Extent of Health Care Website Flaws Unexpected (Roger Runningen, HIX, Health Insurance Exchange) A position related to that of all the economists who couldn’t see the financial crisis coming. It’s like being able to know that you don’t know something quite basis and important.
CBO director: Obamacare will reduce unemployment (Greg Sargent, The Washington Post)
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
A ‘smoking gun’ on Ice Age megafauna extinctions (University of Copenhagen, Science Daily) Hat tip to Naked Capitalism. Climate change killed the mammoths, wooly rhinos, northern region horses and other large grazing animals because the former rich grazing flora was replaced by by low nutrient, woody plants 15,000 to 25,000 years ago.
Is your money safe at the bank? An economist says ‘no’ and withdraws his (Terry Burnham, PBS NewsHour) Hat tip to John O’Donnell.
JP Morgan nears commodities sale (Gregory Meyer, Camilla Hall, Neil Hume, Financial Times) JP Morgan will be exiting energy commodity markets.
Today ‘Behind the Wall’ features mortgage markets and real estate plus articles on macro economic models, gold/gold miners and several other topics.
The Anatomy of Mortgage Stress (Martin North, Digital Finance Analytics) Hat tip to Macro Business. Housing prises are rising smartly and employment has held fairoly steady, resulting in the lowest mortgage stress in Australia in a decade. (See graph below.) What could possibly go wrong? Martin North says rising unemployment and higher interest rates could put pressure on housing prices and drive mortgage stress back up.
Click on graph for larger image at Digital Finance Analytics.
More Men in Prime Working Ages Don’t Have Jobs (Mark Peters and David Wessel, The Wall Street Journal) The increasing percentage of men age 25-54 not in the labor force has been increasing at a constant rate for 50 years.
Annotations by John Lounsbury 06 February 2014.
EU Said to Weigh Extending Greek Loans to 50 Years (Nikos Chrysoloras and Rebecca Christie, Bloomberg) Extend and pretend? Why not extend to 100 years. Or perpetual securities? Question: Can Greece even pay the interest? maybe the solution would be perpetual debt at zero interest. Now there’s a thought.
The Coming Mortgage Delinquency Disaster (Keith Jurow, Advisor Perspectives dshort.com) Keuth Jurow contributes to Global Economic Intersection. A very small percentage of underwater homes complete foreclosure and are taken over by the bank. Even if short sales are taken into account, the conclusion is that many home owners are who are not making mortgage payments are still living in their house.
IBM eyes sale of semiconductor arm (Ed Hammond and Richard Waters, Financial Times) A few weeks after Big Blue sold its low-end server business to Lenovo there is a report that they want to unload the world’s most advanced semiconductor research, development and production business. Econintersect suggests that the next announcement will be a change in corporate name: International Business Services Corp.
Flip now if you plan to flip that house at all (Trey Garrison, Housing Wire) Warnings like this are often false alarms or come too late. Three years of data indicating that a trend is slowing.
Hedge Funds Preparing for $1 Trillion Property Bill: Mortgages (Sarah Mulholland, Bloomberg) Without the big influx of shadow banking loans there would be a big huge commercial real estate mortgage crash as banks are unwilling to roll loans over. See next article.
Zell Says Residential Real Estate Outlook ‘Benign’ (Bloomberg) Housing discussion starts at 8:22.
Beyond Keynes and the Classics. Outline of the Goods Side/Money Side Model of the Business Cycle and Macroeconomic Configurations (Antony P. Mueller, Social Scienc Research Network) Hat tip to John O’Donnell. This paper is simultaneously very clearly laid out and also quite a mess. It is a presentation of macro supply and demand curves in the formalism of quantity of money and quantity of goods, including the companion variables of velocity of money and price of goods. (The famous MV = PQ relationship). But in fact, except for the clarity of identification of money and production parameters, it contains no more information than the John Hicks IS/LM model.
The general macro supply and demand method suffers from its application to define economic equilibrium, the existence of which is much debated today, although not as widely as Econintersect would prefer.
So why is this paper on the reading list? For those who want to increase their understanding of the traditional equilibrium modeling of the past nearly 80 years this is perhaps the most easily understandable discussions yet written, especially for non-economists or those with only “ancient” undergraduate exposure to the subject.
The Next Big Trade to Unwind (Justin Smythe, The Next Big Trade) Gold miners have been outperformed by gold itself for the past eight years. Will this trend start to “unwind” the downtrend for $HUI:$GOLD ? Note that the last time the ratio got down to the 0.15 level (late 2000) the 12-year bull market for gold was about to start. Even though gold was in the start of a bull market, gold miners outperformed bullion for the next three years (2002-2004). A repeat performance would see both bullion and miners start a new multi-year bull run within the next year (or so) and the miners would be outperforming for the first few years.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Florida Professors Experimented With a Little Naked Short Selling (Matt Levine, Bloomberg) This is either a 60 second scan or a one hour deep study. Efforts in between are likely to be inefficient.
Coming to a Post Office Near You: Loans You Can Trust? (Elizabeth Warren, Huffington Post) In 2012 $89 billion was sucked out of poverty level households by private vampires. See also next article.
The Post Office Should Just Become a Bank (David Dayen, The New Republic) The 10% of poverty level income (on average) is spent on financial services such as payday loans and exorbitant credit card fees. An new report by the U.S. Inspector General suggests that could be reduced by 90% by establishing a the Post Office as a bank. See also preceding article.
5 Tax Rules for Investors (Allan S. Roth, Financial Planning)
India to Build World’s Largest Solar Power Plant (Sanjay Kumar, Nature, Scientific American) With a nominal capacity of 4,000 megawatts, comparable to that of four full-size nuclear reactors, the ‘ultra mega’ project will be more than ten times larger than any other solar project built so far, and it will spread over 77 square kilometers of land – greater than the island of Manhattan. This will triple the solar capacity in India.
The Prophet of No Profit (Matthew Yglesias, Slate) Is Jeff Bezoz the anti-capitalist?
Share of labor force projected to rise for people age 55 and over and fall for younger age groups (The Editor’s Desk, Bureau of Labor Statistics) By 2022 25% of the labor force will be 55 and older. The age group 16-24 will fall to 10% of the labor force, down from17% 30 years earlier.
January Employment ‘Little Changed’ – Rut-Roh (Steve Minter, The Global Manufacturer, Industry Week) Hat tip to Chad Moutray. This article points out that U.S. manufacturing employment had good momentum in the second half of 2013 and that continued with 21,000 more manufacturing jobs in January. For all of 2013 manufacturing employment grew by 195,000.
What’s the Game Changer for Gold? (Frank Holmes, U.S. Global Investors)
Mental Masturbation is Alive and Well in Versailles on the Potomac (Franklin C. Spinney, Counterpunch) Hat tip to Roger Erickson. Includes in full a 1989 article from The Washington Post by the same author.
… your Social Security and Medicare are poised to be sacrificed on the altar of the Military – Industrial – Congressional Complex in the name of fiscal prudence.
Knockout Punch for the Stock Market (Robert Isbitts, Sungarden Investment Research) Dow near 9,000 in 2014?
Why volcanoes are the energy source of the future (Cristopher Mims, Quartz)
Price Adjustments (Eric Shaefer, Advisor Perspectives dshort.com) Inflation is on a clear trend – down, i.e. disinflation.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
This Schwab Ad Epitomizes the Disingenuous Advice Industry: Buyer Beware (The Derivative Project) Another important article disclosing customer abuse that masquerades behind the FINRA protection racket. This time it is the dissection of a Charles Schwab IRA service that serves no other purpose than to skim money from client accounts. See recent GEI Opinion articles, review of Larry Doyle’s book In Bed With Wall Street and Mark Mensack’s Kangaroo Court expose.
Mosquitoes Carry Yet Another Tropical Disease toward the U.S. (Dina Fine Mason, Scientific American) Cases of chikungunya fever, native to Africa, have already spread across the Caribbean islands.
Twitter 2, JP Morgan, 0: Bythe Masters Withdraws After One Day Appointment as CFTC Advisor (Yves Smith, Naked Capitalism) A revolving door for unindicted banksters? Who woulda thunk?
‘Behind the Wall’ are four articles evaluating stock markets, three on China banking and credit plus three other articles.
World Markets Weekend Update: A Mixed Bag (Doug Short, Advisaor Perspectives dshort.com) Doug Short contributes to Global Economic Intersection. Did global markets turn a corner last week?
The 5% Solution Revisited (Brian Pretti, Financial Sense) Hat tip to John O’Donnell. See also 2010 article here.
[H]istory is strongly suggesting we use the 5% level below of the 50 day moving average of the S&P as a significant and meaningful risk management line in the sand. If we exceed this level to the downside for any sustainable period ahead, we’re all going to have to assume that something different is beginning to happen and that price risk is accelerating in perhaps an unacceptable manner. (2010 article)
Pretti suggests that the significance of the 5% rule warning may be returning. He says the failures of 2010, 2011 and 2012 coincided with Fed QE interventions which short-circuited corrections.
ICBC Offers Clients Option to Recoup Funds From Trust (Jun Luo, Bloomberg News) Last week Chinese investors were mysteriously bailed out of a product issued by China Credit Trust Co. that had offered returns that sounded too good to be true and ended up becoming delinquent in making payments. The name of the trust was “Credit Equals Gold”.
Jim Grant: The world Has Never Seen The likes of China’s Credit Frenzy (Mark Melin, Value Walk) Hat tip to John O’Donnell. Here is a picture of a credit bubble that cannot be denied.
The $15 trillion shadow over Chinese banks (Harry Evans, The Telegraph) Credit analyst Charlene Chu has been warning of China’s shadow banking credit bubble for years.
Corruption across EU ‘breathtaking’ – EU Commission (BBC)
5 Things To Ponder: Market Correction Over Or Just Starting (Lance Roberts, STA Wealth Management) Lance Roberts contributes to Global Economic Intersection.
U.S. Productivity Growth Has Taken a Dive (Edward C. Prescott and Lee E. Ohanian, The Wall Street Journal) Productivity has averaged about 1.1% annual growth since 2011, less than half the historical rate since 1948. The authors have some ideas on how to increase it, including deregulation, getting rid of bad effects from Obamacare and making it easier for immigrants to start businesses. Even improved education gets a mention.
The S&P 500, Dow and Nasdaq Since Their 2000 Highs (Doug Short, Advisor Perspectives dshort.com) As of the moment we still haven’t escaped from the bear market that started in 2000.
The Embattled Climate Scientist Who Fought Back (Jaisal Noor, The Real News) Hat tip to Yves Smith at Naked Capitalism. Read the comments at YouTube for a microcosm of the ridiculous discussion that accompanies this topic. See also What Does the American Public Want Done to Fight Climate Change?
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Retirement Strategy: Buying The Dips Worked Once Again (Alan Saltzman, Regarded Solutions, Seeking Alpha) So far, so good.
Jay Rockefeller bemoans ‘Appalachian myth,’ lax regulations at spill hearing (Erica Martinson, Politico) Hat tip to Roger Erickson.
“I came from outside of Appalachia, so sometimes I see Appalachia in ways that are different than others,” the West Virginia Democrat said, adding that the myth is “the idea that somehow God has it in his plan to make sure that industry is going to make life safe for them.”
The Debt Crisis in Puerto Rico: Why Is It Not More Newsworthy? (Robert E. Prasch, New Economic Perspectives) The financial crisis in Puerto Rico is far larger and affects many times as many people compared to Detroit. Yet Puerto Rico gets relatively little attention in the media.
Japan Should Sell Senkaku Islands (John West, Asian Century Institute) John West contributes to Global Economic Intersection. The possible value of oil and gas reserevs is not discussed in the article.
A Most Dangerous Era (John Mauldin, Thoughts from the Frontline) John Mauldin and Casey Mulligan have both contributed to Global Economic Intersection. Quotes from Casey Mulligan (from an interview article in The Wall Street Journal) and provides the following graph for marginal tax shift resulting from Obamacare for median incomes. Before you make your own interpretation here is a statement attributed to Mulligan by the WSJ:
Mr. Mulligan is uncomfortable speculating about whether the benefits of this shift outweigh the costs.
‘Job-lock’ and the Republican dilemma over Obamacare (Michael Hiltzik, Los Angeles Times) Oops! The CBO report says that Obamacare ends ‘job-lock’, the sutuation where the need for health insurance locks individuals into jobs they don’t want.
FACT CHECK: Anti-Obamacare chorus is off key (Associated Press, The Washington Post) The CBO report estimates that people will work less to get a bigger subsidy for their health insurance premium.
Econintersect suggests this may be nonsense. Consider a single person making $17,235. Federal income tax plus FICA will total $1,892 for 2013. If that person had health insurance in 2013 under the ACA example above, the premiums would add an expense of $689. Total of taxes plus health insurance would be $2,581.
What would have happened if this same individual had made $22,980 in 2013? Federal income tax plus FICA would total $3,034 and ACA health insurance would be $1,070 for a total of taxes plus health insurance of $4,104.
The cost of earning an additional $5,745 is $1,523 ($4,104 minus $$2,581). It is a ridiculous idea that many people will turn down the $4,060 after-tax net gain in income. If they do not pursue the additional income it will be for other reasons than they only get to keep 74% of it!
This is a study that should be carried out for more income ranges.
It’s housing that’s killing productivity (Unconventional Economist, Macro Business) Australia’s declining productivity growth is attributed to the country’s housing boom which is soaking up more and more resources in housing and rising land prices that add nothing productive to the economy. This is reflected in the rise of the finance and insurance sectors from 4% of GDP 40 years ago to 10% today. This is almost three times growth of all the rest of the economy.
Half the nation’s uninsured live in just 116 counties (Reid Wilson, The Washington Post) Less than 4% of the U.S. counties have more than 50% of those without health insurance.
More than 2 million people without insurance – 5 percent of the national total – live in Los Angeles County, the biggest pool of potential sign-ups, while more than a million uninsured live in Harris County, Tex., home of Houston. Nearly 30 percent of all Harris County residents are without insurance. Hundreds of thousands without insurance live in Cook County, Ill., Miami-Dade County, Fla., and Dallas County, Tex., the third, fourth and fifth-largest pools of uninsured.
Click on map for larger image at The Washington Post.
China Savers’ Penchant for Property Magnifies Bust Danger (Xiaoqing Pi, Bloomberg)
Chinese households’ concentration of wealth in real estate is magnifying the danger to the world’s second-largest economy of any property bust, as the nation grapples with the consequences of its record credit surge.
What’s the most bullshit-sounding-but-true fact you know? (Reddit) Hat tip to Barry Ritholtz, The Big Picture. Check this out if you’ve got some time to kill.
Stephen Roach explains why the US recovery is so anemic and yet Wall Street remains so optimistic (Arabian Money) Bloomberg TV has Roach’s thinking about the U.S. balance sheet recession. Click below and scroll to bottom of article for video.
The paradox of choice (Barry Schwartx, PBS NewsHour) Is too much choice not market optimizing but rather increasing inefficiency? The following PBS segment was recorded before Christmas:
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Growing Pains (Diane Coyle, aeon Magazine) Hat tip to Macro Business.
Measure a country purely in terms of its GDP and you neglect the wellbeing of its people. Yet can that be measured?
Edwin Sutherland: The 75th Anniversary of His Coining The Term White-Collar Crime (William K. Black, New Economic Perspectives) William K. Black contributes to Global Economic Intersection. Accounting is the weapon of choice for financial sector fraud. From Sutherland:
“White-collar criminality in business is expressed most frequently in the form of misrepresentation in financial statements of corporations….
These varied types of white-collar crimes in business and the professions consist principally of violation of delegated or implied trust, and many of them can be reduced to two categories: misrepresentation of asset values [and breaches of trust, e.g., usurpation of corporate opportunity].”
Fredericton man builds $300 solar furnace, decreases heating bill (CBC News New Brunswick) Hat tip to Naked Capitalism.
Randy Buchanan made heating unit from pop cans, aluminum eavestrough downspouts, old window.
Eurozone banks face £42bn ‘capital black hole’ (Kamal Ahmed, The Telegraph) This year’s stress tests may come to harsh verdict.
Will we see the end of snow? More importantly, when will we learn to see the world clearly? (Fabius maximus) Fabius Maximus contributes to Global Economic Intersection. Two telling graphs. One shows a trend to increasing extent of snow cioverage during the winter and to decreasing extent of snow cover in the spring. Looks like it correlates to the hypothesis of more extreme weather.
BOE Staff Said to Have Condoned Currency Traders’ Conduct (Suzi Ring, Gavin Finch and Liam Vaughan, Bloomberg) Hat tip to John O’Donnell. The Bank of England protected market fixing by the banks? How much cover does the Fed provide for U.S. banksters? How clean are other central banks? This is all part of the fabric of modern crony capitalism.
Wind and Gas Forcing Out Nuclear in Midwest (Nick Cunningham, OilPrice)
Taken together, wind and natural gas have driven electricity prices in the Midwest down 40% since 2008.
More on Puerto Rico Debt (David Kotok, The Big Picture) A follow-on the the Puerto Rico debt crisis article we had on yesterday’s list. (Different source and different details than yesterday.)
Why Australia’s economic debate doesn’t rate (Steve Keen, Business Spectator) Steve Keen contributes to Global Economic Intersection. This acerbic discussion probably deserves a news story (or a reposted article), but for now we put it here.
Stinking Corporate Revenues, Desperately Doctored Earnings-Per-Share (Wolf Richter, Testosterone Pit) With earnings growing much faster than revenues Econintersect suggests the analogy of failing to gain air speed by the end of the runway might be apt for 2014.
Business success, as defined by growth in revenues and net profits and not by financial engineering and artfully fabricated EPS, is crucial to the economy. But for a quarter of a century, corporate profits have been rising at a faster rate than GDP and are now “dangerously elevated by all reasonable measures,” writes Chris Brightman, Head of Investment Management at Research Affiliates. The phenomenon is the result of a spectacular reallocation of income from labor to capital. It repressed wages and created the biggest profit bubble ever. But pressures have reached a tipping point. Read…. The Unglamorous End of the Largest Corporate Profit Bubble in History.
High-Speed Trading Isn’t About Efficiency—It’s About Cheating (Matthew O’Brien, The Atlantic) High Frequency Trading (HFT) is a “socially useless” activity that serves only as a tax on traditional investors. The argument that HFT has lowered costs for everyon is bogus. Before 2005 HFT was less than 10% of trades. In 2009 it was 60-73% and in 2012 about 50%. The graph below suggests that rather than creating lower trading costs HFT has increased in volume by taking advantage of it.
The Super Bowl of War: Three Decades of Failure in Afghanistan (Robert Scheer, TruthDig) Hat tips to Rger Erickson and Chuck Spinney.
[W]e have come to sacrifice the basic rights of the individual enshrined in our Constitution in the name of finding what our last president, in his comic book lingo, termed the “evildoers,” without ever conceding that they were once, as President Reagan defined them, our “freedom fighters.”
Senator Warren Indicts Regulators ‘In Bed with Wall Street’ (Larry Doyle, Sense on Cents) See also GEI Opinion book review for “In Bed With Wall Street“. Sen. Warren charges that current enforcement system for financial crime encourages more crime.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Destitute Chilean Farmer Defeats Monsanto in Landmark Legal Victory (Sustainable Pulse) Hat tip to Roger Erickson. The farmer won the battle but lost the war. It seems that the settlement ordered by the court was far less than what he lost and his indebtedness.
Global-Warming Slowdown Due to Pacific Winds, Study Shows (Alex Morales, Bloomberg)
Monnet’s Brandy & Europe’s Fate (Strobe Talbott, The Brookings essay) Read also Roger Erickson’s comments at Open Operations Forum.
House Approves Higher Debt Limit Without Condition (Jonathan Weisman and Ashley Parker, The New York Times) For additional background background see House GOP leaders will bring ‘clean’ debt-ceiling bill up for vote Tuesday night (Robert Costa, Paul Kane and Ed O’Keefe, The Washington Post)
Weak emerging markets: business cycle update (Dirk Hof Schire, Fidelity Viewpoints) Lot’s of good graphs and discussion here but the graph below really caught our eye:
Birinyi Sees S&P 500 at 1,900 by July as Shorts Miss Drop (Nick Taborek and Callie Bost, Bloomberg) That’s up 5 1/4% from here.
The Prosecution That Isn’t Happening (James Kwak, The Baseline Scenario)
People keep asking why no senior executive has gone to jail for the misdeeds that produced the financial crisis-and cost the United States more than $6 trillion, or $50,000 per household, in lost economic output. The usual answers are that no one did anything wrong (oh, come on) or, more realistically, that it’s too hard to convict individuals in complex financial fraud cases.
At the same time, however, the U.S. Attorney’s office for the Southern District of New York-the district that includes Wall Street-has amassed a 79-0 record in insider trading cases…
Now, despite the 79-0 record (which includes guilty pleas), insider trading is not necessarily the easiest thing in the world to prove, especially in a criminal action. Insider trading is a violation of SEC Rule 10b-5 …
Now guess what? Rule 10b-5 is also one of the ways to go after someone for the kind of securities fraud that helped produce the financial crisis.
So the only difference is that insider trading is done by guys with less political power and influence than banksters who break the same fraud laws?
Hayek, Von Mises, And The Road To Government Paralysis (E.J. Dionne, Jr., Investors.com) Hat tip to Mark Thornton. This is about as superficial as one can get for such a discussion. Maybe it was written for Congress?
A Leading Chinese Economist Warns of a Difficult Year and ‘Dead’ Companies (Michael Forsythe, The New York Times)
Wu Jinglian, an 84-year-old scholar whose views often clash with those of the country’s leaders, told fellow economists at a forum in Beijing on Monday that the government had to deal with the rise of “dead companies” – state-owned enterprises with high debt levels that depended on subsidies to survive.
CBP’s Deficit Projections (James Hamilton, Econbrowser) James Hamilton contributes to Global Economic Intersection. The declining deficits are unsustainable according to Prof. Hamilton and must start rising again with current policies.
Toward a Simpler Palate (Adam Butler, Mike Philbrick and Rodrigo Gordillo, Gestalt U) Hat tip to Doug Short, Advisor Perspectives. Adam Butler and Mike Philbrick have contributed to Global Economic Intersection. Maturing from complex models toward “simplicity and coherence” is the authors’ formula.
Blankfein Says Emerging Markets Still Better Than in 1998 (Michael J. Moore, Bloomberg) Whew!!! Now we feel better.
Our Janet launches Australian dollar (House and Holes, Macro Business)
So, for today, taper isn’t tightening. It’s hot money risk on and yesterday’s EM crisis is today’s buying opportunity. Let’s see what happens as more taper actually transpires.
Assessing the health of US labor markets remains a challenge (Walter Kurtz, Sober Look)
Clearly the traditional unemployment rate benchmarks are inadequate. The “activity” measures such as participation are driven by multiple factors, some of which are not directly related to the health of the economy.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Pillow nudges sleepers when they begin to snore (Nick Lavars, gizmag) Will this save some marriages?
We live in the America Bush Jr created. Understand that before looking forward. (Fabius Maximus) Fabius Maximus contributes to Global Economic Intersection.
Passing years make it ever more clear that Bush Jr was one of the few transformative Presidents in US history, decisively changing the course of both domestic and foreign policy.
Click on picture for larger image at Fabius Maximus.
Economist Jason Furman is the wonkiest wonk in the White House (Zachary A. Goldfarb, The Washington Post) A former master juggler, unicycle rider and even an occasional fire-eater performance plus Matt Damon for a college roommate and an acquaintance with Ben Affleck as a teenager, what other credentials does one need to become a leading economist? Well maybe he doesn’t play the saxophone or clarinet as well as Alan Greenspan or have studied in the same Julliard class as Stan Getz, which might leave Furman deficient in the credentials department.
Today we have 12 articles listed and discussed ‘behind the wall’.
Scary 1929 market chart gains traction (MarketWatch, The Wall Street Journal, Mark Hurlbert) Here is a chart that shows an uncanny correlation. (But see also the next article following.)
Some Lines Say Maybe the Stock Market Will Go Down (Matt Levine, Bloomberg) Here is a chart that uses the same data that was used to create the chart in the previous article:
The difference? Levine chart uses the same relative vertical axis scale for both data sets. Something every analyst needs to do when determining what correlations might mean is to look not only at the correlation coefficient but also the relative magnitudes in the correlation. The Levine chart emphasizes the difference in the magnitudes by using the same vertical scale for both plots. Matthew Boesler and Andy Kierisz point out at Business Insider that they calculate a corresponding drop to 1929 occurring in 2014 would be only 24%, which comes in the category of a major correction. In 1929 the decline was 44%, a crash.
Price of Greatness: Cost of Hosting the Olympics Keeps Rising (WealthManagement.com) Here are the last five Winter Olympics plus the current games:
- 1994 Lillenhammer, Norway: $1.2 billion (highest estimate)
- 1988 Nagano, Japan: $11 billion ($10 billion in new infrastructure)
- 2002 Salt lake City, Utah, USA: $1.26 billion
- 2006 Turin, Italy: $4.1 billion (Massive corruption has been alleged)
- 2010 Vancouver, BC, Canada: $9.2 billion (highest estimate)
- 2014 Soshi, Russia: $50 billion (and counting)
Good slide show at WealthManagement.com.
The Fed is not to blame for turmoil in emerging markets (Eswar Prasad, Financial Times) See also the following article. Cornell professor Prasad argues that emerging market countries have done it to themselves by failing to let their currencies adjust freely. He says we shouldn’t blame the high liquidity currencies Japan, China and the U.S.
The Federal Reserve is causing heartburn for central bankers in emerging markets. Since 2008 the US central bank has been flooding capital markets with cheap money, forcing down yields on safe assets. Many investors scurried into places such as India and China in the hope of earning higher returns. Now that the Fed is reversing course, credit booms in emerging markets are turning to bust. This is especially painful for countries with current account deficits, which are reliant on foreign finance.
A World Unprepared, Again, for Rising Interest Rates (Eduardo Porter, The New York Times) Porter reviews a number of pronouncements from leading economists about the emerging market turmoil and ends up suggesting that the world still needs to learn to wear swim wear when going swimming. Econintersect would add… particularity at high tide. Read also immediately prior article.
$GOOG – Google (Last:1186.15) (Rick Ackerman, Rick’s Picks) Rick Ackerman has contributed to Global Economic Intersection. Ackerman is looking for marginal new highs before prices collapse significantly.
Click on chart for larger image.
A Walmart Worker Explains Why Walmart’s Customer Service Is Horrible (Hamilton Nolan, Gawker) Hat tip to Roger Erickson. A lengthy e-mail can be summarized into two things:
- Cost cutting on personel numbers, pay and hours;
- Perverse management bonus incentives.
But you should read the entire article to understand the context.
Falling Property Values Hint at Trouble on the Farm (Jesse Newman and Jacob Bunge, The Wall Street Journal) Falling corn prices are resulting in failed farm auctions as no bids are reaching minimum. Farmers’ balance sheets could suffer; financing of operations could dry up as questions of solvency arise. The start of a farm industry deflationary spiral? Maybe a premature worry but not something that can be dismissed out of hand.
Japan’s current account firmly in the red (Walter Kurtz, Sober Look) The adjusted current account for Japan has produced four months in a row with a negative current account balance , something that has never happened before. The entire year year 2013 has the lowest current account balance surplus on record. Econintersect note: We attribute this to the loss of the domestic nuclear power industry (jacking up energy imports) combined with the dramatic decline in the value of the yen.
China Trust Assets Surge to $1.8 Trillion Amid Default Risks (Jun Luo, Bloomberg) They chase yield in China, too. And sometimes yield chasers have a Wile E. Coyote moment (unless there is a mysterious bailout as happened last month).
How Dodd-Frank Doubles Down on ‘Too Big to Fail’ (Charles W. Calomoris and Allan H. Meltzer, The Wall Street Journal) In January Elizabeth Warren asked a bipartisan panel of four economists (including one of the authors here) if the Dodd-Frank Act would end TBTF. All answered ‘No’.
Dodd-Frankinstitutionalizes too-big-to-fail protection by explicitly permitting bailouts via a “resolution authority” provision at the discretion of government authorities, financed by taxes on surviving banks-and by taxpayers should these bank taxes be insufficient. That provision should be repealed and replaced by clear rules that can’t be gamed by bank managers.
The Best Government Money Can Buy (Franklin C. Spinney, CounterPunch) Hat tip to Roger Erickson. If you have missed Chuck Spinney when we had him on the “reading list” before don’t miss him this time. If you read him previously, read again. This is well documented investigative journalism.
The Treas Financial Manual already tells the Fed how to clear checks when there’s no money in the account. (Stephanie Kelton, Twitter) Hat tip to Roger Erickson. Explain again how is it that the U.S. can run out of money?
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Giant Laser Complex Makes Fusion Advance, Finally (Kenneth Chang and William J. Broad, The New York Times) Successful control of a nuclear fusion reaction could effectively end the energy limitations of the planet earth. It may sound like a perpetual motion machine, but it is theoretically possible to get more energy out of a thermonuclear fusion reaction than is put in to start it. That is because “trapped energy” within two hydrogen atoms is released when they fuse to produce a new helium atom. This is the enormous energy which has been demonstrated for the last 60 years in enormously destructive hydrogen bombs. The NYT article reports on a paper in Nature with 22 authors from the Lawrence Livermore (CA) and Los Alamos (NM) National Laboratories. The team has obtained more energy from a laser powered hydrogen fusion reaction than was put in, apparently establishing the first controlled thermonuclear fusion. There is still a long way to go for practicality, however. They got more power from the reaction than reached the hydrogen atoms invovled, but only 1% of the laser’s energy actually got to the reaction site, leaving a needed improvement of a factor of 100 before a useful energy production process is realized.
Stockman – $500 Trillion Derivative Bomb Threatens The World (King World News) Hat tip to Michael Welyke, Newsana) The former Budget director for Ronald Reagan warns that derivatives, especially interest rate swaps (which are the major part of the total), have the potential to blow up the global financial system.
The Empathy of Self-Interest (Wendy McElroy, The Daily Bell) Hat tip to John O’Donnell. Wendy McElroy argues (correctly in Econintersect‘s opinion) that progress comes from the pursuit of self-interest. But she also argues (incorrectly in our opinion) that “any attempt to impose central planning runs counter to social harmony“. This would appear to rule out the coordination of the commons and to deny the possiblility of return on coordination, where the total of a community is greater than the sum of the individual parts. And another point: For McElroy’s narrow definition, which depends on the “Theory of Moral Sentiments” and the “Social Nature of Man“, to produce a maximization of progress shows naivite in our our opinion. We have read that 1-2% of humans are sociopaths and as many as 10% in high positions in finance suffer from that character flaw. Such people do not seem to be included in McElroy’s view of the human population. How many sociopaths does it take to destroy the harmony of a village?
FINRA OKs Plans on BrokerCheck Link, Expungement and Arbitrator Definition (Melanie Waddell, ThinkAdvisor) The arbitrator definition is directed at one of the most serious abuses perpetrated by FINRA. See here and here. The new proposal would remove eligibility to exclude for classification as a public arbitrtaor anyone who had ever worked in the financial industry “for any duration“.
House passes ‘clean’ debt-ceiling bill, ending two-week showdown (Paul Kane, Robert Costa and Ed O’Keefe, The Washington Post) Econintersect has done a quick calculation of the national debt increases under each president in the graph below, compounded annually and rounded to the nearest whole number:
- Reagan/Bush I …… 9%
- Clinton ……………… 5%
- Bush II ……………… 8%
- Obama ……………… 9%
Possible conclusions:
- Obama is the new Reagan?
- Clinton is the budgetary hero?
- Each regime was trapped into a deficit path created by the previous administration?
- Presidents don’t have first order control over deficits?
- These comparisons are total political palaver nonsense?
- None of the above?
- All of the above?
The Vampire Squid Strikes Again: The Mega Banks’ Most Devious Scam Yet (Matt Taibbi, Rolling Stone) Hat tip to Roger Erickson. The latest theme addressed by Taibbi is the banks take-over of everything. And it has come to pass through obscure lines in legislation that no one thought about (except possibly incipient vampire squids?) at the time the act was passed and signed into law.
Banks, however, were never really regulated under those laws [laws like Sherman and Clayton anti-trust acts]. Only the Great Depression and years of brutal legislative trench warfare finally brought them to heel under the same kinds of anti-trust concepts that stopped the robber barons, through acts like Glass-Steagall and the Bank Holding Company Act of 1956. Then, with a few throwaway lines in a 1999 law [Financial Services Modernization Act of 1999 aka Gramm-Leach-Bliley Act] that nobody ever heard of until now, that whole struggle went up in smoke, and here we are, in Hobbes’ jungle, waiting for the next fully legal catastrophe to unfold.
U.K. Warns Scotland: Vote To Secede, Lose Common Currency (Krishnadev Calamur, NPR) Chancellor George Osborne has announced that if Scotland votes for independence from the UK later this years they will also divorce the pound sterling. Scottish leaders had indicated they would keep the British currency if the civil separation was approved. Econintersect notes that what the Scots wanted to do would create a miniature version of the current euro zone fiasco.
Spinning wheels and shaky deals (Steve Keen, Business Spectator) Steve Keen has contributed to Global Economic Intersection. Toyota has closed its Australian auto production plant leaving the country with no domestic auto manufacturing. Keen attributes the outcome to poor government policy, which was mislead by common economic textbook logic, which happens to be wrong. (Econintersect: Quelle surprise!) The blind spot was the assumption that the classical model that fixed costs are just that, fixed, and the marginal cost of production is determined by the variable costs (labor and materials) – commonly called the marginal costs – which start to rise per unit once the fixed capital is fully utilized and additional labor and material costs are incurred which cannot increase production. This leads to some optimal level of production that minimizes cost per unit.
In reality, Keen points out, fixed costs are not actually fixed but are normally scaled with increased production as marginal costs are added. This produces a graphic much different from the one above. In the real world, the more you make the lower the unit cost.
Read the article – Keen has a simple illustrative example that explains the classical conceptual blind spot. And a complete description of all the central planning failures that went into the sad outcome just realized. [For examples of the fixed capital blind spot see here, here and here.] As with many teaching examples, the logic is impeccable. It’s the assumption that the conditions represent reality that are off base.
Who Anticipated the Great Depression? Gustav Cassel versus Keynes and Hayek on the Interwar Gold Standard (Douglas A. Irwin, Journal of Money, Banking and Credit) Hat tip to James Hamilton, Econobrowser. Forget the Keynes-Hayek debate about The Great Depression, Irwin argues that both were out-thought and out-analyzed by an economist named Gustav Cassel who did a much better job of anticipating how the 1920s and 1930s would unfold in advance and gave a reasoned analysis of how to correct for the mistakes that he foresaw. This is a follow-on to the paper posted at GEI Analysis in 2010 which argued that France’s hoarding of gold amounted to the destruction of global currency and triggered massive deflation starting in the late 1920s and extending into the early 1930s. The following two graphs are from the 2010 article.
Chinese History X (Peter Cai, China Spectator) Virtually every person in China today under the age of 70 was taught in school the official government line that the Chinese Communist Party was the primary force in China contributing to the defeat of Japan in World War II. This contrived version of history ignores the deaths of 3.2 million Chinese Nationalist soldiers (including 210 generals) incurred during the bulk of the resistance to the Japanese occupation of China. Now a groundswell in China is pushing for recognition of the Nationalist war heroes. Less than a year ago the government finally issued an order recognizing the veteran status of former Nationalist army soldiers. But little more has yet happened beyond that.
Money makes people right-wing and inegalitarian (Andrew J. Oswald and Nattavudh, Voxeu) Interesting experimental result but a more interesting factor would be to understand why. Can it be as simple as poor people want rich people’s money and rich people don’t want them to have it? What then separates humans from other animals?
China Banks’ Bad Loans Rise to Highest Since Financial Crisis (Jun Luo, Bloomberg) Credit management issues are the biggest challenge for the rebalancing effort in China. See also the Reuters story which follows.
Six China shadow banks threatened with default over coal firm exposure: paper (Gabriel Wildau, Reuters) Not only are there $824.6 million in loans from firms in the now infamous “trust firm” category, but another failed entity, Jilin Trust, has wealthy investors looking to seek repayment from government owned China Construction Bank. It is a question of implied government backing of non-government agency papaer. Americans, does it sound like Fannie and Freddie?
The Dollar and the Damage Done (Barry Eichengreen, Project Syndicate) Barry Eichengreen has contributed to Global Economic Intersection. While it is unfair to dump all the emerging markte turmoil blame on the Fed, Eichengreen says that Bernanke’s crowd cannot be held entirely blameless either. One way to mitigate damage that might lie ahead would be for the U.S. to increase monetary support for the IMF, he says.
The EyeOpener Report- Corporatocracy: How the Corporate Welfare State Divides & Conquers (Sibel Edmonds, Boiling Frog Post)
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
Today ‘behind the wall is focussed on investing articles.
Mobile phone market hits ‘the great moderation’ (Patrick Seitz, Investors.com) Hat tip to Roger Erickson. For some reason, this causes Roger to wonder:
When chocolate sales for valentines, and card sales for Mother’s day actually decline, will it be the final nail in the coffin of The Century of The Self? Will we return to such organizations as the Society for the Prevention of Useless Giving?
California exchange pulls group site (Allison Bell, Life Health Pro) Paper beats silicon. (Paper covers rock.)
Officials at Covered California said they are shutting down their Small Business Health Options Program website while they redesign it. The SHOP division has been taking applications on paper, and it will continue to do so while the exchange is overhauling the SHOP site.
Is This Goldman Sachs’ Most Dangerous Trade Yet? (Shah Gilani, Wall Street Insights & Indictments) Shah Gilani has contributed to Global Economic Intersection. Control of commodity uranium by banks (in this case Goldman Sachs and Deutsche Bank) is a security threat to nations, according to Gilani. See also the new Matt Taibbi article discussed ‘behind the wall’ yesterday.
Today all 12 articles ‘behind the wall’ are related to investing.
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20 Signs That The Global Economic Crisis Is Starting To Catch Fire (Michael Snyder, The Economic Collapse) Hat tip to Jimmy T. LeBaume (FlyoverPress). Very good summary list of problems, including a couple that have been discussed in the past week ‘behind the wall’.
Admit it: You were wondering, why hold bonds? (Jeff Hussey, Russell Blog) Short answer: diversification. Long answer? Follow the link and read the post.
Double Trouble (John Hussman, Hussman Funds) Rarely do all the models tracked by Hussman have agreement about prospective stock market returns as they do right now. And rarely have the 10-year projected returns been this low: 2.7% annual returns for the next ten years.
A Secular Bull Market? (Juliet Ellis, Intentional Investing Forum)
Five years from now, I believe we will look back and see that 2014 was part of the early stages of a multi-year secular bull market for US equities, characterized by rising stock prices with only short, intervening market corrections.
Contrarian Value Investing in a Liquidity-Driven Environment (Francois Sicart, Tocqueville Asset Management, Advisor Perspectives) Among many market metrics discussed in this article, one caught our attention particularly. The agreement between PE (Price/Earnings) ratios has rarely been this tight. In the past this extreme behavior has preceeded (by a couple of years) a major market downturn. The following graph from the article has been annotated by Econintersect.
Colonialism’s Enduring Dividends (Bhaskar Chakravorti, Foreign Affairs) Colonial powers of past centuries still have an economic advantage interacting with former colonies. Free registration is required to read complete article.
Emerging Markets could get cheaper: but they’re cheap (James Mackintosh, FT Long Short) The author asks:
Are emerging markets a bargain or yet another proverbial falling knife?
The author opines that the dollar holds the key for emerging markets. If the dollar fails to advance emerging arkets may already be a bargain. Many good graphics in this article, the following one of them.
CHART OF THE DAY: Investors Are Spilling Out Of The Emerging Markets At A Record-Setting Rate (Sam Ro, Business Insider) The secret to making a killing? Grabbing a falling knife just after it stops dropping.
Are big gains coming for Big Oil? (Jonathan Yates, TheStreet.com) Oil stocks are down for the year but Yates says rally has started. And he is bullish long term as well.
Bullish Possibilities (Dominic Cimino, Preferred Planning Concepts, Advisor Perspectives) Cimino sites the bullishness of the Dow Jones Transports (shown below) and the need for a signal from the $SOX (Philadelphia Semiconductor Index – not shown here) to break the twelve-year resistance level that it now bumps up against. These are two metrics he is watching for confirmation of bullishess.
Click on chart for larger image at Advisor Perspectives dshort.com.
Why I Love Amazon.com but Won’t Buy It’s Stock (Vitaliy Katsenelson, Institutional Investor) Vitaliy explains why Amazon.com is so great for consumers but doesn’t say why he won’t own the stock.
These Gold Charts Will Make Your Heart Beat Faster (Frank Holmes, U.S. Global Investors) Frank Holmers has contributed to Global Economic Intersection. Gold has pushed above its 200-day moving average for the first time in about a year.
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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 of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number accepted.
We Need Real Competition, Not a Cable-Internet Monopoly (John Cassidy, The New Yorker) See also by the same author: Does Comcast Own Washington? And be careful what you think of doing to try to stay ahead: Ready to break the internet? Netflix’s “House of Cards” premiere is a big test of how video gets to you (Zachary Seward, Quartz)
The Wolf of Sesame Street: Revealing the secret corruption inside PBS’s news division (David Sirota, Pando Daily) Hat tip to Barry Ritholtz, The Big Picture) Will there be a name change to “Propaganda” Broadcasting System? Or “Payola ” Broadcasting System?
The Fed and Conspiracies (Robert Murphy, Free Advice) Hat tip to Mark Thornton. Murphy endorses the Murray Rothbard assessment that the Fed is “the product of insidious insiders“.
Today there are eleven articles discussed ‘behind the wall’.
Why Quantitative Easing Didn’t Work (Gary Halbert, Advisor Perspectives) Halbert’s bottom line is that QE saved the financial system but didn’t impact Main Street sufficiently to restore economic activity. Econintersect doesn’t see any insight here that hasn’t been repeatedly expressed but it doesn’t hurt to keep repeating it because there is not much evidence that the obvious is recognized (at least publicly) by many in the economic main stream or in positions of political power.
What Does “Keynesian” Mean? (Uneasy Money) Hat tip to Barry Ritholtz, Bloomberg. This is worth a careful read inspite of containing a few quick, cheap (but accurate) shots, such as the following:
[W]ithin the mainstream, there is no basic difference in how to create a macroeconomic model. The difference is just in how to tweak the model in order to derive the desired policy implication.
Obamacare Taxes and Why They May Be Problematic (Meghan Foley, Wall St. Cheat Sheet) See also GEI Opinion.
Recovery Occurring Almost Exclusively Among the Wealthy (Gaius Publius, Naked Capitalism) Maybe the government will have to provide all but the top earners underwater breathing devices?
Five things that cost more than space exploration (Rachel Feltman, Quartz) We would like to see “Five things that cost more than Social Security and Medicare”. Maybe we’ll have to research that ourselves?
Next Frontiers for Lean (Ewan Duncan and Ron Ritter, McKinsey Quarterly) Lean-production techniques have been revolutionizing operations for 50 years with advances particulary occurring in manufacturing and distribution logistics. Advances in technology, psychology, and analytics may make the next 50 even more exciting as many service activities will join the parade.
How To Make Higher Education Free Without New Taxes Or More Government Spending (Yves Smith, Naked Capitalism) One factoid presented: as little as 10% of university budgets go directly to educating students.
Claiming Social Security: A Timeline for Clients (Mark Caner, ThinkAdvisor) A straightforward summary of what you need to know about taking Social Security benefits.
Dividends: It Was the Best of Times. It Was … (Political Calculations)
Click on graph for larger image at Political Calculations.
Bitcoin: It’s the platform, not the currency, stupid! (Sander Duivestein and Patrick Savalle, TNW Blog) We are having trouble wrapping our minds around this after one quick reading. It’s long and its filled with sweeping generalities plus specifics that we aren’t grasping yet. Maybe one (or more) of our bright readers will be able to net some of this out for us?
There’s Rich, Then There’s the 0.01% (Barry Ritholtz, Bloomberg)
Mathematically speaking, the difference between poor and rich is much smaller than the chasm separating the well-off from the stupendously wealthy.