389 (2 October 2019)

Welcome!  The articles below caught my attention this week.  What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  Article titles preceded by [SR] require a subscription.

(27 September 2019)The Fall of Juice and the Rise of Fresh FruitBloomberg.com

——–“Americans consumed 5.2 gallons of fruit juice per capita in 2017 . . . this is the lowest fruit juice number since the USDA began tracking its consumption in 1970.  The rise and fall of orange juice is at the heart of this story.  Consumption took off in the U.S. in the late 1940s, after USDA scientists figured out how to make frozen orange-juice concentrate that could be reconstituted into a palatable beverage. . . . For decades, OJ was successfully marketed as the healthy, vitamin-rich way to start the day.  Then, around the beginning of the new millennium, it got caught up in a turn against sugar that swept through medicine and popular discourse.  Blame for rising obesity and heart disease rates shifted from fats and meats to sugars and carbs.  This anti-sugar turn stripped orange juice of its reputation as a health food. . . . Whole oranges and other fruits are still considered healthy, though, and consumption of fresh fruit has been rising.”

********Although orange juice is the feature of the article, grapefruit consumption also figures prominently.  There has been a “spectacular decline in grapefruit consumption, from a peak of 9 pounds per capita in 1976 to just 1.9 in 2017, [that] appears to have been caused mainly by a collision between older Americans’ breakfast preferences and their prescriptions.  Grapefruit and grapefruit juice . . . can interact in dangerous ways with medications for high cholesterol, high blood pressure and a variety of other ailments likely to afflict the elderly.”  Also of note is the dramatic rise, and recent tapering, of high fructose corn syrup as a sweetener, an expansion that mostly came at the expense of sugar.

********The article concludes noting that things can change, as dietary recommendations are seemingly driven by shifting research conclusions.  However, the “U.S. may truly have passed peak fruit juice and peak caloric sweetener.  That’s probably a good thing.”

(27 September 2019) [SR]GM’s Electric Ambitions Rattle Below the Surface of the UAW StrikeThe Wall Street Journal

——–“Even as General Motors Co. and the United Auto Workers union come closer to resolving their biggest work confrontation in decades, a larger, unsettled issue is the inevitable pain for U.S. workers from GM’s long-range bet on electric cars.  GM’s need to free up cash to invest in electrics has led it to make deep cuts in its core business, including its decision to close four U.S. factories—a main point of friction in the longest walkout at GM since 1970.  For the UAW, there’s no avoiding the harsh reality of a wider transition taking hold across the auto industry: Building electric vehicles requires far fewer workers, making it near-impossible to avoid job losses and wage cuts.  In addition, fewer components are needed, and many of them are imported.”

********As the article notes, “Union officials worry that GM and its two Detroit rivals—Ford Motor Co. and Fiat Chrysler Automobiles NV—could over time outsource much of the mechanical guts of an electric car to nonunion suppliers.”  It seems clear that a shift to electric vehicles from conventional gas- and diesel-powered vehicles, will result in a substantial decrease in the demand for auto workers, a change exacerbated by the possibility of an increased use of nonunion laborers.

(27 September 2019)Climate Risk in the Housing Market Has Echoes of Subprime Crisis, Study FindsThe New York Times

——–“Banks are shielding themselves from climate change at taxpayers’ expense by shifting riskier mortgages—such as those in coastal areas—off their books and over to the federal government, new research suggests.”  Researchers Amine Ouazad and Matthew Kahn “examined the behavior of mortgage lenders in areas hit by hurricanes between 2004 and 2012 . . . They found that, after those hurricanes, lenders increased by almost 10 percent the share of those mortgages that they sold to Fannie Mae and Freddie Mac, government-sponsored enterprises whose debts are backed by taxpayers.”  Ouazad and Kahn “found that the odds of an eventual foreclosure rise by 3.6 percentage points for a mortgage originated in the first after a hurricane, and by 4.9 percentage points for a mortgage originated in the third year. . . . [But, the] regulations governing Fannie and Freddie do not let them factor the added risk from natural disasters into their pricing, which means banks and other lenders can offload mortgages in vulnerable areas without financial penalty.  The increases the incentive for banks to make the loans and them move them off their books, the authors said.”

********Clearly, a well-functioning market would account for the risk differentials of different properties.  Ouazad and Kahn seem to have identified as serious issue.  You can read their paper, “Mortgage Finance in the Face of Rising Climate Risk,” here.

(30 September 2019)The World’s Most-Used Cryptocurrency Isn’t BitcoinBloomberg.com

********This article caught my attention simply because Bitcoin is the most talked about cryptocurrency.  So, if not Bitcoin, then what?  Tether.  Although Bitcoin “accounts for about 70% of all the digital-asset world’s market value, . . . data from CoinMarketCap.com show that the token with the highest daily and monthly trading volume is Tether . . . With Tether’s monthly trading volume about 18% higher than that of Bitcoin, it’s arguably the most important coin in the crypto ecosystem.”  Tether is a stablecoin, “a category of tokens that seek to avoid price fluctuations, often through pegs or reserves.”

********Facebook’s proposed cryptocurrency, Libra, is supposed to be a stablecoin, like Tether; Bitcoin is not a stablecoin.  The article contains a list of the top 10 cryptocurrencies by daily trading volume, which may be of interest.   For those interested in the latest news on cryptocurrencies, Bloomberg devotes a continuing part of its site to them under the heading Crypto.

(30 September 2019) [SR]Egg Glut Deepens Problems in Farm EconomyThe Wall Street Journal

——–“Too many hens laying too many eggs are pushing down prices for the consumer staple, hurting sales at producers such as Cal-Maine Food Inc. and adding more stress to the U.S. farm economy. . . . The egg glut is adding to pressure on a US. agricultural economy in turmoil. . . . The trade war has sapped demand for soybeans and other crops from China, a top customer, after years of high production.  That has led to a bounty of stockpiled grain that is contributing to the expansion of U.S. livestock herds and flocks. . . . Retailers have been quick to pass the drop in egg prices on to customers, eager to make more sales of a consumer staple. . . . That is pushing up egg sales by volume.”  For Cal-Maine, the fall in egg prices have led to a substantial decline in revenues, it reported “sales of $241.2 million for the quarter, down 29% compared with a year earlier.”  This led to a reported “loss of $45.8 million, . . . compared with a profit of $12.4 million” a year earlier.

********Looking at the numbers, it appears that the demand for eggs is inelastic as an increase in supply led to a fall in revenue from egg sales. 

(30 September 2019)What Kind of Problem Is Climate Change?The New York Times

********Alex Rosenberg, who previously published under the name of Alexander Rosenberg, is a philosophy professor at Duke University, who has long written on matters touching upon economics.  He is one of the contributing faculty of the joint Duke-UNC Philosophy, Politics, and Economics program.  In this article Rosenberg take a look at the climate change problem from the PPE perspective.  There are some connections to be seen between PPE and the invisible forces.  Clearly politics and economics are shared by both.  However, whereas PPE has philosophy as “the third leg,” the invisible forces has culture/history as its third leg.  In either case, I sense, what the third leg is “bringing to the table” is an emphasis on ethics and mores.

(1 October 2019)India Isn’t Letting a Single Onion Leave the CountryThe New York Times

——–“Truckloads of onions are being turned back at the Indian border.  Officials are threatening raids to prevent onion smuggling.  India’s neighbors, reliant on hundreds of millions of pounds of the crop, are reeling from the news: Not a single onion can leave India.  Hit first by drought and then by monsoon rains, India suffered an onion shortage that nearly tripled the price in recent months, edging close to a third rail of politics in many countries: the national diet.  In India, onions—so important to the cuisine all around the country and across South Asia—are central to foreign policy and domestic harmony alike.  Indian governments have been brought down over inflated food prices before.”  Prime Minister Narendra Modi “decided to tackle the onion shortage this week.  Not only did his administration ban onion exports, it is also cracking down on onion hoarding.  Retailers and wholesalers now have strict limits on what they can keep on hand.  They have to sell the rest.”

********An engrossing look at the importance of onions in Indian cuisines.  It evokes Marie Antoinette’s infamous “Let them eat cake” of 1789 and Gandhi’s salt march of 1930.  No doubt the salt march is never too far below the consciousness of Indian politicians.   All this led me to think about the relationship between food and revolution, not a new idea, to be sure, but I did wonder if someone had written something systematic and historical on the subject.  I didn’t find a book but would be glad to have someone direct me to one.  Two pieces that address the idea are: (1) “A Revolution Marches on Its StomachSlate and (2) “The people are hungry: The link between food and revolutionGrist.

(1 October 2019) [SR]The Seven-Year Auto Loan: America’s Middle Class Can’t Afford Its CarsThe Wall Street Journal

——–“Walk into an auto dealership these days and you might walk out with a seven-year car loan. . . . Car loans that are increasingly stretched out are a pronounced sign that some American middle class buyers can’t afford a middle-class lifestyle. . . . A lending machine has revved up in response, making it possible for more Americans to procure a vehicle by spreading the debt over longer periods.  Wall Street investors snap up these loans, which are bundled into bonds.  Dealers now make more money on the loans their customers take than on the cars they sell.”

********The article provides a graph that shows that the percentage of car loans that are 73-84 months have grown from approximately 10% in 2011 to 35% in 2019.  As the article points out, incomes have grown sluggishly in recent years, but “car prices have grown rapidly.  New technological and safety features, such as larger and more sophisticated multimedia displays, have made even the most basic cars more expensive.  U.S. consumers have also veered toward pricier rides . . . The result is that consumers are seeking bigger loans than ever to purchase a car.”

May you have a good week!                                


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