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- Marc to Market: Thoughts on the Week Ahead: Pitfalls around the Corner
If you haven't read Marc Chandler and if you want plenty to contemplate on the current status of global economics and finance, here's an opportunity.
In recent weeks we have identified four main elements to the investment climate: Speculation about Fed tapering the cyclical recovery in Europe, the stabilization of China and a resumption of capital exports from Japan.
Marc goes on to discuss those and many, many other points to watch around the world and at home (US) — very impressive, highly recommended.
Read the source article … http://www.marctomarket.com/2013/08/thou ghts-on-week-ahead-pitfalls-around.html
- Econbrowser: The geography of success
Weak U.S. economic growth continues to be discouraging. But it's worth taking a look at a few places where things going well for America.
There has been a remarkable resurgence in U.S. oil production over the last few years, with levels now back up to where they were in 1992, though still 28% below the peak reached in 1970.
People go where the jobs are and need housing. Since oil and gas are boom and bust, they often would rather rent. Housing construction (also construction jobs) will follow the oil and gas workers. Buying the land and building the housing to own as a landlord can present problems down the road if the oil or gas reserves will only last a short time. The landlord will end up being stuck without tenants and housing he or she can't sell at a profit. In such cases, especially where jobs will last only a couple of years or so, renting out mobile homes might make more sense, as they can often be relocated to where the jobs go. Be sure to pencil in a sinking fund to cover future anticipated/timed moving costs.
Read the source article … http://www.econbrowser.com/archives/2013 /08/the_geography_o_1.html
- Why the Fed's bond-buying may not have helped the economy
When the Fed buys billions of mortgage bonds, the pair finds, other investors who want to hold some amount of the securities have to pay more for them, pushing down the rates on the bonds, and by extension lowering the costs for homebuyers. By the researchers' math, the Fed's first round of QE, back in 2009, lowered 30-year mortage-backed securities yields by 1.07 percentage points; its 2011 efforts to buy more of the securities lowered them 0.23 percent; and the QE3 policy now underway contributed another 0.16 percent.
"The scarcity . . . generates incentives for banks to originate more loans and relieve the shortage of the current coupon MBS," they write.
They find similar impacts in terms of lower rates for Treaury [sic] bonds, but they argue that, in contrast to MBS, these haven't helped the real economy.
We didn't read the cited paper; but, concerning the Washington Post article (quoted), Treasurys are how the government borrows.
The private sector has been flooded with debt and could not, and still cannot, possibly spend enough to keep the economy going. It has been left to the government (with a much small overall debt) to pick up the slack. Since generally raising taxes during a recession is counter-productive and since raising taxes only on the richest people still would not have been enough and would have been fought against by them tooth and nail, it has been left to the government to borrow, to run larger deficits for a while, to keep the economy from slipping into worse than the Great Depression. Also, there were not enough other buyers to soak up all the Treasurys.
This is common knowledge amongst most top-tier economist s, though there are Austrian School advocates who are nevertheless against such governmental spending.
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