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- Economic Principals – Blog Archive – Beckoning Frontiers
David Warsh writes an interesting article on Marriner Eccles, Fed Chair of 1934-51.
When the Crash came, in 1929, Eccles began a search for remedies that led, among other places, to the underconsumptionist views of William Foster and Waddill Catchings, a middlebrow anticipation of Keynesian economics described in Road to Plenty in 1928, which Eccles supplemented with "naked eye" observations of his own. In 1932 the tycoon startled the Utah Banker's Association by proclaiming the gospel of compensatory finance:
The theory of hard work and thrift as a means of pulling us out of the depression is unsound economically. True hard work means more production but thrift and economy mean less consumption Now reconcile those two forces, will you?… There is only one agency… that can turn the cycle upward and that is the government. The government… must so regulate… the economic structure as to give men who are able, willing, and worthy to work the opportunity to work, and to guarantee to them sustenance for their families and protection against want and destitution.
Marriner Eccles was right. It's called the Paradox of Thrift.
What we always need in a deep recession or in a depression are jobs whether privately or publicly financed. We need low taxes and high fiscal spending until the economic crisis is over. Then we can tax more and pay off public debt, which efforts keep an economy in the growth cycle in check, keep it from overheating.
- 8 Affordable U.S. Cities for Homeowners Based on Paycheck Power | Wall St. Cheat Sheet
Kurtis Droge reports:
… house prices in 25 of the largest metropolitan areas in the United States have gone up 16 percent in the last year, according to Interest.com. Compare that with a rise in incomes of 3 percent on average in those same areas, and it isn't hard to understand why homes have become less and less affordable across the country.
Regional variance in terms of home affordability also fluctuates. Some cities have higher median incomes than others, and the price of homes also differs. Of the 25 cities included in the Interest.com study, 17 had a negative rating for "paycheck power," meaning that the median house is not affordable on a median income. With that said, let's take a closer look at the other cities included in the study: the eight cities in the United States that are the most affordable to live in based on paycheck power.
- Pending Home Sales Index Declines Again; Is It Now A "Buyer's Market"?
Dan Green reports:
The Pending Home Sales Index is forward-looking. It tallies the number of U.S. homes which have recently gone to contract between buyers and sellers and NAR knows that 80% of such homes under contract will become "closed sales" within 2 months of contract.
Closed sales are tallied in the monthly Existing Home Sales report.
According to the real estate trade group, the Pending Home Sales Index rose dropped 6 percent in August on a monthly basis, falling to 101.6. The reading is not a "bad" one, but a negative pattern has emerged since the index reached its intra-year peak in May.
First, for the first time since last decade, the Pending Home Sales Index has fallen for four consecutive months. Second, the monthly drop between August and September of this year is the largest one-month drop in 29 months.
Despite the decline, though, the Pending Home Sales Index continues to top its benchmark reading of "100". Values over 100 indicate that homes are going into contract at a faster rate than during 2001, the first year the index was published.
2001 was a good year for U.S. housing. 2013 is performing even better.
- Investors' Home Purchases Total $1 Trillion Since 2011
They are buying all-cash and holding.
Krista Franks Brock reports:
Since 2011, investors have purchased more than 950,000 homes; and with 370,000 purchases so far this year, they have already surpassed the number of purchases they made in either of the past two years, according to a new report from RealtyTrac.
In total, investors spent $1 trillion on home purchases since 2011, according to RealtyTrac's first-ever Investor Insight report released Monday, titled Real Estate Investor Purchase and Finance Patterns: 2011 to 2013.
RealtyTrac noted more than half of investor buys were all-cash purchases, and the percentage goes up dramatically when considering investor entities that purchased at least 1,000 homes since 2011.
Among investors that have purchased 100 properties or more in the past few years, the percentage of homes that have been resold drops to 25; and among investors that have purchased 1,000 or more properties, the resold share drops to a meager 1 percent, according to RealtyTrac.
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