Linking ≠ endorsement.
↑ Sober Look: The US student loan problem – facts, charts, thoughts
Consider the fact that the pay increases of Social Security recipients in the US are linked to the inflation rate. Of course the actual inflation rate that retirees experience is often higher than it is for younger generations. Pension recipients don't benefit to the same extent from declining prices of electronics, apparel, and a number of other products. Furthermore, the planned adjustment to increases using the so-called "chained CPI" will make the pay increases even smaller (see story). But American seniors on Social Security will have to get by.
Why then is it so difficult to ask US colleges and universities who benefit from taxpayer-funded loans to live by the same standards as the social security recipients? The US taxpayers should insist that any college with students who pay using federally backed student loans must agree to cap tuition and fees. It's time for institutions of higher learning to start living by the concept of "chained CPI" rather than to simply keep writing research papers on the topic.
That would be a start; but when I was young a public college education in California was tuition-free.
We could stop charging our children to get college educations simply by funding all such institutions via bond-free United States Notes.
It would not be inflationary because the rise in productivity would vastly offset the increase in funds in the economy.
If it's that simple, why don't the politicians do it? They don't do it because of egotistical elitists who control them via funding and favors, such as riches and cushy jobs when those politicians leave office. Those elitists don't want all boats to rise. They want their egos massaged relative to everyone else's economic situation. If they don't keep others down, they don't feel self-superior.
What do you think about that? Is it harsh but true or just plain wrong or what?
↑ Pieds-à-Terre Owners Dominate Some New York Buildings – NYTimes.com
In a three-block stretch of Midtown, from East 56th Street to East 59th Street, between Fifth Avenue and Park Avenue, 57 percent, or 285 of 496 apartments, including co-ops and condos, are vacant at least 10 months a year. From East 59th Street to East 63rd Street, 628 of 1,261 homes, or almost 50 percent, are vacant the majority of the time, according to data from the Census Bureau's 2012 American Community Survey.
Some of the city's most exclusive addresses, such as 15 Central Park West and One57, receive a far more lucrative tax break — the so-called 421a tax exemption….
…nonresidents typically do not pay New York's hefty income taxes and instead pay just a small fraction of their apartment's value in property taxes. Property taxes here are based on a complex equation related to rental values and can be very low. At One57, for example, a unit that sold for nearly $3.6 million is estimated by the city to have a market value of just $430,000 when calculating its property tax.
↑ Americans Need Fuel-Cost Rescue as Spending Falls: Economy – Bloomberg
The lowest costs at the gas pump in four years and the biggest payroll gains in more than a decade are projected to lift buying power and household purchases….
"Consumers have not overreacted to the negative news of a global slowdown or Ebola nor to the positive news of lower gas prices," Richard Curtain, the Michigan survey's chief economist, said in a statement. "Instead, consumers have kept their focus on improved job and wage prospects. Finally, five years after the start of the recovery, consumers have begun to adopt the expectations and behaviors that have driven past expansions."
We think that's a premature assessment. We will hold off until we see more about how the globe reacts to the complete end of QE and its impact upon commodity prices in general. We'll also have to see how well the Fed's planned new methods for handling interest rates will work, though we think they will.
↑ Six ways the internet of things will affect our jobs – Forum:Blog Forum:Blog | The World Economic Forum
What will humanity do when the machines we've built can outperform every human in every capitalistically financially compensated position?
What good will money be then?
When will we decide that simply being born human entitles one to be free from having to work for compensation?
As the internet of things starts to underpin more and more industries, businesses expect it to bring increasing value. But is it a fad or a truly disruptive force? Industry executives believe the IoT will have a powerful impact on their business.
↑ Portfolio Sale of 64 Apt. Communities Shows Multifamily Investment Still Has Legs – CoStar Group
Just when you think the multifamily investment mania might have run its course, along comes a deal in which more than 20,000 apartment units change hands in one of the largest multifamily transactions so far in 2014.
Lone Star Funds, one of the leading real private equity buyers in the world, acquired a portfolio of 20,439 apartment units in 64 communities across the nation from a partnership of DRA Advisors LLC and Bell Partners Inc. The transaction was valued in excess of $1.8 billion.
↑ Office Market Reaches Recovery 'Sweet Spot' | Realtor Magazine
The stars are aligning for the office sector: Falling vacancies, rising net absorption, a controlled supply of new office space, rising rents. Investors are seeing higher property incomes on their office property investments, according to CoStar's Third Quarter 2014 Office Review and Outlook. CoStar notes the sector has reached its "sweet spot in the market cycle."
Office-sector investors need to be prepared with conversion plans for the long haul. Technology is going to make most such office space obsolete in the not-too-distant future.
↑ Special Report: Why Madrid's poor fear Goldman Sachs and Blackstone | Reuters
Last year Madrid's city and regional governments sold almost 5,000 rent-controlled flats to private equity investors including Goldman Sachs and Blackstone. At the time, the tenants were told their rental conditions would remain the same.
But as old contracts expire, dozens of people have received demands for higher rent, been told their rents will increase dramatically, been threatened with eviction or moved out to escape the insecurity.
↑ Compensation shrinks for all income groups — except the very highest | Al Jazeera America
We're missing the boat.
American paychecks shrank last year, just-released data show, further eroding the public's purchasing power, which is so vital to economic growth.
↑ Exploding wealth inequality in the United States – Washington Center for Equitable Growth
This is not sustainable.
There is no dispute that income inequality has been on the rise in the United States for the past four decades. The share of total income earned by the top 1 percent of families was less than 10 percent in the late 1970s but now exceeds 20 percent as of the end of 2012. A large portion of this increase is due to an upsurge in the labor incomes earned by senior company executives and successful entrepreneurs. But is the rise in U.S. economic inequality purely a matter of rising labor compensation at the top, or did wealth inequality rise as well?
Before we answer that question (hint: the answer is a definitive yes, as we will demonstrate below) ….
What should be done to avoid this dystopian future? We need policies that reduce the concentration of wealth, prevent the transformation of self-made wealth into inherited fortunes, and encourage savings among the middle class. First, current preferential tax rates on capital income compared to wage income are hard to defend in light of the rise of wealth inequality and the very high savings rate of the wealthy. Second, estate taxation is the most direct tool to prevent self-made fortunes from becoming inherited wealth—the least justifiable form of inequality in the American meritocratic ideal. Progressive estate and income taxation were the key tools that reduced the concentration of wealth after the Great Depression. The same proven tools are needed again today.
There are a number of specific policy reforms needed to rebuild middle class wealth. A combination of prudent financial regulation to rein in predatory lending, incentives to help people save—nudges have been shown to be very effective in the case of 401(k) pensions—and more generally steps to boost the wages of the bottom 90 percent of workers are needed so that ordina ry families can afford to save.
↑ Phoenix doesn't rank high on new real-estate list
Metro Phoenix didn't make a new top 25 list of U.S. real estate markets with the best prospects for growth, development and investment.
It ranked No. 26 out of 75.
↑ Invitation Homes bringing another REO-to-rental securitization to market | 2014-10-24 | HousingWire
Invitation Homes is preparing to bring its third REO-to-rental securitization of the year to market soon. The securitization, Invitation Homes 2014-SFR3, will be collateralized by a $775.1 million loan secured by first priority mortgages on 4,048 income-producing single-family homes.
↑ A New Macroeconomic Strategy by Jeffrey D. Sachs – Project Syndicate
Jeffrey D. Sachs has come a long way.
Both neo-Keynesians and supply-siders have misunderstood the investment paralysis. Neo-Keynesians see investments, public and private, as merely another kind of aggregate demand. They neglect the public-policy decisions regarding energy systems and infrastructure (as well as the targeted R&D to promote new technologies) that are needed to unleash smart, environmentally sustainable public and private investment spending. Thus, they promote gimmicks (zero interest rates and stimulus packages), rather than pressing for the detailed national policies that a robust investment recovery will require.
The supply-siders, for their part, seem utterly oblivious to the dependence of private investment on complementary public investment and a clear policy and regulatory framework. They advocate slashing government spending, naively believing that the private sector will somehow magically fill the void. But, by cutting public investment, they are hindering private investment.
… Our generation's most pressing challenge is to convert the world's dirty and carbon-based energy systems and infrastructure into clean, smart, and efficient systems for the twenty-first century. Investing in a sustainable economy would dramatically boost our wellbeing and use our "excess" savings for just the right purposes.
Yet this will not happen automatically.
Correct! We need well-planned fiscal spending on highly targeted infrastructure.
↑ Kansas Faces Additional Revenue Shortfalls After Tax Cuts – NYTimes.com
In 2012, Gov. Brownback called his state's tax cuts a "real live experiment" in how tax-cutting affects the budget and the economy. So far, the main result of the experiment seems to be that cutting taxes causes the government to lose revenue.
People who hate government, whether good government or bad, will love that. They'll use it as an excuse for cutting government spending and for greater privatization, whether good or bad for the common citizen.
↑ Why Europe is doomed, in 3 paragraphs – The Washington Post
Matt O'Brien sums it up quite well.
The ECB could keep not doing enough, Germany could keep blocking them from doing more, and Europe could keep stagnating.
↑ Europe's Fiscal Wormhole by Guntram B. Wolff – Project Syndicate
An interesting workaround by Guntram B. Wolff:
The International Monetary Fund now estimates a 30% risk of deflation in the eurozone, and growth figures within the monetary union continue to disappoint. But policymakers seem trapped in a cat's cradle of economic, political, and legal constraints that is preventing effective action. The fulfillment of policy rules appears to be impossible without growth, but growth appears to be impossible without breaking the rules.
A two-year €400 billion ($510 billion) public-investment program, financed with European Investment Bank bonds, would be the best way to overcome Europe's current impasse. Borrowing by the EIB has no implications in terms of European fiscal rules. It is recorded neither as new debt nor as a deficit for any of the member states, which means that new government spending could be funded without affecting national fiscal performance.
In addition, the ECB could purchase EIB bonds on secondary markets, which would help to keep funding costs low — or even reduce them. More important, purchases of EIB bonds would enable the ECB to undertake quantitative easing without triggering the degree of controversy implied by intervening in 18 separate sovereign-bond markets, where concerns that ECB purchases would affect the relative pricing of sovereigns are very real.
…existing infrastructure projects that are supposed to be financed from national budgets could be funded by the EIB. By removing some of the burden from national budgets, the current decline in public investment could be reversed.
There are no laws on the books there that allow issuing bond-free euros?
↑ 9 trends impacting where foreign homebuyers park their money | Inman News
What's trending in the luxury international market? FIABCI, the International Real Estate Federation, is an excellent resource whether you serve international clients who purchase in your local market or you play in the bigger international arena.
According to FIABCI's latest research, here are nine current trends:
↑ How many houses can you buy elsewhere for the price of one in London? – Quartz
…only prices in Silicon Valley, the subject of many angst-ridden articles about an acute housing crisis, appear to come close to London's levels. For the average price of a modestly-sized house in the British capital, in any other American metropolitan area you could buy a home—in some cases, a small property empire—and have money left to spare.
↑ Ronald Janssen: Why Austerity Is Contagious
The bottom line is that austerity policy is contagious. At the risk of being singled out by financial markets because of rising external deficits, a country cannot afford to stay outside the European austerity squad completely. If surrounding economies are dragging down French export markets and exports, France is sooner or later forced to "return the favour", squeeze its own domestic demand and in turn weaken the export market perspectives for the economies and trade partners that surround France. If not, its external deficit or, as the Commission likes to call it, its external 'imbalance', will increase further and become 'excessive'.
… Unless Germany boosts its demand by a big multiple of French expenditure cuts, the net overall effect of such an operation will be hugely negative for the French economy.
↑ Danny Dorling: Why Current Global Inequality Is Unsustainable
…the one per cent itself is not a unified group. There is more inequality within the one per cent than there is among the rest of society and there is a growing gap between those at the lower end of the one per cent and those at the top — the 0.1 per cent. What I think we're witnessing in the UK is a change from the old model where the one per cent ran the country with the support of the nine per cent below them, to a new model where the country is run by the 0.1 per cent, with the support of the rest of the one per cent. The cleavage in society is no longer between the richest ten per cent and the rest, but between the richest one per cent and the rest. This began in 2008 when the nine per cent in the upper middle class (below the very richest in society) began to see their incomes fall.
Politically, this is fascinating because you can run a country with the support of the top ten per cent in society. You can fool another 20 per cent into thinking that they too could get into this group, but how do you address a country in which it begins to become obvious to people that everyone in the 99 per cent is on the losing side? How can this kind of situation be sustainable? I suspect that, much like a hundred years ago with the First World War and the revolution in Russia, it will take an external crisis to bring about a change. But we have to recognise that such a change is very likely to happen.
↑ Mexico's Powerful Energy Reforms by Martin Feldstein – Project Syndicate
Martin Feldstein touts Mexico's privatization of its oil industry but doesn't say a word about Anthropogenic Global Warming caused by carbon burning. He doesn't mention the risk that much of the profits from Mexico's oil will go to the top 0.01% economic class, including outside Mexico. He doesn't mention any of the environmental dangers already clearly identified in the US with fracking. He mentions deep-water oil drilling but doesn't mention the legacy of the Deepwater Horizon disaster the negative toll of which won't be completely known for generations, if ever.
We'd appreciate more balance in his economic analysis rather than pure neoliberal propaganda.
Too harsh? What's your take?
↑ New Zealand sets record of all records | The Investor
2014 has already proved a record breaking year for the New Zealand commercial property market with no sign of slowdown as we move towards year end according to property consultants, JLL. This year, to date, investors have acquired more than NZ$2.8 billion (US$2.2bn) worth of New Zealand's industrial, retail, and office properties compared with NZ$2.1 billion (US1.7bn) in the previous year; making this the largest volume of commercial property stock transacted.
↑ U.S. Homeownership Rate Falls to Lowest Since Early 1995 – Bloomberg
The homeownership rate in the U.S. fell to the lowest in more than 19 years as the market shifted toward renting and tight credit blocked some potential buyers.
The share of Americans who own their homes was 64.4 percent in the third quarter, down from 64.7 percent in the previous three months, the Census Bureau said in a report today. The rate was at the lowest level since the first quarter of 1995.
Entry-level buyers have been held back by stringent mortgage standards and slow wage growth. The share of first-time buyers was 29 percent in September for the third straight month, compared with about 40 percent historically, according to the National Association of Realtors said.
Stringent mortgage standards are definitely not part of the problem. Wages and hours are.
↑ American Wellbeing Since 1979 by J. Bradford DeLong – Project Syndicate
J. Bradford DeLong:
On odd days, my bottom line is that material wellbeing since 1979 has grown at 0.5% per year for America's poor, compared to 4% per year for America's rich (and 6% per year for its super-rich). This is because most of the expansion is not the equivalent of a greater income for America's poor in any reasonable sense, and because America gets relatively little value for its health-care financing.
On even days, however, my bottom line is very different. America's poor in 1979 lagged so far behind normal OECD social democracies in terms of health and health care that even though each extra dollar produced only $0.25 of real health-care services, that $0.25 was worth about one dollar to the poor in terms of material wellbeing.
On this reading, the expansion of America's health-care programs has kept the properly measured material wellbeing of its poor on an upward path since 1979 at a rate not much less than that of real per capita GDP.
↑ Where the Owner Doesn't Live in the Home | Realtor Magazine
A growing number of new homes are being purchased by "absentee buyers," which are most often real estate investment trusts, corporations, or individual investors who don't actually live on the properties.
In the retirement haven of The Villages, Fla., for example, nearly 35 percent of new homes purchased so far this year have been bought by absentee owners.
↑ CFA Institute Conference Proceedings Quarterly : Central Banking, State Capitalism, and the Future of the Monetary System | CFA Institute Publications
We very much agree with the following from Ann Pettifor:
Because of the flawed economic orthodoxy that is dominant in the economics profession and among policymakers, there has been a failure in both the banking and shadow banking sectors to regulate or to manage the private printing of money so that it is aimed at productive investment and not credit-fueled speculation.
The BOE was very slow to understand the nature of the crisis. The European Central Bank made some very large mistakes, such as hiking interest rates at the height of the crisis in 2009. The Fed has perhaps been the most sound in its logic, but the problem is that it is "pushing on a string."3
My criticism of central bankers is that they do not understand that fixing the banks is insufficient. Demand has to be effectively created, and if banks cannot accomplish that through lending, then the state needs to intervene to create public investment. …central banks have taken a hands-off position. To an extent, they have financed government deficits, but they have been very quiet about whether the public sector should do more to revive economic activity.
There can be too much credit in an economy, which leads to inflation, but inflation also occurs if credit is aimed at speculation rather than at productive activity. In addition, inflation occurs if credit includes very high rates of interest and cannot be repaid.
In her statements, however, she failed to mention that in the US, the Federal Reserve requires banks to maintain 10% reserves against outstanding loans. They can borrow funds to do that, but they risk insolvency depending upon the quality of the loans they make, the interest they charge and pay, and their other investments and such.
We don't agree with the blanket statements that money is not a commodity or that there is no such thing as the money multiplier. We simply say that those are contextual/semantical issues and best simply qualified. It is not an either/or but a matter of degrees and definitions, etc.
Quibbling over trifling details? Perhaps.
↑ BoE's surprise bank ratios – YouTube
Speaking of reserve requirements in Britain:
Bank of England announced the latest part of its new banking rules meant to avert further crises in the sector. The FT's Michael Stott asks Sam Fleming, financial policy correspondent, to explain the rules and why they have delighted the City.
This doesn't change the fact that the banks lend before they have the deposits. The requirement of deposits before lending constitutes some people's definition of the money multiplier. Of course, provided they don't over lend, banks that obtain deposits don't have to go out to get funds to meet reserve requirements. Therefore, in that case, the multiplier still exists. It is simply not the only explanation for how money is created.
If you are an investor in 1-4 unit properties in Arizona, California, Nevada, Oregon, Utah, or Washington, please do the financially responsible thing and make sure you have proper Landlord Insurance with PropertyPak™. We love focusing on real estate and the economy in general, but we are also here to serve your insurance needs.
Hill & Usher (PropertyPak™ is a division) has many insurance offerings. See our menu above for more info and links.
Did this post help you? Let us know by leaving your comment below.
Note: This blog does not provide legal, financial, or accounting advice. Seek professional counsel.
Furthermore, we, as insurance producers, are prohibited by law from disparaging the insurance industry, carriers, other producers, etc. With that in mind, we provide links without staking out positions that violate the law. We provide them solely from a public-policy standpoint wherein we encourage our industry to be sure our profits, etc., are fair and balanced.
We do not necessarily fact checked the contents of every linked article or page, etc.
If we were to conclude any part or parts of our industry are in violation of fundamental fairness and the legal standards of a state or states, we'd address the issue through proper, legal channels. We trust you understand.
The laws that tie our tongues, so to speak, are designed to keep the public from losing confidence in the industry and the regulatory system overseeing it. Insurance commissioners around the country work very hard to analyze rates and to not allow the industry to be damaged by bad rate-settings and changes in coverages. The proper way for people in the industry to deal with such matters is by adhering to the laws, rules, and regulations of the applicable states and within industry associations where such matters may be discussed in private without giving the industry unnecessary black eyes. Ethics is very high on the list in the insurance industry, and we don't want to lose the people's trust. That said, the industry is not perfect; but what industry is?
For our part, we believe in strong regulations and strong regulators.
We welcome your comments and ask you to keep in mind that we cannot and will not reply in any way or ways where any insurance commissioner could rightly say we've violated the law of the given state.
We are allowed to share rating-bureau data/reports and industry-consultant opinions but make clear here that those opinions are theirs and do not necessarily reflect our position.