News: Real Estate, Risk, Economics. Dec. 13, 2014

Linking ≠ endorsement.

Table of Contents
(Click to sections below.)

1) Heavy rains cause havoc in Greece and Romania – YouTube

2) The Shame of America's Rotting Roads – Bloomberg View

3) Why Citi May Soon Regret Its Big Victory on Capitol Hill – American Banker Article

4) The Rise of Men Who Don't Work, and What They Do Instead – NYTimescom

5) BBC News – The China Price: The global impact of Chinese deflation

6) WSJ Survey: Oil Prices Are Near Their Bottom – Real Time Economics – WSJ

7) Germany's Four Neins by Marcel Fratzscher – Project Syndicate

8) 3 charts for Ed Miliband | Flip Chart Fairy Tales

9) Activists Seek More Public Input in Fed President Picks – Real Time Economics – WSJ

10) Good and Bad Inequality by Dani Rodrik – Project Syndicate

11) The Koch Brothers' Governors | Michael Hudson

12) Putting Deflation First by Barry Eichengreen – Project Syndicate

13) Why the government is sweetening the financial incentives for homeowners who got mortgage relief – The Washington Post

  1.    Heavy rains cause havoc in Greece and Romania – YouTube

    Add your comment.

  2.    The Shame of America's Rotting Roads – Bloomberg View

    Barry Ritholtz:

    Why Congress takes so little pride in one of the great U.S. accomplishments is beyond my understanding. We should find out soon if Congress is the incompetent "Parliament of Whores" depicted by P.J. O'Rourke, or whether it can carry out even the most basic of government functions.

    True; however, the gas tax won't work anymore because electric is coming on quickly.

    In our view, the system should be upgraded and maintained from general revenues: from a single tax (income only).

    Why have all these different taxes and user taxes? If something is a societal good and the voters want it to exist, then pay for it from one source.

    Simplify, streamline.

    Why privatize everything? (Toll roads?)

    The best solution is one public bank where the total quantity of money is uniformly increased or decreased across all accounts. There would be no taxes in that case. There would only be the perfect control of inflation/deflation with never a lack of funding.

    Is it too good to be true? No, it's too good for the self-centered greedy who are egotistically controlling things right now.

    Add your comment.

  3.    Why Citi May Soon Regret Its Big Victory on Capitol Hill – American Banker Article

    "Wall Street's determined lobbying on Section 716 provides compelling evidence that Wall Street's business model depends on the ability of large financial conglomerates to keep exploiting the cheap funding provided by their 'too big to fail' subsidies," said Arthur Wilmarth, a professor of law at George Washington University. "Shame on Congress if it allows megabanks to continue to pursue the same business strategy that brought us the financial crisis."


    Add your comment.

  4.    The Rise of Men Who Don't Work, and What They Do Instead –

    Some countries have developed policies that encourage older people to leave the labor force, so they do not "crowd out" younger workers. But studies across countries and time suggest that crowding-out may not actually be a problem. Economies do not appear to have a fixed number of jobs. When more older people are working, they are earning money that they will then spend in ways that may create more jobs for young people, for example.

    Even if this is the case, though, the rise of elderly employment in recent years has not provided enough of a lift to put more young people back to work.

    Add your comment.

  5.    BBC News – The China Price: The global impact of Chinese deflation

    Linda Yueh:

    …the rest of the world will be affected by the prices of the world's biggest trader. It's just more uncertain than what we have been used to when the US was the main setter of global market prices.

    And that will be the state of the world economy that we'll need to get used to: being affected by the two biggest economies in the world, although one of them is still in a state of development and transition.

    That's the China effect on the world economy that will be felt in a variety of ways for years to come.

    Add your comment.

  6.    WSJ Survey: Oil Prices Are Near Their Bottom – Real Time Economics – WSJ

    …forecasters surveyed by The Wall Street Journal think the long tumble in crude prices is coming to an end.

    We're thinking many producers will fall by the wayside.

    Add your comment.

  7.    Germany's Four Neins by Marcel Fratzscher – Project Syndicate

    Good overall article: Marcel Fratzscher:

    Given that the German economy's output gap remains negative, the government should be implementing expansionary fiscal policy that targets the country's infrastructure weaknesses. In this sense, Finance Minister Wolfgang Schäuble's plan to spend an additional €10 billion ($12.5 billion) on public investment in 2016-2018 is a step in the right direction. But, at just 0.1% of Germany's annual GDP, Schäuble's scheme looks more like an attempt to quiet criticism from the rest of Europe than a genuine policy shift.

    Add your comment.

  8.    3 charts for Ed Miliband | Flip Chart Fairy Tales

    …a 4.7 percent real-terms cut in overall spending since 2010 becomes a 25 percent cut in public service spending. Take out capital spending and look at day-to-day service spending and the cut rises to 27 percent. But the population is rising too so that translates to 31 percent per capita. Because some departments are protected and have their budgets maintained, everything that isn't health or education faces cuts of around 57 percent. An overall cut of just under 5 percent therefore gets amplified because of other spending pressures.

    Now that's how it's done.

    Add your comment.

  9.    Activists Seek More Public Input in Fed President Picks – Real Time Economics – WSJ

    The gradualists' approach to banking and monetary reform:

    Federal law dictates the process for choosing the regional presidents. They are picked by a subset of the banks' boards of directors, with approval from the Fed's Washington-based board of governors. The regional bank boards include bankers, business executives and some community representatives, but directors from banks supervised by the Fed don't have a vote in hiring the banks' presidents.

    Commercial banks that are members of the Fed system own the stock of their district's reserve bank and elect most of its directors. Remaining directors are appointed by the Fed board in Washington.

    We'd rather see a complete system change.

    Add your comment.

  10.    Good and Bad Inequality by Dani Rodrik – Project Syndicate

    Lengthy excerpt from an informative Dani Rodrik article:

    Economists have produced new arguments showing why good economic performance is not only compatible with distributive fairness, but may even demand it.

    For example, in high-inequality societies, where poor households are deprived of economic and educational opportunities, economic growth is depressed. Then there are the Scandinavian countries, where egalitarian policies evidently have not stood in the way of economic prosperity.

    Early this year, economists at the International Monetary Fund produced empirical results that seemed to upend the old consensus. They found that greater equality is associated with faster subsequent medium-term growth, both across and within countries.

    Moreover, redistributive policies did not appear to have any detrimental effects on economic performance. We can have our cake, it seems, and eat it, too. That is a striking result — all the more so because it comes from the IMF, an institution hardly known for heterodox or radical ideas.

    In the advanced countries, the causes of rising inequality are still being debated. Automation and other technological changes, globalization, weaker trade unions, erosion of minimum wages, financialization, and changing norms about acceptable pay gaps within enterprises have all played a role, with different weights in the United States relative to Europe.

    Each one of these drivers has a different effect on growth. While technological progress clearly fosters growth, the rise of finance since the 1990s has probably had an adverse effect, via financial crises and the accumulation of debt.

    It is good that economists no longer regard the equality-efficiency tradeoff as an iron law. We should not invert the error and conclude that greater equality and better economic performance always go together. After all, there really is only one universal truth in economics: It depends.

    Add your comment.

  11.    The Koch Brothers' Governors | Michael Hudson

    Speaking of general revenues, we just ran into this scathing and, in our view, accurate rebuke by Jeffrey Sommers & Michael Hudson:

    The Koch Brothers are the closest thing the United States has to Russia's oligarchs. They fuse ownership of the economy and state, using the latter to enrich themselves while making private gains through the public's losses. Their idea of a "market economy" is to buy government officials and the assets they privatize at giveaway prices.

    Add your comment.

  12.    Putting Deflation First by Barry Eichengreen – Project Syndicate

    Speaking of gradualism, in this case "incrementalism," Barry Eichengreen nails it.

    The problem is that this kind of incrementalism will not work. When the problem is deflation, quantitative easing will help only by transforming expectations.

    When deflationary expectations are entrenched, as they are in Europe today, consumers and investors delay spending on the ground that prices and costs will be lower tomorrow. Those expectations become self-fulfilling, because less spending means even less inflation and, in the worst case, falling prices.

    Add your comment.

  13.    Why the government is sweetening the financial incentives for homeowners who got mortgage relief – The Washington Post

    While the initial re-default rate was high in the early days of the program, the rates have been dramatically lower among borrowers who kept up with their payments for at least a year, suggesting some of the borrowers are now on more solid financial footing, Bowler said. The re-default rate was 30 percent to 40 percent over a three-year period for people who qualified for HAMP in 2009, in the immediate aftermath of the housing bust. The rate is trending in the mid-20 percent range for those who qualified in 2012.

    Still, the government doesn't want to take any chances. "We continue to look for ways to expand the effectiveness of our program," Bowler said. "We're being very proactive with this population of borrowers, who were deeply and adversely affected by the financial crisis."

    There are those who are opposed to helping borrowers in this way. However, there are things that need to be taken into consideration before simply letting the market decide.

    Plenty of people had no idea just how terribly Ponzi scheme the Wall Street system was. They had no idea the size of cushion they would need to weather the storm. Should they all be penalized when there are even now not enough rental units to absorb everyone affordably?

    We agree that there is moral hazard by letting bad financial decisions to result in nothing but bailouts. However, we're talking here about people who mostly were misled by a system telling them that they could afford their purchases and while those who did the telling have bailed out themselves.

    The banks have lobbied government and made huge campaign-contributions and created revolving doors to regulatory agencies such that even recently they've managed yet again to set things up for a future bailout (rolling back Dodd-Frank).

    Why should the "little" people get the shaft while the mega-bankers get richer and richer?

    Tie creating more affordable housing to foreclosures and prosecuting criminal bankers, and we'll back the plan.

    Add your comment.

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.