News: Real Estate, Risk, Economics. Jan. 27, 2015

Linking ≠ endorsement.

Table of Contents
(Click to sections below.)

1) How Much More (Or Less) Would You Make If We Rolled Back Inequality? : Planet Money : NPR

2) Squaring the Circle: can insecure workers also be confident consumers? By Colin Crouch | Edward Elgar Publishing BLOG

3) Ilargi: Brussels is a Bunch of Criminals | naked capitalism

4) Don't Let Oil Distract You From This Potentially Epic Real Estate Collapse

5) Understanding How a FICO Credit Score is Determined – YouTube

6) Spending More on Public Schools Boosts US Economy – Bloomberg View

7) MI Forum: Hall of Mirrors – YouTube

8) globalinequality: Repeat after me: Wealth is not income and income is not consumption

9) No Need to Fear Low Oil Prices | BlackRock Blog | Global Market Intelligence

10) Oil Drillers 'Going to Die' in 2Q on Crude Price Swoon – Bloomberg

11) Blackstone Said in $1.7 Billion Deal to Buy Apartments – Businessweek

12) Glenn Stevens must act fast to rescue Australia's economy

13) Carney Says QE Can Encourage Excessive Risk-Taking in Markets – Bloomberg

14) Tsipras moves to form anti-austerity Greek government after crushing victory | Reuters

15) Merkel must take stock of Greek challenge to German doctrine

16) [278] Grexit's still possible and central banks aren't doing real QE – YouTube

17) Floodproofing | FEMAgov

18) Fargo Acting Mayor: FEMA agrees to basement exemption | CharlotteObservercom

19) Hartford Courant – State Rep. Wants To Take Dog Breed Out of Homeowners Policy Equation

20) mainly macro: Keeping quiet about hidden motives?

21) Ending Greece's Nightmare – NYTimescom

22) Yanis Varoufakis: Greece's future finance minister is no extremist – Telegraph

23) Coppola Comment: Reflections on Recovery and Reform

24) High-end apartments dominate Pittsburgh region's real estate | Pittsburgh Post-Gazette

25) Doubts grow about mid-year rate hike, but Fed won't express any – MarketWatch

26) Alexis who? – YouTube

  1.    How Much More (Or Less) Would You Make If We Rolled Back Inequality? : Planet Money : NPR

    Some economists would argue that this could never exist, because economic growth has been been driven by forces, such as globalization and technological change, that have also driven up inequality.

    Those economists are erroneously assigning cause and effect.

    Globalization and technology haven't driven up inequality. Greed has.

    Add your comment.

  2.    Squaring the Circle: can insecure workers also be confident consumers? By Colin Crouch | Edward Elgar Publishing BLOG

    Colin Crouch, professor emeritus of the University of Warwick and external scientific member of the Max Planck Institute for the Study of Societies at Cologne; vice-president for social sciences, British Academy:

    The financial crisis was a massive failure of the core neoliberal strategy of deregulating financial markets, but its advocates have very skilfully redefined the crisis as having been one of public spending, skating over the fact that it was bailing out the banks that put intolerable strain on many countries' public resources. Since then the growing inequality being produced by neoliberal economy has become an object of concern for the OECD, the World Bank and other international agencies, not for reasons of social justice but because of its looming negative economic effects. Starting in the US and spreading across the advanced world, the richest 1% of the population is taking an ever bigger share of growing wealth, leaving working people depending increasingly on credit to finance their consumption. The more egalitarian societies of north-western Europe have had a social model that has evaded this problem. How long will it be before dominant economic and political opinion recognizes that understanding, strengthening, and if possible exporting that model would serve the general interest better than undermining it?

    Add your comment.

  3.    Ilargi: Brussels is a Bunch of Criminals | naked capitalism

    First the insanity of the ECB QE itself. The problem with Europe's economy, what drives it into high unemployment and deflation, is that people are not spending. If QE would really be aimed at reviving the economy, or at battling deflation, it would need to assume that people will start borrowing on a massive scale just because Draghi buys bonds — and soon perhaps even stocks — from bankers. There simply is no logic in that. The stated goals, pro-growth and anti-deflation, are not true. It's a sleight of hand.

    In order to achieve the stated goals, money would have to reach the real economy. As it stands, the best Draghi can do is to 'hope' it will. That's not enough by a mile. This is not about doubts over its effectiveness, that's baloney, we know it's not effective when it comes to the stated goals. It will still leave Europe with no growth, and deeper deflation, and now €1.1 trillion deeper in debt. While banks can grow their reserves.

    And it's not as if Draghi doesn't understand. Draghi is Goldman. And neither is it as if this is the only option. Steve Keen's modern version of a debt jubilee, in which money is given directly to the people, under the condition that they first use it to pay off debt if they have any, would be much more effective. But it would be far less profitable for the banks, and that's why it's not considered.

    Add your comment.

  4.    Don't Let Oil Distract You From This Potentially Epic Real Estate Collapse

    Sean Williams brings a very important point forward.

    Regulations in China require a homebuyer to put 30% down before purchasing a home, but desperate developers in some provinces have waived this clause in order to continue selling homes. The result could be a mortgage default that dwarfs what we witnessed in the United States, as buyers are jumping into homes with potentially no money down.

    We sure do need to see the percentages concerning this before coming to any preliminary conclusions as to how soon, fast, deep, and long the coming downturn.

    Add your comment.

  5.    Understanding How a FICO Credit Score is Determined – YouTube

    Episode 1 of the Continuing Feducation Video Series, Understanding How a FICO Credit Score is Determined, provides a short overview of credit scores—how they are determined and why they are important.

    Add your comment.

  6.    Spending More on Public Schools Boosts U.S. Economy – Bloomberg View

    It's such a shame that this has to be posted.

    It's become almost conventional wisdom that throwing more money at public education doesn't produce results. But what if conventional wisdom is wrong?

    A new paper from economists C. Kirabo Jackson, Rucker Johnson and Claudia Persico suggests that it is.

    Of course it is. It's one of the places massive fiscal spending via bond-free/unencumbered money should be targeted.

    Add your comment.

  7.    MI Forum: Hall of Mirrors – YouTube

    Barry Eichengreen is a modest, realistic, pragmatic economist-historian and political scientist working from within the mixed-economy paradigm. He is clearly a Keynesian and monetarist.

    We agree with his position regarding fiscal spending. It would have been politically difficult.

    However, the population and politicians should have been given a crash course so that fiscal spending could have been vastly greater to shorten the recovery by many, many years.

    Barry Eichengreen, professor of economics and political science at the University of California, Berkeley

    Moderated by Michael Hiltzik, Pulitzer Prize-winning journalist and author

    January 6, 2015
    6:30pm – 8:00pm
    Santa Monica

    As the world slowly shakes off the lingering effects of the Great Recession, a renowned economist, author and policy advisor identifies the similar causes and responses that hampered recoveries from the 2008 financial meltdown and the Great Depression.

    At this Milken Institute Forum, Barry Eichengreen will discuss his book, "Hall of Mirrors: The Great Depression, the Great Recession and the Uses — and Misuses — of History." Eichengreen makes the case that the two worst economic crises of the past 100 years were preceded by credit booms, questionable banking practices and a fragile global financial system.

    Eichengreen asks why policymakers in the U.S. and Europe didn't do better in 2008, given that the lessons of the crash of 1929 were so well known. In his comparison of the two crises, Eichengreen examines the responses of governments on both sides of the Atlantic to explain the missteps that have made the current recovery so slow.

    Add your comment.

  8.    globalinequality: Repeat after me: Wealth is not income and income is not consumption

    Branko Milanovic:

    It is a wrong belief that there should be one and only one measure that would give us the answer who is poor and who is rich. The three welfare aggregates (wealth, income and consumption) are related but they are not the same. (And I leave out other "details" like the distinction between net income, that is, after-fisc income, and market income or income before any government transfers and taxes.) There are people who are poor or middle class according to one measure but rich according to another. Wealth is not income nor is income consumption.

    Add your comment.

  9.    No Need to Fear Low Oil Prices | BlackRock Blog | Global Market Intelligence

    Russ Koesterich:

    Although lower prices will ultimately lead to some adjustment in U.S. production, current levels are unlikely to lead to an immediate cutback in U.S. shale production. However, they are likely to impact future exploration.

    Add your comment.

  10.    Oil Drillers 'Going to Die' in 2Q on Crude Price Swoon – Bloomberg

    Oil companies have slashed thousands of jobs, delayed billions of dollars in projects and dropped or scaled back expansion plans in response to the prolonged rout in crude prices. …

    "The second quarter is going to be devastating for the service companies," Young said in a telephone interview from Houston. "There are certainly companies that are going to die."

    Add your comment.

  11.    Blackstone Said in $1.7 Billion Deal to Buy Apartments – Businessweek

    Blackstone Group LP (BX:US), the biggest owner of U.S. single-family houses, agreed to buy 36 apartment properties across the country for about $1.7 billion as it expands its rental business….

    The low-rise, garden-style properties are being sold by Praedium Group, a New York-based real estate investment firm, and contain about 11,000 apartments….

    The deal would increase the number of apartments managed by Blackstone's LivCor multifamily real estate unit to about 43,000 at a time when demand for rental housing in the U.S. remains robust.

    Add your comment.

  12.    Glenn Stevens must act fast to rescue Australia's economy

    Few central bankers in modern history have had a better run than Australia's Glenn Stevens. He steered his country around the global financial crisis, drove its currency to record highs and extended its recession-free run past the two-decade mark.

    That's all in jeopardy now, however, as Stevens, governor of the Reserve Bank of Australia, stands still while China's slowdown and deflationary forces close in. …

    … The collapse in global commodity prices challenges Beijing's claim that its economy is growing by 7.3 per cent. Even more than the plunge in crude oil, iron ore at its lowest price in more than five years suggests China is growing slower. …

    As Goldman Sachs and others call an end to the commodities supercycle, the Australian government's fiscal policies are anachronistic. Prime Minister Tony Abbott's efforts to trim the budget deficit are out of sync with a deflationary world.

    Add your comment.

  13.    Carney Says QE Can Encourage Excessive Risk-Taking in Markets – Bloomberg

    "In an environment of low interest rates, and low interest rates for a period of time, and also quantitative easing, there can be excessive risk taking," Carney said during a Saturday panel at the World Economic Forum's meeting in Davos, Switzerland. "What those monetary policies are looking to do is move from an environment of reticence to take risk to responsible risk-taking. We're trying to avoid reckless risk-taking."

    Add your comment.

  14.    Tsipras moves to form anti-austerity Greek government after crushing victory | Reuters

    We are anti-austerity, so we're please concerning that aspect.

    Syriza's victory will also encourage other anti-austerity forces in Europe and add impetus to calls for a change of course away from the focus on budget belt-tightening and structural reform favoured by Berlin.

    Those calls have come not just from anti-system movements such as Podemos in Spain but also from leaders such as French President Francois Hollande, who congratulated Tsipras on his win, and Italian Prime Minister Matteo Renzi.

    Germany, stop the austerity. You've been damaging Germany, Europe, and the world.

    Add your comment.

  15.    Merkel must take stock of Greek challenge to German doctrine

    The loudest cheer in Berlin came from the Left Party, Syriza's sister organisation, where leader Bernd Riexinger congratulated Greeks for kicking out "corrupt" parties and raising "hopes of new social justice in politics".

    Experienced Berlin watchers suggested that critics of German austerity should not underestimate Merkel's skill at shifting to fit a new status quo.

    "She has no other option to wait it out and make the best of it," said Dr Gero Neugebauer, political scientist at Berlin's Free University.

    "If others demand it, she has little option but to renegotiate with Greece."

    Add your comment.

  16.    [278] Grexit's still possible and central banks aren't doing real QE – YouTube

    Richard Werner is vastly underappreciated. We've learned a great deal from his work. We're glad to see him on the show. We're sure there will be a part 2 of his interview. Good overall episode:

    On Sunday, Greek voters handed power to the anti-austerity Syriza party, whose main "objective" is overhauling the bitter economic reforms' that Greece has had to suffer through since the recession. Since first seeking a bailout in 2010, Greece has initiated broad economic overhauls and cutbacks that have helped mend its public finance following six years of deep recession. But those cutback have come at a cost: some 25% of Greeks remain jobless while a quarter of all households live close to the poverty line. Erin weighs in.

    Then, Erin sits down with Marshall Auerback, director of institutional partnerships at the Institute for New Economic Thinking and research associate at the Levy Economics Institute. Marshall tells us what the Syriza party winning in Greece means for Europe and gives us his take on whether Greece should default or leave the Eurozone.

    After the break, Erin is joined by Richard Werner, director of international development and the founding director of the Centre for Banking, Finance and Sustainable Development at the University of Southampton. Richard talks to us about how central banks work and tells us how the term "quantitative easing," which he coined in the early 1990s, has been wrongly interpreted and executed over the last decade.

    And in The Big Deal, Erin and Edward Harrison continue the discussion on Greece. Take a look!

    Add your comment.

  17.    Floodproofing |

    Any combination of structural and non-structural additions, changes, or adjustments to structures which reduce or eliminate flood damage to real estate or improved real property, water and sanitary facilities, structures and their contents.

    The National Flood Insurance Program (NFIP) allows a new or substantially improved non-residential building in an A Zone (Zone A, AE, A1-30, AR, AO or AH) to have a lowest floor below the Base Flood Elevation (BFE), provided that the design and methods of construction have been certified by a registered professional engineer or architect as being dry floodproofed in accordance with established criteria.

    Floodproofing of areas below the BFE in residential buildings is not permitted under the NFIP exceptin communities that have been granted an exception to permit floodproofed basements. Floodproofing is not permitted in Coastal High Hazard Areas (Zone V, VE, or V1-30). It is recommended that floodproofing be implemented up to one foot above BFE for a factor of safety and to receive full credit for flood insurance rating.

    Limited enclosed areas below elevated within newly constructed and substantially improved residential and non-residential structures may be permitted provide that they are wet floodproofing. See Enclosure. Certain other categories of structures may be allowed to be wet floodproofed if a variance is issued and other requirements are met. See Agricultural Building and Accessory Building.

    Add your comment.

  18.    Fargo Acting Mayor: FEMA agrees to basement exemption |

    FARGO, N.D. Fargo's acting mayor says the Federal Emergency Management Agency has moved to continue to allow homeowners to have basements in the city's new floodplain.

    Add your comment.

  19.    Hartford Courant – State Rep. Wants To Take Dog Breed Out of Homeowners Policy Equation

    …Eric George, president of the Insurance Association of Connecticut, a trade group and lobbying organization for insurance companies in the state, said that insurers charge higher rates for certain breeds of dog because the liability is greater. George said that if such a law were enacted by the Connecticut legislature it would likely cause all homeowners' premiums to rise to "subsidize" the few that might own dangerous dogs.

    "The cost is going to have to go somewhere, so all other policies are going to be subject to premium raises," George said. "The costs are the costs and if you can't get appropriate premiums from the more risky claimants then, obviously, costs are going to have to be allocated everywhere."

    We agree.

    Add your comment.

  20.    mainly macro: Keeping quiet about hidden motives?

    Simon Wren-Lewis nails it again. It is definitely ideology (bad ideology) and not data.

    Here I quote Jeremy Warner, economics editor of the Telegraph (for non-UK readers, a newspaper firmly to the right): "In the end, you are either a big-state person, or a small-state person, and what big-state people hate about austerity is that its primary purpose is to shrink the size of government spending." He also wrote: "The bottom line is that you can only really make serious inroads into the size of the state during an economic crisis. This may be pro-cyclical, but there is never any appetite for it in the good times; it can only be done in the bad."

    Add your comment.

  21.    Ending Greece's Nightmare –

    Bravo Mr. Krugman.

    Two years after the Greek program began, the I.M.F. looked for historical examples where Greek-type programs, attempts to pay down debt through austerity without major debt relief or inflation, had been successful. It didn't find any.

    So now that Mr. Tsipras has won, and won big, European officials would be well advised to skip the lectures calling on him to act responsibly and to go along with their program. The fact is they have no credibility; the program they imposed on Greece never made sense. It had no chance of working.

    If anything, the problem with Syriza's plans may be that they're not radical enough.

    Add your comment.

  22.    Yanis Varoufakis: Greece's future finance minister is no extremist – Telegraph

    Syriza, a hard left party, that outrightly rejects EU-imposed austerity, has given Greek politics its greatest electoral shake-up in at least 40 years.

    You might expect the frontrunner for the role of finance minister to be a radical zealot, who could throw Greece into the fire.

    He is not.

    You may listen to him here: s-deep-respect-of-eu-framework-varoufaki s-O4UKeNNnQLmrYko6cZQMpg.html

    We've read his work for some years. He's a good choice for Greece right now.

    What we are looking forward to most is when Greece exits it's depression by doing the exact opposite of austerity while staying within the eurozone, showing that the Merkel/German way was flat out wrong and should never be used again anywhere.

    Add your comment.

  23.    Coppola Comment: Reflections on Recovery and Reform

    Frances Coppola points out how Keynes leaned away from the public side of the mixed economy for the sake of capitalism.

    The NIRA was a programme of labour market reforms and public works aimed at ensuring full employment at living wages. Those who think that this is what "Keynesianism" is about should study what Keynes actually said. Keynes was no Keynesian.

    Now, it is true that Keynes was writing to the President of a currency-issuing sovereign, whereas Eurozone member states have voluntarily relinquished their right to issue their own currencies. But that does not invalidate Keynes' remarks about the importance of government spending. When private sector agents cannot or will not spend, government must enable them to do so. Keynes is not suggesting that government does it FOR them. He is recommending that private sector agents be provided with more money so that they can spend it themselves.

    Add your comment.

  24.    High-end apartments dominate Pittsburgh region's real estate | Pittsburgh Post-Gazette

    Apartment bubble?

    One trend that will affect the region's real estate market in coming years is the growing number of new apartment houses that come with steadily escalating rents. Mr. Hanna said 1,600 apartments were started in the city of Pittsburgh last year and those units are renting for $1,500 to $2,500 a month.

    "If I looked and saw where I thought the bubble might be, I think it's going to be apartment buildings," he said. "The rents that we are seeing are not Pittsburgh rents.

    So, he thinks that apartments will be overbuilt to fill the demand? It will take a huge amount of construction to create a bubble, unless he means that rent rates are in a bubble right now. They are.

    Add your comment.

  25.    Doubts grow about mid-year rate hike, but Fed won't express any – MarketWatch

    While there are growing doubts among economists that the Federal Reserve will make their first hike in short-term interest rates in June, don't look for the U.S. central bank to give any hints that it may hold stay a little while longer than expected.

    The Federal Open Market Committee will meet for two days beginning Tuesday to set monetary policy for the next six weeks and will release a statement at 2 p.m. on Wednesday. There will be no press conference.

    We think many have always been simply dreaming that the Fed ever signaled a June, 2015, rate hike. The Fed has always hedged.

    We don't think we've gone out on much of a limb saying that we don't see any rate hike in the foreseeable future. The fundamental simply don't point to one.

    That said, we thought the Fed wouldn't begin the taper as soon as it did or as steeply as it did. We still feel it was premature and that the Fed should have pushed lenders to educate lending and lend to them. It's either that or fiscal spending, which we advocate much, much more.

    Add your comment.

  26.    Alexis who? – YouTube

    Global markets took the news of Alexis Tsipras' victory in the Greek election with a shrug on Monday. John Authers cautions that the risks in the situation are higher than investors currently appear to believe.

    There's another possibility. Investors might think it's a good thing: that Greece needs less austerity and that Germany has been wrong.

    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.