Linking ≠ endorsement.
↑ [Recommended] Looking at the Middle Kingdom with Fresh Eyes | Mauldin Economics
This article is great at making clear just how unclear the data from China are.
Although China is the world’s largest producer of value-added manufactured goods, it has not been an export-led economy for a very long time. As I detailed in last month’s letter, China’s growth has largely relied on extraordinarily high levels of fixed investment, supported by even higher levels of domestic savings and an unsustainable rise in private-sector credit.
China’s greatest challenge will lie in deleveraging the economy while also rebalancing toward a consumption-driven growth model for the first time in modern history. That cannot happen as long as households remain repressed by unequal access to credit markets or intentionally suppressed exchange rates, which essentially represent a transfer of household wealth from workers to state-favored firms. But reforming the system will require a greater slowdown than China’s policymakers are letting on. And, Leland warns, Beijing runs the risk of blowing its credibility and instigating capital flight if the divergence between official forecasts and China’s actual economic experience grows too large.
We still think people are generally underestimating the current real-estate bubble in China.
↑ CONVERSABLE ECONOMIST: Hours Worked, No Change; Output, Up 42%
The more immediate question is what to make of an economy that is growing in size, but not in hours worked, and that is self-evidently having a hard time generating jobs and bringing down the unemployment rates as quickly as desired. I’m still struggling with my own thoughts on this phenomenon. But I keep coming back to the tautology that there will be more good jobs when more potential employers see it as in their best economic interest to start firms, expand firms, and hire employees here in the United States.
Automation will eliminate required human labor. How are we going to handle it as a society? We think we should provide for everyone a very high quality of life.
↑  Stephen Rosenberg on Housing & Don Boudreax corrects Economic misunderstanding – YouTube
At time mark 4:35:
… we sit down with Greystone CEO Stephen Rosenberg to talk about the housing market, mortgages, and the effects of a possible end to Fannie Mae and Freddie Mac.
↑ Kick-starting southern Europe: Some like it hot | The Economist
Net foreign direct investment, broadly in retreat since 2007-08, is growing again, most strongly in Spain, followed by Italy, with Greece and Portugal still laggards (see chart 1). The totals are nowhere near their levels before the crisis but the ebbing tide seems to have turned.
Lone Star, a private-equity firm, and JPMorgan Chase, a bank, are putting the final touches to an agreement to buy around €4 billion-worth of Spanish property loans from Commerzbank, a German lender. Foreigners account for over 60% of the burgeoning investment in commercial and multi-dwelling residential property in Spain these days, and for over 70% in Italy, according to Real Capital Analytics, a research firm. …
When economies crash, private-equity boots are often the first on the ground, especially when it is cheap to borrow money to invest. They came with capital—and a healthy desire to maximise profits—at a time when southern Europe was starved of it.
In 1991 community advocate Gail Cincotta, in testimony before the Senate Banking committee stated: “Lenders will respond to the most conservative standards unless [the GSEs] are aggressive and convincing in their efforts to expand historically narrow underwriting.” The next year Congress imposed affordable housing mandates on Fannie Mae and Freddie Mac. Over the next 15 years the Department of Housing and Urban Development (HUD) forced the abandonment of traditional underwriting standards, which led to an accumulation of an unprecedented number of weak and risky non-traditional mortgages. The collapse of housing and mortgage markets, and the ensuing Great Recession, may be directly traced to those events in the early-1990s.
The American Enterprise Institute often writes in favor of hyper-privatization. Every chance it gets or makes, it trots out this canard that the GSE’s were responsible for the Great Recession when, in fact, it was Wall Street. Had Wall Street not flooded the market with non-GSE subprime mortgage-backed securities, the Great Recession would not have happened. Had Wall Street banks not engaged in allowing no-doc loans, the Great Recession would not have happened. Had the standards at the GSE’s been adhered to, the Great Recession would not have happened. The GSE’s reacted to Wall Street, not the other way around. Wall Street set the pace that the GSE’s thankfully never did catch up with. As it is, the Wall Street banks have been made to take back fraudulent loans foisted on the GSE’s.
North Dakota once again proved to be the dominant leader in having the nation’s fastest housing growth in the country, a title it’s earned for the last three years, according to Census Bureau statistics released this week. The oil boom continues to drive up demand for housing throughout the state.
How long will it last? Who has an exit strategy? Anyone with one will be depending upon others being left holding the bag.
↑ Debunking George Osborne’s ‘recovery’ in four charts
Britain is booming! At least, that’s what George Osborne would have us believe. Casual observers could be forgiven for thinking that the UK economy has indeed entered into a robust recovery from the deep collapse of 2008-2009 and the tediously long stagnation that followed. The UK chancellor says the country’s growth is now the envy of Europe and the US. He immodestly attributes this to his austerity policies.
But, to paraphrase Winston Churchill, this 0.8% quarterly growth is not the end, not even the beginning of the end, nor even the end of the beginning.
↑ Unstoppable $100 Trillion Bond Market Renders Models Useless – Bloomberg
Household spending declined in April, while the world’s largest economy contracted in the first quarter for the first time since 2011, government reports showed last week.
“Given the outlook for the global economy and inflation, bonds are not a bad place to be,” Gary Pollack, the New York-based head of fixed-income trading at Deutsche Bank AG’s private-wealth management unit, which oversees $12 billion, said in a telephone interview on May 28.
↑ Millennials squeezed out of buying a home – Jun. 1, 2014
“When we surveyed Millennials they cited several barriers to homeownership, especially access to financing,” said Steve Deggendorf, a senior director for Fannie Mae.
Many Millennials simply can’t come up with the hefty 20% down payments. Others don’t have good enough credit to qualify for loans.
Making it even more difficult are the heavy student loan burdens many college grads carry.
↑ States feel unequal burden of carbon reduction targets – FT.com
President Barack Obama’s plan to cut power plants’ carbon dioxide emissions places a widely differing burden on different states, opening the proposals to objections from those that feel they are being treated unfairly.
We understand the EPA’s logic, but satisfying every state would likely not be possible.
↑ Black Knight: 2 million borrowers face rate resets | HousingWire
There are approximately 2 million modified mortgages facing interest rate resets, and of that amount, 40% are currently underwater, Black Knight’s April Mortgage Monitor Report found.
We’ve been hearing for years that resets will sink the real-estate recovery. However, what recovery?
If things continue on as they are, we won’t be back in 2018, as most thought but rather more like 2024 if we’re lucky.
The Fed and Congress really need to revisit their plans. We need the Fed to force the movement of money into the real economy (not mere financial speculation) while we need the US Congress to use fiscal spending on real economic gains: good-paying jobs on truly productive infrastructure, etc.
↑ Wells Fargo Will Stop Offering Most ‘Interest-Only’ Home-Equity Loans – Real Time Economics – WSJ
Wells Fargo & Co. is overhauling its offerings of home-equity lines of credit so that most new customers will be required to pay principal and interest over the life of the loan, a significant shift by the nation’s largest home-equity lender.
Monday’s WSJ takes a look at how more homeowners who took out so-called Helocs during the housing boom are now facing higher monthly payments as 10-year “interest-only” periods end, requiring borrowers to make interest and principal payments.
Many consumers borrowed heavily during the housing bubble with little consideration for what would happen in 10 years, since few expected home values to decline sharply and leave them without the ability to refinance their loans and avoid higher payments.
↑ EconoMonitor : Dan Alpert’s Two Cents – The Devil’s in the Data: It Appears No One Knows What to Make of the U.S. Economy, and Here’s Why
Tons of easily understood data in this one by Daniel Alpert:
“…one in five American homeowners with a mortgage remains underwater, a stubbornly high rate that is contributing to inventory shortages and holding back a full market recovery. The “effective” negative equity rate, which includes those homeowners with a mortgage with 20 percent or less equity in their homes, was 39.2 percent in the third quarter. Listing a home for sale and buying a new one generally requires equity of 20 percent or more to comfortably meet related expenses.”
One cannot find a more classic example of a market unable to find a true “clearing” price level because of non-market influences (i.e. government policy initiatives). And like much of post-crisis history, much has been made of headline data in housing without careful consideration of underlying dynamics.
We are living with an economy that appears to have been able to generate annual growth in the 2% range and has created enough jobs to replace those lost in the Great Recession, but nowhere near enough to absorb the increase in working age population since then. Certainly, the U.S. economy has not achieved anything remotely close to the escape velocity necessary to sustain the virtuous circle of job and wage growth, consumption, and creation/absorption of new capacity.