Linking ≠ endorsement.
↑ State raises possibility of banning neonicotinoids | Star Tribune
Minnesota regulators, for the first time, are considering banning or restricting a controversial class of insecticides that has been linked to honeybee deaths.
Insecticide use in Minnesota is governed by both state and federal law. The EPA is also reviewing the effects of neonicotinoids on bees and other pollinators, while New York, Oregon, Canada and Europe all have placed bans or restrictions on them.
The chemicals are now the most widely used class of insecticides in the world, according to the state Agriculture Department, and studies have found that they can damage the navigation and reproduction abilities of honeybees and bumblebees, even at low concentrations. Honeybees alone pollinate more than $15 billion worth of crops in the United States.
↑ Toxic Chemicals and Carcinogens Skyrocket Near Fracking Sites, Study Says – US News
Do you invest in real estate near fracking operations?
Oil and gas wells across the country are spewing “dangerous” cancer-causing chemicals into the air, according to a new study that further corroborates reports of health problems around hydraulic fracturing sites.
“This is a significant public health risk,” says Dr. David Carpenter, director of the Institute for Health and the Environment at the University at Albany-State University of New York and lead author of the study, which was published Thursday in the journal Environmental Health. “Cancer has a long latency, so you’re not seeing an elevation in cancer in these communities. But five, 10, 15 years from now, elevation in cancer is almost certain to happen.”
Eight poisonous chemicals were found near wells and fracking sites in Arkansas, Colorado, Pennsylvania, Ohio and Wyoming at levels that far exceeded recommended federal limits. Benzene, a carcinogen, was the most common, as was formaldehyde, which also has been linked to cancer.
Some of the levels mentioned in the article are staggeringly high.
↑ Storm water backs up into Illinois’ State Farm Center – Sports – Journal Star – Peoria, IL
CHAMPAIGN — The University of Illinois says it is evaluating the condition of the basketball court inside the State Farm Center after several inches of storm water backed up inside the arena.
The university said on its athletics website that the water covered the arena floor about 3 a.m. Tuesday and reached the court due to a blocked storm-drain line.
A man has been jailed on charges he set fire to the Pennsylvania discount store where he worked, starting a blaze that did $2 million in damage to a strip mall.
NEW ORLEANS (AP) – The U.S. Army Corps of Engineers should bear the full $2.9 billion cost of restoring wetland damage blamed on poor maintenance of the now-closed Mississippi River Gulf Outlet, Louisiana coastal restoration officials say in a federal lawsuit.
↑ China Shadow Banking Shifted to Insurers Alarms Moody’s – Bloomberg
China Pacific Life Insurance Co., Taiping Life Insurance Co. and Du-Bang Property & Casualty Insurance Co. all expanded trust investment fivefold or more in the first half, a “credit negative” for companies traditionally focused on fixed-income securities, according to Moody’s Investors Service. Fifty-one percent of the trust investment was directed to real estate and infrastructure, making insurers vulnerable to a cooling property market, according to Fitch Ratings.
↑ EM prospects in a post-QE world – YouTube
Excellent, quick overview:
Over the past six years, quantitative easing has led to liquidity flowing from developed to developing countries. Now the US Fed has wound down QE, what are the prospects for emerging markets? The FT’s emerging markets editor James Kynge finds out.
↑  Merk on Europe and the Fed and Keen on economics and asset price inflation – YouTube
Axel Merk does an excellent job explaining the current situation.
We think ending QE right now is a mistake. However, fiscal spending on the right things could more than make up for it. The trouble is that we have anti-Keynesians in Congress who do not understand how money is created and destroyed and how all of that impacts the larger economy. The very last thing we need is austerity in any sense. Unfortunately, the severe lack of fiscal stimulus relative to the size of the downturn does represent equally severe austerity.
Axel Merk doesn’t state things that way, but what he does say strongly suggests that he understands it quite well.
[@ 4:04] Erin is joined by Axel Merk — president of Merk Investments — to talk about the Fed, Europe, and oil. After the Fed ended its third round of large scale asset purchases (aka QE), the equities market and US government yields backed up. Going forward, Axel believes more volatility may be in store as risk premia increase and the market adjusts to a new world without the Fed’s interventions.
After the break, Erin sits down with Steve Keen [@ 15:15], head of the School of Economics, History, and Politics at Kingston University. Steve tells us about his book, “Debunking Economics,” now coming in a more accessible graphic art form. And he explains how to make finance and economics jargon more understandable to the general public. Steve also has a thing or two to say about the intersection of asset price inflation and economic growth.
↑ Regulating the global insurance industry: Motivations and challenges | VOX, CEPR’s Policy Portal
AIG was not insurance. The business that brought AIG down was a type of banking business, undertaken not by the insurance company of AIG in New York, but by a financial subsidiary located in London, called AIG Financial Products. Using the insurer’s balance sheet and top rating, the subsidiary provided credit enhancements of US subprime products, mainly to banks, by selling over $500 billion of credit default swaps, which are not an insurance product but a non-regulated financial product (Baranoff 2012).
There is no doubt that insurers are an important component of the financial sector and that large insurance companies are both significant financial intermediaries and important investors in financial markets. There is also no doubt that they play an essential economic role, by allowing firms and households to manage economic risk. In that sense, insurers are systemically important for the economy because they provide an essential economic function.
What is less evident, and what needs further study, is the extent to which insurers can be originators or transmitters of systemic risk in the financial system — the risk that causes large parts of the system to fail. This question warrants more research into the sources and transmission channels of risk. Such research should be rooted in the business model and balance sheet structures of insurance companies, which clearly differ from those of banks.
Advancing the regulation of ‘systemic risk’ in insurance without such an explicit understanding of sources and transmission channels could end up missing the point — it might not address the right aspects and it might not use the right tools. In particular, given the different economic and financial role of capital compared with banking, it is not evident that capital surcharges would be the preferred instruments in insurance.
AIG’s Lesser Depression experience is an argument for not mingling insurance and finance, per se.
As Chinese offshore investment spikes around the globe, Los Angeles is a prime destination for the new wave of capital.
In the midst of urban renaissance, Los Angeles is a focal point for Chinese developers seeking high-impact projects; investors are attracted by the city’s stable returns, linkages with Asia and opportunities for urban core developments. The inflow of foreign capital into high-profile projects will alter the Los Angeles cityscape and will further enhance LA’s position as a global gateway city.
Preliminary forecasts at the end of Q3 2014 show investment up 23% percent over Q1-Q3 2013
“Global commercial property markets continue to see increased investor activity with both prime and secondary opportunities attracting substantial competition and interest from clients,” said Arthur de Haast, from JLL’s International Capital Group.
“The sheer amount of equity still on the sidelines awaiting deployment means total volumes this year are on track to reach US$700 billion, an amount we last saw back in 2006.”
“The below average development pipeline of the last few years means that rents are rising significantly in locations where demand is strong. This provides investors with confidence that their assets will perform well which encourages them to invest in additional opportunities.”
↑ UK unemployment falls to six-year low, but wage growth remains stubbornly weak | Employment,Labour market,ONS,Pay growth,UK | Markit Commentary
Wages have failed to pick up despite unemployment falling sharply. The jobless rate fell to a six-year low 6.0% in the three months to August, with the total number of unemployed down by 154,000 to 1.972 million, dropping below two million for the first time since November 2008. The 538,000 annual fall in unemployment was in fact the largest since records began over 40 years ago, in 1972.
The puzzle remains as to why the tightening of the labour market has failed to feed through into higher wages (the number of people unemployed for every existing job vacancy is now down to 2.9, its lowest for six years). The normal laws of supply and demand do not appear to be applying to the current labour market, at least according to the official data. …
… Private sector regular wages, for example, rose 1.4% in the year to August (based on the single month figures), which was the fastest rate of increase since February. However, the overall rate of pay growth remains disappointingly muted, and below inflation, which is currently running at 1.2%. Until wage growth picks up significantly, and at least outstrips inflation, there is little chance of the Bank of England raising interest rates.
↑ German States Join Ranks Pressing Merkel to Spur Spending – Bloomberg
Angela Merkel economically shoots Germany in the feet, and the whole world feels the pain.
Austerianism (correct spelling) is backwards.
Germany’s state governments stepped up calls for infrastructure spending, adding another source of pressure on Chancellor Angela Merkel to boost investment as economic growth falters.
Much like Merkel’s national government, the states are caught between a deteriorating growth outlook and the balanced-budget drive that Germany started in response to the euro area’s debt crisis. It’s making the 16 regions set aside political differences to challenge the status quo, from rich Bavaria to rural Mecklenburg-Western Pomerania in the east, home to Merkel’s electoral district.
The struggle in Germany parallels the international conflict pitting Merkel and Finance Minister Wolfgang Schaeuble against the International Monetary Fund and countries such as France and Italy that advocate spending to stimulate growth.
Merkel didn’t flinch, telling lawmakers yesterday that Germany won’t raise public spending and reaffirming her goal of balancing the budget next year, according to a party official who asked not to be named because the session was private.
…with the 2010 European crisis, China has indeed started to shift its foreign investment focus from mostly natural resources-related investments in Africa, Asia and Latin America, towards assets in European countries that, at the height of the crisis, were often faced with the need to privatize quickly and at relatively cheap price….
↑ Secular stagnation is the outcome of deliberate policy; it can (still) be reversed – PRIME ECONOMICS
Actually, Larry Summers did not devise the term “secular stagnation” (it was Alvin Hansen); and while we did not want Larry as Fed Chairman and were quite critical of his decidedly neoliberal positions, especially during the Clinton administration, we don’t believe he thinks there’s nothing that can be done about the current situation. In fact, we suspect he largely agrees (now) with the balance of this article, as we do.
Secular stagnation within a deflationary context, let us be clear, is the outcome of deliberate policy choices. It has not come about by accident. It has not come about for lack of economic understanding, learning or analysis. It has not come about for lack of economic tools — both fiscal and monetary, or indeed for lack of human agency. Instead secular stagnation is the deliberate outcome of policy choices made by those dominant in the world’s most powerful policy-making institutions, including the IMF.
Calculated choices, including the following, have led to stagnation:
We just have to overcome a major obstacle: the resistance of those who are “holders of titles to money”; powerful creditors. Those who have lent money — the global rentier class — gain effortlessly from deflation’s invisible inflation of their most valuable asset: debt. In a deflationary environment, they stand idly by as the value and cost of debt effortlessly rises. ,
But things don’t have to be this way. Money-lenders can be faced down, as they were in the 1930s, 40s and 50s — by determined political leaders, and by enlightened economists. And stagnation, deflation and inequality can all be reversed — if intervention is timely — by human agency.
As we said above, we agree. The following is from the Forbes article linked to by “Prime”:
As Joseph Stiglitz has pointed out, few economists deserve more blame for the financial trainwreck of the last five years than Summers. In a blog for the New York Times a few days ago, Stiglitz, who won the Nobel prize for economics in 2001, commented: “As a Treasury Department official during the Clinton administration, Mr. Summers supported banking deregulation, including the repeal of the Glass-Steagall Act, which was pivotal in America’s financial crisis. His great ‘achievement’ as secretary of the Treasury, from 1999 to 2001, was passage of the law that ensured that derivatives would not be regulated — a decision that helped blow up the financial markets.”
Stiglitz added: “Some of those who were responsible for these key policy mistakes have admitted the fundamental ‘flaws’ in their analyses. Mr. Summers, to my knowledge, has not.”
Stiglitz has also pointed out that Summers’s record of egregious error goes back at least to the mid 1990s, when he encouraged East Asian nations quickly to liberalize their capital markets, a development that led straight to the Asian financial crisis.
That’s, among other reasons, why we didn’t want him for Fed Chair.
↑ Insurance Coverage For Green Home Upgrades | Bankrate.com
But before you install that solar panel array, wind turbine or solar water heater, check with your home insurance agent. After all, you don’t want to make a dumb insurance move with your energy-smart home.
“It shows that this homeowner is very into good home maintenance, and I will tell you that better-maintained homes are less risky,” he says. “It’s not that you have a solar water heater; it’s that you care about your home and you’re going to maintain it to a higher standard.”
↑ The Inequality Trifecta by Mohamed A. El-Erian – Project Syndicate
Bravo, Mohamed A. El-Erian:
In normal times, fiscal policy would support monetary policy, including by playing a redistributive role. But these are not normal times. With political gridlock blocking an appropriate fiscal response — after 2008, the United States Congress did not pass an annual budget, a basic component of responsible economic governance, for five years — central banks have been forced to bolster economies artificially. To do so, they have relied on near-zero interest rates and unconventional measures like quantitative easing to stimulate growth and job creation.
Beyond being incomplete, this approach implicitly favors the wealthy, who hold a disproportionately large share of financial assets. Meanwhile, companies have become increasingly aggressive in their efforts to reduce their tax bills, including through so-called inversions, by which they move their headquarters to lower-tax jurisdictions.
…sustained political determination would help to close massive loopholes in estate planning and inheritance, as well as in household and corporate taxation, that disproportionately benefit the wealthy.
Likewise, there is scope for removing the antiquated practice of taxing hedge and private-equity funds’ “carried interest” at a preferential rate. The way home ownership is taxed and subsidized could be reformed more significantly, especially at the top price levels. And a strong case has been made for raising the minimum wage.
To be sure, such measures will make only a dent in inequality, albeit an important and visible one. In order to deepen their impact, a more comprehensive macroeconomic policy stance is needed, with the explicit goal of reinvigorating and redesigning structural-reform efforts, boosting aggregate demand, and eliminating debt overhangs. Such an approach would reduce the enormous policy burden currently borne by central banks.
↑ The great mortgaging | VOX, CEPR’s Policy Portal
Oscar Jorda, Alan Taylor, and Moritz Schularick:
…banking today consists primarily of the intermediation of savings to the household sector for the purchase of real estate. The core business model of banks in advanced economies today resembles that of real estate funds: banks are borrowing (short) from the public and capital markets to invest (long) in assets linked to real estate.
By contrast, non-mortgage bank lending to companies for investment purposes and nonsecured lending to households have remained stable over the 20th century in relation to GDP. Nearly all of the increase in the size of the financial sectors in Western economies since 1913 stems from a boom in mortgage lending to households and has little to do with the financing of the business sector.
We find that, as a byproduct of the boom in mortgage lending, household leverage ratios (mortgage debt divided by the value of the housing stock) have increased substantially in many economies over the 20th century, as seen in Figure 3. Put differently, household mortgage debt has typically risen faster than asset values, resulting in record-high leverage ratios that potentially increase the fragility of household balance sheets and the financial system itself.
Complementing the influential recent work of Mian and Sufi (2014) for the US, our work takes a longer and wider view to show that the blowing up and bursting of private credit booms — centered on aggressive mortgage expansion — reflects deep processes at work across all of the advanced countries. This is a phenomenon that has built up persistently across the mid to late 20th century.
By using our new disaggregated credit data we can demonstrate that contemporary business cycles seem to be increasingly shaped by the dynamics of mortgage credit, with nonmortgage lending playing onl y a minor role. Since WW2, it is only the aftermaths of mortgage booms that are marked by deeper recessions and slower recoveries. Both in normal recessions and in financial crisis recessions, the slump is deeper and the recovery slower if mortgage growth was rapid in the preceding boom, as Figure 4 shows.
↑ How America’s poor are slipping further behind — in 3 charts – The Washington Post
Why they rent:
Let’s take a typical worker in the bottom fifth of earners and look at what’s happened to him in the 21st Century. Since 2000, his household’s income, after adjustment for inflation, has dropped about 15 percent. The amount in his savings account, always meager, has fallen too — by about 35 percent. If he fell out of work as the economy slid into recession, he may have fallen behind on paying his bills, hurting his credit score just as banks tightened lending.
And, in the more than five years since the end of the Great Recession, he returned to a much different low-wage market — one with a preponderance of part-time jobs.
That’s a lot to digest at once. But taken together, this means that over the last 15 years, poorer Americans have:
1) less money to spend;
2) less opportunity to borrow and;
3) less certainty about the size of their paychecks.
Does investing in infrastructure really pay off? In our study, which uses a combination of empirical analysis and model simulations, we find that increased public infrastructure investment can have powerful effects on the macroeconomy. It raises output in the short term by boosting demand and in the long term by raising the economy’s productive capacity. In a sample of advanced economies, a 1 percentage point of GDP increase in investment spending raises the level of output by about 0.4 percent in the same year and by 1.5 percent four years after the increase (Figure 3, panel 1). In addition, the boost to GDP a country gets from increasing public infrastructure investment tends to offset the rise in debt, so that the public-debt-to-GDP ratio does not rise (Figure 3, panel 2). In other words, public infrastructure investment could pay for itself, if done correctly.
…current conditions present a golden opportunity to increase public infrastructure investment in countries with infrastructure needs. In many advanced economies there is still substantial economic slack and interest rates are at historic lows—which means a bigger bang for the buck for such investment.
↑ 5 Reasons to Worry About Deflation – Washington Wire – WSJ
The deflation scare is back, as Jon Hilsenrath and Brian Blackstone report on the front page of The Wall Street Journal. It’s worth taking a moment to contemplate why deflation is such a bad thing. After all, falling prices sound appealing to consumers, especially compared with the alternative of higher prices.
So why worry?
4. Deflation is terrible for debtors. Prices and wages fall, but the value of your debt does not. So you’re forced to cut spending. This applies to consumers and to governments, and it is one of the biggest issues in Europe right now. As Yale University economist Irving Fisher wrote decades ago, debtors are likely to cut spending more than creditors increase it, and this can turn into a really bad downward spiral.
Front companies in the UK are at the heart of an investigation into one of Europe’s biggest money-laundering operations, allegedly forming part of a conspiracy to make $20bn (£12.5bn) of dirty money look legitimate. The funds are believed to have come from major criminals and corrupt officials around the world wanting to make their ill-gotten cash appear “clean”, so they can spend it without suspicion.
↑ Recession in Russia, revolt in Venezuela? The knock-on effects of tumbling oil prices | World news | The Guardian
Sudden slump in price of crude — now at its lowest for four years — sends tremors through capitals of the world’s great oil powers. A look at the economic and geopolitical implications of $80 oil.
It doesn’t make fracking more affordable or developing and processing tar sands.
It does make construction and agricultural production less expensive.
This is all on account of a rising US dollar, which is deflationary in the US, just what we don’t want for reasons cited above, just what the Fed has been struggling against even though they’ve just ended QE.
This could cause a global depression, as if we haven’t already benn in one. It would simply be worse.
The way out of all of this is US fiscal spending via bond-free United States Notes. Get on the bandwagon. It’s free money that if invested wisely, would create the first sustainable boom in US history: end poverty.
↑ Living Wages and Fair Pay | Sustainable Cities Collective
The significant difference between the living wage and the minimum wage leaves many people unable to meet their needs, dependent on benefits on which there is a squeeze, taking on dodgy loans, getting into debt – with growing numbers using food banks. Unlike the living wage, the minimum wage does not tackle poverty. The living wage-minimum wage differential is not fair because being fair means meeting needs now and into the future – being decent, caring and honest in giving dues. Meeting needs now and into the future is at the core of sustainability.
↑ America, the Balanced by Jeffrey Frankel – Project Syndicate
…if true investment income is indeed as large as double what is reported, the true US current-account balance entered the black in 2009 and has been in surplus ever since.
↑ Is the German economy growing or stalling? | Construction,GDP,Germany,Manufacturing,PMI | Markit Commentary
Germany’s Federal Minister for Economic Affairs and Energy, Sigmar Gabriel presented the government’s Autumn Statement, in which Germany’s economic growth forecast for 2014 was cut from an initial 1.8% to 1.2%. Furthermore, oofficial data showed industrial production falling at the sharpest rate since the financial crisis and exports plunging substantially.
However, it is likely that the weak industry data in part reflect common problems with official statistics not properly accounting for the variable timing of school holidays, which can play havoc with standard seasonal adjustment techniques. Moreover, while geopolitical tensions and sluggish growth in some of the world’s largest economies weigh on sentiment and economic performance overall, households’ consumption remains healthy, thanks to a robust labour market and rising wages.
PMI data paint a similar picture on the health of the German economy. The survey data show geopolitical tensions and the sanctions on Russia had weighed heavily on the performance of Germany’s internationally-focused goods-producing sector, with the Markit/BME Manufacturing PMI dropping to a 15-month low. In contrast, the service sector continued to expand at a robust pace in the third quarter.
↑ Libertarian Think Tank is Spoiling for a Fight with the Fed – Real Time Economics – WSJ
The Cato Institute has some bones to pick with the Federal Reserve.
The Washington libertarian think tank this week will launch a new Center for Monetary and Financial Alternatives. Its goal: challenge the central bank’s policies and explore alternative ways to manage the U.S. money supply, including but not limited to a return to the gold standard.
Critics have variously accused the Fed of bailing out fat-cat Wall Street bankers, harming Americans who rely on interest from their savings, distorting the flows of the free market, failing to generate sustainable economic growth and flirting with out-of-control inflation and a debased currency. Defenders say the Fed’s policies prevented the crisis from escalating into a financial catastrophe, helped stabilize the financial system and helped nurture a fitful recovery, and they note inflation remains low and the dollar strong.
Returning to the gold standard would be an unmitigated disaster. It’s not worthy of serious consideration.
We welcome an alternative to the Federal Reserve System, but the laissez-faire ideas of the Cato Institute are not good or even better.
↑ Money is power… | Socialist in the City
Well, we discussed laissez-faire capitalism. Here’s something from a socialist website.
Sometimes the metaphors that people come up with to understand complex systems are really smart. I stumbled on one last night at a debate on the causes of the housing crisis, having popped outside for a cigarette, I had a chat about economics with the bouncer who told me that for her ‘Money is like electricity, it needs to flow, it doesn’t really matter who’s holding it, as long as it moves things get done’. At the time I thought that was a pretty smart thing to say. When I thought about it later I realised it was brilliant.
You’ve heard us discuss the velocity of money flowing into the right public and private investments. Right now, it isn’t flowing there much at all. That’s the first problem. We need massive fiscal spending to prime the pump or to excite the electrons, to use the electrical metaphor.
↑ 11 amazing real estate facts to entertain your brain | Inman News
How many of them did you know? We only knew 7 of them.
↑ China’s Vicious Growth Circle by Keyu Jin – Project Syndicate
Most economists have a reason to be worried about China’s economy — whether it be low consumption and large external surpluses, industrial overcapacity, environmental degradation, or government interventions like capital controls or financial repression. What many fail to recognize is that these are merely the symptoms of a single underlying problem: China’s skewed growth model.
↑ State Jobless Rates Indicate Less Labor Market Slack – US News
Eighteen states have jobless rates below at or below 5.5 percent, a level known as the non-accelerating inflation rate of unemployment, or NAIRU, which refers to the natural level of joblessness that doesn’t cause inflation to rise. Inching closer to this threshold could indicate an ironing out of labor market slack and could be one step closer to addressing the one missing link in the recovery: wage gains.
“We’re already getting into situations in a number of states where they’re reaching points of labor shortages,” says Joel Naroff, president and chief economist at Naroff Economic Advisors, Inc. “That says that businesses in those states are going to start raising their wages. They can’t operate the same way they had been operating. It’s no longer easy for them to find workers.”
The stronger dollar may have something to say about that.
No mention shall be made of the abuse that corporations inflict on social systems through tax evasion, which deprives public coffers of one billion euros yearly, according to estimates by the Commission itself. No mention of the ever quicker redistribution of wealth from the bottom to the top. And no mention of the erosion of democracy, in both economy and society, that is driven by financial markets. Rather, the competitiveness pacts strengthen those actors who have spent years calling for “painful but necessary” reforms of the social infrastructure. In times of tight budgets, who can afford to leave money in Brussels?