Linking ≠ endorsement.
⇧ Consumer Price Index Summary
On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers declined 0.4 percent in December after falling 0.3 percent in November. The index for all items less food and energy was unchanged in December after rising 0.1 percent in November.
“…less…energy…” is important because deflation in gas is good for consumers while bad for producers of oil and gas.
⇧ mainly macro: Why below target inflation is a big problem
Simon Wren-Lewis, economics professor at Oxford University and fellow of Merton College:
…I cannot also help noticing that some on the right have been arguing for higher interest rates for some time, and refuse to admit they were wrong. They are confirming Kalecki’s idea that although what he called full employment was good for society, it may not be good for some particular parts of society. Those pursuing this line should not be dismissed: they should be laughed into obscurity.
⇧ Michal Kalecki, “Political Aspects of Full Employment”
“Michal Kalecki (22 June 1899 – 18 April 1970) was a Polish Marxist economist.” He absolutely nails it in this article. The only thing blocking full employment without any problem inflation is strangely selfish people.
The entrepreneurs in the slump are longing for a boom; why do they not gladly accept the synthetic boom which the government is able to offer them? It is this difficult and fascinating question with which we intend to deal in this article.
All a nation needs to do is go on a war footing economically but rather than build weapons, build up the country’s peacetime infrastructure. The Japanese were doing this before they were wrongly convinced by Western laissez-faire types to stop it. That’s when Japan’s economy tanked. Germany did vastly better at ending its Great Depression than even the US did under the New Deal and for the reasons explained in the article. There is no reason whatsoever though that the same economic effort couldn’t be done but without the weapons and wars.
This is easy. Economics is easy. It always has been. Why are we holding ourselves back? Why are we allowing others to hold us back?
We need to break the shackles.
There’s also little evidence that Dodd-Frank enriches the biggest banks; firms go out of their way to avoid a SIFI designation, which they wouldn’t if there were a benefit to them, and Wall Street analysts take it for granted that capital requirements and other regulations are more binding for the largest firms.
⇧ Central Banks Must Target Growth Not Inflation | Brookings Institution
This is the clearest explanation of Market Monetarism we’ve read. Warwick J. McKibbin:
Nominal GDP growth is the sum of inflation and real GDP growth. To understand why nominal GDP targets works well, consider the case of a fall in productivity (equivalent to a rise in input costs). An inflation targeting central bank would tighten policy in response to rising inflation. A central bank following a nominal GDP target would combine the rise in inflation with the fall in real GDP and not tighten policy or may even loosen policy if the expected fall in real GDP is larger than the expected rise in inflation. The outcome for the real economy would be better but expectations from having a clear policy rule would not be undermined.
Given a mixed economy under a monetarist system, targetting nominal GDP versus just inflation makes sense. What about the dual mandate that includes employment? Our understanding thus far is that the market monetarists argue it would be taken care of automatically.
⇧ Off the Charts Blog | Center on Budget and Policy Priorities | State and Local Tax Systems Hit Lower-Income Families the Hardest
Washington State’s tax system is the most regressive, according to ITEP.
However, there is no state income tax in Washington State.
⇧ Francs, Fear and Folly – NYTimes.com
This is one reason that slashing government spending in a depressed economy is such a bad idea: It’s not just the immediate cost in lost jobs, but the increased risk of getting caught in a deflationary trap.
It’s also a reason to be very cautious about raising interest rates when you have low inflation, even if you don’t think deflation is imminent.
It’s a sound argument for Swiss helicopter money. You don’t have to park money in banks. You can hand it out. You’ll get inflation if you hand out enough, guaranteed.
⇧ Calculated Risk: NMHC: Apartment Market Conditions Slightly Tighter in January Survey
“Last year’s ramp-up in new construction finally signaled complete recovery on the supply side. Even so, demand for apartment residences remains strong enough to absorb the increase in deliveries—and then some, as occupancy rates edged up a bit more.”
⇧ The 200 Most Powerful and Influential People in Residential Real Estate
What makes the Swanepoel POWER 200 (SP200) unique is that we have integrated in one list all the different types of leaders in the real estate industry, even though they succeed and/or serve in different sectors of our industry. Some have entrepreneurial power or financial strength, some hold high office and have positional power, while others have political clout and some have personal power.
⇧ North Minneapolis housing market takes a turn for the better | Star Tribune
This resurgent housing market is prompting the city to begin testing the market by restarting some long-stalled housing redevelopment projects. They include the partly built Heritage Park, where four public housing projects were razed 15 years ago, and Humboldt Greenway farther north, a Hennepin County-inspired project that stalled when the recession hit.
⇧ Global growth: Demographic deceleration – YouTube
McKinsey Global Institute partners Jaana Remes and Richard Dobbs discuss how an aging world will change the pace and locations of economic growth in the coming decades.
We think that technology is the wild card here.
⇧ Global Growth: The productivity challenge – YouTube
Well, we promise we wrote our technology comment above before we saw this next video from McKinsey.
McKinsey Global Institute partners James Manyika and Jaana Remes discuss how the world will need to rely on productivity gains to drive global growth.
⇧ 2014: “Tallest Year Ever,” According to Council on Tall Buildings and Urban Habitat – Architect Magazine
The Council on Tall Buildings and Urban Habitat (CTBUH) released its annual report, the 2014 Tall Building Data Research Report, which concluded that 97 buildings of 200 meters (656 feet) or higher were completed last year, beating every previous year on record, including the all-time high of 81 completions 2011. Additionally, eleven “supertalls” (buildings of 300 meters—984 feet—or taller) were completed, making this year even more significant for tall buildings, as it was also the highest recorded annual total.
How long will China keep it up?
⇧ From Welfare State to Innovation State by Dani Rodrik – Project Syndicate
Imagine that a government established a number of professionally managed public venture funds, which would take equity stakes in a large cross-section of new technologies, raising the necessary funds by issuing bonds in financial markets. These funds would operate on market principles and have to provide periodic accounting to political authorities (especially when their overall rate of return falls below a specified threshold), but would be otherwise autonomous.
Designing the right institutions for public venture capital can be difficult. But central banks offer a model of how such funds might operate independently of day-to-day political pressure. Society, through its agent — the government — would then end up as co-owner of the new generation of technologies and machines.
The public venture funds’ share of profits from the commercialization of new technologies would be returned to ordinary citizens in the form of a “social innovation” dividend — an income stream that would supplement workers’ earnings from the labor market.
That’s not really saving capitalism from itself. It’s incrementalism. It’s postponing the inevitable: total democracy. It’s allowing the slow death of capitalism. It’s Burkean conservatism to avoid the possibility of Robespierre. History has been marking the whittling away of capitalism. Sometimes it’s been violently traumatic. Sometimes it’s been more peaceful (New Deal). The point is that the suggested fix will not work but for a while.
There is nothing inherent to capitalism that makes it better for the future than democracy; and we have to be clear here that democracy is not synonymous with Stalinism.
Anyway, Dani Rodrik is absolutely correct that choices will have to be made. There just won’t be necessary jobs as we know them (work that will have to be done for compensation) enough for all or anything close to it.
⇧ Money Dries Up for Oil & Gas, Layoffs Spread, Write-Offs Start | Wolf Street
Wolf Richter says fracking has been one giant Ponzi scheme:
This [the fracking bust] is the inevitable result of fracking for natural gas whose price has been below the cost of production for years — though the industry has vigorously denied this at every twist and turn to attract the new money it needed to fill the holes.
Congress and the White House have changed things so the banks will again not lose but this time bank depositors will.
Will FDIC be backed by the full faith and credit of the US? If so, why should the banks not have to eat their bad loans rather than the American taxpayers in general? Why should the superrich owners of banks be propped up rather than the banks nationalized?
It’s like 2007-8 all over again, but at least gas is cheaper.
Even if it’s a wash for the regular consumer, why favor the banks remaining private when they could be nationalized, as has happened before?
Why is the US a plutocracy?
⇧ Amazon’s Luxembourg Tax Deal May Be Illegal, Says EU Report | Fast Company | Business + Innovation
Along with other multinational companies, including Apple, Starbucks, and Fiat, Amazon is facing increasing scrutiny from the European Union in recent months over its tax strategies in Europe.
On Friday, regulators from the European Union published preliminary findings in a 23-page report, claiming that the current tax deal Amazon receives in Luxembourg—where Amazon has its European headquarters—constitutes illegal state aid.
A few days ago the influential IFO Institute published a short paper (https://www.cesifo-group.de/ifoHome/presse/Pressemitteilungen/Pressemitteilungen-Archiv/2015/Q1/press_20150106_Griechenland/main/0/text_files/file0/document/GRexit_Haftung_Deutschlands.pdf) suggesting that a Greek default inside the euro-area would cost Germany €77.1 billion, while a default combined with an exit from the euro would cost €75.8 billion. The two numbers are about the same, yet unsurprisingly, media reports emphasised that a Grexit would be cheaper for Germany by €1.3 billion (see e.g. a Focus report here: https://www.focus.de/finanzen/news/staatsverschuldung/ifo-institut-berechnet-grexit-kostet-deutschland-weniger-als-griechenlands-verbleib-im-euro_id_4386519.html).
We think that the publication of such numbers falsely suggests that direct losses can be calculated precisely. Even more importantly, we noticed that the calculation did not consider three major factors:
- the different haircuts likely under the two scenarios,
- private claims,
- other second round losses.
All three factors suggest that direct losses for Germany would be much larger if Greece were to exit the euro.
⇧ Rooftop Solar Shines Light On Bad Business Practices
Issued raised by someone pro-solar:
In my own search for a company to put a solar array on our roof, I came across companies that outright lied about their products, either wrongfully claiming they were made in America, or stating they were the only ones manufactured in my home state.
But I also came across excellent companies, like Smart Energy Today, who encourage inexpensive strategies, like high-tech insulation, to reduce utility bills more than the more costly solar arrays. If solar is chosen, they lay out the pros and cons and discuss who and where each component is made, how the rebates and tax credits apply, and just how long the pay-off period is given a range of projected electricity costs for that area.
⇧ Funding in Shanghai’s realty dives – Headlines, features, photo and videos from ecns.cn|china|news|chinanews|ecns|cns
Is this a relative crash?
Investment in Shanghai’s real estate plunged over 50 percent last year, and the market saw domestic investors taking the lion’s share of the deals, global property service provider DTZ said in a report yesterday.
⇧ Phoenix home prices up, but sales fall in Nov.
“While investor purchases are still below the peak levels we saw in the Phoenix area after the housing crash, the levels have started to recover over the last four months,” Orr [Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business at Arizona State University] said. “However, we may see fewer international buyers in the market now because of the recent dramatic rise in the value of the dollar against most foreign currencies.”
⇧ Calgary Real Estate: More $1 Million Dollar Homes Than Ever
CREB chief economist Ann-Marie Lurie told CBC News that the volatile price of energy is casting a cloud of uncertainty over the market, and no one seems too sure what influence the energy sector will have on the market in months to come.
Well, one things for sure, if prices stay down or fall even lower (likely) and stay down, all the “unsure” real-estate talk in Alberta will end.
In Aspen,…people who clean the vacation homes, maintain the mansions’ gardens and work in the hotels must find housing in mobile home parks or subdivisions squeezed into the few acres of developable space dozens of miles to the west. A few — about half of Aspen’s year-round population of 6,700 — are able to score units in the town’s unusual affordable housing program that, on the open market, would sell for millions each.
Why don’t the resorts add service-personnel living quarters?
“Even if oil averages $55pb for the next seven years and, hypothetically, expenditure stays at $239bn (2015 budgetary spending) there is enough money to support a deficit of that magnitude.
They could also tighten their belts. Therefore, oil prices are not going way back up anytime soon.
The push for alternative energy will be dampened. Environmental improvements, other than cutting back on fracking, won’t be made as quickly. Global warming will be worsened (barring new reduction factors). Oil producing nations dependent on high prices will be hurt. Oil importing nations will benefit. Gas consumers will benefit. The global net-result won’t be better.
The fire department said everyone should have a carbon monoxide detector in their homes, just like they have a smoke detector, because it is just as important.
⇧ David Wu: China’s Regulation Problem – YouTube
We really like David Wu’s constant emphasis upon doing what is best for the Chinese people as a whole and individually. He’s a man truly for the people even though he’s a man of position. He’s also realistic.
David Wu, a chartered accountant by training, is also a member of PwC China’s Management Board, and also holds the following leadership roles: China Government and Regulatory Affairs Leader, North China Markets Leader and Beijing Senior Partner.
⇧ How Much Money can you Make From Rental Properties – YouTube
I make over $6,000 a month from my rental properties which rent from $1,300 to $1,500 a month and are bought from $80,000 to $135,000.
⇧ Still Report #352 – Dutch Parliament Debate Coming – YouTube
Here’s Bill Still, whom we’ve known for many years now, speaking about monetary and banking reform. He wants to take things further than the MMT (Modern Money Theory) crowd, many of whom completely seem to miss the point Bill makes very well here.
You’ve heard us extol the MMT movement. We’ve done so while often saying that we want to go further. Bill discusses much of why.
That doesn’t mean that we want to end up with what Bill finally has in mind for the US or the world though. We have differences, but compared to where the US economic system stands now, you’d think we were quite close.
The Dutch Parliament will have to discuss monetary reform in similar fashion to the recent debate in the British Parliament due to a fast-moving initiative petition in the Netherlands.