News: Real Estate, Risk, Economics. Feb. 19, 2015

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Table of Contents
(Click to sections below.)

1) US Issues Draft Rules on Commercial Use of Drones; Insurers Welcome

2) [292] Mosler: weak Greek position because of refusal to consider Grexit – YouTube

3) A new era for monetary policy – Adair Turner – YouTube

4) JLL: Investor Appetite for Multifamily Housing is Booming – YouTube

5) Northeast and Eastern US Winter Storms

6) Mortgage applications plunge as rates hit highest level of the year

7) Producer Price Index News Release text 8:30 am (EST), Wednesday, February 18, 2015

8) Construction Materials Prices Plummet in First Month of 2015

9) Farmers disappointed by restrictions in proposed drone rules | Reuters

10) FAA Opens Skies to Drones in First US Unmanned Flight Regulation – Bloomberg Business

11) High court rules state-level oil-and-gas regulation not violation of city’s home rule rights | Fox Business

12) Inequality Has Actually Not Risen Since the Financial Crisis – NYTimescom

13) German economic growth smashes expectations | ETF,GDP,Germany,PMI | Markit Commentary

14) For Home Prices, The Rebound Effect Is Over. Long Live Job Growth – Forbes

15) My Experience With The Troika In Ireland

16) Is the $1tn China carry trade imploding? | beyondbrics

17) Why Greek Exit From The Euro Would Be A Very Bad Idea – Forbes

18) New bill would raise Washington minimum wage, kill Seattle’s $15 minimum wage law – Puget Sound Business Journal

19) Ocean Acidification Seen From Space Calls For Attention – American News

20) Firefighters warn against dangers of space heaters – WMBFNewscom, Myrtle Beach/Florence SC, Weather

  1.    U.S. Issues Draft Rules on Commercial Use of Drones; Insurers Welcome

    “Insurance coverage for drone operators and clients will likely be a practical requirement for any commercial use, but the FAA wisely chose not to make this a federal requirement,” said Jimi Grande, NAMIC vice president of federal affairs.

    See numbers 9 & 10 below. Also see Hill & Usher’s for UAV (Unmanned Aerial Vehicle) coverage: A comprehensive insurance program designed in partnership with the Remote Control Aerial Photography Association (RCAPA) and administered by Hill & Usher Insurance & Surety.

    Add your comment.

  2.    [292] Mosler: weak Greek position because of refusal to consider Grexit – YouTube

    …Warren Mosler — president of Valance Co., Inc and chairman of Consulier Engineering. Warren tells us the EU’s approach to the Greek debt crisis has failed to lift the Greek economy. He explains the difference between a currency issuer and a currency user and warns that Greece cannot maximize its negotiating leverage given its insistence that it will not exit the eurozone. If Mosler were to negotiate on Greece’s behalf, all options would be on the table, as he believes the potential for Greece to manifest currency issuer status best allows it to fulfil public purpose and return Greece to economic health.

    We agree with Warren Mosler that it would be completely doable; however, leaving should be a very last resort. It would be extremely politically counter-productive for the EU project of a United States of Europe, which Europe really needs and ought to include Russia.

    Germany is the problem, not Greece. Warren Mosler knows that by the way. We aren’t suggesting otherwise. He seems to think Germany won’t relax enough, so the breakup will happen.

    If Greece does exit and does benefit economically relative to its current situation, Spain and others will quite possibly follow that lead. Germany may will have killed the EU and eurozone as we know them. Also see number 17 below.

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  3.    A new era for monetary policy – Adair Turner – YouTube

    A high-level workshop “A new era for monetary policy” with Lord Turner, a Senior Fellow at the Institute of New Economic Thinking took place on October 7th 2014 in London to explore new thinking on debt, economic instability, and monetary policy.

    This is very fine at explaining how we arrived where we are but not the solution.

    Even Positive Money’s full-reserve idea is not radical enough.

    What we need is full democratization of the monetary and financial system wherein we completely eliminate debt, both private and public, and eliminate inflation and deflation while lifting all boats until technology replaces mandatory human labor/work for compensation.

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  4.    JLL: Investor Appetite for Multifamily Housing is Booming – YouTube

    Job growth drives the multifamily sector’s growing momentum, according to this video segment from JLL: “Multifamily fundamentals are firing on all cylinders, setting the stage for a robust lending environment in 2015.”

    It’s more than job growth. It’s also the lack of it. People can’t afford to purchase. Hopefully, the vast majority will be too smart and knowledgeable to fall for the lower lending-standards being pushed at them.

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  5.    Northeast and Eastern U.S. Winter Storms

    Boston had received 90.2 inches of snow since January 23, breaking the record for snowfall amounts over such a short period of time.

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  6.    Mortgage applications plunge as rates hit highest level of the year

    Just 25 percent of buyers in 2014 using conventional or FHA loans put less than 3 percent down on their home purchases, according to RealtyTrac. That is down from 27 percent in 2013 and down from a peak of 46 percent in 2009, when the first-time homebuyer tax credit went into effect. First-time buyers are more likely to put less cash down on their home purchases.

    It just shows how sensitive today’s buyers are to the slightest moves in rates. The 30-year fixed is still below 4 percent, historically very low, but home prices are still rising. Prices are not being driven as much by demand as they are by incredibly tight inventory.

    Demand is unlikely to improve this week, not for refinances nor for purchases. Interest rates jumped again Tuesday, reacting quickly to a selloff in the bond market. Mortgage rates loosely follow the yield on the 10-year Treasury, which moved markedly higher. Investors fled the safe-haven bond trade, as fears about Greece and the euro zone abated.

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  7.    Producer Price Index News Release text 8:30 a.m. (EST), Wednesday, February 18, 2015


    The Producer Price Index for final demand decreased 0.8 percent in January, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices moved down 0.2 percent in both December and November. On an unadjusted basis, the index for final demand was unchanged for the 12 months ended in January.

    That will give the Fed pause concerning raising the Fed rate.

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  8.    Construction Materials Prices Plummet in First Month of 2015

    “The decline in oil and petroleum prices finally showed up in the PPI data. In general, falling input prices are good for contractors but for those involved in oil exploration and mining activities, the news is not nearly as positive.” —ABC Chief Economist Anirban Basu.

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  9.    Farmers disappointed by restrictions in proposed drone rules | Reuters

    U.S. farmers hoping to use drones to locate lost livestock or monitor trouble spots in their fields were disappointed by what they say are overly restrictive commercial drone rules proposed Sunday by the Federal Aviation Administration.

    Two of the long-awaited draft rules were singled out for particular criticism: a requirement that pilots remain in visual contact with their drones at all times and a height restriction that limits the crafts to flying no more than 500 feet above ground. These constraints, farmers and drone operators say, would limit a drone’s range — and consequently its usefulness.

    We haven’t studied the FAA’s rationales in depth. We can, nevertheless, think of many rationales on both sides of this technology.

    Add your comment.

  10.    FAA Opens Skies to Drones in First U.S. Unmanned Flight Regulation – Bloomberg Business

    …the FAA is considering creating more flexible rules for “micro” drones lighter than 4.4 pounds, which pose lower risks. The agency is asking for the public’s reaction to the idea.

    There will be a 60-day public comment period on the regulations.

    We’d still want them regulated. The use of UAV’s without any regulations no matter the vehicle’s size would be anarchistic, chaotic, and dangerous.

    We think noise is also an issue, and we haven’t seen that addressed, though we’re sure it’s been discussed or being discussed somewhere in the federal agency. Limited hours of operation should be considered.

    Should the vehicles have to emit a GPS and serial-number signal tied to the specific operator, at least for the larger vehicles?

    What about hackability? What minimum levels of security should be mandatory?

    Add your comment.

  11.    High court rules state-level oil-and-gas regulation not violation of city’s home rule rights | Fox Business

    Certain local zoning laws can’t be used to supersede Ohio’s state-level system for regulating oil and gas drilling, a fiercely divided Ohio Supreme Court ruled Tuesday.

    Three justices — Paul Pfeifer, Judith Lanzinger and William O’Neill — dissented in the decision.

    “Let’s be clear here,” wrote O’Neill. “The Ohio General Assembly has created a zookeeper to feed the elephant in the living room. What the drilling industry has bought and paid for in campaign contributions they shall receive. The oil and gas industry has gotten its way, and local control of drilling-location decisions has been unceremoniously taken away from the citizens of Ohio.”

    Fracking and its negative consequences are at issue. Real estate values can plummet after the damage has been done. Insurance rates can shoot up or coverage become unavailable. Health and life can be put in harm’s way. If fracking money buys state-level politicians, local communities are left unrepresented and defenseless.

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  12.    Inequality Has Actually Not Risen Since the Financial Crisis –

    David Leonhardt:

    No question, inequality is extremely high from a historical perspective — worrisomely so. But a new analysis, by Stephen J. Rose of George Washington University, adds an important wrinkle to the story: Income inequality has not actually risen since the financial crisis began.

    How could that be? Because the crisis, which ran roughly from 2007 to 2010, reduced the pretax incomes of the wealthiest Americans more than the incomes of any group. The wealthy have indeed received the bulk of the gains since the recovery began, but they still haven’t recovered their losses.

    …Washington’s recent efforts to fight inequality — as imperfect and restrained as they’ve been — have made a bigger difference than many people realize.

    …. The Great Depression and the New Deal helped reverse the high inequality of the 1920s. The last several years haven’t reversed more than a small fraction of the post-1980 rise in inequality.

    It’s even possible that inequality will soon surpass its 2007 peak, because the affluent often fare better than any other group in the second half of an economic expansion. …

    In the last several years, however, the federal government has tried to combat inequality, through a combination of tax and spending policies. These efforts weren’t aggressive enough to bring major raises to most families. The financial crisis was too big, and Washington’s response was too restrained. Yet the efforts were aggressive enough to make a difference.

    They are a reminder that rising inequality is not inevitable, and that the country has the power to shape its economy.

    This is old news in that it was all stated when Thomas Piketty’s book, Capital in the Twenty-First Century, was the hot topic.

    In addition, we now have a Republican Congress.

    The trend is far from over unless the “99%” actually stop that long-term trend.

    Furthermore, the issue isn’t with a flat tax. It’s with the degree of what should be a progressive tax.

    Let’s also not forget hidden wealth. We’ve seen some secret bank accounts exposed (but all?). We’ve also seen corporations offshore their tax burden. Who are the shareholders (wealth, not just income)?

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  13.    German economic growth smashes expectations | ETF,GDP,Germany,PMI | Markit Commentary

    The weak German GDP numbers in the second and third quarters (-0.1% and 0.1% respectively) always sat uncomfortably with stronger signals from the PMI surveys (see our note here). Like the surveys, the GDP data now indicate that Germany in fact had a reasonably good year over 2014 as a whole, growing 1.6%. The GDP data for Germany have simply been more volatile than the PMI….

    That will only hurt Greece in negotiations.

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  14.    For Home Prices, The Rebound Effect Is Over. Long Live Job Growth – Forbes

    This is big news. For much of the recovery, the rebound effect was more closely tied to local price gains than job growth was. But today, things have reversed: Job growth is now much more important than the rebound effect. As home prices have increased and gotten close to long-term normal levels, and as investors and foreclosure sales have become a smaller part of housing activity, fundamental drivers of housing demand — like job growth—have taken over again.

    Nationwide, rents rose 6.5% year-over-year in January. The three large rental markets with the steepest rent increases — Denver, Oakland, and San Francisco — all have had job growth of 2% or more. In general, metros with faster job growth have larger rent increases, though some Sunbelt markets like Riverside-San Bernardino, Houston, and San Diego have had impressive job growth with more limited rent increases.

    It is good news, but sustainability is the issue. We won’t run through the litany of things that could go wrong. We’re also still having to wait for the oil-price shock to settle enough to really tell what’s happened. The Trulia data is too old for that.

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  15.    My Experience With The Troika In Ireland

    Paul Sweeney was Chief Economist with the Irish Congress of Trade Unions:

    While there was growth in jobs and incomes in the 7-year period after 2001 until the Crash of 2008, policy was now boosting a massive bubble. It was based on uber-liberal economic policies of de-regulation, privatisation, massive tax shifting from direct to indirect taxes, many of which were based on property, large tax “incentives” and pro-cyclical fiscal policies.

    In the latter years of the boom it may have appeared as if ultra-free market liberalism was working, but it was a gross illusion. We lost almost a decade of economic progress, many Irish businesses closed, all Irish banks collapsed, unemployment and emigration soared and we lost our dignity.

    The Troika bailout team of the IMF, European Commission and European Central Bank took over the running of the country for 3 years on 18 November 2010. …

    The key elements were to rescue the banks, asset disposals (privatisations), a programme of fiscal consolidation (austerity), a range of structural reforms (interference in labour affairs, pay cuts and firings) and a downsizing of the state in ‘a business friendly environment.’

    The new government of Fine Gael and Labour renegotiated the MOU and the first thing it did was to reverse the cut in the minimum wage, which had just been implemented by the previous government. It also reduced the proportion of the consolidation taken by cuts and increased the tax element — a more progressive balance. This early adjustment in the fiscal balance between cuts on public services, which hurt the poor, and targeted tax rises, sought by the trade unions, was important and progressive.

    The new government also had a major success in February 2013 when it negotiated a deal (the Promissory Notes) to extend the length of time of the debt repayments for up to 40 years, at lower interest rates. This has a major economic impact. It failed, however, in ‘burden sharing’ of the cost of rescuing the banks with other foreign banks and other creditors. This failure did not go down well with the Irish public.

    For a Europhile, the attitude, policies and arrogance of the Commission was deeply disappointing as I had believed that it was there to serve the people of Europe and that social solidarity and society were an integral part of what Europe was about. Ecofin is clearly run by a group of economists who are slaves to an out-dated ideology. This ideology is failing Europe today.

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  16.    Is the $1tn China carry trade imploding? | beyondbrics

    Analysts say these outflows reveal an unwinding of the “China carry trade”, through which speculators have borrowed short-term from overseas banks at relatively low interest rates and then invested in high-yielding Chinese assets amid expectations of a renminbi appreciation.

    “As for the source of outflows, we believe that the unwinding of carry trades, and other speculative short-term flows, has played a major role,” said Jason Daw at Societe Generale in Singapore. “Outflows in those short-term accounts are likely to remain sizeable,” he added.

    In an economy engorged by debt — currently estimated to amount to around 240 per cent of GDP — China faces the threat that if liquidity depletes sharply, it may depress growth. Thus Beijing has to find a way to replenish the liquidity lost through capital outflows.

    One option, analysts said, would be to cut interest rates, invigorating companies by reducing their debt service burden while making it cheaper to borrow. But this course of action may also depress the renminbi, triggering further outflows as investors dump the “carry”.

    This is the reason why, analysts said, Beijing decided…to cut its bank required reserve ratios (RRR), a move that does not involve altering interest rates but nevertheless replenishes liquidity lost through capital outflows by liberating effectively frozen deposits in the banking system.

    They also cut rates.

    They loosened capital controls, allowing more Chinese to invest outside China.

    We think all of this is part of China more internationalizing their currency against the US dollar as the world’s reserve currency.

    It’s one of many steps (an international bank, various trade deals, etc.) China has taken to help free up China and its allies from US financial and economic global domination.

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  17.    Why Greek Exit From The Euro Would Be A Very Bad Idea – Forbes

    Frances Coppola:

    …insolvency of the Greek central bank would frankly be the least of anyone’s worries in the event of a Greek sovereign default. The majority of Greek sovereign debt is held not by banks — even Greek ones — but by a range of EU institutions including the ECB, the EFSF and Eurozone governments through bilateral lending. And by the IMF. All of these institutions would lose substantial amounts of money if Greece defaulted on its debt. This would be the case whether or not Greek default was accompanied by exit from the Euro.

    It is in no-one’s interests for Greece to default, and very foolish indeed for the Eurozone to indulge in the sort of brinkmanship that could force it to default. Have we so soon forgotten the failure of the last-minute talks intended to rescue Lehman Brothers? We surely are not going to make the mistake of believing that there would be no systemic consequences from a Greek default. Default of a sovereign is NEVER without systemic consequences, however small the country — and Greece, although a small country, is certainly not insignificant.

    But should Greece leave the Eurozone anyway? Some think that it would be better for it to leave. It could then set up its own currency, re-denominate its debts into the new currency and reflate its economy. The currency would devalue significantly, giving it competitive advantage, while monetary reflation would stimulate the economy and payment of debt in the (devalued) new currency would be far less onerous. What’s not to like?

    There is a great deal not to like. For Greece, the consequences would be pretty unpleasant, at least in the short term. [Frances continues by explaining how it would be hard and risky for everyone.]

    True, but if Germany won’t be flexible, Greece will be shoved out and will have to make the best of a bad situation.

    The problem is neoliberal economics and the bankers’ hatred of the leveling inherent in real democracy.

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  18.    New bill would raise Washington minimum wage, kill Seattle’s $15 minimum wage law – Puget Sound Business Journal

    The bill would raise the minimum wage annually to match inflation….

    That part makes good sense. We’ve always been for it going back many decades. Index the minimum wage to inflation, but make that the local-inflation rate: Cost-of-Living Adjustment (COLA).

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  19.    Ocean Acidification Seen From Space Calls For Attention – American News

    About 1/4 of the carbon dioxide released through human interactions is absorbed by the oceans, where water can transform the gas into carbonic acid. Even though this process has temporarily slowed the amount of carbon being released into the atmosphere, it has also raised acidity in oceans, potentially harming marine wildlife.

    “Oceans around the globe have become 30% more acidic since the start of the Industrial Revolution, according to the National Oceanic and Atmospheric Administration (NOAA).”

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  20.    Firefighters warn against dangers of space heaters –, Myrtle Beach/Florence SC, Weather

    While they make look small and safe, space heaters can cause a lot of problems. They are one of the leading causes of home heating fires across the country.While they make look small and safe, space heaters can cause a lot of problems. They are one of the leading causes of home heating fires across the country.

    There are insurance policies where the use of space heaters is prohibited, including by type of heater. Check your policy, and understand that not all space heaters are created equal.

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