Linking ≠ endorsement.
⇧ Why the Obama administration is fighting for a trade deal its liberal allies hate – Vox
This article by Ezra Klein comes off as very fair and balanced, etc.; however, that’s because it is missing the single most important aspect of the debate, which concerns the Investor-State Dispute Settlement (ISDS) issue. (https://en.wikipedia.org/wiki/Investor-state_dispute_settlement#Debates) By the way, lest someone come to the wrong conclusion, we aren’t saying that Ezra’s oversight was deliberate.
The issue is corporatism versus democracy.
It’s nice to read the following though:
The first thing the administration says is that this is a good deal: when the text is finalized and released publicly, people will be surprised by how different from its predecessors this trade deal really is. They note that Obama ran for office promising to renegotiate NAFTA, and while that didn’t happen, this deal fully reflects his thinking about what went wrong with NAFTA — particularly in the weak enforceability of its labor and environmental standards.
As our consistent readership knows, we’ve always stressed high labor and environmental standards for such trade agreements. Unfortunately, were talking about a secret document (even though there have been selective and other leaks) where the President is asking for fast-track authority, which will greatly lessen the time to debate the treaty/agreement and where it will be an up-or-down vote (no amendments).
We aren’t against the agreement. We reserve judgment about its contents. We don’t really know yet what’s in it. We’re against the process and what’s possibly in the draft text as too corporatist and anti-democratic.
⇧ New Day For RESPA: The UDAAPification Of Section 8 | BuckleySandler LLP – JDSupra
The Real Estate Settlement Procedures Act has gone the “UDAAPified” way of debt collection — this time, through enforcement rather than guidance.
Even if we’re talking about absolute numbers rather than as a percentage of the population and even if we’re talking about incomes before benefits, this is not a good thing. The US could have done vastly better. John Quiggin:
Both the number and the percentage of families in poverty dropped sharply during the 1960s when the “War on Poverty” was being waged actively, and remained near their all-time lows through the Nixon and Carter years until 1979, when the Volcker recession hit, followed by the election of Ronald Reagan. These events can reasonably be said to mark the point at which the government unequivocally changed sides.
⇧ The US Oil Bust Just Got Worse | Wolf Street
The largest US refinery strike in 30 years that impacted 12 refineries and a fifth of US refining capacity appears to be settled. A tentative agreement has been reached between the United Steelworkers union and oil companies. Once these refineries are fully operational again, more crude will head their way. The driving season will start soon. SUVs and pickups and even fuel misers have a prodigious appetite collectively and can burn through a lot of gasoline in a hurry. And imports could be throttled back further.
So there is a very good chance that storage capacity will disappear as a death trap for the price of oil this year. But US oil production is likely to continue to rise, leaving the industry to face an even bigger oil glut and even more price mayhem next year. Yet production won’t start declining until the money runs out.
⇧ China Real Estate | Kaisa Group
Consider Kaisa, a Shenzhen-based property developer whose investors included private equity giant the Carlyle Group and Singapore investment fund Temasek holdings. Kaisa raised about $2.5 billion on the bond market, and became a major developer in more than 20 Chinese cities, the New York Times reported. But in February, following a corruption scandal, the family of the firm’s chairman Guo Yingcheng sold its 49 percent stake for just $580 million — a fraction of what it was worth less than a year ago, according to the newspaper. Chinese authorities froze sales at several Kaisa residential developments in December, without providing an explanation.
⇧ Just How Tight is Mortgage Credit, Anyway? ‹ Zillow Real Estate Research
Determining just how easy it is (or isn’t) to get a mortgage now relative to other points in time is no easy task. But we’ve gone ahead and done it anyway.
The flow of housing credit was largely unrestrained prior to the subprime mortgage crisis. And in response to the crisis, housing credit all but evaporated. But what has happened since is much less clear, particularly because measuring credit conditions is difficult and often inaccurate.
It is difficult to capture mortgage credit availability with one single metric, because a number of factors play a role in determining whether a loan applicant is approved. This includes credit history, proof of income, loan size, documentation and down payment size. On top of approval, there are also issues of interest rates, mortgage insurance premiums and the type of loan issued. All of these variables impact credit conditions, making quantifying credit access a multidimensional problem.
The new Zillow Mortgage Access Index (ZMAI) accounts for seven of these factors and dates back to 2002.
Thanks to Kevin Simpson-Verger for the link: https://mobile.twitter.com/KevinismyBroker/status/576237240306765825
⇧ California has about one year of water left. Will you ration now? – LA Times
What in the world have they been waiting for?
Several steps need be taken right now. First, immediate mandatory water rationing should be authorized across all of the state’s water sectors, from domestic and municipal through agricultural and industrial. The Metropolitan Water District of Southern California is already considering water rationing by the summer unless conditions improve. There is no need for the rest of the state to hesitate. The public is ready. A recent Field Poll showed that 94% of Californians surveyed believe that the drought is serious, and that one-third support mandatory rationing.
We’ve been pushing for desalinization for decades.
⇧ Vanuatu hit hard by Typhoon Pam – YouTube
The Pacific may have seen the worst of Typhoon Pam as winds are now subsiding, but it has left a trail of destruction in her wake, notably on the island of Vanuatu.
Described as an unusually powerful hurricane, Pam crashed into Vanuatu’s northeastern coast, from which there have been unconfirmed reports of dozens of deaths
In total there are 267,000 people spread across 65 islands, so detailed damage and casualty reports will take some time to come in.
⇧ Blyth Devastates Congress’ Approach to Budget – YouTube
The video is quite good, quite short, and quite to the point. Hang in there. They do start showing the slides.
In testimony from earlier this week, Brown University Professor Mark Blyth told the Senate Budget Committee that austerity would gravely hurt the American economy.
They still won’t do the right thing. Besides, it’s the House that really controls the money.
No embed available:
One firm has amassed more than 38,000 apartment units in markets including Phoenix, Tucson, Seattle, Anchorage, Colorado and Texas.
Together, the Weidner Apartment Homes properties, founded by billionaire Dean Weidner, 72, have a net asset value of $2.3 billion.
…the 30th-largest owner of rental properties in the United States, according to the National Multifamily Housing Council.
⇧ Young Woo Micro Apartments | NYC MIcro Aparments
A handful of companies are leading the push, abandoning 12-month leases for month-to-month arrangements, according to the New York Daily News. The micro-rentals allow millennials to come and go at a moment’s notice and even move between buildings within a landlord’s portfolio.
Germany, too, has its share of dodgy banks. But the real risk there lies elsewhere: in the life insurance sector. Moody’s, a rating agency, already warned in late 2013 that an environment of low interest rates would be very dangerous for the German life insurers. At that time, the yield on 10-year German government bonds was still a respectable 2 per cent. They were at 0.34 per cent last Friday. For five-year paper, the rate is even negative.
To make matters worse, this is all happening at a time when the insurance industry itself is subject to tightening domestic and European regulation. Since 2011, German insurance companies have to hold a reserve to protect themselves against falling bond yields. And a new European regulatory regime will impose stricter capital requirements and solvency rules from 2016.
At zero interest rates, it is very difficult for the industry as a whole to remain solvent. …
If there is anything in Europe that requires urgent reform, it is not the Greek product market, but the German and Austrian financial sector. This sounds utterly implausible to the casual observer. But if Germany continues with its policy of forcing a deflationary adjustment in the eurozone and running large savings surpluses with an unreformed financial sector at home, we should prepare for the next big financial crisis.
Actually, what they need to be prepared for if the Germans continue with the neoliberalism are higher insurance premiums to make up the difference. Austerity is robbing poor Peter to pay rich Paul while a whole bunch of the money simply falls through the cracks so that the system as a whole loses.
⇧ Bill Gross Investment Outlook
(Please note: Janus hasn’t planned well concerning the website address of the article. Even Janus’s archiving URL’s so far fail to include the year. If you visit this link after March of 2015, you will have to click on March in the archived links. If you visit after 2015, Janus may require you to find March 2015’s link under a 2015 category.) Bill Gross:
…following the Great Recession, it was actually the United States that gained first mover advantage, lowering interest rates to near zero percent by the beginning of 2009, initiating quantitative easing (QE) policies far sooner than competitors, and in effect devaluing the dollar by 15% over the next several years as shown on the following Chart I. Analysts speculate as to why the U.S. has been the blue ribbon growth winner during the global recovery but seldom do they attribute part of the prize to an early devaluation of the dollar and the competitive advantage it earned via global trade. Others caught on with a lag however, and the U.S. tailwind from competitive devaluation has since stalled — in fact the tailwind has now turned into a headwind. While it was once the only breed in the show, it now competes against better coiffured currencies with their own QE’s and promises to hold interest rates for lower and longer than does the U.S. Japan has a quantitative easing program 2 to 3 times greater than our own in comparative GDP terms and the ECB of course is about to embark on its own grand journey into the vast unknown of bond buying, yield lowering, and presumably further Euro currency devaluation.
…it may be — lower yields make sovereign and corporate debt burdens more tolerable and their exports more competitive. But common sense would argue that the global economy cannot devalue against itself. Either the strong dollar weakens the world’s current growth locomotive (the U.S.) or else their near in unison devaluation effort fails to lead to the desired results, much like Japan experienced after its 50% devaluation against the Dollar beginning in 2012.
We think Bill is overly intellectualizing it. (Please don’t take our criticism wrong. We like Bill and want our criticism to be viewed as constructive, as intended.) A negative interest rate on a deposit is just another form of inflation, though roundabout.
What he is correct about is that many people do not spend in the face of it but save. He’s also completely correct that it all represents currency wars. It’s a race to see which country can best avoid deflation relative to its competitors. It’s no way to run a global economy. It’s rather foolish to say the least.
What needs to happen to break out of this cycle is massive fiscal spending on productive investments very widely defined to include things such as college tuition, room, board, etc. The spending needs to occur via newly created bond-free currency spent by the government directly into the economy. There’s more to it than that, but that’s the right starting place given the sad state of economic education and understanding in the US and elsewhere.
⇧ Why a win-win is possible for Greece and the EU – Agenda – The World Economic Forum
Louka T. Katseli:
Only 11% of bail-out loans went to finance the government accounts. Conditionality for the bail-out loans included sharp cuts in fiscal expenditures and social benefits, steep rises in direct and indirect taxes and across-the-board cuts in wages and pensions, exceeding in many instances 40%. This resulted in a massive 25% drop in national income, raised the average unemployment rate to over 27%, increased over-indebtedness and exacerbated poverty and inequality.
… the Greek government’s popularity ratings have exceeded 80% as a consequence of its negotiating stance. For most Greeks, it was the first time since 2010 that a Greek government highlighted to the creditors and the international community the dramatic consequences and the fallacy of an ill-designed austerity and structural-reform programme that not only impoverished large segments of the population, but also exacerbated the debt burden, deteriorated investment prospects, led thousands of highly-skilled professionals to leave the country and worsened the country’s long-run competitiveness prospects.
… For the Eurozone, which continues to be characterized by secular stagnation and deflation, reaching a compromise in the Greek case offers an opportunity for a needed and wanted turn-around in policies by providing less austerity, more flexibility and better sequencing. Such a turn-around will have positive repercussions for trade, investment, growth and employment. …
In the very short run, provision of liquidity to the economy is essential. An economy cannot run if consumers, investors or exporters do not have a minimal assurance that credit will continue to be available over the next six months. Linking the provision of ECB credit to the approval and implementation of structural reforms, which by their very nature take time t o be properly designed and implemented, can easily backfire and has already started doing so: it fuels widespread uncertainty and deposit withdrawals and provides incentives for capital flight and quick-fixes. …
…despite the Private Sector Initiative, which reduced the burden of its private debt by 130 billion euros in 2011-2012 — without official debt relief, Greece’s external indebtedness will continue to rise, sap domestic activity and crumble investment and growth prospects. Eurozone countries will have to continue to bail-out Greece through more loan extensions for the country to be able to pay back its creditors.
A new deal needs therefore to be forged between Greece and its Eurozone partners: one based on an effective political settlement that would strengthen the Eurozone by spurring growth, maintaining social cohesion and underpinning inclusive, democratic institutions. Such a new deal can indeed be a win-win game for both Greece and the Eurozone.
⇧ Resolving Residential Mortgage Distress: Time to Modify | iMFdirect – The IMF Blog
While forbearance can help households to adjust their consumption more smoothly, it also invites free riding by some borrowers not under severe financial distress. Lenders should therefore consider temporary forbearance only for borrowers who are currently under proven financial strain but have sufficiently strong prospects to recover their debt service capacity. In any case, lenders must closely monitor forborne loans.
Well, that’s all true; however, the article leaves out a huge aspect of the entire problem: bad or no regulation of the lending industry.
The average homebuyer simply ought not have to be able to comprehend the macro- and microeconomics of the whole lending system before taking out a loan.
What do you think of the following? The burden for making loans that go sour because of a systemic failure of governmental regulation should fall squarely first upon those who clamored for the deregulation (the lenders). After that, it should fall upon society as a whole to help those who through no fault of their own, lose their homes. The first to lose should be the top executives of the lenders and who clamored for the deregulation followed by the shareholders. The losses should be retroactive (clawed back) and should impact future earnings and golden parachutes. In other words, executives who mislead society into bad deregulating should not gain or retain a dime resulting from such deregulation. Of course, there should be the same safety net for them as there is for every American. If their fortunes are wiped out, they can apply for welfare benefits, etc., just the way anyone else can. If they engaged in fraud and the lending institution shows a pattern of such, criminal actions should be taken and the institution should lose its license or be nationalized or otherwise taken over by government for the benefit of the public.
…the acceleration of austerity looks like a mistake and the slower pace of austerity in 2012-13 and thereafter was welcome.
However, the Conservatives now plan to intensify the pace of fiscal consolidation again after the next election.
⇧ Greece Optimist Throws in Towel Seeing Tsipras Go ‘Plain Nuts’ – Bloomberg Business
Is this article a bit hyperbolic on Erik Nielsen’s part? We think it comes off as too elitist (IMF, Goldman Sachs) in perspective. What’s your view on it?
The “Germany should pay World War II reparations” statement was by way of saying to the Germans that they shouldn’t forget the help and forgiveness they received. We think that’s correct.
The Greek situation is first and foremost a humanitarian crisis. Austerity heaped upon Greeks, insistences that Greece selling itself out into the future for many, many decades, that it adopt more laissez-faire than those insisting upon it, is all very unfair and just plain bad economics.
⇧ ECB’s Draghi calls for quantum leap in European integration | Reuters
Euro zone countries had not yet converged sufficiently to dispel doubts about the bloc’s cohesion, said Draghi, stressing: “We have now integrated too much to even entertain reversing the process — our economies are far too intertwined.”
Draghi has been pushing deeper integration since early 2012, when the euro zone debt crisis led him and other top crisis-fighting figures to work on a roadmap towards a banking union, fiscal union, economic union and political union.
In our view, Draghi’s approach toward Greece is not conducive to such integration. He should back off austerity and rather seek to fix Greece from a humanitarian perspective. That would go a very long way in demonstrating that member states should integrate because when the chips are down, the whole of Europe will rally to help those most negatively impacted. It would give Europe more ability to make a Greek mixed-economy much more sustainable.
⇧ Ireland on top of the world in global house price index | Money | The Guardian
House prices in Ireland leapt by 16% in 2014, putting it at the top of Knight Frank’s global house price index — but the market remains a long way off its pre-crisis peak.
At the other end of the table, the only country to record double-digit price falls in 2014 was Ukraine, where the market dropped by 16.7%.
⇧ The melting of Antarctica was already really bad. It just got worse. – The Washington Post
The problem caused by not doing what it takes to switch the world off carbon burning:
A hundred years from now, humans may remember 2014 as the year that we first learned that we may have irreversibly destabilized the great ice sheet of West Antarctica, and thus set in motion more than 10 feet of sea level rise.
Warm water under the ice is reportedly the issue.
⇧ An environmental movement is awakening in China | Marketplace.org
The Chinese public has come to believe they have a right to a clean environment.
Colder, snowier winters, hotter summers, welcome to AGW. Of course, La Nina and El Nino will have something to say about it (unless that system is being broken too).
Scientists from Germany have proven the United States and Europe (Russia as well) will experience longer heat waves in 2015 given that the summer winds carrying cooler breeze have weakened because of climate changes.