Linking ≠ endorsement.
⇧ China and Global Governance by Javier Solana – Project Syndicate
Javier Solana was EU High Representative for Foreign and Security Policy, Secretary-General of NATO, and Foreign Minister of Spain. He is currently President of the ESADE Center for Global Economy and Geopolitics, Distinguished Fellow at the Brookings Institution, and a member of the World Economic Forum’s Global Agenda Council on Europe.
Last July, China led the establishment of the New Development Bank by the five BRICS countries (Brazil, Russia, India, China, and South Africa) and contributed significantly to its $100 billion endowment.
Likewise, at the latest Asia-Pacific Economic Cooperation meeting in Beijing, China spearheaded the creation of the Asian Infrastructure Investment Bank (AIIB). And it has established a $40 billion Silk Road Fund, to support its ambitions to re-create the ancient overland and maritime routes connecting Asia to Europe.
Whose fault is that? Read the article to find out.
⇧ A guide to the economy: the deficit – Full Fact
The US budget deficit has been falling but has been revised/adjusted.
In 2008 the Treasury thought that the structural deficit for 2007/08 was about 2.7% of national income. But in 2014, the Office for Budgetary Responsibility produced figures showing that it was closer to 4% of national income.
⇧ Metro Detroit housing market blooms for buyers and sellers
Although home sale prices in suburban Detroit are still 20% or more below their peak of a decade ago, prices have been gradually rebounding since mid-2012, with many neighborhoods seeing yearly gains of 10% or more, due in part to a thin supply of move-in-ready houses.
The prices look like the typical too-highly priced ones we’ve seen in most “hot” areas of the country. Where are the affordably priced homes? Those who need affordable housing must rent.
⇧ A Simple Guide to “Secular Stagnation” — Money, Banking and Financial Markets
Three-quarters of a century ago, Hansen argued that the United States would be stuck perpetually in a situation with excess savings, with the result that a large portion of U.S. productive capacity would remain permanently underutilized.
Summers’ account of demand-driven “secular stagnation” turns conventional business cycle analysis on its head. In macroeconomics or money and banking, textbooks (including ours) characterize business cycles as temporary deviations from the long-run path of potential output. These deviations are generally self-correcting: once prices and wages adjust to the new circumstances, equilibrium between demand and supply is restored and the economy returns to its long-run trend. Monetary and fiscal policy can promote stability by hastening this self-correcting dynamic, limiting the variability of growth and inflation.
This conventional story was a useful characterization of post-World War II business cycles; at least until 2007. …
Perhaps the most useful test will be whether — after nearly six years of recovery and a tightening labor market — we will finally begin to observe a rise of wage and price inflation that signals the erosion of economic slack. If not, the case for secular stagnation will gain increased force. And, even if inflation does pick up, stagnationists likely will insist that the damage to aggregate supply came from a failure to address the demand problem in a timely and vigorous way.
“…even if inflation does pick up, stagnationists likely will insist that the damage to aggregate supply came from a failure to address the demand problem in a timely and vigorous way.” Likely? No, definitely.
⇧ The Investor’s Guide to Rental Property Characteristics
Time to shop for a rental property. Where do you start? What kind of property do you want? Seems like there wouldn’t be that many options out there, but guess what? There are! Okay, well relatively, maybe there aren’t a ton, but there are enough to be confusing if you are just starting out. With all of them being considerations anytime you are shopping for a rental property, the options can start feeling a little bit overwhelming.
⇧ An Emerging Markets Status Update | Economy Watch
Saudi Arabia increased its oil output in March to the highest level in at least twelve years.
That sounds like an aggressive move, but they have to sell more at the lower prices so they can pull in enough money too. How low are they willing to go, and once there, how long could they hold out?
Expect gas prices to continue dropping.
Note how well Russia is doing in spite of the sanctions regime. We expect that trend to continue. Their shelves are filling up with new Russian-made/grown goods.
⇧ Save big on new construction: secrets your buyers should know | Inman
Should you buy new construction as a rental? It’s not typical; but if you do, you might want a buyer’s agent: a real estate agent who is working for you and not the developer/seller.
Some new-home buyers think that if they do not use an agent for their purchase, the builder will reduce the price of the home by the amount of the commission. For the most part, this cannot be further from the reality. Builders do not want to reduce their prices because it sets the comparison price for future home sales in that neighborhood. Builders instead add the commissions paid to a buyer’s agent into the marketing budgets of the homes. If a buyer goes to a new-home builder without a real estate agent, either the builder’s agent or the builder will pocket that money.
Reforestation is a necessary component of land-use management for the sake of global risk-management.
What happens to the Amazon doesn’t stay in South America. It impacts the whole planet.
⇧ Fires Kill 15, Leave 5,000 Homeless in Russian Siberia, RIA Says – Bloomberg Business
Speaking of deforestation:
Wildfires swept through Russia’s Khakassia region in Siberia, killing at least 15 people and leaving about 5,000 homeless….
What we’re doing to our planet is horrifically shortsighted.
⇧ Arizona Governor Signs Bill to Modify Asbestos Injury Claims
We’re rather progressive, even populist in many instances; but we don’t know how much of this legislation was designed to prevent real claims-fraud.
Attorneys representing victims of asbestos exposure say a bill Arizona Gov. Doug Ducey signed into law will limit victims’ ability to recover losses.
Ducey said he signed the measure Thursday to increase transparency and fairness in asbestos litigation.
California regulators imposed the largest penalty in the agency’s history, ordering PG&E Corp. to pay $1.6 billion for failures that led to a deadly 2010 natural gas pipeline explosion in a San Francisco suburb.
⇧ Krugman’s Anti-Cameron Contradiction by Jeffrey D. Sachs – Project Syndicate
Jeffrey D. Sachs:
…both the US and UK economies have cast considerable doubt on Krugman’s oft-repeated view that a robust recovery would require further fiscal stimulus, a position that he maintained at least until 2013. The post-2010 recoveries in both countries came despite significant cuts in the structural (cyclically adjusted) budget deficit, suggesting that both recoveries occurred in the face of fiscal contraction.
Paul Krugman’s observation was correct.
In addition, the “recoveries” have been anemic at best and could be fleeting (hence the quotation marks). All one needs to do is look at stagnant wage rates with social-benefit cuts.
In our book, a nation is doing only as well as its lowest economic class.
⇧ Growth Dividend from Stabilizing Fiscal Policies | iMFdirect – The IMF Blog
The message is loud and clear: governments can use fiscal policy to smooth fluctuations in economic activity, and this can lead to higher medium-term growth. This essentially means governments need to save in good times so that they can use the budget to stabilize output in bad times. In advanced economies, making fiscal policies more stabilizing could cut output volatility by about 15 percent, with a growth dividend of about 0.3 percentage point annually.
Of course, using the budget to stabilize output requires healthy public accounts that can take hard hits during severe storms. And when the sunshine returns, policymakers must be wise enough to repair public accounts in preparation for future storms. That’s how stability, growth, and sustainability go hand in hand.
That’s pure Keynes.
Now, why are we stuck there? We aren’t even using Keynes, but those who are against the anti-Keynesians aren’t even discussing moving beyond Keynes by very much at all.
Well, there are two main reasons: vested interests and vested interests.
⇧ Asia’s Multilateralism by Joseph E. Stiglitz – Project Syndicate
Joseph E. Stiglitz kills two birds with one truth:
When he was Chair of the US Federal Reserve, Ben Bernanke mistakenly described the problem as a “global saving glut.” But in a world with such huge infrastructure needs, the problem is not a surplus of savings or a deficiency of good investment opportunities. The problem is a financial system that has excelled at enabling market manipulation, speculation, and insider trading, but has failed at its core task: intermediating savings and investment on a global scale. That is why the AIIB could bring a small but badly needed boost to global aggregate demand.
So we should welcome China’s initiative to multilateralize the flow of funds.
There are a number of critics of Thomas Piketty’s work who are basing their negative critique on depreciation of the assets of the wealthy.
It’s certainly true that such depreciation occurs, but the idea that the income from wealth won’t stay ahead of such depreciation by virtue of new purchases should be studied more.
The variables involved in Piketty’s understanding are nearly infinite. There is consolidation of wealth if left unchecked, but there are countervailing forces to break up the concentration. History shows that.
Generally speaking though, if left as is, our currently mixed economy in the US would continue the consolidation process toward the top of the wealth/income pyramid to the point where there wouldn’t be enough income lower down to continue turning the wheels fast enough for those at the very top. That though wouldn’t necessarily mean enlightenment at that top.
We know, because we’ve been through such cycles many times before in history. One could rightly say that we’ve been stuck in the cycle since it first began. Even the Marxian nations didn’t escape it because many of their bureaucrats were substitutions for the top capitalists of the more capitalistic nations.
One thing is certain, we can’t go on this way indefinitely while knowledge and intelligence rise.
⇧ The Chinese Economy Besieged and Embattled: the Real Estate Market
Very, very pessimistic about China:
…investors are holding back now. Since 2012, newly entering foreign capital has been switching away from real estate. Local real estate bosses such as Wang Shi and Pan Shiyi are also systematically reallocating their capital as they see the high risk in today’s real estate market.
Vanke Corp, the largest residential real estate developer, is moving capital abroad by developing and selling property in other countries. Hong Kong developers, like Li Ka-shing, are also fleeing Mainland China by trying to sell property unnoticed, while still praising China’s real estate market. But since they have hoarded so much property, most of them have to sell at a very low price in hopes of selling faster. This shows that investors who entered China early are eagerly looking for ways out.
… Those who bet all or most of their assets on real estate are panicking, because they are about to lose their source of post-retirement income. …
But the local governments are even more fearful. The halt in real estate transactions means government revenue is flowing out. Soon the governments will be confronted with all the pains of bankruptcy, like defaulting on salaries, pensions, and healthcare payments.
As a result, on the one hand local governments have thrown out all kinds of market-stimulus policies—not so much to revive the market as to lure in purchases; on the other hand, they urge the regime’s central government and the central bank to print more money like they did in 2008.
From the local governments’ perspective, only another large scale over-issuing can help sell the houses and bring in revenue. Though Beijing expressed willingness to support the real estate industry, the chances of printing large amounts of money are minimal, to the despair of the local governments.
⇧ Safeguard Properties launches new fast-track legislation tool | HousingWire
The interactive map features states that have enacted, are contemplating enacting or have expired/inactive fast-track legislation for vacant and abandoned properties.
⇧ Secular Stagnation: The Long View
Many connected activities and sectors – health care, education, industrial research, and finance – are being disrupted by the latest technologies. But once a broad range of adaptations is complete, productivity growth should accelerate….
Well, the question remains the degree to which the benefits will be shared across the whole of society. The less they are shared, the lower will be true growth.
⇧ China’s Not-So-New Not-So-Normal by Jim O’Neill – Project Syndicate
Very, very optimistic about China: Jim O’Neill:
Many international observers have been worried about the country’s oversupply of housing and the related credit boom, making me wonder whether I have been overly sanguine about these risks. But my conversations persuaded me that both problems are likely to be manageable.
To be sure, the housing market is in the doldrums. But, as many pointed out to me, this is partly the result of deliberate government measures to deflate it (also comforting is the fact that consumers are in general not overleveraged). Some builders will experience problems with credit, and so might some local authorities. But spending by the central government is such a small percentage of the country’s total GDP that policymakers have a lot of room for maneuver if intervention becomes necessary in these areas.
⇧ Five key claims from Labour’s manifesto – Full Fact
Is austerity in senior care really growth?
⇧ Is it possible to end global poverty? – BBC News
The UN is expected to adopt the World Bank’s ambitious target of ending extreme poverty by 2030. Could we really see the end of poverty within a generation?
It would be a great deal sooner than that if the powers that be would stop deliberately ignoring the solution: “Monetary-and-Banking-Reform Platform for The United States”: Here
⇧ Tory manifesto — a change of tack? – YouTube
Tories out laboring Labour on some things? Not hard to do even though Labour is a bit more Old Labour than in a generation.
David Cameron has launched the Conservative manifesto with a vow to outspend the Labour party on the NHS and childcare. Why have the Tories abandoned their austerity mantra? Lionel Barber, FT editor, asks the FT’s political commentator, Janan Ganesh.
Where are the third parties there? Where are they in the US?
Well, in the US, that’s easy: suppressed by the Republicans and Democrats colluding together to keep them that way via poll rankings for debate entries.
In our view, whether you’re a Republican or Democrat or other, you should be opposed to keeping third party candidates and independents out of the head-to-head debates against the Republicans and Democrats.
It’s better to hear more ideas and to have more choices than just two, especially when the two aren’t different enough on some core issues.
⇧ China’s growth poised to fall below 7% – YouTube
China’s growth could fall to 4 or 5 per cent in coming years, well below the 7 per cent target, says George Magnus, associate with the China Centre at Oxford University. He explains the risks of a hard landing to Long View columnist John Authers.
John says, “You heard it here first.” Well, no. We’ve been saying it for some time now, like years. We aren’t alone in that either.
Nevertheless, we enjoy John’s segments and don’t hesitate saying that we’ve picked up some good insights from them, including directly from John thinking out loud.
We like such thinking out loud.
⇧ Q&A: Important Real Estate Tips – YouTube
Good answers by Ilyce Glink:
I’ve been getting some really great real estate questions on my blog lately. So today I chose two to answer. The first question is about inheriting underwater property, and the second question is about exchanging a rental home for a second home. Watch today’s Real Estate Minute to find out more.