News: Real Estate, Risk, Economics. Jul. 1, 2015

⇧ 5 Places Where Rising Rents Are Deepening the Rental Crisis | Zillow Blog
Why we aren't yet overbuilding rentals:
As rents have grown, wages remain relatively stagnant, meaning more and more of a renter's income is being dedicated to rent instead of saving for a down payment. This forces renters to forego buying and rent longer, feeding into the high demand that pushed up rents in the first place. It also means renters may struggle to pay for medical care, repay student loans, or save for retirement.
⇧ AmeriSurv.com - Nonresidential Construction Spending Continues Growth With Stellar May
Through the first five months of 2015, nonresidential construction spending is having its second best year since the Census Bureau began tracking the metric in 2002.
The caveat here is the same as for construction employment: economic headwinds, which the article properly mentions.
⇧ California Is Becoming a Dust Bowl
More than equal space for a view opposing "liberal" environmentalism:
in the 1960s and early 1970s, no one anticipated that the then-nascent environmental movement would one day go to court to stop most new dam construction, including the 14,000-acre Sites Reservoir on the Sacramento River near Maxwell; the Los Banos Grandes facility, along a section of the California Aqueduct in Merced County; and the Temperance Flat Reservoir, above Millerton Lake north of Fresno.
Had the gigantic Klamath River diversion project not likewise been canceled in the 1970s, the resulting Ah Pah reservoir would have been the state's largest man-made reservoir. At two-thirds the size of Lake Mead, it might have stored 50 million acre-feet of water, enough to supply San Francisco for 30 years.
...
Victor Davis Hanson is Martin and Illie Anderson senior fellow at the Hoover Institution. This article, which is reprinted by permission of City Journal, © 2015 The Manhattan Institute, all rights reserved, also appeared in the Hoover Digest, 2015, No. 3, Summer.
The article is a scathing attack on those who blocked more dams.
We must say that environmentalists have a more holistic view than the article suggests. Many of them were equally opposed to unbridled population growth.
Humanity's issue is proper stewardship. How do we live and grow without ruining the ecology? How do we fit in with ecology while still progressing?
Will technological advancements race out in front of increasing pollution and other damage in time to correct our mistakes? How and where should we be applying our technological-advancement efforts?
We went to the Moon due to governmental, democratic efforts. We could certainly target repairing the ecosystem without giving up technology itself.
The farmer/author and the environmentalists could mostly be satisfied if not thrilled.
⇧ City to audit real-estate-development incentive program | The Seattle Times
Seattle's city auditor will investigate a real-estate-development incentive program at the request of City Councilmember Mike O'Brien, after he learned planners had been ready to let a hotel builder contribute millions of dollars less than required toward the city's low-income housing fund.
The planners have reversed course, saying they made a mistake, while the builder is calling the case a false scandal cooked up by a labor union as part of an ongoing conflict.
⇧ Conspirators are sentenced in Kansas City arson and insurance fraud scheme | The Kansas City Star The Kansas City Star
Two men were sentenced Tuesday to federal prison for conspiring to burn houses in Kansas City after they bought and insured them.
⇧ Construction Unemployment Rates Improve in 40 States in May
Construction employment has traditionally been deemed a leading economic indicator along with fuel prices. All other things considered, this is a good sign though there are still economic headwinds for the US economy.
On an annual basis, construction unemployment rates for 44 of the 50 states fell in May 2015 compared to May 2014.
⇧ Floods, landslides leave at least 37 dead or missing in China - Xinhua | English.news.cn
BEIJING, June 30 (Xinhua) — Rain-triggered floods and landslides in four provinces since Friday have left at least 37 people dead or missing.
⇧ Greece crisis: IMF was pushed around by Angela Merkel and Nicholas Sarkozy — and now it is being humiliated - Business Comment - Business - The Independent
...what made the episode a true scandal was that European leaders were also mindful that German and French banks held sizeable chunks of Greece's sovereign debt on their books. A write-down would have forced those banks to record big losses. They might have even needed a public bailout.
It's perhaps no surprise that Germany's Angela Merkel and France's Nicolas Sarkozy wanted to avoid that. But a technocratic institution such as the IMF should never have gone along with it.
⇧ N.Y. Officially Bans Fracking, Ending 7-Year Environmental, Health Review
The technology has produced new jobs, created economic growth and reduced energy prices but has triggered concern that it could pollute air and water, cause earthquakes and pose long-term health effects that aren't yet known.
We must evaluate fracking versus cleaner, safer alternatives. For instance, fracking certainly contributes to global warming. As we've seen, it also has reportedly caused a dramatic increase in earthquakes in certain previously calm areas.
⇧ Oklahoma Woman Blaming Fracking Wastewater for Quake Can Sue - Bloomberg Business
Oklahoma's Supreme Court said New Dominion LLC can be sued for damage caused by an earthquake that a woman blames on disposal wells tied to fracking, in what may be the first such case to head to a jury trial.
...
Oklahoma, a region not known for seismic activity, has experienced a rash of earthquakes since 2009, the same year area oil companies began using hydraulic fracturing, or fracking, to shatter deep rock layers to extract oil and gas. ...
...
In Ladra's case, the Oklahoma Supreme Court reversed a trial court's ruling that the Oklahoma Corporation Commission, which regulates the energy industry, has exclusive jurisdiction over cases concerning oil and gas operations.
The insurance industry covers the frackers and those suffering losses due to earthquakes, so the industry's position will not likely be very uniform on the issue for awhile yet.
⇧ TISA Exposed: 'Holy Grail' of Leaks Reveals Detailed Plot for Corporate Takeover | Common Dreams | Breaking News & Views for the Progressive Community
"Transparency" in this TISA text means ensuring that commercial interests, especially but not only transnational corporations, can access and influence government decisions that affect their interests—rights and opportunities that may not be available to local businesses or to national citizens.
That's exactly the same point we wrote. If you are not a multinational corporation (or even if you are), these trade deals could be really bad for you.
⇧ US housing stages 'lopsided' recovery
Speaking of headwinds:
David Crowe, chief economist at the National Association of Home Builders, said that the industry had no choice but to respond to the strongest areas of demand.
We don't subscribe much to the higher-lending-standards-problem notion. We lay the blame for the housing problem at the feet of bad fiscal policy. The economy should have been stimulated via direct governmental employment funded via new, bond-free currency issuances. We could have more than fully recovered within less than a year had we had the right fiscal and monetary policies and practices applied.
⇧ Firefighters Battle Blazes in 4 Western States
...blaze near Santa Margarita in central California was mostly contained after burning two homes, four mobile homes and two recreational vehicles that people lived in.
The fire charred less than 3 square miles of dry brush, along with 10 other buildings.
⇧ Fire Destroys Alabama Apartment Complex
Four people have been injured in a fire that destroyed a Bessemer, Ala., apartment complex.
... According to Battalion Chief Kenny Ray, the fire may have started on the 30th Avenue side of the 32-unit, 2-story complex and spread quickly, fueled by strong winds.
⇧ Severe Storms, Tornado Damage Homes, Injure 7 in Illinois
At least seven people were injured as severe thunderstorms that swept across northern Illinois spawned a tornado, damaged homes and uprooted trees.
Particularly hard hit...was Coal City, a community of approximately 5,000 residents about 60 miles southwest of Chicago....
⇧ Michigan Hit with Damaging Winds, Tornados, Flooding
A series of severe thunderstorms that pushed damaging winds and tornados into several parts of Michigan on Monday and Tuesday wrecked homes and knocked out power to thousands of people, officials said.
From Monday afternoon through early Tuesday, the National Weather Service said tornados struck in the Ionia County community of Portland as well as in Washtenaw, Sanilac and Tuscola counties. State police reported storm damage that could be from tornados in Calhoun, Jackson, Kalamazoo counties.
⇧ Wildfire Season Being Felt Throughout California
A fast-moving fire that broke out near Santa Margarita....
...scorched about 1,000 acres and burned several homes....
...700-acre fire in Madera County had destroyed three structures....
Over 500 acres have burned in the Sierra National Forest....
⇧ OC approves abandoned properties ordinance - pressofAtlanticCity.com: Breaking News
After months of discussion and revisions, an abandoned properties ordinance was passed on second reading by council without comment Thursday night.
The ordinance empowers an assigned official to place neglected buildings on an Abandoned Properties list, the start of a process that could ultimately result in the city's taking the blighted spots by eminent domain.
⇧ 884 properties damaged by Coal City tornado | Morris Herald-News
A total of 884 properties were damaged as a result of the EF3 tornado that tore through Coal City late Monday night.
...
The assessment concluded that 349 damaged properties are habitable, 375 are habitable with repairs needed, 106 are uninhabitable and 54 are lost completely.
⇧ On the Market: Morning links from the New York Observer | Observer
The big news yesterday was that leaders in Albany had put together a "framework" for the renewal of rent regulations and 421a, with a very much middle-of-the-road 4-year extension, which, in Gothamist's opinion, fails renters by only raising the rent at which vacancy decontrol is triggered from $2,500 to $2,700, a "solution" that likely means that thousands of rent-regulated units will be lost.
⇧ Supreme Court upholds a key tool fighting discrimination in the housing market - The Washington Post
The case arose from a lawsuit filed by the Inclusive Communities Project against the Texas Department of Housing and Community Affairs over how it distributes tax credits for low-income housing. ICP argued that the state's formula effectively ensured that low-income housing was primarily built in poor, minority neighborhoods, and seldom placed in white suburban ones. As a result, poorer, minority families in need of affordable housing had little option but to live in impoverished communities without access to good schools, jobs or opportunity.
"This is going to open up this issue all over the country," said Myron Orfield, a law professor at the University of Minnesota. "The things that are happening in Texas are happening in every city in the United States. They're all evading civil rights law by concentrating affordable housing in segregated neighborhoods, thus perpetuating segregation — which Justice Kennedy said they cannot do today."
...
In his rebuttal, Thomas wrote that racial imbalances don't always disfavor minorities, pointing to instances in which minorities have dominated certain industries.
"And in our own country, for roughly a quarter-century now, over 70 percent of National Basketball Association players have been black," Thomas wrote. "To presume that these and all other measurable disparities are products of racial discrimination is to ignore the complexities of human existence."
Well, the NBA is not affordable housing, even though the affordable housing has been often built upon the "cheap" land, as those who brought the action stated.
⇧ Send Tenants a Firework Notice One Week Before a Holiday
...the dangers that fireworks pose to people and property should make landlords take a stand against them at their rental properties and fully communicate their desires to their tenants about the use of fireworks at the property.
Some other things to consider:
If such fireworks are illegal in your area, you might consider reminding the tenants about that.
Many pets are terrified by fireworks. Even if they don't see them, the noise can make them tremble in fear for hours.
Those who shoot off fireworks will often do so until late in the night rather than wrapping it up at a reasonable hour. Some people do have to get up early for work the next morning.
Air pollution is no small matter when fireworks smoke is all around you drifting into your open windows on warm July 4th nights too.
So, go to the local, legal, professional fireworks display and enjoy those instead.
⇧ Multifamily Market Absorption at the Start of 2015 | Eye On Housing
Apartment absorptions continued to be strong at the end of 2014, as multifamily production levels remain elevated.
...
...for properties with five or more units, approximately 6,400 Low-Income Housing Tax Credit or other federally subsidized units were completed during the last quarter of 2014. This is down from the 13,500 such units completed a year earlier.
We just aren't doing nearly enough on the affordable-housing front. As we've said, they will be absorbed for the foreseeable future (given current construction-rates, etc.) while leaving plenty of room for more than reasonable profits for developers and owners.
Government especially needs to do more to streamline the processes involved and to make them much more uniform.
All other things being equal, better-housed people make them better citizens and employees. Public assistance and subsidies are investments well worth it.
⇧ How to Update a Kitchen to Attract Buyers
We can't see why these tips wouldn't also apply to rentals.
Kitchens are more important than ever when it comes to influencing buyers' perceptions of a home as well as the perceived value. Some home owners make it a priority to invest in remodeling key rooms to increase the value of their home for when they are ready to sell. However, sellers who are pressed for time and need to get their homes on the market fast can still achieve the look of a remodel by giving their outdated kitchen a modern face lift that will engage buyers without breaking the bank.
⇧ Carney says many financiers unaware of ethics - Yahoo News UK
"A lot of people in these markets didn't really know — and probably still do not know — what is expected of them because it hasn't been adequately defined in everyday language," Carney said at a conference in the City of London.
Is he being overly charitable, or is that putting it mildly?
Oh, there are a number of people who didn't know they were engaging in unethical behavior, but saying "a lot of people" seems a bit misleading. Let say instead that many had ethical lapses where they let their greed carry them away into rationalizations ad nauseam (and that's not even counting the sociopaths in high finance).
⇧ U.S. Senate Passes Trans-Pacific Partnership Agreement by a 60-38 Vote [wrong]
On Wednesday, the U.S. Senate passed the Trans-Pacific Partnership agreement....
That's not accurate. They passed Fast Track, not the TPP. However, the title may as well read, "On Wednesday, the U.S. Senate passed global corporatocracy." Don't forget that it falls under the plutocrats' full control (really just a handful of families/dynasties). So, aren't we really seeing the rise of the global plutocracy as never before? Is our democracy becoming nothing more than a mask for the globalization of fascism (rule by state-corporatism)?
⇧ Texas' housing market still growing faster than the rest of the country, despite energy sector declines | | Dallas Morning News
Decreases in oil prices in the last year have led to a slowdown in employment growth in Texas and job cuts in some cities.
But Texas' housing markets are still holding up.
...
In Houston, sales are basically flat.
Prices in all of Texas' big cities are still rising.
"Usually the builders just build," which adds to the housing supply, he said. "This time, the builders are not building."
High and rising prices do not necessarily equal a "hot market." In fact, they can indicate the exact opposite, depending.
⇧ Home Prices Rising, But Economists See Builders Pinched LEN DHI TOL - Investors.com
Crowe says, "builders are seeing a profit squeeze — they're having to pay higher prices for their land, and they're having to pay more for labor ... and they're suffering either from no credit or very expensive credit."
...
Zillow (NASDAQ:Z) chief economist, Stan Humphries, sees rents up more than home prices.
"Rents are rising 4.3% year over year while home prices are up 3.3% year over year (in May)," he said. "We're very tight in terms of rental vacancies. It's no surprise why rents are on a tear in this country."
Humphries says that he continues to be very bullish on rental demand, noting that while some renters will move into homes, millennials and restrained wage growth support the rental market.
"The kid in your basement is not going to go buy a house," Humphries said. "He's going to move into rental stock."
⇧ Dear governments and aid agencies: Please stop hurting poor people with your skills training programs - Chris Blattman
Chris Blattman:
...skills program just have to be more market-driven, or on-the-job, or linked to firms, or targeted to the right people.
Maybe.
Maybe? They most certainly do.
What this article is missing is the public sector as at least the employer of last resort. That would change everything.
All we have to do is look to the New Deal employing the unemployed as the basic starting place for a full policy discussion.
We could have done much better than the New Deal, but the Austerians held sway.
⇧ U.S. Inflation Undershoots Fed's 2% Target for 37th Consecutive Month - Real Time Economics - WSJ
...for the 37th consecutive month, annual inflation undershot the central bank's 2% target. Prices rose just 0.2% in May from a year earlier, unchanged from April, and growth in core prices slipped to 1.2% in May from 1.3% the prior month.
The rationale for the Fed raising rates is so the Fed will have room in the future to move toward the Zero Lower Bound when necessary. That rationale is totally misplaced at the moment. They're speaking very prematurely. Wait for rates to actually rise before tightening at all is our standing advice.
⇧ Why Angela Merkel's Is Wrong On Greece
Jürgen Habermas:
...currency union will remain unstable as long as it is not enhanced by a banking, fiscal and economic union. But that means expanding the EMU into a Political Union if we want to avoid even strengthening the present technocratic character of the EU and overtly writing off democracy as merely decorative.
...
Because the federal German Chancellor opted as early as May 2010 to treat investor interests as more important than a haircut in restoring the Greek economy to health, we're stuck in a crisis once more. ...
...
It's certainly the case that we're dealing here with the stubborn sticking to a policy of an austerity programme that not only runs into overwhelming criticism from international experts but has caused barbaric costs in Greece and has demonstrably failed here. ...
...
Let's be quite clear about the disgusting, nay scandalous aspect of this rejection: A compromise collapses not because of a few billion here or there, not even because of this or that condition, but solely because of the Greek demand to allow a new start for the economy and a population exploited by a corrupt elite by agreeing debt forgiveness — or an equivalent regulation, e.g. a debt moratorium tied to growth.
Instead, the creditors insist upon the acknowledgment of a debt mountain that the Greek economy will never be able to overcome. Mind you, it goes without saying that a haircut is unavoidable sooner or later. So the creditors insist with bad faith on the formal recognition of a debt burden they know is intolerable. ...
...
Angela Merkel brought in the IMF from the outset for her dubious rescue moves. This body is responsible for dysfunctions in the international financial system; as therapist it takes care of its stability and thus acts in the common interest of investors, especially of institutional invest ors. As Troika members, European institutions also coalesce with this player so that politicians, in so far as acting in this function, can retreat into the role of untouchable agents acting strictly according to the rules of the IMF. This dissipation of politics into market conformity helps to explain the chutzpah with which representatives of the federal German government, all of them highly moral people, can deny their political co-responsibility for the disastrous social consequences that they nevertheless took on board as opinion leaders of the European Council through the implementation of the neoliberal austerity programmes.
We don't agree with the speculating about Tsipras and Syriza. Our view is that Tsipras and Varoufakis have always been very clear and correct (assuming the objective has been remaining in the EU, etc., while not being forced into eternal insolvency).
⇧ Chinese Stock Plunge Leaves State Media Speechless - Bloomberg Business
They have been speechless because they know that what they've been doing (stimulating) is having less and less lasting impact and they don't know what to do to keep the people from rising up and throwing out the Chinese Communist Party's one-party dictatorship of China.
They can't just keep kicking the can. It won't work.
If they want to remain even remotely socialist (even a social democracy with a strong state-side mixed economy), they'll have to open things up to democracy of the multi-party type. How to do that without being overrun by predatory capital buying the democracy and turning it into a farce is the issue they should be focused upon, not how to remain a dictatorship.
⇧ Joseph Stiglitz: It's Time to Get Radical on Inequality - YouTube
America's economic system has failed by not raising living standards for most.
Nobel laureate Stiglitz, author of The Price of Inequality and The Great Divide, studies the forces driving inequality and what is at stake if it continues. In his view, bad economic thinking deserves part of the blame — fanciful ideas like trickle-down and the notion that economists should try to increase the size of the economic pie and let the politicians worry about distribution. On the contrary, Stiglitz sees distribution as a problem economists must confront. He warns that an economic system that doesn't raise standards of living for most Americans is a failure.
Stiglitz departs from Thomas Piketty on the causes of inequality and sees capital gains on land and rents associated with monopoly power, discrimination, and exploitation as the big story. He also faults deregulation in the banking industry.
Stiglitz warns that inequality and unfairness are undermining our identity as Americans, destroying our society, and harming the economy. It's time, he says, to get radical. We have to understand that mild tweaking won't work and that we must take on the underlying and power structures if we hope to tackle this enormous challenge. Watch the video to learn more about how to do this.
The American Dream was not, and is not, laissez-faire. The real American Dream was, and is, sharing. So says Joe Stiglitz, and we agree with him.
"Inequality" equals unfairness. Joe isn't saying make everyone "equal" regardless of any factors. He's saying share enough so everyone has a really fair chance, not a fake one in a rigged game.
⇧ mainly macro: The big picture
Simon Wren-Lewis
Why has there been such a pathetic recovery? There is a simple, entirely conventional answer, which perfectly fits the timing: fiscal austerity.
⇧ Breaking Greece - The New York Times
Paul Krugman:
...right now it's the creditors, much more than the Greeks, who keep moving the goalposts. So what is happening? Is the goal to break Syriza? Is it to force Greece into a presumably disastrous default, to encourage the others?
At this point it's time to stop talking about "Graccident"; if Grexit happens it will be because the creditors, or at least the IMF, wanted it to happen.
Of course.
⇧ Arizona health industry exhales after ACA court victory
With the U.S. Supreme Court backing the Affordable Care Act for the second time in three years, Arizona hospitals and health interests say it removes major uncertainty about the health-care law that has extended coverage to more than a half-million Arizonans.
Okay, we'll weigh in a bit.
We are very glad that people who have coverage under the ACA won't be losing it.
We think the ACA wasn't the best solution to what ails the US healthcare system, but it was better than the status quo.
What disappoints us though is that such sloppy wording in federal legislation can prevail.
On balance though, insuring the uninsured is more important.
⇧ Shoot the Dog and Sell the Farm | Thoughts from the Frontline Investment Newsletter | Mauldin Economics
We're including this excerpt from John Mauldin's article because we think the vast majority of people who are for what Greek Prime Minister Alexis Tsipras is attempting to accomplish (we include ourselves in that), simply don't hear the other side's complaints about Greek pensions and the like.
Now, we want to add that the Greeks have offered to cut many things drastically and the Greek economy is in a Great Depression condition, which in our view, requires a humanitarian outlook rather than a neoliberal approach.
It is also our view that Wolfgang Schaeuble in particular simply doesn't understand, or doesn't care, that requiring of Greece all the cuts and so-called reforms that have been suggested would not result in Greek solvency but rather debt slavery until utter ruination or revolution.
The smart approach would be to give Greece all the flexibility it would need to become, and to remain, solvent while introducing "reforms" only when economically feasible (only when they would not make the humanitarian situation worse).
Germany should remember all the economic and financial assistance it received after WWII and extend the same to Greece regardless of ideological differences.
John Mauldin:
The average age at which Greek workers receive a pension is lower than most other EU countries — 57.8 years old. Then again, this is about the same as Italy (58), is far higher than Slovenia (56.6), and is already poised to go up sharply, with the retirement age to be increased to 67 in the coming decades. (The speed with which this happens is one of the contentious points in the negotiations.) I should note that even France has already moved to change their retirement age over time to 67. Then again, the classic manipulation of the system is that those who hold some 600 "hazardous duty" jobs like hairdressers and writers are allowed to retire at 50. Many people can actually work for three years, establish a baseline, and retire with a full pension at 50 years old. Go figure why the rest of Europe is a little annoyed at having to come up with money to maintain such a system.
The Greeks are offering to slowly raise the retirement age to 67 and to make early retirement less attractive — something that needs to be done, yes, but it still doesn't attack the structure of the system.
I should point out that the Greek population is older, on average, than the rest of Europe, and getting older. While their pension benefits are generous, their disability payments are among the lowest in Europe, and their spending on family benefits is also lower than average.
Europe is also asking that the Greek significantly raise the VAT, especially on electricity. Greek citizens would see a minimum 10% increase in their power bills, which, ironically, many of them don't pay anyway.
⇧ Greek PM Alexis Tsipras calls referendum on bailout terms | World news | The Guardian
In a dramatic move that will put Europe on tenterhooks, the Greek prime minister Alexis Tsipras told his fellow citizens...he would call a referendum on the bailout accord that international creditors have proposed to keep the debt-stricken country afloat.
As our readers know, this is what we expected would happen and that we have backed the idea. In our view, the timing is perfect.
However, as we tweeted: https://twitter.com/PropertyPak/status/614891825996931072
By the time this post goes live, that aspect will no doubt have been cleared up.
⇧ Europe's Moment of Truth - The New York Times
Paul Krugman:
First, if it wins the referendum, the Greek government will be empowered by democratic legitimacy, which still, I think, matters in Europe. (And if it doesn't, we need to know that, too.)
Second, until now Syriza has been in an awkward place politically, with voters both furious at ever-greater demands for austerity and unwilling to leave the euro. It has always been hard to see how these desires could be reconciled; it's even harder now. The referendum will, in effect, ask voters to choose their priority, and give Tsipras a mandate to do what he must if the troika pushes it all the way.
If you ask me, it has been an act of monstrous folly on the part of the creditor governments and institutions to push it to this point. But they have, and I can't at all blame Tsipras for turning to the voters, instead of turning on them.
We agree with that 100%.
⇧ It's the Politics, Stupid! | Sparse Thoughts of a Gloomy European Economist
Francesco Saraceno:
This has been since the beginning about politics. Creditors cannot afford that an alternative to policies followed since 2010 in Greece and in the rest of the Eurozone materializes.
Austerity and structural reforms need to be the only way to go. Otherwise people could start asking questions; a risk you don't want to run a few months before Spanish elections. Syriza needed to be made an example. You cannot survive in Europe, if you don't embrace the Brussels-Berlin Consensus. Tsipras, like Papandreou, was left with the only option too ask for the Greek people's opinion, because there has been no negotiation, just a huge smoke screen.
Exactly!
⇧ Banks are not loanable-funds intermediaries: Macroeconomic implications | VOX, CEPR's Policy Portal
Zoltan Jakab and Michael Kumhof:
...the key insight is that banks are not intermediaries of real loanable funds. Instead they provide financing through the creation of new monetary purchasing power for their borrowers.
We see that statement made all over the Internet, but it is not entirely correct.
What it should say is as follows:
"...the key insight is that banks are not solely intermediaries of real loanable funds. Instead they provide the vast majority of financing through the creation of new monetary purchasing power for their borrowers."
The authors are writing primarily about the non-US banking system. In the US, we still have a 10%-reserve-ratio requirement to underpin our fractional-reserve-banking system. The qualifier is that banks can create loans beyond that ratio and then obtain the additional reserves to cover the loans they've made. The Fed accommodates this supposedly provided the particular banks will remain solvent.
We asked the Fed for some detailed explanations concerning this, but they refused to answer for whatever reasons.
⇧ Labor Force Participation: The U.S. and Its Peers
Despite the similar trends in youth, prime-age and pre-retirement participation rates, the U.S. is the only country in our sample experiencing a recent decline in the aggregate labor force participation rate. This is explained mostly by a larger-than-average drop in the labor force participation of prime-age males, a decrease in the participation of prime-age women and a lower-than-average increase in the participation of pre-retirement-age workers in the U.S. economy. Aging also played a role, as the share of the population between ages 25 to 54 (the group with the highest level of labor force participation) experienced a larger-than-average drop.
⇧ TPP now in sight | VOX, CEPR's Policy Portal
Gary Clyde Hufbauer:
...the eventual payoff will be substantial, illustrated by the estimates in Table 1. Focusing just on the US, our estimates suggest that the widely disbursed gains — some $77 billion annually — will exceed the concentrated losses incurred by displaced workers by a ratio of 20 to 1 or higher. Displaced workers deserve assistance — the purpose of TAA — but inevitable job losses are not a reason to oppose TPP.
There wasn't a single word about the creation of a global corporatocracy replacing national democracies. Why not? Under these proposed trade deals, sovereign power will be transferred to the multinational corporations and, therefore, their top voting shareholders (plutocrats).
⇧ Is the Trans-Pacific Partnership Unconstitutional? - The Atlantic
Can the president and Congress, consistent with Article III, assign to three private arbitrators the judicial function of deciding the merits of a TPP investor challenge?
The Supreme Court has not ruled on this precise question. But the collective reasoning in four of its recent rulings bearing on the issue leans heavily toward a finding of unconstitutionality. The Court has placed significant limits on the ability of Congress to assign the power to decide cases traditionally handled by the courts to people other than Article III judges, even when the judicial substitutes are full-time federal officials, such as bankruptcy judges or the heads of federal agencies. Moreover, in each case in which the Court approved of a dispute being taken away from federal judges, there was judicial review at the end of the process, which is not the case with TPP. Moreover, although the Justice Department issued a lengthy opinion in 1995 on when arbitration can be used to replace court adjudication, it did not then, and has not since then, defended the constitutionality of arbitration provisions like those in the proposed TPP.
As it presses for the passage of TPP, the administration needs to explain how the Constitution allows the United States to agree to submit the validity of its federal, state, and local laws to three private arbitrators, with no possibility of review by any U.S. court. Otherwise, it risks securing a trade agreement that won't survive judicial scrutiny, or, even worse, which will undermine the structural protections that an independent federal judiciary was created to ensure.
From Article III, Section 2, US Constitution:
"In all cases affecting ambassadors, other public ministers and consuls, and those in which a state shall be party, the Supreme Court shall have original jurisdiction. In all the other cases before mentioned, the Supreme Court shall have appellate jurisdiction, both as to law and fact, with such exceptions, and under such regulations as the Congress shall make."
There's also this issue:
"The Supremacy Clause is the provision in Article Six, Clause 2 of the United States Constitution that establishes the United States Constitution, federal statutes, and treaties as "the supreme law of the land." It provides that these are the highest form of law in the United States legal system, and mandates that all state judges must follow federal law when a conflict arises between federal law and either a state constitution or state law of any state.
The supremacy of federal law over state law only applies if Congress is acting in pursuance of its constitutionally authorized powers." https://en.wikipedia.org/wiki/Supremacy_Clause
It appears to us that the proposed trade deals should not be allowed to cut the federal courts out of the loop. The position the courts would take obviously remains to be seen if the trade deals are even passed, which we hope they are not, not in their present forms anyway.
⇧ The Awesome Gratuitousness of the Greek Crisis - The New York Times
Paul Krugman:
How did this turn into a catastrophe that among other things saw debt soar to 170 percent of GDP despite savage austerity?
The euro straitjacket, plus inadequately expansionary monetary policy within the eurozone, are the obvious culprits. But that, surely, is the deep question here. If Europe as currently organized can turn medium-sized fiscal failings into this kind of nightmare, the system is fundamentally unworkable.
However, there's this:
"Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country's already bloated deficit." https://www.spiegel.de/international/europe/greek-debt-crisis-how-goldman-sachs-helped-greece-to-mask-its-true-debt-a-676634.html
That's from 2010 and refers to the pre-Syriza Party government, so don't blame Tsipras or Varoufakis. Plus, the Greek people didn't know the government was up to such activities with Goldman Sachs.
⇧ EBB Retrofit Animation - YouTube [California seismic retrofit ]
Homeowners
Is your house earthquake-ready? If an earthquake happened today, would your house stay on its foundation? You may qualify for up to $3,000 toward a seismic retrofit of your house. https://www.earthquakebracebolt.com/HomeownerRegistration
This animation shows what is involved in completing a seismic retrofit on a house with a raised foundation and a 4 foot cripple wall.
"Watch Earthquake Brace + Bolt in action."

"This video introduces the training course, defines applicable terminology, and shows pictorially why seismic rehabilitation of houses is important."

The remaining parts may be found here: https://www.youtube.com/channel/UCqiwZNUf9z9OrseJoVGWMMg
⇧ Smoking ban coming to Millville properties
Thinking of having a quick smoke in your apartment?
Unless you're willing to pay a fine or go to court, you might want to think twice.
Those circumstances are what some residents will face starting in October, when the Millville Housing Authority enacts a smoking ban on all of its properties. ...
...
The ban, which housing authority officials said has been encouraged by the U.S. Department of Housing and Urban Development, would benefit the MHA by saving insurance and maintenance costs.
We agree with the ban, though we feel for those who are currently addicted to nicotine.
⇧ Real estate's job machine cranks into high gear - The Orange County Register
A healthy real estate market isn't just good news for property owners and the people who serve them.
Much has been said about real estate's limited role in the recent economic rebound. That may be changing, as the industry contributes new jobs in a big way.
⇧ New York City Board Votes to Freeze Regulated Rents on One-Year Leases - The New York Times
The board that regulates rents for more than one million rent-stabilized apartments in New York City voted on Monday night for a freeze on one-year leases, an unprecedented move in its 46-year history.
...
"Tenants are struggling to pay their bills and even a small increase would force many tenants to leave the city or, for those who can't even afford to leave the city, to enter the shelter system," said Ilana Maier, the program director for the Metropolitan Council on Housing. "This decision will provide meaningful relief for tenants."
Joseph Strasburg, the president of the Rent Stabilization Association, which represents 25,000 landlords, called the rent freeze an "unconscionable, politically driven decision to carry out de Blasio's campaign promise of two years ago."
"A rent freeze on the surface may sound pro-tenant," he said, "but the reality is landlords will now have to forgo repairing, maintaining and preserving their apartments, which will trigger the deterioration of quality, affordable housing de Blasio pretends to care about."
...
Research by the board staff showed that landlords' operating incomes after expenses had grown for nine consecutive years, most recently by 3.4 percent. Their operating costs grew by only 0.5 percent because of significantly lower fuel costs, the staff said.
"...landlords will now have to forgo repairing, maintaining and preserving their apartments...." If there isn't already such a thing, there needs to be a method for landlords to plead hardship and to get financial help with maintenance where an audit really shows that the landlord is up against it even where the landlord is running things as efficiently as possible. Thoughts?
⇧ Washington's Sleepy Hollow fire burns 24 houses, unites a neighborhood
"It's kind of surreal at the moment, it's hard to process," said Eric Curry, who was spraying down the charred remains of his neighbor's house to make sure it didn't reignite and spread to other properties.
⇧ Events Continue to Conspire Against the Fed - Tim Duy's Fed Watch
Tim Duy:
September was not a sure bet, but you could see how the data evolved to get you there. But then came Greece. Greece - will it never end? Financial markets were roiled as Greek Prime Minister Alexis Tsipras abandoned the latest round of bailout negotiations with the EU, IMF, and ECB and instead pursued a national referendum on the last version of the bailout proposal. Most of you know the story from that point on - run on Greek banks, the ECB ends further ELA extensions, a bank holiday is declared, likely missing a payment to the IMF etc., etc.
At this juncture, everything in Greece is now in flux. Greece will be holding a referendum on a deal that apparently no longer exists, so it is not clear what negotiations would happen even if it passes. Moreover, it seems likely that the economic damage that will occur in the next week or longer will almost certainly require an even bigger give on the part of Greece's creditors. Is that going to happen? There is no exit plan to force Greece out of the Euro. What if Greece refuses to leave? How does Europe respond to a growing humanitarian crisis Greece as the economy collapsed? This could drag on and on and on.
As would be reasonably expected, the jump in risk sank equities across the globe, in the process stripping away US stock gains for 2015. Not that there was much to give - it only took a little over 2% on the SP500. Yields on Treasuries sank in a safe-haven bid, and market participants pushed Federal Reserve rate hike expectations out beyond 2015.
⇧ These 2 Maps and 2 Charts Show How Millennials Are Reviving Downtown Cleveland - CityLab
The authors of the new report focus on two main reasons for Cleveland's rebound among young workers. First is its lengthening list of residential amenities: "walkability, social connectivity, proximity to retail and nightlife, or more generally a preferred lifestyle." By next summer locals can add Public Square to the pile.
And to think that not too long ago, people were saying that Cleveland was dead.
⇧ Wynne Godley · Maastricht and All That · LRB 8 October 1992
This lays out why Europe is in such a mess. It needed federalism: a United States of Europe. That's what we we're for at the time. We thought it was a no-brainer. It was.
⇧ Draghi's Greek Bank Options Present Bleak Choices as ECB Meets - Bloomberg Business
The Governing Council could ease any of the above conditions to allow banks to stay afloat in an attempt to prevent a widespread financial crisis.
Should it do so, it would attract accusations of breaking its own rules, undermine its credibility and, in the worst case, violate European Union law that bans central-bank financing of governments.
It would have been doing the right thing, but it didn't. Draghi is insufficiently Keynesian.
⇧ Greece referendum: did the euro just die at 4pm? | Paul Mason | Paul Mason
Paul Mason:
Tsipras told his voters Syriza could negotiate an end to austerity and debt relief within the Euro. He and Varoufakis believed this: because the Italian PM Matteo Renzi had told them it was possible; and Hollande, and also the US State Department. The hard left of his own party were existentially anti-Euro, and pro Moscow, and he was determined to prove them wrong. So it's been a hard swallow for Tsipras to make this break. But his new position: vote No and strengthen our hand in pursuit of an austerity-lite deal within the Euro, may no longer be based on possibility.
They did what they had to try, and they've chosen the smartest democratic route in the face of Wolfgang Schaeuble's unfortunate uneconomic mind.
⇧ Let the bidding commence for a piece of Detroit's 'art' - RealViews
There's a new piece of 'art' up for auction online, and it's not something that can be delivered to your home from the likes of eBay. Coming in at 486,991 square feet and rising nearly 30 stories above the city sidewalks, Detroit's iconic Fisher Building was placed on Auction.com last week. Dubbed Detroit's "largest piece of art" and a national landmark, the Fisher Building is one of the most high profile properties to appear for sale online — and one expert believes could bring a lot of power and prestige to the highest bidder.
Check out this image of the lobby: https://detroitartdeco.com/images/fisherlobby2.jpg
⇧ Troika-Bailout-Referendum Speech by Alexis Tsipras
Fellow Greeks,
For six months now the Greek government has been waging a battle in conditions of unprecedented economic suffocation to implement the mandate you gave us on January 25.
⇧ Real estate market likes cash | PhillyVoice
According to a recent analysis, Philadelphia is No. 1 in homes bought and sold for cash in 2015.
...
In 2012 and 2013, Saha could buy some of the homes for $30,000 to $40,000, which could be renovated for around $20,000 and then rented. It was an inexpensive process.
"We thought, 'why aren't we buying these hand over fist?'" said Saha. "That is what we started to do."
...
Perry GraBois owns Jag One Properties LLC, which focuses on developing Point Breeze. He said that while the market is still good, the properties that gave developers high profits with little effort are harder to find.
"Everybody now is jumping into the game," said GraBois.
⇧ Double bubble trouble in China | Gavyn Davies
...China is now faced with the fall-out from three inter-connected problems: an equity bubble, a major top in property markets, and a credit explosion that has weakened the banking sector.
...
Although Chinese banks are certainly responding to their deteriorating balance sheets by reining in lending to normally viable investment projects, the turmoil in the interbank market that brought the global banking system to its knees in 2008 is much less likely, since the market assumes that the authorities will not countenance the failure of any major domestic institutions. Instead, they will in effect be recapitalised by the state, using the fiscal and central bank balance sheets as required to do this.
The resulting flows from the taxpayer to the banking sector will be more opaque, and therefore more politically feasible, than in comparable crises elsewhere. Furthermore, it is widely believed that China has the "fiscal space" needed to clean up the problem, though the authorities are clearly concerned about the moral hazard from bailing out failed financial entities.
On the positive side, the hard landing in the real estate sector is already well advanced, and the latest house price data suggest that the market may be improving slightly as the government eases restrictions on mortgage borrowing.
But overall credit extension in the economy is still growing at 15.8 per cent, compared to growth of only 6.2 per cent in nominal GDP, so the credit/GDP ratio is still rocketing.
We still think China is just kicking the can down the road.
⇧ The Problem with Completely Free Markets | The Fiscal Times
Mark Thoma's argument for a mixed economy versus a laissez-faire one:
I believe in markets as much as anyone. But for markets to work well the conditions for perfect competition must be approximated. In many important markets such as healthcare, retirement security, energy, and finance, that means the government must be involved.
⇧ Where did the Greek bailout money go? | World news | The Guardian
Less than 10% of the bailout money was left to be used by the government for reforming its economy and safeguarding weaker members of society.
Greek government debt is still about €320bn, 78% of it owed to the troika. As the Jubilee Debt Campaign says: "The bailouts have been for the European financial sector, while passing the debt from being owed to the private sector to the public sector."
⇧ China pumps up liquidity - YouTube
Worries over China's economy pushed shares into bear territory last week, prompting more liquidity from the People's Bank and fresh market volatility. Diana Choyleva, chief economist at Lombard Street Research, explains to the FT's John Authers why China is taking this risky road.