Linking ≠ endorsement.
⇧ FRB: Meeting calendars, statements, and minutes (2010-2016)
2015 FOMC Meetings
⇧ Sangiacomo And Trinity Properties Subpeonaed By City In Allegedly Shady Rentals Case: SFist
Following on a lawsuit filed in August by City Attorney Dennis Herrera against Trinity Properties, Herrera has now subpeonaed documents from Trinity and its leaseholder Lumi Worldwide concerning a block of 16 units that were meant to be below market rate rentals, but which are being rented to tourists as The SOMA Suites Hotel.
⇧ City lists 373 properties as candidates for prison demolition program | Pine Bluff Commercial
A partnership between the state and city to use prison labor to remove condemned houses is moving closer to becoming a reality, as the city has developed a list of 373 condemned houses that are candidates for the program, according to the Pine Bluff Police Department.
⇧ Construction Activity Increases as Backlog Edges Higher
“The nation’s nonresidential construction industry is now one of America’s leading engines of growth,” said ABC Chief Economist Anirban Basu. “The broader U.S. economic recovery is now in its 74th month, but remains under-diversified, led primarily by a combination of consumer spending growth as well as residential and nonresidential construction recovery. Were the overall economy in better shape, the performance of nonresidential construction would not be as closely watched. The economic recovery remains fragile despite a solid GDP growth figure for the second quarter, and must at some point negotiate an interest-rate tightening cycle. Recent stock market volatility has served to remind all stakeholders how delicate the economic recovery continues to be.
⇧ Economist’s View: The Fed Must Act Soon? Why?
12-month PCE inflation
Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 PCE 0.3 0.3 0.2 0.2 0.3 0.3 PCE excluding food & energy 1.3 1.3 1.3 1.3 1.3 1.2 Trimmed Mean PCE 1.6 1.6 1.6 1.6 1.7 1.6
See the problem? The Fed’s target rte of inflation is 2.0 percent, but trimmed mean inflation, which is intended to isolate long-run inflation trends and ignore short-run variation, is holding steady at 1.6 percent.
⇧ mainly macro: More (dark) thoughts on interest rates
If you had told me ten years ago that a decade hence UK output per head would be 15% below the 1955-2008 trend, inflation was zero and yet people would be talking about raising interest rates I would have said you were mad. If you had said that at a time when interest rates and real wages are at record lows the government was proposing to not invest for the future because that was the best way to prepare for the next crisis I would have said you knew nothing about business and economics. If you had said that just years after a huge financial crisis, followed by a host of financial scandals, the City regulator would be sackedbecause the Chancellor wanted less tough regulation I would have said you were thinking about some corrupt state and not the UK. If this is all a bad dream, what will it take to wake people up?
⇧ The Attainable American Dream? Not in These Major Tech Hubs | Zillow Blog
With home values continually on the rise in these cities, young people are less certain they’ll be able to afford a home of their own. In January, 18 percent of 18- to 34-year-old renters in San Francisco planned to buy within a year. Now, that number has dropped significantly to just 8 percent. Similar patterns hold true among young people in Seattle, San Jose and Denver.
Rent, rent, rent if one can even continue affording that. Build, build, build if one can make a reasonable profit/can afford the land, etc.
⇧ Majority of Greeks Say Adopting Euro Has Harmed Country
As the Greek debt crisis came to a head again earlier this summer, it’s no surprise that leaders in more solvent eurozone countries expressed doubts about Greece’s participation in the monetary union — but these doubts are also widespread among Greeks themselves. A majority of adults in the country — 55% — said in a poll conducted May 14-June 16 that they think converting from the Greek drachma to the euro in 2001 has harmed Greece, while one-third (34%) said the common currency has benefited the country.
Greeks are less likely to harbor doubts about their country’s membership in the European Union. In fact, responses to this question are essentially the inverse of those regarding eurozone participation: 54% of Greeks say EU membership benefits the country, while 35% believe the opposite.
⇧ Chinese Drywall Suit Stalled by Shielded Chinese Government Agencies
More than a year after suing the Cabinet agency that oversees China’s biggest state-owned companies, lawyers for people who say their homes were ruined by drywall made in China are still trying to get the lawsuit served on the State-Owned Assets Supervision and Administration Commission.
⇧ AP Exclusive: Drilling boom means more harmful waste spills
This is a huge and important article. Before you just think fracking and other methods of oil and gas extraction are great, you need to read this.
Nice job of reporting by John Flesher:
… a broken pipe soaked the land with as much as 420,000 gallons of oilfield wastewater — a salty and potentially toxic drilling byproduct that can quickly turn fertile land into a dead zone. The leaked brine killed every sprig of grama and bluestem grasses and shinnery shrubs it touched.
⇧ Former Fort Carson soldier gets 2 years in prison for setting home on fire
Staff Sgt. Jacob Warrum, 27, pleaded guilty on June 26 to third-degree arson.
He increased his home insurance coverage days before his house at 7568 Chasewood Loop caught fire, according to Gazette archives.
⇧ Price vs Value: Where’s the Upside in Property Markets? | Finance & Investment content from National Real Estate Investor
The abundant capital in the market and voracious investor appetite for acquisitions has resulted in sale prices being pushed higher than values across many metros.
CBRE recently conducted global analysis of spreads between regional class-A office property yields and the local bond yields. The historical trend shows an average spread of about 300 basis points. The current snapshot shows the U.S. coming in below that benchmark, with a spread of 240 basis points between bond yields and cap rates. However, when accounting for forecasted rental increases the spread jumps to 850 basis points.
Values are chasing prices. But that does not necessarily mean that sale prices have reached the ceiling, agrees Ken Riggs, president of Situs RERC, a real estate firm that specializes in property valuation management, appraisal, research and risk analysis. “I think prices will move higher for another 12 months,” he says.
⇧ Have we reached a tipping point for technology? – Agenda – The World Economic Forum
According to an Oxford study cited in the report, the advent of artificial intelligence could lead to almost half of all current jobs being computerized. And society must come to terms with issues such as privacy and trust in a world where everything can be measured and recorded.
“…artificial intelligence could lead to almost half of all current jobs being computerized….” Not half but all.
⇧ Will a weak Canadian dollar really lead to stronger exports?
There’s a lack of US demand for Canadian exports, plus:
… the global norm appears to be a race to the bottom with nearly 40 central banks jumping on the currency devaluation bandwagon this year.
And that is even more true when China’s central bank happens to be one of the 40.
⇧ US economy — on the road to recovery? | FT Business – YouTube
Covering both sides of the issue:
America’s economy is motoring again, and the Federal Reserve is expected to raise interest rates for the first time since 2006 — but the timing is uncertain. Is the real economy ready for a rate rise?
The auto industry is doing “well” reportedly based on subprime lending.
⇧ CoreLogic Chief Economist Perspective- September 2015 – YouTube
A stronger pace of household formation has been a missing ingredient needed to bolster the housing recovery. Household formation, which refers to an individual, couple, group or family that forms their own independent living quarters, had been running at very low levels since 2007 but has recently accelerated.
No mention of rentals versus purchases:
⇧ China deflation risks grow, foreign central banks on alert | Reuters
… New Zealand’s central bank governor Graeme Wheeler said the yuan devaluation had left them concerned about the risk China may let it slide further.
“We’ve seen authorities basically say they want to stabilize the renminbi, but if there were to be a very substantial depreciation in the renminbi it would certainly export deflation around the rest of the world, so everybody is looking closely at China,” he said at a press briefing following an interest rate cut in New Zealand.
The deflation threat was underlined by data showing that Chinese manufacturers cut prices at their fastest rate in six years, with the producer price index (PPI) down 5.9 percent in August from a year earlier, though consumer prices are rising for now.
⇧ Rent control: The key to neighborhood stabilization? – The Berkeley Blog
… is the economists’ feared effects of rent control on stalling housing production true in the land of Costa Hawkins, which prohibits buildings constructed after 1995 to be regulated under rent control? Our data indicates it’s not: When we looked at housing production numbers from 2007 to 2013, the six cities that had rent control in the Bay Area actually produced more housing units per capita than cities without rent control.
What am I missing? “…prohibits buildings constructed after 1995 to be regulated under rent control….” “…we looked at housing production numbers from 2007 to 2013….” Wouldn’t those automatically be non-rent-controlled?
The U.S. Environmental Protection Agency did not adequately study the pesticide sulfoxaflor before approving its use in 2013 on a wide variety of crops, including citrus and cotton, the 9th U.S. Circuit Court of Appeals said.
Sulfoxaflor is part of a group of insecticides known as neonicotinoids…
“We’re certainly extremely happy,” said Greg Loarie, an attorney with the group Earthjustice, which challenged the EPA’s approval of sulfoxaflor on behalf of groups in the beekeeping industry. “It means that sulfoxaflor comes off the market while the EPA does the work it should have done a long time ago.”
I favor the precautionary principle.
⇧ China under mounting pressure to ease policy as economy stumbles | Reuters
… the central bank has warned that looser policy may not be effective in lessening the pain felt by companies.
Companies are holding back on spending amid a reluctance by banks to lend due to rising bad debts.
⇧ CFO Press Release 9/9/2015 Northwest Florida Homeowner Arrested for Arson after State Fire Marshal Accelerant Detection K-9 “Bailey” Successfully Tracks Accelerants
… Mr. Dice was suspected of setting his own home on fire using accelerants to help sustain the life of the fire and was arrested for Arson.
⇧ Investors snapping up new homes for rentals
This is a big deal.
It was widely deemed a temporary play: Large-scale investors buying thousands of discounted foreclosed properties during the worst of the housing crash and turning them into single-family rentals. When home prices recovered, they would surely sell them for a hefty profit. The housing market is recovering, albeit more slowly than expected. Foreclosure volume is way down and home prices are way up, but these investors are not selling.
They are buying more, and now they are buying new.
… As this new interest develops, however, builders are starting to offer institutional buyers bulk discounts. Not only does it help builders grow revenue, but it gets them closer to normal levels of production, which has been a real struggle thus far.
… Lennar … step further, opening its first single-family rental community in Sparks, Nevada.
“One of the big criticisms of the single-family rental world is that they’re all kind of one-offs in unique locations with unique amenities. The scalability of the management is what gets it complicated. This makes it much more like an apartment community in that it’s all together and can be managed by a single entity,” said Stuart Miller, Lennar’s CEO.
That was a really, really smart move by Lennar.
⇧ Why Corbyn could prompt a Tory lurch to the Left – Independent.ie
Under Osborne, the best-paid have been shouldering a greater share of the burden than at any time in history. Why?
Because he cut the top rate of tax. Lower tax rates led to higher tax revenues; this is what John F Kennedy referred to as the “paradoxical truth” of taxation. But it’s one that Corbyn is ideologically unable to grasp.
Several of Corbyn’s proposals have been tried over the decades and left a trail of political destruction.
Ask low-paid workers in Stockholm or Manhattan if his proposed rent controls are a good idea. Ask Zimbabweans how ‘People’s Quantitative Easing’ worked out for them.
Tax cuts for the rich was done by George W. Bush in the US. It did not increase revenues but did increase the deficit. The US State of Kansas tried it too. It’s been a disaster. Meanwhile, California raised taxes on the rich and did increase revenue and state-wide growth at the same time. Tax rises and cuts are never one-size fits all.
As for rent control, plenty of people in Manhattan love it. Of course, there are many ways to deal with housing affordability in a proper manner, but laissez-faire (purely an ideology not based on hard data) is not one of them. I’m not saying that the article’s author is advocating laissez-faire, but he sure leans heavily in that direction.
Concerning PQE, without the stimulus spending by the US, our Great Recession would have been that much worse. Imagine how much better the stimulus would have been had it not been done via borrowed money (low rates or not and regardless of whether the Fed returns 94% of its income to the US Treasury). If we didn’t borrow, we wouldn’t have a debt ceiling. The stimulus could have been vastly larger, which would not have caused anything remotely approximating hyper-inflation but would have ended the recession much faster and would put the unemployed back to work rather than making unemployment drag on and on and on.
Honestly, cherry picking the examples is not helpful. It’s misleading, whether intentional or not.
Let’s not forget all the world-famous economists who signed onto the statement that Jeremy Corbin is putting forth mainstream economics.
“It’s almost a coddling relationship,” said Jill Morrison of the Powder River Basin Resource Council, an environmental advocacy group in Wyoming, adding that it takes large court judgments or settlements for companies to mend their ways. “The industry looks at spills as a cost of doing business.”
“We can hold a large suspended penalty over their heads for one to five years and they agree to pay immediately with no court process if they violate again,” he said. “We don’t see much recidivism this way.”
What’s “much recidivism”? Plus, if word were to get out that there would be fines, how many wouldn’t have even that first “accident”?
⇧ Justice Department Sets Sights on Wall Street Executives – The New York Times
The memo is a tacit acknowledgment of criticism that despite securing record fines from major corporations, the Justice Department under President Obama has punished few executives involved in the housing crisis, the financial meltdown and corporate scandals.
… In settlement negotiations, companies will not be able to obtain credit for cooperating with the government unless they identify employees and turn over evidence against them, “regardless of their position, status or seniority.” …
“We’re not going to be accepting a company’s cooperation when they just offer up the vice president in charge of going to jail,” ….
… [because of] the Supreme Court’s reversal of a conviction against the accounting firm Arthur Andersen in the Enron scandal, and a federal court’s rejection of a case against KPMG employees linked to tax shelters. Prosecutors began to shift from indictments and guilty pleas to deferred-prosecution agreements — essentially a form of corporate probation.
Realignment of logistics networks heightens demand
Continued innovation in order fulfilment and delivery is driving further adaption of logistics networks and heightening demand in multimodal locations, for automated facilities and for facilities supporting efficient urban logistics.
⇧ The FOMC is coming — Money, Banking and Financial Markets
FOMC members presumably expect that a continued tightening of labor markets eventually will start to exert inflationary pressure. So far, however, there is little indication of a pickup in the trends of wage or price inflation. Maybe this is a temporary consequence of the fall in energy prices, the appreciation of the dollar, and the slowdown in China. Or, maybe it is something else. We surely don’t know, and we assume they don’t either.
It’s no mystery or secret. Wages have been sticky because more people at the top of the income and wealth pyramid have been getting their greedy way since the early 1970’s.
The plain fact of it is that there has been, and remains, a financial-class struggle in the US. Capitalists (in the Marxist sense: the owners of the means of production) have prevailed over democrats (small-d, meaning regardless of political-party affiliation). Either we live in a democracy or we live in a capitalist (laissez-faire) society. We can’t live in both at the same time because money is not distributed equally the way votes are counted (or supposed to be) equally.
We can have democracy with a mixed economy; but, the more mixed (the more capitalistic), the less democratic.
⇧ Real estate executive sent to federal prison for investment scam – Sacramento Business Journal
Heaven Investments managed to raise more than $30 million from investors all across the country to put into a real estate exchange program. But the company never obtained a license to offer the investments it was selling.
⇧ Lemoyne Borough adopts inspection ordinance for residential rental properties | PennLive.com
It’s been roughly six years in the making, but Lemoyne now has an inspection ordinance for residential rental properties.
David Lanza, lawyer for CARPOA, the Capital Area Rental Property Owners Association, said no inspection ordinance is better than having an inspection ordinance, but he was complimentary of the borough’s development process for the ordinance adopted on Thursday.
“I just want to thank the committee for working with us over the past couple of years,” Lanza said. “We’ve made our comments and a lot of the comments were adopted in what’s before the council tonight and we certainly appreciate that this is certainly better than most boroughs and townships that have ordinances, better than what they’ve adopted from our perspective.”
Actually, good landlords should like this. It will drive out the competition that leans toward slum-landlording practices, which practices aren’t at all good for the industry.
⇧ If mortgage rates go to 6%, here’s what happens to housing
To see how prices might be hit by rising rates, real estate consultant John Burns ran the numbers assuming the rate for a 30-year fixed mortgage gradually moves back up to 6 percent—from the current average of just more than 4 percent.
The result is that some very hot markets—including San Francisco, San Jose, California, and Miami—may be overvalued by more than 20 percent.
⇧ China’s Forex Follies by Barry Eichengreen – Project Syndicate
It could be that Chinese policymakers regard the 2% devaluation as a down payment — the first in a succession of downward adjustments. But, in that case, they violated the first rule of exchange-rate management: Don’t cut off a cat’s tail in slices.
⇧ China’s `New Normal’ Growth Model Is Starting to Get Expensive – Bloomberg Business
Measures aren’t yet on the scale of the 2008-2010 binge, which left a debt overhang that’s now dragging on growth. Li on Thursday reiterated there hadn’t been spending on that scale and spoke of the balance between counter-cyclical spending and structural reform as akin to playing Chinese chess.
“There’s been no equivalent of the 4 trillion yuan announcement that heralded the 2008 stimulus” said Bloomberg economist Tom Orlik. “But if you add up the monetary, fiscal, stock market and FX interventions, China has been burning a lot of cash to keep growth and markets stable,” he said.
⇧ UN votes for new debt rules but UK tries to block – Jubilee Debt Campaign UK
… Tim Jones, policy officer, Jubilee Debt Campaign, said:
“This could prove to be a historic breakthrough. The vast majority of nations have spoken out for a change to the broken debt system. From the Greek debt debacle, to Argentina being held to ransom by vulture funds, to decades-old debt crises in Jamaica and El Salvador the need for change has never been clearer. It is outrageous that the UK has chosen to put reckless lenders ahead of people around the world by voting against these principles.”
The vote adopted nine principles that should be respected when restructuring sovereign debt: sovereignty, good faith, transparency, impartiality, equitable treatment, sovereign immunity, legitimacy, sustainability and majority restructuring.
Michel Aglietta and Nicolas Leron:
… putting an end to the problems facing the Euro calls for economic policies to be coordinated at the supranational level. This logically implies the implementation of a European budgetary policy — that is to say a European political executive and, thus, a federal European state. This federal state would need to be formalised by a constitutional settlement at the same level. …
… Put bluntly, control by the European Commission over budgets voted by national parliaments does not square with any conception of democracy.
… The European economy, threatened by secular stagnation, urgently needs a large stimulus package of loans and investment (from the EU acting as a public power) that Member States are not prepared to take on by themselves given their European-ordained obligations to curb their budgets. …
There will not be a European people — viz a European society that adopts shared public debt — and, by extension, a bona fide European democracy, until the total volume of the European budget or, more specifically European public debt, surpasses the threshold that would transform the EU from a regulatory machine into a fully-fledged and legitimate democratic power.
Well, that’s all true but only within a very narrow context: the status quo bond-linked monetary system. The better idea is to get rid of all the governmental debt by using only a debt-free currency.
⇧ Oil drillers idle rigs amid risk of prices falling to $20 | GulfNews.com
“Well economics fail to justify the deployment of fresh drilling capital, even after factoring in 30 per cent declines in well costs and efficiency gains,” Andrew Cosgrove and William Foiles, analysts at Bloomberg Intelligence, wrote in a Sept. 8 report.
You can bet your bottom dollar that the oil industry has people working around the clock to find more and more ways to trim costs by improving the technology.
⇧ Larimer mountain property prices jump
The decision to buy in the burn area, where an existing home might be surrounded by blackened trees, varies greatly among buyers, he said.
“Some are really not very interested in considering the 12th filing,” he said. “Others it doesn’t seem to bother at all, particularly if they can purchase a little more house for a little less money.”
⇧ Lancaster County Amish jump into real estate | TribLIVE
“They put sweat equity into a property, and they are shrewd in the way they spend their money,” he said. “They’re also not afraid to purchase in areas that other investors might not purchase — like Cabbage Hill,” Lefever said.
⇧ As migrants fill his properties, Fergus Wilson puts up rents by 33% | Money | The Guardian
Fergus Wilson, Britain’s most controversial buy-to-let landlord, is increasing rents across his 900 houses in Kent by up to 33% and filling his properties with eastern European migrants — while at the same time saying that Britain is heading for a “housing disaster”.
⇧ 24 things that Jeremy Corbyn believes – BBC News
“Quantitative easing for people” could be used to invest in housing, energy, transport and digital projects. Unlike the £375bn issued electronically by the Bank of England between 2009 and 2012 to buy bonds, gilts and other debts, this would be “QE for people instead of banks”, Corbyn says. Tax campaigner Richard Murphy argues these plans would stimulate the economy and boost employment. But Shadow Chancellor Chris Leslie attacked the proposal, saying it would lead to higher inflation and interest rates, hurting the poor most.
Chris Leslie doesn’t understand the timing or the impact or is being disingenuous. If done incorrectly and at the wrong time, it could. Those circumstances don’t exist right now. Corbyn’s advisers know how and when so that inflation and interest rates would remain in check.
⇧ China is dumping U.S. debt – Sep. 10, 2015
… China’s sales [of Treasurys] could make Treasury yields higher than they would normally be. That’s of concern because Treasury rates are used as a benchmark that set the cost of borrowing for items like credit cards and mortgages.
While it’s “not the end of the world,” SkyBridge Capital senior portfolio manager Troy Gayeski said higher yields could lead to a “slowdown in the housing recovery.”
What’s key is how much cash China ultimately needs to raise to defend its currency and stock market. …
… Now that China’s economy is in disarray, America might not be able to count on its No. 1 lender to gobble up U.S. debt like in the past.
So, why borrow? Just issue the currency without borrowing anything.
This is democracy versus plutocracy.
Jean-Luc Mélenchon, Member of the European Parliament, co-founder of the Parti de Gauche (France)
Stefano Fassina, Member of the Italian Parliament, former Italian deputy minister of economy and finance (Italy)
Zoe Konstantopoulou, President of the Hellenic parliament (Greece)
Oskar Lafontaine, former German minister of finance, founder of Die Linke (Germany)
Yanis Varoufakis, Member of the Greek Parliament, former Greek minister of finance (Greece):
The President of the European Commission, Jean-Claude Juncker, said it clearly: “there can be no democratic choice against the European treaties”. …
This is our plan A: We shall work in each of our countries, and all together throughout Europe, towards a complete renegotiation of the European Treaties. …
The majority of governments representing Europe’s oligarchy, and hiding behind Berlin and Frankfurt, also have a plan A: Not to yield to the European people’s demand for democracy and to use brutality to end their resistance. … they also had a plan B: To eject Greece from the Eurozone in the worst conditions possible by destroying its banking system and putting to death its economy.
… we also need a plan B of our own to deter the plan B of Europe’s most reactionary and anti-democratic forces. To reinforce our position in the face of their brutal commitment to policies that sacrifice the majority to the interests of a tiny minority. But also to re-assert the simple principle that Europe is about Europeans and that currencies are tools for promoting shared prosperity, not instruments of torture or weapons by which to murder democracy. If the euro cannot be democratised, if they insist on using it to strangle the people, we will rise up, look at them in the eye, and tell them: Do your worst! Your threats don’t scare us. We shall find a way of ensuring that Europeans have a monetary system that works with them, not at their expense.
I’m for democracy over plutocracy. How about you?
⇧ China’s Freer But More Volatile Markets | Foreign Affairs
China’s waning control over its stock and currency markets has certainly produced a stomach-wrenching spectacle, but its fallout for the real economy looks manageable. Unlike in the United States, where a severe stock market correction could spread to credit markets and prevent businesses from securing loans or consumers from securing mortgages, China’s credit supply is dominated by state-controlled banks. This blocks the channel through which stock market panic could infect other parts of the financial sector or the real economy. In addition, stocks comprise a smaller share of Chinese household wealth than in the United States, limiting the risk that consumers will cut spending as stock prices fall. And if the yuan does indeed depreciate further in coming months, it will likely do more good than harm to the Chinese economy. A weaker yuan would support the export sector and help China save their reserves as insurance to hedge the risk that the country’s long, slow deceleration turns into a scarier downturn. Perhaps most importantly, China’s government still controls the levers it used to spur an economic boom in 2008 and 2009. If 2015’s slowdown becomes more severe, officials could easily direct state-owned firms to launch another investment spending spree with the funding of state-controlled banks (Wisely, they have not done so).
Are the common Chinese people economically and financially sophisticated enough to not panic?
Regardless, the godlike status of the CCP’s top leaders has been seriously tarnished.
Also, the Chinese leadership has embarked on another round of “stimulus spending” on perhaps additional unproductive “assets.”
⇧ Big Data Analysis Reveals October is Best Month to Buy a Home in U.S. – WORLD PROPERTY JOURNAL Global News Center
The best single day of the year to close on the purchase of a home is October 8th
After removing perennial holidays such as Christmas Day, New Year’s Day, Veteran’s Day and July 4, our analysis found that over the past 15 years buyers who closed on the purchase of a home on Oct. 8 have realized the biggest average discount — 10.8 percent below estimated market value at time of sale — among any of the remaining 356 days in the year.
⇧ Intersections of Psychology and Economics – YouTube
This is an excellent development I’ve been advocating for many decades.
Much has been said about the interaction between economics and psychology. With Prof. Singer we discuss the psychological research that informs cutting-edge economics as well as the psychological underpinnings of old models. She explains the key importance of understanding preferences and behavioral change.
⇧ China August industrial output up 6.1% on-year vs +6.4% expected
Chinese e-commerce giant Alibaba Group Holding Ltd., which dominates online sales in the country, on Tuesday lowered its sales forecasts in a fresh signal that the economic slowdown is taking a bite out of consumer spending.
Vehicle sales fell 3 percent in August from a year earlier, the China Association of Automobile Manufacturers said.
Data last week showed that China’s manufacturers slashed prices at the fastest rate in six years in August as commodity prices fell and demand cooled, signalling stubborn deflationary risks in the economy and adding to expectations of further stimulus measures.
Imports tumbled more than expected while exports shrank again, pointing to persistently weak demand both at home and abroad.
⇧ Euro not so attractive for us anymore: Polish finmin
So, if the euro is so great for Greece, what’s this all about in Poland?
Before, Poland would have to fulfil certain budgetary criteria before joining the euro. Now, the minister told CNBC that the euro zone would have to evolve in order for Poland to sign up and say goodbye to its zloty.
Opening the German labour market quickly and comprehensively to migrants would provide a boost to the German economy.
⇧ Hundreds of homes and other structures destroyed in Valley fire – LA Times
Middletown was particularly hard-hit, with blocks of homes and other structures lost. Photos showed Middletown’s main street burned, along with part of a school. Also burned was an apartment complex in the town.
Cobb also sustained substantial damage.
⇧ Study Predicts Antarctica Ice Melt if All Fossil Fuels Are Burned – The New York Times
Burning all the world’s deposits of coal, oil and natural gas would raise the temperature enough to melt the entire ice sheet covering Antarctica, driving the level of the sea up….
The rest of the earth’s land ice would melt along with Antarctica, and warming ocean waters would expand, so that the total rise of the sea would likely exceed 200 feet, the scientists said.
“To be blunt: If we burn it all, we melt it all,” said Ricarda Winkelmann, a researcher at the Potsdam Institute for Climate Impact Research in Germany and the lead author of a paper published Friday in the journal Science Advances.
“This is humanity as a geologic force,” said Ken Caldeira, a researcher at the Carnegie Institution for Science in Stanford, Calif., and another author of the paper. “We’re not a subtle influence on the climate system — we are really hitting it with a hammer.”
In a rough calculation, the scientists found that burning all fossil fuels might raise the average temperature of the planet by something like 20 degrees Fahrenheit. Past research suggests that an increase that enormous would likely render vast stretches of the earth too hot and humid for human habitation, cause food production to collapse, and drive much of the plant and animal life of the planet to extinction.
“What right do we have to do things that, even if they don’t affect us, are going to be someone else’s problem a thousand years from now?” asked Ian Joughin, an ice sheet expert at the University of Washington….
We don’t know what technological and scientific advancements wait in store that could mitigate or even reverse Anthropogenic Global Warming, but we are gambling right now. Also, the short-term impacts have already started.
If we apply the precautionary principle, we will have a crash program for alternative energy research and development regardless of carbon-sequestration efforts underway. We need to do both and easily could.
⇧ America producer prices data point to tame inflation – The Nation Nigeria
In the 12 months through August, the PPI fell 0.8 percent after a similar decline in July. It was the seventh straight 12-month decrease in the index.
Tame inflation despite a rapidly tightening labour market poses a dilemma for Fed officials who are contemplating raising rates for the first time in nearly a decade.
Though job openings are at a record high and the unemployment rate is at a 7-1/2-year low, wage gains have been lacklustre. That has helped keep inflation well below the Fed’s two percent target.
⇧ Year-End Tax Strategies: What to Do NOW to Maximize Savings
My article today is going to be a short one focused on some tax strategies you should start thinking about to reduce your reportable income. Since we are rounding out the third quarter and about to enter the fourth, it’s a good idea to go ahead and start organizing your documents related to your business for the year. It’s time to get your bookkeeping solution in check and up-to-date and speak with your CPA or accountant to discuss any year-end planning tips/strategies that you can utilize to improve efficiencies and lower your tax liability.
⇧ A Cautionary History of US Monetary Tightening by J. Bradford DeLong – Project Syndicate
Most well-written article I’ve seen from Brad DeLong in a long time:
The tightening cycle upon which the Fed now seems set to embark comes at a delicate time for the economy. The US unemployment rate may seem to hint at the risk of rising inflation, but the employment-to-population ratio continues to signal an economy in deep distress. Indeed, wage patterns suggest that this ratio, not the unemployment rate, is the better indicator of slack in the economy — and nobody ten years ago would have interpreted today’s employment-to-population ratio as a justification for monetary tightening.
It is tempting to conclude that the Fed’s eagerness to tighten monetary policy — despite unfavorable historical precedents and ongoing economic uncertainty — is driven by commercial banks with excessive influence in official policymaking. [That’s been my openly stated position on this blog.] After all, commercial banks’ business model works only when the banks can earn (via passive and relatively safe long-term investments) at least 3% a year more than they pay depositors. And that is possible only if US Treasury rates are higher than they are now.
If this is true, it would reflect a failure by bankers to understand their industry’s material interests. What would most benefit commercial banks is not an immediate increase in interest rates, but a monetary policy that contributes to ensuring that the economy is capable of supporting higher interest rates in the future. If history is any guide, tightening monetary policy in the near term will only lead to further economic turbulence, followed by a rapid retreat to low interest rates. Embarking on that path should be a cause of concern for everyone.
⇧ Divided on diagnosis, EU ponders euro zone reform | Reuters
France’s Economy Minister, Emmanuel Macron:
“If the member states are not ready for any form of financial transfer in the monetary union, as is the case today, then you can forget the euro and the euro zone.”
Go for it!
⇧ Across the Curve – Blog Archive – China Fixed Investment Disappoints
“The economy is showing no sign of recovery,” said Ding Shuang, chief China economist at Standard Chartered Plc in Hong Kong. “From the perspective of monetary policy, the government has done what it can, but demand from the real economy needs to pick up to really make use of that.”
These are good questions/points; however, construction workers moved on, new ones require training, and many young people don’t savvy such labor. So, it would seem that training/education is in order (on-the-job too).
… this insane gamble taken by Saudi Arabia last winter to increase its own production to 10.6 million barrels per day at the climax of the fall in prices was already lost because it reveals a deep misconception of fracking, which is by no means a classical resource extraction method, and one which doesn’t require substantial investment nor elevated oil prices in order to be viable.
They were damned if they did and damned if they didn’t.
Rather than Peak Oil, it looks like we have Valley Oil.
That said, the curse of oil can hit via fracking in spades due to the environmental problems, including earthquakes.
One wonders when Saudi Arabia will become a sinkhole. Perhaps the Russians have it right, and oil is being produced geologically deep within the Earth at a vastly faster rate than the West has publicly claimed.
The system will not be able to indefinitely pad its nest with the capital gains from rising equity markets. This is because these markets will eventually be ”infected” by the events in the real world. And the real world is that of the “reserve army of labor” (Marx’s expression) that must always fight and often suffer in order to survive.
The necessary and appropriate fiscal measures remain blocked by the global financiers for obvious self-serving reasons. But increasing the income of every citizen would boost consumption, stimulate the economy, and give those citizens a minimum equity in our societies, while having a positive impact on employment. Today, it is in the interest of capitalism to create a universal minimum wage: at least to save itself…
Correct, but we can do better and should! We need democracy — the real thing.
⇧ Jeremy Corbyn, Labour, and the Challenge for British Politics – The New Yorker
“Anthony Lane [the New Yorker’s film critic] writes about Jeremy Corbyn’s rise to power and the challenge he presents for British politics.”
I debated whether to include this article because it contains so many statements that are very far afield from the focus of this blog.
On second thought, I decided to point to one statement/position in the article even at the risk of leaving unaddressed a great deal that could be refuted. It is, after all, an ideological hit piece which I hopefully assume my readers will read with the grain of salt. Here’s the statement that is on topic on this blog.
This means, we are told, that the Bank of England will print more money: an endearing and almost childlike solution, though not one that has met with unqualified success elsewhere.
The only difference between the US government stimulus spending, which kept the US from falling deeper into the depression hole, and the People’s QE that Corbyn has in mind is that the US borrowed the money to do it and certainly didn’t have a large enough stimulus package or directed enough at main street, though much of it was.
The number of top-flight economists in the world, ones who rightly warned against the policies and practices that lead to the Great Recession, or Lesser Depression if you will, who know this about the stimulus is very large indeed. To call PQE childish itself promotes ignorance, perhaps intentionally.
⇧ Booby-trapped? New auction set for tax militants’ properties | The Seattle Times
Federal officials are trying once more to sell properties formerly owned by a pair of tax militants that include a 100-acre parcel that might be booby-trapped.
⇧ Moving Day for an Alleged Real Estate Fraud Victim | WNEP.com
Cabrera says he paid cash for the home in February of last year. He paid the money to his real estate agent Ignacio Beato.
It turns out, Cabrera doesn’t own the home at all. He says Beato gave him fake paperwork.
Could this have gone through a standard closing? It sure doesn’t sound like it.
When hiring an attorney to help you navigate the legal waters of a real estate transaction, look for attorneys with experience in real estate law specifically. Ask the attorney or firm how many transactions they have done. It’s important that you hire someone with specific expertise in purchases agreements and title work and all the other intricacies of real estate law.
What’s your view of the article?
⇧ Audit: Section 8 properties owe $508,000 in taxes | Pittsburgh Post-Gazette
An audit by the Allegheny County Controller’s office revealed that some Section 8 property owners have failed to pay more than $508,000 in county, municipal or school property taxes since 2012.
⇧ John McDonnell: what will Corbynomics look like? | Paul Mason | Paul Mason
Pay close attention to this. The Tories will try to paint Corbyn as what he is not.
I’ve been posting Anne Pettifor (one of my favorites) and others on this blog, and elsewhere, for years. They are very well aware of inflation and how to prevent it. The question is only whether Corbyn will stay true. Everything so far suggests that he will, but Tsipras didn’t remain true to Varoufakis (though Yanis won’t say it).
The appointment of John McDonnell MP as shadow chancellor was the clearest signal Jeremy Corbyn could have sent. …
It’s clear from their campaign speeches that Corbyn and McDonnell have understood the transformed structure of capitalism over the past 25 years makes it difficult to enact the old programme of Bennism: wholesale nationalisation and state planning. Instead they have begun to draw ideas from the “post” socialist think tanks: Prime Economics, run by debt campaigner Anne Pettifor; the New Economics Foundation, whose economist James Meadway is influential in the Corbyn camp. Both McDonnell and Corbyn have picked up and run with the “people’s quantitative easing” strategy advocated by Richard Murphy, the tax justice campaigner.
And here’s the interesting thing: it’s not far off what generations of orthodox Keynesian economists have wanted to do to the British state, including senior old-school Lib Dems.
⇧ John McDonnell: Corbyn’s shadow chancellor speaks to Jon Snow – YouTube
Here you go.
Jeremy Corbyn’s new shadow chancellor John McDonnell speaks to Jon Snow, in his first interview since being appointed.
Keyword there: “democratic.”
⇧ The cruel game of musical chairs in the U.S. labor market – Washington Center for Equitable Growth
The dire experience of these workers with college degrees displacing workers with less formal education stands in strong contrast to the widely-held view in economic and policymaking circles that the main problem facing the U.S. economy is a shortage of highly-educated workers. If college-educated workers were in short supply, then we would expect their wages to rise as employers attempted to lure them away from their competitors. Yet the inflation-adjusted value of the wages of college-educated workers has barely increased in the 21st century.
What’s more, between 2000 and 2014 (the last year for which complete data are available), the employment of college-educated workers has increased much more rapidly in low-earning industries than in high-earnings ones. If there weren’t enough college graduates to go around, then the opposite should be happening because high-earnings industries would presumably be outcompeting low-earnings industries to hire college-educated workers.
The implication of all of these findings is that the U.S. labor market doesn’t lack for college-educated workers. Workers who have degrees are already taking jobs further and further down the job ladder. Encouraging or subsidizing higher education attainment will not solve the fundamental problem facing workers in the current job market: There are not enough jobs.
Also, there is a decidedly anti-share-the-wealth mentality among top executives.
⇧ Renters Not Looking to Buy Anytime Soon, Zillow Says – Real Time Economics – WSJ
The lack of first-time buyers is worrying because without new homeowners, the housing market is just recycling existing owners and isn’t contributing to economic growth. Economist blame the stubborn absence of new buyers on the lack of more affordable inventory and struggles to save for a down payment when many are pouring a huge portion of their incomes into rents.
Let’s not forget that constructing rentals does contribute to economic growth and also helps to reduce high rents. Landlords have to hear the “bad” news with the “good.”
⇧ What Do U.S. Economists Think of Official China Statistics? ‘Only a Fool Would Believe Them’ – Real Time Economics – WSJ
An overwhelming majority of the respondents to the latest Wall Street Journal survey of 64 economists—not all of whom answered every question—said China’s gross domestic product figures miss the mark. How far-fetched are the numbers? Well, here are a few comments on the question, “Do you think that China’s GDP statistics accurately reflect the state of the Chinese economy?”
“The joke is that 78.352% of all their statistics are made up.” —Bernard Baumohl, The Economic Outlook Group
Love that one.
⇧ Jeremy Corbyn would clear the deficit — but not by hitting the poor | John McDonnell | Comment is free | The Guardian
So let me make it absolutely clear that Labour under Jeremy Corbyn is committed to eliminating the deficit and creating an economy in which we live within our means.
That, however, does not mean that Corbyn and McDonnell are unaware that the government can create money without borrowing. What it means is that they understand that doing too much of that (over and above what productivity can handle) will lead to unnecessary and unhelpful inflation. Done in the proper amount, though, it will eliminate austerity altogether and lead to continued sustainable growth (short of natural catastrophes or invasions or the like).
“China is moving towards a consumption-based economy and recent events do not change this.” “During the stock market boom, there was no corresponding boost in retail sales or consumption. Similarly, we cannot expect a negative effect on retail sales on the way down.
The average Chinese people are being emotional, etc. It would be a mistake to gauge their future actions based upon what we would do were we in their shoes knowing what we know. Recent data suggests that service-sector growth has already been negatively impacted. That, of course, could change depending upon what the people can be made to understand and to believe about incomes going forward.
Anthony Sanders, professor of finance, George Mason University:
Expand credit access … again? That really only works with rising incomes. Redo the FICO (credit) indices as HUD Secretary Julian Castro has recommended? That simply is a second-best solution to the real problem — no real labor recovery.
Relax QM (qualified mortgage) rules? Introduce NEW mortgage products (such as AEI/Ed Pinto’s Wealth Building Mortgage)? These solutions mask the real problem: lack of true economic growth and a labor market recovery.
I would recommend … that trying to increase real median household income is the solution rather than credit/downpayment relaxation solutions.
And if you can’t afford to buy a home, rent.
⇧ Rethinking government debt — Prime Economics
There is a terrible fear among financial sector actors that these countries will pursue reckless economic policies that destroy the purchasing power of their currencies and the value of their government debt. This fear has been deliberately communicated to the general public in those countries by captive politicians and media, in order to ensure wide acceptance of the austerity policies that much of the financial sector believes is necessary to maintain the value of safe assets. It is perhaps understandable, but it is economically unjustified. The truth is this:
Running a primary fiscal surplus in a recession makes the recession worse, raising debt/gdp and increasing the risk of sovereign default
Running a primary fiscal surplus when growth is poor and the private sector highly indebted is likely to cause a recession
Running a sustained absolute surplus robs the private sector of its savings
Paying off government debt deprives the private sector of a safe store of value
Increased growth and prosperity arising from productive investment outweighs the cost to future generations
Sadly such basic economics is lost on credit ratings agencies and investors, who see only rising deficit and debt/gdp and start to panic about getting their money back.
It is indeed necessary that the government debt of the world’s “premier” countries should remain “safe”. But draining their economies by forcing austerity policies upon them is not the way to keep it safe. On the contrary, it is likely to make it LESS safe. Safety is ensured through investment in the physical and human capital of the country to secure growth and prosperity for the future.
Clearly, even governments of “Premier League” countries can’t do entirely as they please. There is bound to be a tipping point at which trust is lost and the country is relegated to the second division. We don’t know exactly what that tipping point is. But the message from today’s low interest rates is that we are nowhere near that point. For the sake of both their own citizens and the global economy, these countries can, and should, invest.
That’s all fine with the exception that Frances didn’t deal with debt-free money issued to match productivity, which issuance would result in no inflation or deflation and would, therefore, protect the assets automatically. The currency should be “nationalized.” The law should require that issuance match the productivity of democratically decided projects.
⇧ Jury Finds Husband and Wife Guilty in Antelope Home Arson | USAO-EDCA | Department of Justice
After a 10-day trial before Chief United States District Judge Morrison C. England Jr., a jury returned its verdict today finding a Sacramento couple guilty on all four counts related to the arson of their former home in Antelope, United States Attorney Benjamin B. Wagner announced.
Evidence at trial showed that the defendants had set the fire or caused the fire to be set in order to collect insurance money ….
The defendants are scheduled to be sentenced on December 4, 2015. They face a minimum statutory penalty of 10 years in prison, a $250,000 fine, and a three-year term of supervised release for the charge of arson to commit another felony. The mail fraud counts carry a potential penalty of up to 20 years in prison, a $250,000 fine, and a three-year term of supervised release. The actual sentences, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.
⇧ Night Thoughts on Dynamic Scoring
• You cannot find a boost to potential output growth flowing from either the Reagan or the Bush tax cuts.
• You cannot find a drag on growth from the Obama tax increases.
• You can find an effect of the Clinton tax increases–but it is that, thereafter, growth was faster, because the reduction in the deficit powered an investment-led recovery.
⇧ mainly macro: Labour and Central Bank Independence
Sometimes the Prof needs to be taken to school.
What CBI prevents either the government or the central bank doing is a money financed fiscal stimulus: a fiscal stimulus paid for by creating money rather than issuing government debt. The central bank can create money, and has done, but cannot force the government to spend more or cut taxes. The government cannot force the central bank to permanently create money to finance these things.
But this is only a problem if you have a government committed to deficit fetishism. It would be ironic indeed that a Labour party now pledged to fight austerity decided it needed to print money because they were reluctant to borrow more. It would be the ultimate triumph of austerity, and also just daft.
It’s daft if you don’t realize what the interest charge is all about. It isn’t to control inflation. Interest was created long before people understood how to juggle rates to control wages to inflation, etc. Interest is first and foremost a means of rent seeking, in this case, passive income after capital creation and/or accumulation.
Sure, there are retirees living off it, but that’s not a problem. They can be paid directly with debt-free money.
The central-banking system globally is highly undemocratic. That’s the problem. It’s highly undemocratic because the richest people in the world spend a substantial portion of their passive and active earnings to buy the anti-democratic system they want.
So, doing away with the often private, so-called independent central-banking system would go a very long way to democratizing the money and giving the regular people, who typically aren’t greedily preoccupied with lording it over others, some power.
Exactly the same thing the central bank (the Fed in the US) does can, and should be, done by a computer system designed expressly for that purpose. A proper computer system could do it vastly better and extremely consistently, all without governmental-debt inflationary pressures at all.
Come on Simon. You’re a smart fellow for sure. Go back to the drawing board on this one and sharpen your pencils.
CSL and the coverage focuses largely on defaults. Yet the paper also mentions, but does not address, a wide body of research which finds that student loans could “impair students’ abilities to finance first homes and to live independently of their families, or could constrain their occupational choices, reducing rates of homeownership and marriage, or entrepreneurial risk taking.” That’s a lot of impacts!
⇧ Labour’s Dead Center – The New York Times
In the British case, the false accusations against Labour involve fiscal policy, specifically claims that the Labour governments that ruled Britain from 1997 to 2010 spent far beyond their means, creating a deficit and debt crisis that caused the broader economic crisis. The fiscal crisis, in turn, supposedly left no alternative to severe cuts in spending, especially spending that helps the poor.
These claims have, one must admit, been picked up and echoed by almost all British news media. It’s not just that the media have failed to subject Conservative claims to hard scrutiny, they have reported them as facts. It has been an amazing thing to watch — because every piece of this conventional narrative is completely false.
⇧ Frothy, yes, but don’t call it a housing bubble
What’s your definition of a bubble? Is it something that must burst, or can the air be let out slowly (simply deflating the bubble without popping it)?
What I don’t see right now are people generally clamoring to get in for appreciation (an increase in market values).
⇧ In Every State, Gains in Income Trail Growth in Economy
Many economists point to growing income inequality. According to economist Lane Kenworthy of the University of California at San Diego, as the top 1 percent of income earners have gotten a larger portion of the country’s overall wealth, “household income growth for the middle has become decoupled from economic growth.”
⇧ University in West Virginia to Require Risk Management Training of Greek System
Marshall University is requiring its fraternity and sorority chapters to undergo training for risk management and party hosting after hundreds of students had to be dispersed by police last month.
Fraternities and sororities can find it difficult to obtain insurance.
⇧ Underinsurance in property is a global, and growing, challenge-Swiss Re sigma study | Business Standard News
In the last 10 years, cumulative total damage to global property as a result of natural disaster events was USD 1.8 trillion, and about 30% of those losses were insured. In other words, the total shortfall in insurance cover – the protection gap1 – was USD 1.3 trillion.
There are different reasons for underinsurance, including factors like perception of risk, insurance knowledge, affordability, and reliance on government post-disaster relief, lack of trust in insurers, and limited access and ease of doing business. Undervaluation of assets due to lack of information and awareness is another contributing factor. Certain risks – such as some peak natural catastrophe, terrorism, cyber or contingent business interruption risks – can challenge the bounds of insurability.
… Successfully addressing property underinsurance requires a coordinated effort and innovative thinking by both the public and private sectors.
Are you underinsured?
⇧ Man arrested for insurance fraud after fire – Olean Times Herald: News – Man arrested for insurance fraud after fire: News
Following an extensive, months-long investigation by the Cattaraugus County Fire Investigation Team (CATTFIT), authorities on Tuesday charged Harry P. Scull, 41, of 3629 N. Authority Road, Great Valley, with second-degree insurance fraud, a class C felony. The sheriff’s office announced the arrest Friday.
⇧ Keynesianism Explained – The New York Times
In his short, clear article, Paul Krugman is completely correct about what constitutes Keynesianism.
It also shows how and why I am not a Keynesian, though I agree with large portions of Keynesianism.
Paul says, “…printing money can solve one specific problem, an economy operating far below capacity. Nobody said that it can conjure up higher productivity, or cure the common cold.”
Well, printing money correctly can definitely conjure up higher productivity and may even (likely) lead to the cure for the common cold.
He also says, “The case for fiscal stimulus is quite restrictive, requiring both a depressed economy and severe limits to monetary policy.”
In my foreseen program, the fiscal and the monetary are one.
Really, the issue here (between Paul Krugman and me) comes down to Paul’s monetary technocracy versus my more-direct democracy.
Everyone is afraid of the “politicians” manipulating the money supply for self-serving, shortsighted political reasons. It’s been done. Richard Nixon is just one case in point.
So what’s a nation to do? Should it stay with the monetary-system status quo of “independent” central banks, or should it hand over the reins to the “politicians”? Ah, this shows the problem. Where’s the other option? Where’s the option of enhancing direct democracy?
Who’s afraid of democracy? Plutocrats. Who’s been controlling the public discourse so democracy enhancements remain off the table? Plutocrats.
Keynesians aren’t the worst, far from it. They can be a little slow on the uptake though. They find it harder to shake off the constant anti-democratic conjuring (speaking of conjuring) of the plutocrats.
“Monetary-and-Banking-Reform Platform for The United States”: Here
One of the main points made by the teachers union is that they have gone six years without a cost-of-living raise, making it hard to live in Seattle? ?where rent and home prices have skyrocketed in? recent? years — in part because of the city’s booming technology industry.
Teachers are far from the only ones feeling it too. Profits from real estate are what it’s all about; but if the product is too scarce, then people who do important jobs for the overall health of the area are priced out and must be paid more or move, leaving the area without those important workers.
The solution isn’t just to pay those more who are best organized to demand it but rather to increase the product to make it affordable enough for all needed workers. All of that’s before the automation revolution consumes the jobs too.
⇧ Carlyle Raises $4.2 Billion for Seventh U.S. Real Estate Fund – Bloomberg Business
Carlyle Group LP raised $4.2 billion for its seventh U.S. real estate fund, meeting the top end of its target range, in preparation for more property purchases at a time when prices are at record levels.
The firm will expand investments in apartment buildings, along with its other areas of focus: ….
⇧ How Puerto Rico hopes to break its debt spiral and fix its broken economy – The Washington Post
The task force proposed closing the budget gap and revitalizing the island’s stagnant economy by tightening welfare benefits, exempting young workers from future minimum wage increases, privatizing government assets, tightening tax enforcement and having the island exempted from regulations that increase the price of fuel used to generate electrical power.
Those far-reaching reforms–which would come after years of austerity that saw government jobs and pensions slashed and taxes increased–would be overseen by a five-person financial control board whose members would include candidates nominated by creditors and, possibly, the federal government, task force officials said in a telephone briefing for reporters.
Where’s the discussion on how Puerto Rico got into its current mess? Why is the mess being placed upon the backs of the poor? I’m sure they didn’t cause it. Who will get richer by these “reforms”?
⇧ Multifamily Loan Delinquencies Fall as Eager Lenders Provide Plenty of Capital | Multifamily content from National Real Estate Investor
It’s relatively easy to find an apartment loan today. “For almost any apartment deal today, you can find a lender, you usually can find a couple of them,” says Mike Riccio, co-director of national production for CBRE Capital Markets.
That’s partly because so few apartment loans are in trouble. Very, very few apartment loans were late in their payments in the second quarter, compared to the first. Delinquency rates improved for all types of lenders covered by the “Commercial/Multifamily Delinquency Report” from the Mortgage Bankers Association. Strong markets are supporting apartment loans. But strong markets won’t last forever, and lenders struggle to balance to need to win business with the need to maintain their underwriting standards.
⇧ EU cash squeeze threatens post-crisis financial reforms – watchdogs | Reuters
Insufficient funding for the European Union’s trio of financial watchdogs undermines reforms aimed at averting another financial crisis, leaves banks in the dark and weakens the region’s voice in global rulemaking, top regulators said on Monday.
The three watchdogs – the European Securities and Markets Authority (ESMA), the European Banking Authority (EBA), and the European Insurance and Occupational Pensions Authority (EIOPA) -face a squeeze as Brussels tightens its belt.
It coincides with all three having to write and implement hundreds of new rules to flesh out reforms that apply lessons from the 2007-09 crisis, when governments had to rescue banks.
Do you think the underfunding might be intentionally done to slow or derail the regulations?
⇧ Ending Marketing Agreements Between Lenders and Brokerages – The New York Times
Marketing agreements between mortgage lenders and real estate brokerages have been commonplace for years. But federal regulators are cracking down on some of these arrangements as violations of anti-kickback laws, and two major lenders have taken steps to end the practice.
In July, Wells Fargo and Prospect Mortgage announced they were doing away with what are known as marketing services agreements, or MSAs, with real estate firms, builders and other referral partners, citing uncertainty about regulatory tolerance for these agreements.
Elke Koenig, chair of the Single Resolution Board, said future bank resolutions will follow new European rules, due to come into full force in January, which dictate that stakeholders in a bank, from shareholders to creditors and uninsured depositors, contribute to a rescue before public funds can be called on.
Do you see that: “uninsured depositors”? Make sure your deposits are fully insured by a governmental agency that has the backstopping of the whole government and which government cannot default. How easy is that? Well, among other things, it will depend upon international banking laws and how much various nations might charge citizens for not banking within those nations.
Some people, people I otherwise often agree with, think that the FDIC in the US wouldn’t necessarily be backstopped by the federal treasury. I disagree with that idea, though it would behoove the federal government to make it clear via a binding statement.
⇧ Chinese Real Estate Investors | The Real Deal Shanghai
The Chinese have invested more than $30 billion in U.S. commercial real estate over the past five years, and experts predict that number to rise in the face of domestic uncertainty in the Chinese market.
Will the Chinese government stop the bleeding: So much private Chinese money leaving China?
⇧ New Pew Report: America’s Poverty Has Shifted From the South to the West Since 1960 – CityLab
The American South has become less poor than it was in the past, while the West has seen a rise in poverty, according to a new analysis of Census data by the Pew Research Center.
In 1960, almost half of America’s poor (49 percent) lived in the South. By 2010, that number was at 41 percent—still a substantial share, but considerably less than before. Meanwhile, the West’s share of the nation’s low-income population climbed from 11 percent in 1960 to 23 percent in 2010.
⇧ Lehman Anniversary: A Reminder That the SEC Needs Someone a Lot Better Than Mary Jo White as Chairman | naked capitalism
Yves here. We’ve written regularly about the pathetic performance of Mary Jo White as SEC chairman. She was ballyhooed as a former effective prosecutor who could rebuild the agency. Here is a partial list of our stories on her tenure:
Time to “Fire” Mary Jo White: SEC Covers Up for Bank Capital Accounting Scam Promoted by Her Former Firm, Debevoise
Elizabeth Warren Declares War on SEC Chairman Mary Jo White
Three Former SEC Commissioners Urge Mary Jo White to Stop Protecting Corporate Cronyism via Inaction on Disclosure of Political Spending
The SEC’s Mary Jo White: A Failure, or Doing Her Real Job?
The SEC’s Mary Jo White Punts on High Frequency Trading and Abandons Securities Act of 1934
Mary Jo White Institutionalizes Deutsche Bank Protection Racket at the SEC
More and more activist groups are demanding that Mary Jo White be replaced, pronto.
⇧ Chinese retreat from Australian property as capital controls bite | afr.com
China is working on stemming the blood flow.
… cracking down on a practice whereby family and friends of those wanting to purchase a property overseas all transfer US$50,000 into an overseas account. That’s the limit each Chinese individual is allowed to move out of the country each year.
The purchaser then pays back his friends and family in China and uses the money from the overseas account to put down a deposit on the property.
The Australian, US, Canadian, and other real-estate markets are going to start feeling this. Of course, people will still find ways to cheat the system.
I’m actually surprised by the high percentage the Chinese government has stopped, though it’s still early in the game. They had been dragging their feet, and I had thought the way to get the money out would have been generally more sophisticated. The oversight and enforcement must have been quite lax right up to the point where they started cracking down.