Linking ≠ endorsement.
⇧ UK labour productivity – it’s mainly a matter of demand — Prime Economics
… stasis in labour productivity improvement over a period of years that has caused so many to fret about the UK “productivity puzzle”, wondering why it has stagnated.
We have long been of the view that — far from being a mystery — the basic answer is that productivity is mainly driven by demand. And demand has been strongly held back by the government’s economic policies which have led to the slowest recovery in recent decades.
But since only supply-side economics are in fashion among the economics mainstream, this issue of demand is largely ignored. …
In sum, UK labour productivity mainly changes up and down with the state of the economy as evidenced by concurrent changes in GDP. This is not to deny the long-term importance for the economy of key supply-side issues such as education and training – but their impact is long-term and indirect.
⇧ Explosion at Sunny Isles Beach condo tower injures six | Miami Herald
A 34th-floor boiler room blew up atop a new waterfront Sunny Isles Beach condominium Friday, injuring six people, including at least one worker in or near the boilers at the time of the explosion.
⇧ Global economy loses steam as Chinese, European factories falter | Reuters
World economic growth lost momentum in September, with China’s factory output shrinking again, euro zone manufacturing growth slowing, and U.S. activity steady.
Steady? I think it’s slowed down.
⇧ Job Growth Weakens in September | Jobs Bytes | Data Bytes | Publications | The Center for Economic and Policy Research
If the Fed tightens in the face of this, they need to be taken out and … (well, figuratively speaking, in my view anyway).
The Labor Department reported the economy created just 142,000 jobs in September, well below most forecasts. Furthermore, the prior two months’ numbers were revised down as well, bringing the average for the last three months to 167,000. In addition, there was a drop in the length of the average workweek of 0.1 hour causing the index of aggregate hours to decline by 0.2 percent. The household survey also showed a weak picture of the labor market. While the unemployment rate was unchanged at 5.1 percent there was a drop of 0.2 percentage points in both the labor force participation rate and the employment-to-population (EPOP) ratio. The drop in the EPOP brought the ratio back to its level of October 2014.
⇧ There’s More to Economic Security than the Official Poverty Measure | Economic Policy Institute
… just how insufficient the poverty threshold is in measuring economic well-being. It takes an additional $25,106 to live in the cheapest budget area (Morristown, Tenn.) and another $82,485 above the poverty threshold to live in the most expensive (Washington, D.C.). In the median family budget area for this family type (Des Moines, Iowa) a two-parent, two-child family needs an additional $39,733 to make ends meet, above the poverty line.
⇧ What happened to the job ladder in the 21st century? – Equitable Growth Equitable Growth
If these workers do not find opportunities to climb, then they will potentially be stuck on the lower income rungs for the rest of their lives.
⇧ The costs of interest rate liftoff for homeowners: Why central bankers should focus on inflation | VOX, CEPR’s Policy Portal
Carlos Garriga, Finn Kydland, and Roman Sustek:
An important channel for monetary policy transmission is through mortgage markets. This column illustrates how the effects of an interest rate lift-off, from the zero lower bound, on homeowners depend on three factors: the prevalent mortgage type in the economy (fixed or adjustable rate), the speed of the lift-off, and the inflation rate during the lift-off. This channel of transmission suggests that if the purpose of the lift-off is to normalise nominal interest rates without derailing the recovery, the Federal Reserve Bank and the Bank of England should wait until the economies show convincing signs of inflation taking off. Furthermore, the lift-off should be gradual and in line with inflation.
⇧ Do the latest GDP revisions vindicate Osborne’s austerity? [Nope] | Ben Chu | Independent Chunomics Blogs
It’s quite true that austerity wasn’t the only constraint on UK growth post-2010 — there was the eurozone crisis and a spike in global oil prices.
But front-loaded austerity didn’t help matters.
The Chancellor’s own Office for Budget Responsibility estimates that the Coalition’s tight fiscal policy was a significant drag on growth in 2010-11 and 2011-12:
Growth would have been around 1 per cent higher in each of those years without the consolidation. If one uses higher fiscal consolidation “multipliers” than the OBR, which some economists do, then the drag on output from austerity was even greater.
⇧ New Homes are Getting Bigger, and Lots Are Getting Smaller | Zillow Blog
Since the late 1990s, the median size of new detached single-family homes in the U.S. has grown 24 percent, from about 2,100 square feet in 1999 to about 2,600 square feet at the end of 2014.
… The median lot size has shrunk by about 10 percent since the late 1990s, from about 9,600 square feet in 1999 to about 8,600 square feet at the end of 2014, leaving less yard space left over.
⇧ The Real Estate Investing Strategy I’d Recommend to Newbies
Dave Van Horn:
Now, I know what some of you may be thinking: “FHA is the most expensive way to buy, especially with MIP (Mortgage Insurance Premium). Isn’t 5% down on a conventional mortgage better?”
Well, not really, and here’s why.
With FHA, they not only allow seller assists, as do most mortgages, but you can purchase with as little as a 3% down payment. You are also able to count up to 90% of the current rents (as opposed to 75% with conventional mortgages), provided that they have a one-year lease agreement signed, and they’ll count this towards the buyer’s monthly income. This can dramatically increase one’s buying power, especially since you can purchase up to a four-unit dwelling with FHA financing. Keep in mind, you can normally only have one FHA mortgage at any given time.
⇧ Farmers Driven From Homes ‘Like Pests’ by Dam Projects – Bloomberg Business
Developing nations are in the middle of the biggest dam construction program in history to generate power, irrigate fields, store water and regulate flooding. Yet governments are finding it harder to move people, who have become less trusting of officials and more connected to information about the effects of the dams. Corruption and wrangles over payments have stalled projects from Indonesia to India for decades and frustrated governments are increasingly turning to the ultimate threat: Move, or we will flood you out.
“Sending rising waters to flood out people like pests is barbaric,” said Professor Michael Cernea, a senior scholar at the Brookings Institution in Washington and former senior adviser for social policies and sociology at the World Bank. “Indonesia has the resources and know-how to resettle these people decently.”
⇧ World Energy Council Reports on Managing, Financing Extreme Weather Risks
The World Energy Council has issued a report, co-authored by Swiss Re Corporate Solutions, which focuses on managing and financing extreme weather risks. The report, entitled —”The road to resilience — managing and financing extreme weather risk “will be presented at the meeting of G20 energy ministers in Istanbul, Turkey.
⇧ UK Insurers Call for Collective Action to Address Climate Change
Lloyd’s of London and other UK insurers called for collective action to address climate change….
“An increase in temperature of more than 2 degrees could lead to a lack of affordable insurance,” Carmen Bell, policy advisor for personal insurance & general insurance at trade body Insurance Europe, told Reuters.
⇧ New Report on Handling Quakes Caused by Fracking
A group of U.S. drilling states, seismologists, academics and industry experts issued guidance Monday in a frank new report on handling human-induced earthquakes caused by hydraulic fracturing or the disposal of fracking wastewater.
⇧ Sea Level Rise Increasing Major Storms, Floods off New Jersey Coast
A new study looking back over 1,000 years finds the flooding risk along the New York and New Jersey coasts increased greatly after industrialization, and major storms that once might have occurred every 500 years could soon happen every 25 years or so.
⇧ Blackstone raises record-breaking $15.8B real estate fund: 20% of the capital is already committed
An interesting problem to have: more money than you’re sure where to invest to make a good-enough return:
A source close to Blackstone recently told The Real Deal that investor demand for its latest fund well exceeded $15.8 billion, but that raising more cash would have made it difficult to find profitable investments.
⇧ Nest Releases Weave Connected Home Protocol, But It’s Different Than Google Weave
Nest has announced that a communication protocol it’s been using internally for its products is now being made available to all device makers. It’s called Weave, and I know what you’re thinking, but it’s not the same as Google’s Weave/Brillo platform (because that’s not confusing at all). Nest Weave will allow devices around your home to communicate directly (and with the Nest app) rather than relying on the cloud.
IoT: are you an early adapter? What are your security concerns about the IoT?
⇧ China PMI surveys signal steepest economic downturn since January 2009 | China,Employment,GDP,Growth,Manufacturing | Markit Commentary
The service sector is not making up the difference in China.
Chris Williamson, Chief Economist, Markit:
China’s economy contracted at the steepest rate for over six-and-a-half years in September, according to survey data, as falling manufacturing output was accompanied by only fractional service sector growth. Firms also reported a stronger decline of new orders and further job shedding. Meanwhile prices fell at an accelerated rate, adding to growing worries about deflation.
The rate of job cutting eased slightly but remained at a pace not seen since the height of the global financial crisis in early-2009. …
Deflationary pressures continued to intensify…. …charges for services showed the biggest monthly fall for just over three years.
⇧ Rebuilding Malls From The Ground Up | PYMNTS.com
“In the best examples of these projects, the design of outdoor public spaces follows traditional urban planning principles, and the project is not only the commercial, but also the social and civic hubs of the community,” Steiner told CoStar.
The change may necessitate an update to consumers’ vocabularies as well. Instead of calling these new retail spaces “malls,” Steiner prefers the term “lifestyle centers” to more accurately reflect the wider breadth of constituent offers, such as cinemas, residential dwellings and sports facilities.
That’s exactly what I wrote years ago should be done only I included retrofitting existing malls to fit the concept.
⇧ How to challenge deductions from your security deposit – LA Times
California residential landlords and managers need to know.
⇧ Q&A: Can Corbyn revolutionise the financial sector and the Bank of England?
Anastasia Nesvetailova, Director, City Political Economy Research Centre (CITYPERC), MA Global Political Economy and BSc IPE, School of Arts and Social Sciences, Department of International Politics, City University London:
Since banks are crucial systemic institutions in our economy, and since they perform many utility-like functions (payments, clearing) critical for the economic security of the country, it can be argued that public ownership is best suited to guard the public interest in utility banking. And in fact, given our experience in the financial crisis, it can be argued that they were, in effect already nationalised.
I can anticipate a counterpoint from the banking industry: public ownership is wasteful, it stifles innovation and competition. But while the benefits of privately-owned banking groups are difficult to quantify, data suggests that bank executives and managers were rewarded handsomely even as their institutions were making losses and were on a public liquidity drip and, further, that in finance, innovation takes the form of regulatory arbitrage and avoidance, rather than the benign pursuit of the public good.
⇧ [Published on Nov 7, 2011] Anastasia Nesvetailova CERIS Global Financial Crisis Economic International Relations – YouTube
She’s on Jeremy Corbyn’s advisory committee and knows her stuff.
CERIS Interview Anastasia Nesvetailova: Global Financial Crisis: Why does it happen again & again ?
Professor Anastasia Nesvetailova is a research specialist in International Political Economy. Her areas of interest cover finance and financial crises, globalisation and governance and her current research focuses on the themes of global financial fragility and crises, the formation of financial and monetary policies, and the process of capitalist evolution in Russia and other FSU countries. She currently teaches at the School of Social Sciences of the City University in London at undergraduate and PG level. She is a former lecturer at the Centre for Global Political Economy of the University of Sussex.
⇧ The smartest economist you’ve never heard of – The Washington Post
Steven Pearlstein has written a very helpful historical summary of the argument between the Keynesian view and those who’ve come to be known as Austerians (people who subscribe to the Austrian School of Economics and austerity as a public economic policy):
It took several years to persuade him, but Blanchard finally signed off on a paper concluding that inequality was an important factor in economic growth rates, with high levels of inequality resulting in growth that is likely to be “low and unsustainable.” The researchers also found no evidence that the level of government redistribution typically found in Europe or North America had any adverse impact on growth rates. Now widely cited and often downloaded, the paper has become the touchstone for what Jonathan Ostry, its lead author, only half-jokingly calls the “kinder, gentler IMF.”
“That the predictions [of Keynesian economics] were wildly incorrect, and that the doctrine on which they were based was fundamentally flawed, are now simple matters of fact, involving no subtleties in economic theory,” wrote two brash young economists, Robert Lucas and Thomas Sargent.
Wow, were they ever wrong!
⇧ China Imposes New Capital Controls | World Affairs Journal
Beijing now finds itself in what looks like a no-win situation. If it does nothing, cash will continue to gush out of China.
If, on the other hand, China acts to stem the outflow, it could make an already bad situation worse. Actions that are too radical can create a panic. Moves not radical enough will probably hasten outflows because holders of cash will think they have only a limited opportunity to transfer their wealth to safer jurisdictions.
⇧ Unemployment in States and Local Areas (all other areas) – FRED – St. Louis Fed
I ran two counties just to see.
⇧ Corbynomics’ Thatcher moment – BBC News
The composition of the panel probably also tells us that the ultra formulation of “quantitative easing for people not banks” – till now seen as the quintessence of Corbynomics – is dead.
Or to put it another way, this group of economists would not sign up to a policy of the Bank of England providing cheap loans to a new state investment bank on a permanent continuous basis – for fear that the anti-inflationary credentials of the Bank of England would be destroyed.
No public punch up
If People’s QE survives – which it may – it will be as a contingent rainy-day monetary tool, for when the economy is next in direst straits.
That said I would expect all these economists to back the notion of the government taking advantage of prevailing low interest rates to borrow considerably more for investment in infrastructure.
I certainly hope that’s completely wrong and that People’s QE will go ahead as planned in a huge way. Anything less would be a huge error playing right into the hands of those who would hate to see PQE work and work well.
⇧ Angry Bear – Where MMT Gets Its Accounting Wrong — And Right
I’m no longer following the bleeding edge of MMT, but it seems to me that MMT may have already dealt with this in a way that strongly suggests its main adherents grasp it.
Runups in stock and real-estate markets create new wealth, net worth, “savings,” money, out of thin air — just like deficit spending, but by a different mechanism. The markets create money too.
That’s what I was arguing with the MMTers about years ago, as I somewhat alluded to in discussing the video entitled “Curriculum Reform & Rethinking Economics – YouTube” (https://propertypak.com/2015/09/23/news-real-estate-risk-economics-sept-23-2015/#09231541), though the discussion was not at all as detailed concerning “accounting,” per se, and was quite wide-ranging.
It will be interesting to see what comes of all of this.
⇧ The Fed and the Disappointing Jobs Report – Bloomberg View
Mohamed A. El-Erian:
It is becoming increasingly clear that the central bank’s commitment to continue to carry the bulk of the policy burden isn’t sufficient to generate high, inclusive and sustainable growth. Congress needs to step in, too, allowing the government to deploy a broader set of policy responses.
Alas, there is little to suggest that such a reaction will be forthcoming. This inertia will hold back corporate enthusiasm for actively deploying large cash holdings into larger productive capabilities and employment.
⇧ The Most Affordable Places to Buy a Home in America | Credit.com
Nationwide, the mortgage payment on an average-priced home in the U.S. (assuming a 3% down payment and including homeowners insurance, private mortgage insurance and property taxes) takes up 36.5% of the average wage in the first quarter of 2015, according to a quarterly analysis from housing data company RealtyTrac.
Even with decreased home affordability on the horizon, there are many places where it’s considered quite cheap to buy a house. Here are the 10 counties with the most affordable homes, according to RealtyTrac’s Q1 2015 analysis.
1. Hamilton County, Florida
Metro area: None
Now, ask yourself why. What’s seen as being “wrong” with the affordable places relative to other more-expensive places? Before buying in any of them, research would be in order to rule out some serious defect/risk, correct?
It’s been a bucket of cold water in the Fed’s face. A very short, focused post:
Friday’s US jobs report combined with the September FOMC decision has significantly altered market expectations for the timing of the first hike by the Federal Reserve.
Frankly, the labor/wages situation still stinks. Those who have stood in the way of massive fiscal spending (which could be via bond-free currency) have caused a great deal of needless pain and suffering. There is no expansionary deficit-reduction in the face of such lowflation. Austerity via tax cuts on the rich and social-welfare cuts on the poor doesn’t work; it only makes things drag on at best.
⇧ Economists Can’t Find the Silver Lining in Today’s Jobs Report – Bloomberg Business
“While it’s always important not to overreact to one single data release, we’ll make an exception in this case,” Paul Ashworth, chief U.S. economist at Capital Economics NA Ltd. in Toronto, wrote in a note to clients. “Aside from manufacturing, the slowdown in employment gains is most notable in business services and education and health, which are not the sectors most prone to cyclical swings.”
⇧ Fed’s Fischer says financial stability toolkit may need to grow | Reuters
… targeting policies at one sector, such as home mortgages, could simply push that sort of lending to less regulated companies.
There is concern that the Dodd-Frank regulations put in place after the crisis are already doing that, helping expand the influence of “shadow” banks not covered by the same rules as commercial lenders.
⇧ Bel Air Household Used 11.8 Million Gallons of Water Last Year – Lifestyles of the Rich & Richer – Curbed LA
“11.8 million gallons of water…”? If true, it’s obscene in my view.
Rich people love water. They use that stuff like it’s some kind of diamond-kale skin cream that’s going to make them live forever, statistically. And even though California is in a historically dire drought so bad that the governor has issued mandatory water cutbacks, and even though a normal person can be fined hundreds of dollars for watering their lawn on the wrong day, there is no limit on how much water a single household can use—a person can pour out “as much water as they can pay for,” according to an LADWP official cited in Reveal’s new study of the state’s biggest residential water users. And so there is a house in Bel Air that used 11.8 million gallons of water in the year ending in April, or enough for about 90 normal households, more than any other property in the state.
⇧ Finne Architects Design A Home Overlooking Elliot Bay In Seattle | CONTEMPORIST
⇧ Portugal’s Austerity Champion Coelho Shows Rajoy Victory Path – Bloomberg Business
“By sticking with the coalition, Portuguese voters are telling Europe that they haven’t turned their backs on the policies that placed their country on the path of recovery,”….
Sad to say, that’s a clear statement confirming the voting majority’s economic illiteracy or duplicity or both.
⇧ Oven suspected in North Side fire that killed 3 children – StarTribune.com
Three young children from the same family died in a late-night fire in a house in north Minneapolis’ Jordan neighborhood that the property owner said had yet to have the heat turned on.
A woman at the scene early Sunday said that the oven was on during the night ….
⇧ Worst nuclear disaster in US history is a secret – YouTube
A little out of the ordinary in video styles we post but the title piqued my interest/curiosity:
NBC4 in California recently did an in-depth investigation into the worst nuclear disaster ever to have happened on US soil, which the US government went to great lengths to keep secret. It’s an event most Americans have never even heard of.
“Loss caused by the nuclear hazard will not be considered loss caused by fire, explosion, or smoke, whether these perils are specifically named in or otherwise included within the Perils Insured Against” is fairly standard language in insurance policies.
⇧ Stephen Williamson: New Monetarist Economics: Some Unpleasant Labor Force Arithmetic
… suppose that about 1 million (roughly the difference between the net increase in long-term unemployment from the beginning of the recession until now) long-term unemployed leave the labor force. This would imply an unemployment rate of about 4.6%. Can unemployment go much lower than 4.6%? Probably not. This means that there is little employment growth left to be squeezed out of the current unemployment pool. So, if payroll employment growth is to be sustained at 200,000 per month, this will require an increase in the labor force participation rate. Could that happen?
⇧ You can print money, so long as it’s not for the people | Zoe Williams | Comment is free | The Guardian
Quantitative easing is bizarrely unapproachable, even though it’s happening right across the world and its unwinding will dominate the economic picture for years to come; one is allowed to reference QE, so long as one maintains at all times a technocratic tone, to indicate that one understands and approves of it as nothing more than a lever to create stability. It was the best idea ever, until you suggest something similar could be done for a social purpose, and then it’s the most perilous idea ever. To interrogate why the benefit must always go to the existing asset-holding class, why human ingenuity can’t devise anything more productive and equitable, is to reveal the shaming depth of your incomprehension. It’s not that you don’t understand money; it’s that you don’t understand the exigencies of the debate, which are that you sign up to a number of false principles before you start.
It turned out that the “no money tree” brigade meant: “If you create money infinitely, that will cause inflation” That is a really curious argument against Corbyn’s people’s QE, like going up to someone eating a banana and saying: “If you eat limitless bananas, you will give yourself potassium poisoning.” There’s a secondary argument about the independence of central banks from governments, which is actually rather an elegant example of our dishevelled politics: if the government issues no directive to the Bank of England, and all the gains of QE go to the wealthiest, that’s “independent”. If the government had said, invest this in, say, the green economy, that would have been independence lost. It has become normal to see upwards redistribution as a law of the physical universe, and anything else as the interference of a heavy-handed state.
… the real barrier to debate is, as with so much in the realm o f debt and austerity, that it’s conducted in bad faith, with infantilising aphorisms, aimed not at deepening understanding but at shooing away public interest with unavoidable economic realities. As a tactic, this has reached the end of its plausibility.
“…end of its” ability to dupe the masses.
⇧ Hamburg to seize commercial property to house migrants – BBC News
Hamburg has become the first German city to pass a law allowing the seizure of empty commercial properties in order to house migrants.
In the Brandenburg region, in eastern Germany, the authorities have halted the demolition of old social housing blocks. Instead they will be refurbished to provide 4,000 flats for migrants, the daily Die Zeit reports.
Meanwhile Franconia, in north Bavaria, plans to build cheap modular units to house migrants for 10 years, after which they will be rented out as social housing for locals.
⇧ Homes as ATMs: It’s starting again
As home values rise, homeowners are gaining more equity on paper — and they’re taking it out in paper. Cash-out refinances jumped 68 percent in the second quarter from a year ago, according to Black Knight Financial Services.
⇧ NASA | Seeing Inside A Hurricane – YouTube
NASA scientist Dalia Kirschbaum explains how the Global Precipitation Measurement Mission’s Core observatory has an instrument that can see layer by layer through a storm.
⇧ John McDonnell lands a blow on our chancer of the exchequer | Business | The Guardian
… we now have a Conservative chancellor of the exchequer, a veritable son of Thatcher, who has recently gone kowtowing to a communist Chinese government, pleading with them to provide finance for the construction in Britain of a nuclear power station by a French nationalised industry. I am not making this up.
⇧ The Trans-Pacific Free-Trade Charade by Joseph E. Stiglitz and Adam S. Hersh – Project Syndicate
Joseph E. Stiglitz and Adam S. Hersh:
… provisions make it hard for governments to conduct their basic functions — protecting their citizens’ health and safety, ensuring economic stability, and safeguarding the environment.
Imagine what would have happened if these provisions had been in place when the lethal effects of asbestos were discovered. Rather than shutting down manufacturers and forcing them to compensate those who had been harmed, under ISDS, governments would have had to pay the manufacturers not to kill their citizens. Taxpayers would have been hit twice — first to pay for the health damage caused by asbestos, and then to compensate manufacturers for their lost profits when the government stepped in to regulate a dangerous product.
I’ve seen the alleged benefits of the planned agreement, but none makes up for the negatives, not even close.
⇧ Vicksburg Tax-Forfeited Properties now up for public bid | WJTV.com
Fifty-nine parcels with an estimated value of $817,444 are included in the auction.
⇧ Will China’s Troubles affect U.S. Commercial Real Estate?
… the commercial real estate market is driven more by the usual demand drivers and by the economy generally than by stock market fluctuations or country-specific problems abroad. Many observers believe that China’s problems won’t have an outsized importance in the U.S. Total U.S. exports to China are less than one per cent of GDP, and less than 2% of the S&P’s 500’s revenues come from sales to China. China’s slowing growth has already put downward pricing pressure on commodities — but for the U.S. economy cheaper commodity prices are generally a good thing, putting more money in consumers’ pockets and lowering production costs. And since China is a creditor to the rest of the world, not a debtor, it seems unlikely that a financial crisis will develop from its current troubles.
The question remains of just how quickly and thoroughly China can switch gears to a consumer-driven economy. The consumer sector has already disappointed. Can the leadership make the right moves to boost things without causing a bigger mess? How can they succeed without democratization on a massive scale and on a crash-course basis?
⇧ South Carolina flooding: State not out of the woods yet – CNN.com
“We have lost everything. What I got on my body is what we have,” she told CNN affiliate WIS-TV. “Pretty much everybody down that hill there has lost everything … our vehicles, our clothes, everything.
⇧ TPP Take Two – The New York Times
The trade deal has possibly been improved. If it has, how much of the reason why has to do with public criticisms based on what was leaked?
Is Paul Krugman being naive?
It’s a secret deal, and just because some of the most predacious multinational corporations are complaining that they might not get everything they want is no reason to conjecture that the deal may, therefore, be good for the common citizens of the world. If those corporations and the nations where they are headquartered were walking away from the table, maybe then.
Is that too cynical?
⇧ TPP trade agreement text won’t be made public for four years | Business News | News | The Independent
When Australian and New Zealand trade representatives asked to view the texts, they were asked to sign an agreement promising to keep it secret for at least four years “to facilitate candid and productive negotiations”, according to a document leaked by the Guardian.
So, Paul Krugman will see the details when they are leaked or after four or so years. Is that the way to run a democracy?
They claim it’s national security. That’s beyond a stretch. It’s elitist security.
⇧ A Core Tenet of How Central Bank Stimulus Supports Growth Doesn’t Fit the Data, According to Deutsche Bank – Bloomberg Business
Deutsche Bank posits that lower real interest rates reduce households’ expected return, thereby prompting them to save more in order to meet their long-term financial goals and forgo spending today.
I find Deutsche Bank’s arguments verging on PSYOPS or a major lapse in basic logic. It’s either that or Bloomberg’s Luke Kawa misreported on it (mistakes happen).
Just look at that quoted bit. It says, “real interest rates.” That’s interest after inflation.
Savers see interest income against price inflation against pay raises. They don’t spend just because interest income goes up. They aren’t the one’s making the spread. The banks make the spread. As I wrote before I saw it anywhere else, that’s why the banks are clamoring for the Fed to raise rates.
We don’t need higher rates. We need more money in the hands of the lower classes. They need enough over and above inflation so they’ll know they can spend a good portion of it. That’s demand-side economics, and it’s right.
Higher rates will benefit the banks, who already had Bankers’ QE. It’s time for People’s QE instead, not more for the banking executives.
Spend debt-free currency directly into the economy. That will stimulate.
The people who are against that are against more economic power to the common folks because it will mean less inequality, etc.
Think of the twisted mindset that seeks to keep folks economically depressed.
Someone has too much time on his hands.
⇧ Stumbling and Mumbling: Demand deniers
… why are the Tories demand-deniers? Alex offers one answer: it’s because they still believe that poverty is the fault of the individual – they are committing the fundamental attribution error.
That’s not it. They just want to pay lower taxes and want the common people to be clamoring for work at lower wages.
⇧ Banks and interest rates: be careful what you wish for — Money, Banking and Financial Markets
What I don’t see here is how excess reserves factor into the equation in the minds of the authors (https://www.moneyandbanking.com/the-authors/). Excess reserves are at an all-time high. Since the banks are a spread-business, as I just said in an earlier entry above and as this linked article correctly states, even though there would be losses on existing assets, the banks could acquire more new assets earning at higher rates (spreads) to more than offset those asset losses.
Regardless, if a rise in rates would hurt the bankers, why would they want them? Upon what is their compensation based?
⇧ Housing today: A ‘bubble larger than 2006’
Wall Street appears to believe that housing is going gangbusters right now, because prices are jumping and demand is returning. Home construction, however, while improving from the depths of a pit, is still dramatically lower than it was not just during the housing boom but even during more normal housing cycles. That is the disconnect.
“Four years in, I would think the housing market would be further along. I think it means we’re going to have a longer, slower recovery,” said Doug Yearley, CEO of luxury homebuilder Toll Brothers,on CNBC’s “Squawk Box” last week.
The skilled, experienced construction workers had to move on. Many of them are creeping up on a decade older and are not in the kind of physical shape certain construction can still demand. Land costs are also an issue. Commodities and fuel are on construction’s side though. Frankly, the government should step in with fiscal stimulus to create more manufactured housing (modular and otherwise). That would be more factory employment and easier for management to train and supervise.
⇧ Rental Property Number 12 after the Rehab – YouTube
No show notes:
⇧ Massive Flooding in South Carolina; Many Consumers Lack Flood Insurance | III
I’d like to add that the article doesn’t mention that National Flood Insurance is not available everywhere. You may learn more about that on their site linked to in the article and here: https://www.floodsmart.gov/floodsmart/
Even as vacancies rise, rents can still continue to increase since new rental units tend to bring higher rents and can boost the average. Case in point, in San Jose, Calif., the vacancy rate increased from 2.7 percent in the previous quarter to 3.3 percent, but rents increased 8.5 percent to $2,023. …
“This really looks like we’re at the inflection point where vacancies are going to start to head higher,” Severino says. He expects rent increases to begin to level off in 2017.
“Importantly, this rise in vacancy has occurred without the deluge of new supply that is in the pipeline but has not yet hit the market,” Severino says in a commentary on the firm’s latest multifamily numbers. “When that occurs, likely in the next few quarters, vacancy increases are sure to accelerate because the market will not be able to digest that much new product.”
“Although vacancy is unchanged over the last year, this is largely due to a weather-induced pullback in construction” during Q1, says Severino. “Without that, vacancy would likely be even higher now. Given the robust pipeline, further vacancy rate increases should be expected.”
A vacancy increase is also part of the latest three-year forecast from the Urban Land Institute, based on a survey of 48 real estate economists and analysts.
⇧ How Real Estate Developers and Urban Farmers Are Shaping the Future of Food – CityLab
“There’s so many different applications where the tenants would value having food growing on the property.”
I think about the liability issues even while I love the idea of food gardens. There needs to be a risk-management approach to it for sure.
⇧ Jury finds Broward man not guilty of arson and fraud in restaurant torching – Sun Sentinel
Jurors deliberated 5-1/2 hours Tuesday before acquitting a Broward man of federal arson and mail fraud charges after his Lighthouse Point restaurant was destroyed by fire.
The jury didn’t think it was beyond the shadow of a doubt.
⇧ The secret, anti-democratic and (new-style) protectionist TPP — Prime Economics
The Financial Times (6 October 2015) explains:
At this stage, the substance of the deal remains unclear. The text, which has been kept confidential throughout the negotiations, will not be released for several weeks. …
The TPP, with its “rules restricting state-owned enterprises and other constraints to government control over the economy” (per FT once more) is yet another important step in the process of constitutionalising, universalising and enforcing the ideological principles and mechanics of unconstrained finance (neoliberalism, if you prefer) and global corporate protectionism. That is to say, taking them out of the reach of any future democratic choice of the citizens of any country.
And with a text that its authors and “owners”, it seems, are too ashamed of to make public even once it is agreed and finalised.
For the TPP represents not “free trade” or “free anything” positive, but a new form of stark protectionism — entrenching in perpetuity the narrow interests of global financial and business interests and values over those of a free society that can choose and determine its own future.
Will the text be released in several weeks? If so, how much of it?
Can “democratically elected” leadership get away with secretly (under the guise of “national security”) eliminating or radically reducing democracy for the sake of global corporatism? We shall see.
⇧ The Corporate-Friendly World of the T.P.P. – The New Yorker
The tobacco carve-out is an acknowledgement, after all, that companies don’t just use I.S.D.S. lawsuits to fight unjust expropriation; they use these lawsuits to fight reasonable state regulation. If that weren’t the case, then no exception for tobacco would have to be made. The carve-out says, in effect, that this is a problem—but it’s only a problem with tobacco. That’s hardly the case. Cigarettes may be a distinctly bad consumer product, and tobacco companies have been aggressive in pursuing litigation under I.S.D.S. provisions in other trade treaties. But tobacco is hardly the only industry that raises serious public-health and environmental concerns, and hardly the only indu stry that’s the object of meaningful state regulations. And it’s far from obvious why we should trust other companies to use these provisions wisely, when they were apparently too risky to trust tobacco with.
Now, one can argue that these corporate-friendly provisions are a small price to pay in exchange for improved labor and environmental standards. But we should at least acknowledge that this is an exchange we’re making, and that trade agreements are now shaped as much by corporate interests as by the public interest.
ISDS also allows corporate insiders to make the final binding decisions overriding any domestic or international courts. In my view, allowing that would constitute global, political, economic, and financial dictatorship by the top executives of the major corporations. For all practical purposes, it would openly render citizen democracy mere window dressing.
⇧ Did The Fed Save The World? – The New York Times
… there is one other big difference between the world in 2008 and the world in 1930: big government. Not so much deliberate stimulus, although that helped, as automatic stabilizers: the U.S. budget deficit widened much more in 2007-2010 than it did in 1930-33, even though the slump was much milder, simply because taxing and spending were much bigger as a share of GDP. And that budget deficit was a good thing, supporting demand at a crucial time.
Again, Bernanke and company were right to step in forcefully. But I’d argue that the fiscal environment was probably more important than monetary actions in limiting the damage.
Oh, and since 2010 officials everywhere, but especially in Europe, have been doing all they can to undo the favorable effects of automatic stabilizers. And the result is that in Europe economic performance is at this point considerably worse than it was at this point in the 1930s.
I agree with that. What I don’t agree with even slightly in the article is that we did anything even remotely akin to “pulling out all the stops.” The stimulus was pathetically small, short-lived, and often wrongly targeted. In addition, bankers’ QE was actually the wrong thing to have done. Nationalization is what should have happened and just for starters.
This is no “hit piece.” It’s quite factual.
Pam Martens and Russ Martens:
What you will not find is an honest accounting of how the Fed allowed Citigroup to grow into a financial Frankenstein and then quietly and secretly shoveled trillions of dollars into the firm to keep it afloat.
You won’t find any of that because on March 3, 2009, former Fed Chairman Ben Bernanke testified under questioning from Senator Bernie Sanders that “the Federal Reserve lends to healthy firms on a collateralized basis…” In reality, Citigroup was a financial basket-case at that point. Its stock closed that day at $1.22. It would take a court battle launched by Bloomberg News and legislation pushed by Senator Bernie Sanders to unearth from the Fed the fact that it had funneled over $16 trillion in cumulative loans to save the financial system. Citigroup was the largest recipient of those loans, with a take of over $2.5 trillion cumulatively, on top of $45 billion in TARP funds and over $306 billion in asset guarantees.
Bernanke’s account in his new book, The Courage to Act: A Memoir of a Crisis and Its Aftermath, attempts to resuscitate the bogus scenario that it was the collapse of Lehman and AIG that set the crisis in motion, not mega banks weakened by lax regulation by the Fed and the repeal of the Glass-Steagall Act, a decision supported by the Fed.
⇧ Parasites in the Body Economic: the Disasters of Neoliberalism
Talk about heavy hitting, the quotes below aren’t even the heaviest in the article, not even close. I consider it a must-read.
Michael Hudson, professor of economics, University of Missouri Kansas City:
Today’s vocabulary is what Orwell would call DoubleThink. If you’re going to call something anti-liberal and against what Adam Smith and John Stuart Mill and other classical economists described as free markets, you pretend to be neoliberal. The focus of Smith, Mill, Quesnay and the whole of 19th-century classical economics was to draw a distinction between productive and unproductive labor — that is, between people who earn wages and profits, and rentiers who, as Mill said, “get rich in their sleep.” That is how he described landowners receiving groundrent. It also describes the financial sector receiving interest and “capital” gains.
… As Germany’s Wolfgang Schäuble said, “democracy doesn’t count.” …
… since Margaret Thatcher led Britain down the road to debt peonage and rent serfdom by privatizing this infrastructure, she and her emulators other countries turned them into tollbooth economies. The resulting economic rent takes the form of a rise in prices to cover interest, stock options, soaring executive salaries and underwriting fees. The economy ends up being turned into a collection of tollbooths instead of factories. So, you can think of rent as the “right” or special legal privilege to erect a tollbooth and say, “You can’t get television over your cable channel unless you pay us, and what we charge you is anything we can get from you.”
… Today, neoliberal economists recommend it as the way to raise “productivity” and make countries wealthier, as if it were not the road to neofeudal serfdom.
The key to the Austrian School is their hatred of labor and socialism. It saw the danger of dem ocratic government spreading to the Habsburg Empire, and it said, “The one thing we have to stop is democracy. Their idea of a free market was one free of democracy and of democratic government regulating and taxing wealthy rentiers. It was a short step to fighting in the streets, using murder as a “persuader” for the particular kind of “free markets” they wanted — a privatized Thatcherite deregulated kind. To the rentiers they said: “It’s either our freedom or that of labor.”
Above all, they opposed governments creating their own money, e.g. as the United States did with its greenbacks in the Civil War. They wanted to privatize money creation in the hands of commercial banks, so that they could receive interest on their privilege of credit creation and also to determine the allocation of resources.
… In Greece’s case, 50 billion euros of its property, everything that it has in the public sector. The country is to be sold off to foreigners (including domestic oligarchs working out of their offshore accounts). Debt leverage is thus the way to achieve what it took armies to win in times past.
… If government is not the director and planner of the economy, then who is? It’s the financial sector. It’s Wall Street. So the essence of neoliberalism that you were mentioning before, is indeed a doctrine of central planning. It states that the central planning should be done by Wall Street, by the financial sector.
A few years ago, I was at the only meeting of INET (George Soros’s group) that I was invited to, and in the morning one of the lead talks was on how Latvia was a model that all countries could follow to balance the budget. Latvia has balanced the budget by cutting back public spending, reducing employment and lowering wage levels while indebting its population and forcing to immigrate. The neoliberal strategy is to balance by selling off whatever remains in the public domain. Soros funded a foundation there (like similar ones he started in other post-Soviet countries) to get a part of the loot.
These giveaways at insider prices have created a kleptocracy obviously loyal to neoliberal economics. I go into the details in my chapter. It’s hard to talk about it without losing my temper, so I’m trying to be reasonable but it’s a country that was destroyed and smashed. That was the U.S. neoliberal model alternative to post-Stalinism. It wasn’t a new American economy. It was a travesty.
⇧ Back to School: Real Estate Jargon Demystified – Urban Land Magazine
Whether as a lawyer, an architect, an engineer, or a broker, a young professional in real estate often hear expressions—some slang, others simply arcane—that neither the finest education nor the thickest dictionary is likely to illuminate. And the professional must solemnly nod, as if understanding came with sunlight, when the client invokes abbreviations, acronyms, and mathematical formulas to brag about the steal made when buying a property. A combination of years—spent deducing meaning from context and gradually gaining insight—will serve to answer most questions, but some must be asked. And asking questions that one fears to be stunningly basic can prove awkward when billing hundreds of dollars an hour.
This informal guide explaining some of those uncommon terms will answer a few of questions and, I hope, spare a little of the beginner’s inevitable anxiety.
⇧ London rises dramatically above New York in global prime property league | Money | The Guardian
The scale of London’s property bubble is laid bare in a report that reveals how the capital has dramatically outstripped New York and every other major city in the world on prices and sales over the past five years.