Linking ≠ endorsement.
⇧ Stephanie Kelton on Twitter: “The gold standard era wasn’t actually one of stability.”
Returning to the gold standard would be a huge mistake for a number of reasons, the lack of stability it would cause being just one of them.
Gold vastly favors the rich.
Gold mining is an environmental and safety nightmare too.
There is utility in gold, and that’s what it is really worth.
In the cyber era, physical gold backing a currency doesn’t even rise to the level of a quaint idea. It would be a self-inflicted constraint on sustainable growth and productivity.
I totally oppose it.
⇧ Producer Price Index News Release text
The Producer Price Index for final demand decreased 0.4 percent in October. Final demand prices dropped 0.5 percent in September and were unchanged in August. In October, prices for final demand services fell 0.3 percent and final demand goods declined 0.4 percent.
PPI typically leads CPI and PCE (used by the Fed).
So, here we have PPI going down, which is disinflationary while we also have a strengthening dollar, also disinflationary.
Commodities are cheaper, and manufacturing and construction should benefit; however, a stronger dollar cuts both ways, making it more difficult for domestic manufacturers to sell internationally, which tightens the economy.
In addition, construction firms are finding it harder to find skilled workers, which makes their products more expensive to sell.
Is the Fed heading in the right direction to balance these things: properly anticipating wage pressures?
The number of variables are infinite for all practical purposes, but it is clear that the Phillips Curve has been impacted by the reduced bargaining power of collective labor (unions).
The Fed should deliberately factor in the change from labor union strength to weakness. They should quantify it and plug it into their model.
Also plug in the curve(s) showing the amount of profits going to top executives and shareholders versus labor, and the degree to which those execs and shareholders have less propensity to spend their earnings into the real economy. Doing so would not redundantly reflect labor’s weakness provided the various inputs are properly weighted going into the model(s).
You heard it here first. “Toot-toot”: anything to benefit my fellow humans. I’m not kidding.
⇧ Dani Rodrik: when economics works and when it doesn’t | Prospect Magazine
Speaking of economic models and especially proper weighting (no, I didn’t read this interview before writing my suggestion to the Fed about it’s model(s) above), here’s Dani Rodrik, a very bright fellow, on the subject:
We get so enamoured of the math that the mathematical structure of models becomes an object of analysis. And that’s one of the problems with economic theory—that it often becomes applied mathematics, where the point is the mathematical properties of the models. And so it becomes more and more peripheral to what economics should be about, which is to look at social phenomena.
“…social phenomena”! Definitely!
⇧ Where Fed’s critics got it wrong in GOP debate – CBS News
With the exception of the following, I agree with Mark Thoma.
… the Fed’s low interest rate policy is blamed for causing income inequality — except that the gap between rich and poor started to widen decades ago in the 1970s.
The argument doesn’t hold up even if it is limited to the time period the Fed’s policy has been in effect. The gains in employment and resulting growth in income from low interest rates and quantitative easing, a Fed bond-buying program aimed at stimulating economic growth, more than offset other factors.
“… more than offset other factors” is the part that requires further qualifying before becoming an acceptable characterization for me. It’s a bit quibbling though on my part. I do understand Mark’s point.
Then there’s this:
Although some Republicans want Congress to have control over the Fed, the bank’s independence was a critical factor in its ability to pursue sound policies and avoid the politics that lead to gridlock, or the mistakes that were made with fiscal policy. The next time you hear Republicans call for more control and oversight of the Fed by Congress, think about how poorly Congress did with fiscal policy, and how creative and aggressive the Fed became in trying to compensate for that failure. Then ask yourself whether that is a good idea.
I will definitely qualify that by saying that it is a good idea provided the entire mind-set of Congress be changed from ignorant to knowledgeable and from working on behalf of the plutocrats to working for the general welfare of the whole people.
The problem with the Fed is that it has saved the plutocrats from themselves (along with their dupes and minions in Congress). That’s not reason enough for me to support the Federal Reserve System when there is a much better alternative to it and what the Republicans in Congress are clamoring for.
This is one of the differences between New Keynesianism and Post-Keynesianism. Post-Keynesianism leaves the door open to debt-free currency pegged to real (Main Street; industrial versus financial), sustainable growth.
⇧ mainly macro: Osborne, Cameron and fiscal irresponsibility
How do you explain cutting inheritance tax one day, and then trying to justify tax credits because ‘we have to get rid of the budget deficit’ the next, other than helping your own at the expense of the poor?
You don’t. What you do, if you’re working on behalf of the plutocrats, is to continue spewing laissez-faire nonsense while pretending to continue to support the general welfare. You count upon the masses to be too busy or mesmerized by corporate media (controlled by the plutocrats) to find out.
How is that countered? Answer: Nonstop hammering in the opposite direction via every means of dissemination morally possible. Give the people sound bites that stand up. Repeat them and repeat them and repeat them.
Through perseverance, the meek shall inherit the Earth.
⇧ China’s Troubled Credit Swells to Sweden-Sized $628 Billion – Bloomberg Business
What is a hard landing?
The amount of bad debt piling up in China is at the center of a debate about whether the country will continue as a locomotive of global growth or sink into decades of stagnation like Japan after its credit bubble burst.
“Evergreening,” which is when banks roll over debt that hasn’t been repaid on time, may contribute to the official bad-loan numbers being understated. The Bank for International Settlements cautioned in September that China’s credit to gross domestic product ratio indicated an increasing risk of a banking crisis in coming years.
⇧ Number of First-Time Home Buyers Falls to Lowest Levels in Three Decades – WSJ
First-time buyers fell to 32% of all purchasers in 2015 from 33% last year, the third straight annual decline and the lowest percentage since 1987, according to a report released Thursday by the National Association of Realtors, a trade group.
⇧ Striking Greeks take to tension-filled streets in austerity protest | News | ekathimerini.com
Alexis Tsipras blew it.
Tsipras came to power in January promising to end the austerity. He then accepted the unpopular terms of Greece’s third bailout when faced with the prospect of an exit from the euro zone.
Solution: Bring back Yanis Varoufakis with the clear and plain objective of implementing Yanis’ plan for a parallel currency, which should have been employed rather than letting Yanis go as Minister of Finance.
⇧ Collapsing Greenland glacier could raise sea levels by half a metre, say scientists | Environment | The Guardian
A major glacier in Greenland that holds enough water to raise global sea levels by half a metre has begun to crumble into the North Atlantic Ocean, scientists say.
But the misleading and/or ignorant anarcho-capitalists say that it is either being offset by other cooling factors or it’s not human-caused via carbon burning or it’s just a natural cycle that will swing back or ….
Meanwhile, if you live and work at any ocean coastline and even freshwater areas butting against the ocean, you better get real.
Without some huge event (natural or artificial) to cause cooling, there will be catastrophes that could have been avoided by reining in the greed.
⇧ Oklahoma Grass Fires Burn Houses, Barns
… one house was destroyed, another was damaged and multiple barns burned down.
⇧ Mortgage rates pushed upward following strong employment data – The Washington Post
Forward guidance prematurely slowing the anemic recovery:
Mortgage rates continued to move higher in anticipation of a Federal Reserve rate hike next month, according to the latest data released Thursday by Freddie Mac.
Home loan rates began creeping up after the Federal Reserve signaled earlier this month that a December interest rate hike was a possibility. What the Fed does with interest rates doesn’t have a direct relationship to mortgage rates, since they are more closely tied to long-term U.S. Treasury yields. Bonds are more likely to move ahead of a Fed action than in response to it.
⇧ Mortgage Rates Rise To 4-Month High | Bankrate.com
The average 30-year fixed rate has increased 23 basis points in just 2 weeks, but don’t expect rates to move much higher than these levels anytime soon, says Jim Sahnger, mortgage loan originator at Schaffer Mortgage in Palm Beach Gardens, Florida.
“There’s still a lot of chatter about what the Federal Reserve’s going to do, but I think if you still look at the underlying economic fundamentals, I think we’re still prime to remain predominately range-bound,” he says.
Even if the Fed makes a move next month, rates will likely stay near record lows, says Brett Sinnott, vice president of capital markets at CMG Financial in San Ramon, California.
If the Fed raises, I think mortgage rates will track the Fed and help to harm the recovery while increasing financial-institution consolidation.
If we are going to keep the Federal Reserve System, which I don’t advocate, and the mixed-economic system (leaning against democracy, which I also don’t advocate), then right now, the Fed should not raise rates, the Congress should issue fiscal stimulus, and the financial sector should be completely re-regulated and broken up (antitrust).
⇧ Oil Heads Back to the Thirties – Bloomberg View
A new twist:
… the message from oil services firms is that shale drillers will not simply be able to turn the tap back on again once prices rise. Halliburton said on its earnings call last month that pressure pumping equipment currently sitting idle was being cannibalized for parts while the stuff still being used was being worked to its limits. And the falling backlog of uncompleted wells will also begin to make an impact.
⇧ Is stagnation destiny? | Authers’ Note – YouTube
This video amazingly touches upon nearly everything I’ve been saying quite recently, including as recently as today above.
Stag is a certainty, either in the form of stagflation or stagnation, according to UBS’s Lutfey Siddiqi. He tells John Authers why and also explains that technology may not help avoid this gloomy outlook and could even make it worse.
⇧ Mayor: No Calls to Report Gas Smell Before House Explosion – The New York Times
“The bottom line is nobody called any emergency numbers on Monday or Tuesday to report gas,” Bollwage said.
⇧ The mystery of metro Phoenix’s stolen real estate ‘for sale’ signs
Real estate agents have lost at least 150 signs during the past few weeks. Those signs cost about $50 each.
That’s quite a number of signs. One should think somebody has seen something to report. Anyway, it will be harder to steal them now, though many people won’t know who is and isn’t authorized to remove the signs. Of course, occupied homes are a different matter.
Regardless, people will likely start video recording signs being removed until someone is caught.
⇧ Real estate near parks deliver higher values – Houston Chronicle
“All buildings, locations and land parcels have unique characteristics — and not all parks are the same,” Deal said. But in general, private property that abuts a quality park can be valued significantly higher than comparable properties without parks.”
⇧ Real Estate Lobbyists Promise Luxury Towers Won’t Totally Shroud Central Park In Eternal Darkness: Gothamist
Speaking of parks and MONEY:
Layla Law-Gisiko, Chair of the Central Park Sunshine Task Force of Community Board 5, told us, “The current zoning in no way addresses the cumulative impact of shadows onto our open space. The overdevelopment along Central Park South will have a tremendous detrimental impact regardless of the slenderness of each individual building.”
Build out, not up? Hmmm. It’s a dilemma.