Linking ≠ endorsement.
⇧ Landlord’s properties declared a nuisance; judge orders professional management | Crime and Courts | host.madison.com
A Dane County judge said Friday that 45 of the 48 rental properties owned by Madison landlord Ray Peterson constitute a public nuisance and ordered that he hire a professional property management company to collect rents and fix building code violations.
A stream of thoughts ran through my head while reading this article, especially that Ray is 90. It might be cheaper for the government to assign someone to work with Ray to help get through the mess.
⇧ JOBS FLASH: Job Growth Strong Again in November, but Household Survey Still Shows Evidence of Weakness | CEPR Blog | Blogs | Publications | The Center for Economic and Policy Research
Dean Baker’s is a sober analysis, seeing both the positives and negatives: no rose-colored glasses here folks. The general consensus is quite rosy, so I’ll just quote of bit of reality from Dean.
… less encouraging with a drop of 0.1 hour in the length of the average work week. This drop, combined with the weak reported growth in the hourly wage, led to a modest drop in the average weekly wage.
The unemployment rate remained at 5.0 percent. There was also no change in the labor force participation rate or the employment-to-population ratio, both of which remain far below pre-recession levels.
Other data in the household survey also are consistent with a weak labor market.
⇧ mainly macro: Paris, climate change and the UK government
Tories equal ideology and duplicity, incompetence, or all three, per Simon Wren-Lewis:
Put alongside virtually abandoning measures to encourage renewables, and this seems more like economic incompetence than ideology. In a classic piece of irony, a wind farm application near to Hinkley was turned down by the government. It is not as if the UK is currently awash with energy capacity. Last month an unexpected surge in demand led the national electricity grid to ask heavy users to reduce consumption.
So it is difficult to tell whether this is about ideology masked with duplicity, or politically driven economic incompetence. Ideology, duplicity and incompetence: have I combined those words together before?
Mark me down for all three.
⇧ Construction Industry Leads November Jobs Report
Historically, construction has been a leading indicator; however, monetary and fiscal policy has erred way over on the side of keeping the economy down.
The latest construction-employment number would be more encouraging except that the Fed is about to slow things down. Yes, fuel costs are important in construction and those cost are down and will likely stay there for some time, but it that enough to bank on? I don’t think so.
I’d much rather err on the side of overheating (which I don’t believe is nearly as scary as the Fed portrays it and clamping down after real heating has occurred isn’t as disruptive).
Anyway, tamping on the brakes when you’re only idling while going uphill will reduce the speed significantly more relative to doing so when the car is really running at the typical speed limit on level ground, a straight road, with no obstacles, and with a tailwind.
jobs release clearly shows that various construction segments continue to gain momentum and that contractors will continue to scramble to secure properly trained human capital,” said Basu.
If, a very big if, the Fed doesn’t brake prematurely or if the Fed will react quickly enough to let up and to even accelerate.
⇧ Oklahoma Disposal Well Plan Expected Following Recent Quakes
“It’s more saline than Dead Sea water,” Boak said. “And since you pulled it from the ground, the best place to put it is back in the ground.”
Well [no pun intended], two things:
First, it’s typically loaded with fracking chemicals where there’s no assurance those chemicals won’t leach into drinking water.
Second, why frack at all when we have a vastly cleaner source of energy: the Sun?
⇧ Anchors Away (Slightly Wonkish) – The New York Times
So a 4 percentage point decline in unemployment would, if the historical relationship holds, mean 8 percent more in real GDP — that is, this naive calculation puts the euro area output gap at 8 percent, which is huge.
Should we take this seriously?
As a rough (average, time-bound) estimate, yes, and also while being prepared to see other variables (including even unknown unknowns) intrude to require adjustments in policy(s), even sudden and radical.
“(Slightly Wonkish)”? No, it’s wonkish all the way. It’s just clear where many other authors don’t seem to know when to stop grinding the obvious into dust.
⇧ Paralysed Opec pleads for allies as oil price crumbles – Telegraph
Goldman Sachs warns that the market is approaching an “inflexion point” that could send prices crashing to a new a floor of $20, the “cash cost” that forces drillers to stop production altogether.
That’s a fantasy on the order of the Zero Lower Bound in interest rates. Some drillers would stop (some already have), of course. Others would go on even while losing money just so they’d be there when things reverse.
⇧ Robot learns to say no: Tufts Human-Robot Interaction Lab demonstration (VIDEO).
… one of the researchers walks a robot through a series of commands including “walk forward.” The adorable little robot notes that will put it in danger because there is “no support,” so it hedges, effectively telling the roboticist no. After the researcher assures the little robot he’ll catch it, it cheerfully walks to and over the edge. Fortunately for human-robot relations, the researcher is true to his word, though it does elicit a quick “Ouch!” from the robot.
⇧ Monetary Policy Renormalization | Federal Reserve Bank of Minneapolis
… bluntly, the Taylor Rule required the Committee to forgo the timely creation of hundreds of thousands—perhaps millions—of jobs in order to get interest rates back up to normal more rapidly.
That’s completely true. Now, ask yourself, for the benefit of whom, the mean-average American or the top banking-executives? I say it was the latter.
I look forward to the continued evolution of Narayana Kocherlakota.
⇧ Calculated Risk: Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama
Top Employment Gains per Presidential Terms (000s) Rank Term Private Public Total Non-Farm 1 Clinton 1 10,884 692 11,576 2 Clinton 2 10,073 1,242 11,315 3 Reagan 2 9,357 1,438 10,795 Obama 21 7,499 108 7,607 Pace2 10,587 152 10,739 134 Months into 2nd Term
2Current Pace for Obama’s 2nd Term
Read the whole article by Bill McBride.
Please note that had we done a New Deal 2.0 (public jobs to get out of the deep recession), we’d be way, way, way ahead of where we are now.
Let’s never repeat even a semi-austerity approach to any recession ever again. Rather, let’s use fiscal spending on real productivity and without borrowing a dime to do it. Okay?
⇧ The November Jobs Report in 14 Charts – Real Time Economics – WSJ
The latest report from the Labor Department offers a snapshot of the health of the domestic economy. Here’s a look at the highlights.
⇧ Finland plans to give every citizen a basic income of 800 euros a month – Quartz
I’m in favor of this, but the article raises some good questions that will need to be addressed.
⇧ China’s Consumers Have a Long Way to Go – Bloomberg View
Commodity prices will eventually stop declining. Chinese consumers will, barring an economic meltdown, keep increasing their spending. The rebalancing will continue. It just has a long, long way to go before the Chinese economy or the global economy is actually balanced.
⇧ Global crisis: Beyond bank balance sheets | VOX, CEPR’s Policy Portal
Nikolaos I. Papanikolaou and Christian C. P. Wolff:
In the years running up to the global crisis, the banking sector was marked by a high degree of leverage. Using US data, this column shows how, before the onset of the crisis, banks accumulated leverage both on and, especially, off their balance sheets. The latter activities saw an increase in maturity mismatch, raised the probability of bank runs, and increased both individual bank risk and systemic risk. These findings support the imposition of an explicit off-balance sheet leverage ratio in future regulatory frameworks.
All things considered, our findings could play a role in the current discussion about a possible revival of the Glass-Steagall Act, which banned commercial banks from underwriting, holding, or dealing in corporate securities, thereby essentially separating investment from commercial banking activities.
⇧ Banking Inquiry in chaos as Joe Higgins and Pearse Doherty refuse to sign off on final report – Independent.ie
… Mr Doherty [Sinn Fein TD Pearse Doherty] said:”When I agreed to take part in the banking inquiry, foremost in my mind were the people who have lost their homes and businesses, the cuts inflicted on our public services and the generation forced into emigration because of the banking crisis.
He added: “The people have the right to know how the banking crisis came about, who was responsible and to be assured that it would never happen again.
“I have worked constructively on the inquiry to get to the full truth of what happened
“While the report includes new information, it fails to fully answer the questions regarding how the crisis came about and who was responsible.
“Our people deserve the full truth. That is why I am unable to sign off on the committee report.”
That sounds quite reasonable and appropriate.
⇧ Exclusive: ECB lowered stimulus ambitions after hitting opposition – sources | Reuters
You see from this article that Mario Draghi really was up against political and ideological headwinds, as I suggested in my last post ( https://propertypak.com/2015/12/04/news-real-estate-risk-economics-dec-4-2015/#1204153 ), which included “Mario Draghi riles Germany with QE overkill – Telegraph,” where I stated:
“The German-led hawks don’t know what they’re talking about, not that the ECB’s plan is the best one possible. It’s not; but, given the mixed economy of the eurozone and EU, given the various rules the ECB is operating under, and given the political tensions caused by Germany, it’s the best that Mario Draghi can muster up right now. Once the world doesn’t come to an end, he’ll have more political capital to spend on additional QE.”
Hints by Mario Draghi ahead of last Thursday’s ECB rate meeting that the euro zone may need another big injection of money backfired, stiffening the resolve of more conservative central bankers who criticized him for raising expectations too high, sources familiar with the discussions said.
⇧ For success and sustainability, seek broad social ‘well-being’; Good governance promotes a ‘virtuous cycle’ of growth | Private Sector Development
Good government has been a constant theme of this blog. I am not an anarchist by any stretch, even this connotation:
“a utopian society of individuals who enjoy complete freedom without government.” ( https://www.merriam-webster.com/dictionary/anarchy )
Norms of behavior constitutes a form of government. To have no agreed upon and adhered to standards of behavior won’t result in freedom but chaos and deprivation.
This is my political-economist side coming out. Anarchy is terrible risk management.
Good governance was underscored as a key factor by Carol Graham, a Brookings Institution and University of Maryland scholar who analyzed the SEDA findings at the CGD seminar. The author of the well-regarded “The Pursuit of Happiness: An Economy of Well-Being,” she identified a “virtuous cycle” of sound decision-making leading to wise policies that, in turn, produce good social outcomes. Rigorous governance standards are crucial, Graham and Rueda-Sabater agreed, noting the parallel between the countries that scored highest on SEDA’s “Life Satisfaction and Income Per Capita” analysis and those that upheld “getting-to-Denmark”-style good-governance norms: “Any way you slice this, people who live in countries with good governance . . . enjoy higher well-being scores,” with the correlation between sustainability and high-quality economic growth suggesting that there are “institutional roots of sustainability.”
It is a great positive that such things are being strongly discussed and published by The World Bank.
⇧ 2016 Economic Outlook
“A weak global economy and stronger U.S. dollar will prevent the U.S. economy from surging ahead in 2016,” said Basu. “Stakeholders can expect a 2.2 percent rate of growth (or similar to that) next year. There are significant risks to the downside, including volatile financial asset prices. The recent softening of job growth may keep the Federal Reserve pinned on the sidelines for the balance of 2015. Under most conceivable scenarios, rate increases will be gradual and intermittent. …
⇧ Safety Communication Messaging
I’m not endorsing this particular company for this technology. I’m simply bringing the technology type to your attention.
You may think this technology isn’t a good fit for your organization; however, I recommend you at least research the field, as employees even in relatively sedate office environments can be exposed to risks that can be monitored and reported.
Safety communication is an extremely important, and often overlooked, facet in business; but, a safer workplace leads not only to happier employees, but also to a better bottom line.
⇧ What kind of recovery is this, Mr Osborne? — Prime Economics
… GDP is up by 7%. How is it possible that producing things, building things and moving them around are all lower, but GDP is up? The mystery deepens when we discover that financial activities and real estate almost exactly track the measured increase in GDP, up 8%. …
If those numbers suggest that the tail wags the dog of the UK economy, further inspection of the chart solidifies that interpretation. …
One word encapsulates the solution to the mystery — speculation. …
Financial corporations have funded their spending with internal funds, much of it by issuing “junk bonds”.
Less and less do corporations borrow from banks to construct, produce and distribute. Less and less of the profits of finance come from loaning money to facilitate the production and distribution of useful activities. Larger and larger grow the financial and real estate sectors, dedicating themselves to essentially parasitic and predatory profit taking through speculation.
The dysfunction of finance is even worse than it seems. The failure of finance to provide loans to small and large business prompts the latter to generate funds through highly risky bond issues (and vice-versa), which fuel financial instability.
In a recent speech in the City of London shadow chancellor John McDonnell warned of another UK financial crisis. Bank speculation and corporate bond sales take us there.
The economic system described is like a Ponzi scheme, only there’s no end to it. The banks just create for themselves all the currency they want and don’t share it equitably. It’s a hallmark of national and global insanity. The sooner the people put a stop to it, the better.
⇧ The Not-So-Bad Economy – The New York Times
Paul Krugman, we’ve been over this before, more than once. Come on, pal. Get with it and stick with it.
… at the Fed. I suspect, however, that officials have been worn down by incessant criticism of their policies, and want to throw the critics a bone.
But those critics have been wrong every step of the way. Why start taking them seriously now?
Paul, why do you forget the light bulb that came on over your head before? The Fed is not throwing any critics a bone. The Fed is about to throw the bankers higher profits at the expense of everyone else. It’s their hidden mandate from the plutocrats, the powers that be behind the throne (the very false, purchased, captured ostensible representational-democratic-republic).
⇧ Central bankers do not have as many tools as they think – FT.com
Okay, Larry Summers shows some of his vaunted genius here. [paragraphing altered by Tom Usher]:
A number of considerations make me doubt the US economy’s capacity to absorb significant increases in real rates over the next few years.
First, they were trending down for 20 years before the crisis started and have continued that path since.
Second, there is at least a significant risk that as the rest of the world struggles there will be substantial inflows of capital into the US leading to downward pressure on rates and upward pressure on the dollar, which in turn reduces demand for traded goods.
Third, the increases in demand achieved through low rates in recent years have come from pulling demand forward, resulting in lower levels of demand for the future. For example, lower rates have accelerated purchases of cars and other consumer durables and created apparent increases in wealth as asset prices inflate. In a sense, monetary easing has a narcotic aspect. To maintain a given level of stimulus requires continuing cuts in rates.
Fourth, profits are starting to turn down and regulatory pressure is inhibiting lending to small and medium sized businesses.
Fifth, inflation mismeasurement may be growing as the share in the economy of items such as healthcare, where quality is hard to adjust for, grows. If so, apparent neutral real interest rates will decline even if there is no change in properly measured rates.
I think he’ll end up in a position to say, “Told you so and did so in detail.” However, he thinks the way Paul Krugman and so many others do: that it is better not to assign crass, base motives to the Federal Reserve System, at least not consistently so.
⇧ Severe flooding prompts evacuations as Storm Desmond sweeps across UK | UK news | The Guardian
This is horrendous, and it’s far from the only massive flooding going on in the world. Parts of India have been inundated apparently like never before.
I haven’t been posting every international weather disaster because there have just been too many of them to keep up with. I’m posting this one because of the connection to it made by Simon Wren-Lewis, which I’ll link to shortly below.
Amid Met Office red alerts, Storm Desmond’s trail of destruction leaves homes flooded and motorists left stranded across Scotland and northern England.
⇧ Cumbrian floods: cancelled flood defence schemes may have added to misery – Telegraph
Major risk-management failure:
Flooding which brought chaos to Britain and saw thousands of people evacuated from their homes may have been avoided if the Government had not cancelled hundreds of defence schemes, it was claimed.
The Mayor of Keswick Paul Titley said: “The flood defences were designed for a one in 100 year event and since it’s six years since we had the last one, we were sort of surprised that we got one so soon.”
Welcome to Anthropogenic Global Warming (AGW: aka carbon burning: oil, gas, coal, …).
⇧ mainly macro: UK flooding, austerity and the media
As promised above, here’s Simon Wren-Lewis’ post on the subject.
UK flooding again tops the news, and I’m reminded of a series of posts I wrote after Christmas 2013. The first showed how austerity led to a sharp cut back on flood prevention. The second pointed out that the consensus was that spending on flood prevention should be rising because of climate change, but the environment minister was a climate skeptic. The third noted how the government had managed to deflect any significant criticism until now, but I thought surely that cannot last. At the time it became one of my most widely read posts, but when the government thereafter continued to avoid serious criticism except for a handful of articles I realised how weak our media had become in holding the government to account.
“You have this huge volcano of methane pollution and except for the fact that a lot of people are getting sick, it hasn’t engendered a lot of attention,” said Tim O’Connor, California oil and gas director for the advocacy group Environmental Defense Fund.
⇧ Economist’s Criticism of Federal Reserve Policies Gains Ground – The New York Times
… Ms. Rey’s research particularly relevant, not least her recommendation that policy makers in the United States and abroad put in place regulations that reduce the intensity and speculative fervor of these flows. That could mean capital controls in emerging markets or new rules for investment funds that would punish short-term trading by investors.
How much would a global currency help? How much would a one-world government help? Well, both would depend upon the quality of the government. What wouldn’t work is a weak union, such as the EU currently has. What also wouldn’t work is a corporatist state.
⇧ In the Charleston area and across the U.S., renters are squeezed – Post and Courier
The majority of renters in South Carolina have been paying more than 30 percent of the household’s income in rent — a level at which families “may have difficulty affording necessities such as food, clothing, transportation and medical care,” according to the U.S. Department of Housing and Urban Development.
In Charleston County, 57 percent of renters were paying at least 30 percent of the household’s income to a landlord. Nearly half paid 35 percent or more.
There are many in the US paying more than 50%.
We need vastly more construction of affordable housing.
⇧ Bond, Treasury Bond: 007 is Out of Cash, but Your Government Can’t Be | naked capitalism
A sovereign government’s finances are nothing like those of households and firms. … [Such a] government does not need to “borrow” its own currency in order to spend. Indeed, it cannot borrow currency that it has not already spent. … Government never needs to sell bonds before spending, and indeed cannot sell bonds unless it has first provided the currency and reserves that banks need to buy the bonds. … A sovereign government cannot become insolvent in its own currency; it can always make all payments as they come due.
MMT’s two-pronged revelation is that it is impossible for a currency-issuing government to run out of a unit that it alone supplies, and that austerity is a cruel fiction that can be instantly reversed. In a word, there are no monetary reasons why we, as a public, cannot have nice things.
We can have universal healthcare; free university education; high-quality public housing; socialized child and elder care; low-cost postal banking; environmental cleanup and retrofitting; and a robust public arts program. We can also create a locally-organized public works system, which would establish just minimum standards for pay and benefits, put the means of production in the hands of workers, and ensure everyone’s right to meaningfully participate in shaping our world. And such a world can be made ours without risking inflationary price rises, says MMT, so long as government funding remains directed at real resources and productive capacities.
⇧ The nation’s most unequal housing market is Miami Beach | Miami Herald
Nearly half of the 20 most unequal housing markets in the country are in South Florida, Redfin found.
⇧ Merging landlords see growing profit on rentals
The announcement last week of a merger between Arizona-based American Residential Properties, which owns 8,938 rental homes, and California-based American Homes 4 Rent, which owns 38,377, was the third such deal in the asset class this year.
⇧ Year in Review: Multifamily Deals
Multifamily properties continue to be sought after by investors as the lingering effects of the housing downturn mean that homeownership rates remain subdued, and favorable demographics are also causing a hike in demand for rentals. According to Matthew Lawton, a Chicago-based executive managing director for HFF, investors are drawn to the rising rents in the sector that are at all-time highs as a result of these factors. “The other thing that’s driving pricing in the multifamily side is that on a risk-adjusted basis, it is a very compelling return,” he said. While the pace of dealmaking is slowing down as the business cycle matures, Real Capital Analytics reports that apartment sales volume was still up 26 percent year-to-date as of this September, compared to September 2014.
⇧ The shrinking planetary GDP | VOX, CEPR’s Policy Portal
Peter A.G. van Bergeijk:
… the IMF forecasts for 2015 for the world economic system are inconsistent, but that this has not been explicitly noted. These are already worrying conclusions in themselves. Moreover, it is likely that the official IMF forecasts for real GPP are likely to be too optimistic as has also been the case in the past. Analysing the IMF’s track record over a 20-year period, the Independent Evaluation Office (2014) reports that real economic growth has been overestimated, especially in periods of global crisis. Further downward revisions of the real economic growth rate are therefore to be expected.
⇧ Cost Segregation Study: Could This Strategy Dramatically Reduce Your Tax Bill?
A cost segregation study is a way to split up the building further and depreciate each component separately over its normal life, which could be as low as 5 or 7 years. This strategy is also referred to as “accelerated depreciation.”