Linking ≠ endorsement.
⇧ December El Niño update: phenomenal cosmic powers! | NOAA Climate.gov
An educational post:
If you’ve been following the development of this El Niño, you may have heard in the media that sea surface temperatures in the central equatorial Pacific are at near-record highs. Are we seeing the most powerful El Niño ever?
⇧ Kentucky Mining Company Fined for Clean Water Act Violations
“After a half of a decade of effort to bring this outlaw company into compliance with the law, this agreement shows what the Energy and Environment Cabinet can accomplish working with the citizens the cabinet is charged with protecting,” said Withrow ….
⇧ Des Moines-Area Fire Chiefs Seeking Reduced Response Times
Support your local and regional fire departments’ efforts to improve service.
“You would go through and completely eliminate your city borders and do some computerized or GIS mapping studies and say, ‘All right, what’s the closest station?’ And you just divvy up your areas based on who can respond more quickly,” Roe said.
⇧ No, NASA has not reversed itself on the dangerous melting of Antarctica
Very interesting and helpful info:
… a study was published that seemed to offer up a bit of much-needed good news. In the Journal of Glaciology, a group of NASA researchers led by Jay Zwally of NASA’s Goddard Space Flight Center in Maryland, reported that satellite data shows that as a whole, Antarctica has been gaining, rather than losing mass during the past two or more decades.
However, the article makes clear that the rate of loss could quickly and dramatically increase more than enough to well offset any gains in snow.
⇧ What Sh*tty Music Can Teach Us About Economics – Evonomics
Frances Coppola in defense of elitism but with major qualifications:
Economics has become dependent on elegant mathematical models whose relationship to the real world is questionable. It is a standing joke that in economics, if the evidence doesn’t agree with the findings of the model, you change the evidence. In some cases — notably in models of the financial system, which are the foundation of monetarist economics — the models are founded on a wrong understanding of how the world actually works. When the foundation is wrong, so is everything built upon it. But the arrogance of the economic elite makes them unwilling to accept that they may have got some things wrong, so they silence people who point this out and put up academic barriers preventing funded research into anything that questions the foundations on which they have built their models of the world.
And as with “serious” music, when economics becomes so divorced from reality that it fails adequately to explain the real world in which people live, people reject it. People rightly ask why academic economists failed either to predict or adequately explain the financial crisis, whereas heterodox economists working in the real economy — many of them untrained in formal economics — not only predicted it but correctly identified the causes.
Elitism in economics isn’t just in economics. It’s more so in finance.
I’m saying that financiers and corporate powers ultimately control the funding of academic economists.
There is a constant battle between academic freedom of academic elites on one hand and the money powers on the other, who want the money powers’ ideology promoted everywhere and especially in colleges and universities to quite literally brainwash minds that will “lead” in the future to protect the monied elites estates into successive generations.
Scientific, medical, and technological advancements will have something to say about all of that though.
⇧ Reinventing Banking: From Russia to Iceland to Ecuador | WEB OF DEBT BLOG
A nice overview by my highly underrated friend, Ellen Brown:
The catastrophic failures of the Western banking system mandate a new vision. These transformations, current and proposed, are constructive steps toward streamlining the banking system, eliminating the risks that have devastated individuals and governments, democratizing money, and promoting sustainable and prosperous economies.
Ellen has a good heart and mind. She’s also excellent at pulling sources together, as this article clearly demonstrates.
⇧ China Has Officially Joined the Currency Wars
It’s the combination of low growth and easy money that puts pressure on the currency. Because the regime created a debt bubble of epic proportions and investors now realize they won’t get the promised returns, capital is flowing out of the country at a record pace.
Until the imbalances are fixed and China takes its losses, and stops the easy money policies, outflows will continue and the regime will face continued pressure to devalue.
I expect the Chinese government to up the crackdown on money outflows.
⇧ How to Break the Wall Street to Washington Merry-Go-Round | Foreign Policy
To be clear, officials are not flouting any laws or rules by moving rapidly into the private sector. In most cases, they are also not attempting to influence policy in a way that bolsters their previous or future employer when they enter government.
That’s saying that they don’t put the compensation of the banking industry executives as a whole above the general welfare of the unemployed and even when factoring in the inflation/stability mandate.
Why have so many been clamoring for so long for higher interest rates then and right in the face of so much labor slack and so many other economic headwinds?
It has always seemed that the Fed talks a good PR game but looks out for its owners, the bankers.
⇧ How Americans see other Americans | Pew Research Center
“… majority (55%) says that “ordinary Americans” could do a better job than elected officials of solving the country’s problems.”
Of course they could. That’s why I’m for much more direct democracy.
⇧ How To Shoot Down A Drone: Ray Guns, Nets And Malware Are Being Used To Knock Drones Out Of The Sky
Using drones in your real-estate business? Read this article.
⇧ City cracks down on rental properties with health, safety violations | KXAN.com
46 rental properties will be hearing from the Austin Code Department this week.
⇧ Stop Using Adam Smith and F.A. Hayek to Support Your Political Ideology – Evonomics
I agree that Smith and even Hayek have been severely distorted by the Randians. I also agree that central planning (without a bottom-up balance) is a grave mistake. What I completely disagree with is that competition is the light. Rather, I say that maximum practical, bottom-up democracy in the spirit not of competition but cooperation is the right path.
Read David Brin’s article while keeping my position above in mind.
⇧ How Startups Are Making Real Estate Businesses More Efficient | TechCrunch
Advances in information technology have generated enormous efficiencies in many industries, including manufacturing, transportation, communications, entertainment, retail and financial services. Yet in real estate, the largest industry of them all, innovation has lagged as agents and brokers have been slow to adopt new technologies.
Fortunately, things are changing. On the consumer-facing side of the business, companies like …
⇧ Blackstone Is Becoming The King Of Real Estate – The Blackstone Group L.P. (NYSE:BX) | Seeking Alpha
Blackstone announced a $2 billion purchase of 10,399 apartment units from Greystar Real Estate Partners. This purchase should drive rental income for Blackstone’s real estate funds.
Blackstone started the quarter with $93.2 billion in assets under management reserved specifically for real estate and with $27 billion in dry powder for investing in real estate.
Rental rates are rising for both residential and commercial properties, and as rates continue to move higher, Blackstone’s income from these properties will grow.
Higher rental income and the potential to sell real estate holdings should lead to strong distributions for BX investors and the stock could hit $40 over the next 12 months.
The Blackstone Group LP (NYSE:BX) has been on a real estate buying spree this quarter.
⇧ World’s Richest Nations Continue to Shower Public Money on Fossil Fuels Companies – YouTube
Did you know the following?
… governments of wealthy nations are giving far more public money to fossil fuel companies than to the renewable energy industry ….
What do you think about that?
⇧ Miami Beach facing possible ‘doomsday’ scenario – YouTube
An agreement to curb carbon emissions is expected to be reached this weekend, following COP21 talks. Meanwhile, some scientists say that the sinking of some American cities is inevitable. Florida has more cities expected to sink than any other US state. Miami is at particular risk, not only because of its low elevation, but its vulnerability to flooding. Due to the city’s porous limestone foundation, water is allowed to pass through freely, unlike for example, Manhattan island, which has a granite and marble bedrock. RT’s Marina Portnaya reports.
⇧ Burien landslide area still not safe as earth continues to settle, city says | Q13 FOX News
Five homes are affected by the landslide but the home on the end of Standring Lane sustained the worst damage.
⇧ It’s Not Just the Poor Who Can’t Make Rent – NBC News
It’s not just low-income Americans who struggle to pay their rent every month, or find an affordable place to live when they move. New research from Harvard says that even renters with annual incomes of $45,000 face unaffordable rents in many cities, with potentially far-reaching effects.
“It’s moving up the income ladder,” said Chris Herbert, Managing Director of the Joint Center For Housing Studies at Harvard.
Harvard corroborates earlier research.
⇧ Make your best offer: Springfield set to auction 22 tax-foreclosed properties | masslive.com
“Besides getting them back on the tax revenue rolls, probably more importantly, it keeps these properties from becoming a negative magnet to the neighborhood,” Sarno said Wednesday.
⇧ A new life for older properties – Crain’s Cleveland Business
Today, after multimillion-dollar renovations, both are or soon will be apartments serving young professionals and empty nesters gravitating to the neighborhood.
⇧ Monday’s Niagara Falls tax foreclosure auction features more than 230 properties – Niagara Gazette: Local News
More than 230 properties will be up for bid on Monday when Niagara Falls holds its annual tax foreclosure and real property auction.
⇧ Central bank policy rates and the real economy — Prime Economics
As much as I like Ann Pettifor, and my consistent readers know I do, I see in her article an approach I’ve seen many times. Ann has taken the either/or approach rather than the correct approach of both.
It is true that savings are not necessary or a prerequisite for credit extension. Bankers do not function solely as intermediaries. However, not all finance is credit (there’s capital formation without taking credit: stocks, etc., albeit lessening of late) and not all credit extenders (banks and others) extend credit as easily as when people are less afraid and saving less.
As for high interest being causal of recessions, I’ve never seen any proof of such causality. Higher rates are a consequence of a heating economy.
What drives the business cycle of booms and busts is not a secret. Which came, and comes, first, the chicken or the egg?
⇧ Canada Need Not Fear Deficit Financing
Yes, interest rates are low. If you must borrow, doing so when rates are low is better. However, Canada doesn’t have to borrow. I don’t say that by way of saying that deficit hawks are correct. I say it while also saying that Canada should spend more, much more. What Canada should do to pay for it is simply create the money without borrowing anything from anyone. Governmental borrowing is a scam by the banking industry against the common people. It’s really that simple.
⇧ 58.5 Percent of Los Angeles Renters Can’t Afford Their Rent – Unaffordable Housing – Curbed LA
“With vacancy rates now at their lowest point since 1985, rents are rising 3.5 percent annually in real terms—the fastest pace in nearly 30 years,” the report says. In LA, vacancy is down to only about 3 percent—around half what it was in 2010.
Los Angeles wants to build a lot more housing, and is trying to think of crafty ways to get more affordable projects built. But until developers are found, financing is in place, and construction is done, the managing director of the center tells the Times, “The crisis in the number of renters paying excessive amounts of their income for housing continues.”
⇧ National home prices rise, Huntsville ranks high in institutional purchases – Alabama News Center
Huntsville, the lone Alabama metro to make RealtyTrac’s October highlights, had one of the nation’s largest shares of institutional investor purchases or homes bought by groups that buy at least 10 properties during a single year.
⇧ U.S. Unveils Hobby Drone Registry Rules, Deadlines
… (FAA) has unveiled its registration process for owners of small unmanned aircraft (UAS), or small drones used for hobby or recreation.
… still developing regulations for commercial drones.
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⇧ Consumer Price Index Summary
On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers was unchanged in November ….
Wow! Such hyper-inflation this is not. Should the Fed tighten the economy? Not on your life, but they will.
⇧ Yes. Concentrated Wealth and Inequality Crushes Economic Growth – Evonomics
Given their publication by Cato, I don’t think I need to explain to my readers which political axe is being ground here. They trumpet their non-statistically significant finding, in what surely looks like an attempt to downplay their significant main finding.
But perhaps to their chagrin, their main finding holds: wealth concentration, inequality, kills economic growth.
⇧ mainly macro: A crisis made in Germany
Of course Germany did not make Greek governments behave in a profligate manner. Of course Germany did not force Irish banks into reckless lending. Their own banks may have helped facilitate both, but so did banks in other core countries like France, and in the UK for that matter. Yet German influence helped magnify the periphery crisis, and Germany was central in turning a periphery crisis into an existential event that impacted on pretty well every Eurozone country, except Germany.
⇧ 6 Things Landlords Should Do to Win Over Tenants
Landlords: Want to turn your tenants into raving fans? Here are 6 tips from a renter’s perspective that’ll make you landlord of the year!
Make sure you treat all your tenants equally under the law. Be sure not to discriminate on account of any protected class within the legal jurisdiction.
⇧ China Steel Output Slumps to a One-Year Low as Prices Collapse – Bloomberg Business
No place to go but down:
Steelmakers in China reined in production last month as prices collapsed and the onset of winter in the largest producer curbed demand already hurt by a cooling economy.
⇧ James Hansen, father of climate change awareness, calls Paris talks ‘a fraud’ | Environment | The Guardian
There is a positive note to end on, however. Global emissions have somewhat stalled and Hansen believes China, the world’s largest emitter, will now step up to provide the leadership lacking from the US. A submerged Fifth Avenue and deadly heatwaves aren’t an inevitability.
“I think we will get there because China is rational,” Hansen says. “Their leaders are mostly trained in engineering and such things, they don’t deny climate change and they have a huge incentive, which is air pollution. It’s so bad in their cities they need to move to clean energies. They realise it’s not a hoax. But they will need cooperation.”
⇧ Officials admit to faking economic figures – China – Chinadaily com cn
No surprise here, not to my readers anyway:
Several local officials in China’s Northeast region sought to explain dramatic economic drops in their areas by admitting they had faked economic data in the past few years to show high growth when the real numbers were much lower, Xinhua News Agency reported on Friday.
Three years ago Liaoning province’s GDP growth was reported at 9.5 percent, but its current figure-over the first three quarters of this year-is just 2.7 percent. Jilin’s growth was reported at 12 percent three years ago, but its current rate is 6.3 percent in the same period.
⇧ China GDP slowdown global growth
In its report published Tuesday, Fitch warned that a sharp slowdown in China’s GDP growth rate to 2.3 percent during 2016-2018 “would disrupt global trade and hinder growth, with significant knock-on effects for emerging markets and global corporates. In turn, this would keep short-term interest rates and commodity prices lower for longer.”
⇧ Economic pain in U.S. heartland as likely Fed hike nears | Reuters
There is “no doubt that manufacturing weakness is costing growth,” said Harm Bandholz, chief U.S. economist at UniCredit Research. However, the sector only accounts for about 12 percent of the U.S. economy and some areas like automotive are performing well.
“You can’t say that everything is perfect,” he said. “But the United States is not doing so bad anymore that we need zero-percent interest rates.”
That’s not gauging wages. That’s ignoring the low wage-rates. It’s ignoring the reasons for the low wages: the nation’s income and wealth is dangerously top heavy. Either we reduce the top-heaviness or we tip over.
⇧ The Mystery of Missing Inflation Weighs on Fed Rate Move – WSJ
“A variety of econometric estimates would suggest that the classic Phillips curve influence of resource utilization on inflation is, at best, very weak at the moment,” said Lael Brainard, a Fed governor who works down the hall from Ms. Yellen.
The global economy may be undermining the Phillips curve, according to Robert Steven Kaplan in his first speech as Dallas Fed president last month. That view is echoed by researchers who say competition from China and other low-wage economies depresses U.S. wages.
A Wall Street Journal survey of economists in August found two-thirds of them still believe there is link between lower unemployment and higher inflation.
But the relationship is affected by outside factors. Criticisms of the Phillips Curve model, and its precision, increasingly come from economists on all sides of the spectrum. So far, economists haven’t coalesced around a superior explanation of inflation’s behavior.
Since the 2007-2009 financial crisis, inflation expectations have sunk. “I talk to a wide range of business contacts, and virtually none of them are mentioning rising inflationary or cost pressures,” Mr. Evans said. “No one is planning for higher inflation. My contacts just don’t expect it.”
⇧ Breaking new ground on neutral rates | Larry Summers
They present thoughtful calculations assigning roles to rising inequality and growing reserve accumulation on the saving side and lower priced capital goods and slower labor force growth on the investment side.
That fits in with my assessment. Just because banks increase reserves never meant that commercial banks would lend against them. Hot money flew around, but that hasn’t turned out well at all. There’s a global slowdown, and money will plow into US bonds again, driving yields down. How can we have higher interest rates now, not slow the economy, and all just to be able to lower rates when there’s a downturn. It makes no sense to me at all except that the banks will charge more (while they can, which shouldn’t last long if at all).
⇧ Adjustment in the Euro Area – The New York Times
Spanish experience since the euro was created in 1999 does indeed suggest that a depressed economy holds down inflation….
⇧ The economic reality is high and rising interest rates — Prime Economics
The long rate on US BBA corporate debt has now risen by one percentage point over the course of 2015. Taking into account inflation (using the CPI which is constructed on a monthly basis, and projecting unchanged into November), rates over the past three months are now at their highest for eight years and (apart from the extreme increase in the wake of the financial crisis) are returning to territory that was the norm in the last decades of the twentieth century.
While apparently it is highly likely that the Federal Reserve will raise interest rates later this month, the reality is that rates are rising sharply already (see Chart at head of this article).
As Ann Pettifor pointed out earlier this week in the FT, central banks have lost control of interest. The financial system remains dysfunctional, prone to failures of confidence that are the legacy of massive private debts that arose in the first instance from excess borrowing at high not low rates of interest.
This has fostered absolute reliance on quantitative easing. It seems highly unlikely that the real economy is any better placed to tolerate these conditions than at any time since the financial crisis. So any monetary tightening will be short lived.
Interesting that I wrote what I did above and then saw this.
The Fed will be slowing on top of forces already in place that work to slow the economy.
⇧ Emergency Opec meeting aired as Russia braces for sub-$30 oil – Telegraph
“Everything points to low oil prices next year, and it’s possible that it could be $30 a barrel, and maybe less. If someone had told us a year ago that oil was going to be under $40, everyone would’ve laughed. You have to prepare for difficult times.”
I wasn’t laughing when I first saw it. In fact, I posted it on this blog.
Check out the next link below to see it.
⇧ A New Ceiling for Oil Prices by Anatole Kaletsky — Project Syndicate
I didn’t laugh off Anatole Kaletsky. I thought he was spot on, as the Brits say.
“‘… the trading range in the brave new world of competitive oil should be roughly $20 to $50.’
Now that’s what we call filtering out the noise.”
⇧ It’s Time for Quantitative Easing for People Instead of Banks
This is a good overview of the possibilities.
Let me say from the outset that fractional-reserve banking isn’t practiced the same way around the world. In the US, we have a 10% reserve ratio. The UK doesn’t have that. In addition, the Fed is not transparent at all about banks under it that violate the ratio. I know this because I asked the Fed directly and it wasn’t forthcoming.
As for Switzerland, it is my understanding that the referendum failed to pass.
Other than those two things, what you’ll read in John Lawrence’s article is very close to the things I’ve been advocating for many, many years now. I’m glad the ideas are catching on and spreading around the world.
… all money created by private banks is fiat money, and, although the government says it is all good, it is the private banks that actually create it, not the supposedly democratically elected government.
⇧ International Group Gives High Marks to Texas State Fire Marshal’s Review of Arson Cases
“This has been a collaborative and transparent process to look at prior arson cases in the full light of current science,” said Texas Fire Marshal Chris Connealy. “We were fortunate to have the considerable expertise of the workgroup to help us with this effort.”
⇧ Connecticut Regulator Warns of Phone Scams Targeting Policyholders
… be wary of a scam in which a caller poses as a representative of an insurance company and informs people that their policy is being canceled for non-payment.
In the scam, the caller then asks for a credit card payment over the phone to reinstate the policy ….
⇧ Chinese zombie SOEs will be restructured and closed. Or will they? | George Magnus
… banks have been known to extend new loans to repay old debt, adjust loan contracts, and shift bad loans off balance sheet. SOEs and local governments have issued bonds as cheaper alternatives to bank loans. Another blockage to recognising bad debt is the difficulty of disposing of it after the event because of the capacity constraints among national and local asset management companies, or bad banks established to hold and work off non-performing assets.
The State Council’s recognition of a major problem is welcome. Yet since the major reform agenda was announced in China at the end of 2013, recognition of complex problems has consistently trumped implementation of solutions. At a time when the economy is slowing down on a secular basis, and unemployment and labour unrest are rising, capacity shutdowns that go beyond heavy industry and shipbuilding to construction and manufacturing, and rising job losses look like a big gamble. SOE reform is a dog that has not hunted yet. It is doubtful the government will accept the consequences of letting it loose in the next two years.
Okay George, but everything State Owned Enterprises (SOE’s) and local governments have done via borrowing could have been done better without borrowing.
There is absolutely nothing to prevent China from sufficiently issuing debt-free currency to retire all SOE and local-government debts. As for the efficiency and efficacy of SOE’s and local and other governmental levels, it would be vastly easier to deal with if there were no debts involved. Plus, by working only with debt-free money, the national government could do a much better and faster job of employing everyone via the public sector if necessary. Transitioning from dirty to clean energy would likewise be easier.
To decide what needs to be done to make the entire system efficient and effective at the most granular level while making the system the most adaptable it can be to accomplish it, the whole system needs to be reformed or revolutionized into a bottom-up democracy so that best policies and practices arise that are communicated to the top where that information can then be disseminated to the whole nation. Local areas would be able to take what works best and adapt those things to local circumstances. The system would be continually evolving to a higher state with no debts; and, if the money supply were matched correctly to real productivity (non-“financial”; no usury/interest) and velocity, there’d be no inflation or deflation.
⇧ Time to Worry About Speculative Construction? Not Yet, Experts Say
… industry experts say investors have learned their lesson and are still exhibiting caution when borrowing money for new construction to avoid overbuilding. The amount of speculative construction, long a bell-whether of sector prosperity, is matching current demand nicely, the experts say.
According to CoStar figures, the level of multifamily construction is 1.5 times what it was 10 years ago, an amount of new development not seen since the 1980s, Mulvee says. These apartment buildings are getting filled, but not by the tenants most experts were predicting, Mulvee notes.
“These new class-A apartment towers—they’re not getting the millennials as residents because unless you’re a recent law graduate or other professional, the rents are just too high for young people,” she says. “These places are going to generation x-ers, and more baby boomers than people realize. And for the young people who are renting, at some point the strollers are going to take precedence over their condo life. Multifamily, even with this demand, is at risk of overbuilding if vacancy starts to rise.”
What she’s suggesting is that people having babies will change to wanting detached single-family homes, which will increase the vacancy rates of multifamily and put downward pressure on rent rates and reduce profit margins at current overhead and expenses resulting in an oversupplied/overbuilt sector.
I think there’s some truth to that but that many will simply not want the landscaping and other maintenance issues. However, where do the children safely play indoors and out? Multifamily providers need to plan ahead to meet needs.
⇧ Bond History Reveals Rate Secrets That Fed Doomsayers Don’t Get – Bloomberg Business
Steady gains in the labor market will help propel economic growth, lead to higher rates and make higher-yielding assets more attractive, according to Jennifer Vail, head of fixed-income research at U.S. Bank Wealth Management, which oversees $127 billion.
“Folks that favor risk will perform better than those that favor safety,” she said.
Stuart Sparks, an interest-rate strategist at Deutsche Bank AG, sees the greater risks to the economy and worries the Fed is moving too soon. That has the potential to upend the current recovery, spur even more demand for Treasuries and cause the yield curve to invert.
In the past week, signs of increasing stress in credit markets emerged as a swoon in junk bonds prompted Third Avenue Management to freeze redemptions from one of its mutual funds.
“The Fed could effectively lock us into a low-growth, low-inflation, low-interest-rate equilibrium,” he said.
⇧ Lessons from the richest man who ever lived
This article focuses upon what “we” can learn from being like Fugger. Well, those who borrowed from him were ignorant that they didn’t need to borrow but rather could have simply issued the currency. They simply would have needed to avoid over issuance.
There were governments in history before Fugger’s time that did issue debt-free, fiat currency. The only mistake they made was not keeping issuance in balance with growth of demand and supply for goods and services by those using the money.
⇧ The Bizarre Theory That Says Fed Increases Will Fuel Inflation – Bloomberg Business
It could also make loans more profitable for banks, which may lead them to step up lending to consumers and companies, according to Brian Jacobsen, chief portfolio strategist at Wells Fargo Advantage Funds, which manages $242 billion in Menomonee Falls, Wisconsin.
That’s what I’ve been saying for months. Paul Krugman picked up on it (twice) but has since not mentioned it that I’m aware of.
It’s exactly what the Fed is up to.
The problem with it is two-fold. First, people are generally too pinched to take advantage of more willingness by banks. Second, the rest of the world is doing worse, much worse, which is a drag on the US economy too. A stronger dollar will only magnify it.
So, while I don’t completely discount Fisher, I say that these times are particular.
⇧ Emerging markets stresses | Short View – YouTube
With oil prices still below $40 a barrel and Chinese trade data pointing to weakening growth, disruption is already pooling in emerging markets.
⇧ Inflation inflection point | Authers’ Note – YouTube
I too have said the focus must be on wage rates (but also participation).
John Authers asks Rebecca Patterson, CIO of Bessemer Trust, if inflation in the US has reached a turning point.
I enjoyed John’s quick observation about Main Street and pain. Obviously, Rebecca doesn’t think the rate rise is premature. We shall see. Maybe she’s right, but I doubt it.
Of course, the Fed could tinker with its other tools besides just the overnight rate. There’s the rate on excess reserves, and there’s the reverse-repo tool too: https://www.newyorkfed.org/markets/rrp_f aq.html
⇧ The Great Greek Bank Robbery
What a ripoff:
Yanis Varoufakis explains:
Sensing potential gains at taxpayers’ expense, foreign hedge funds rushed in to take advantage. As if to prove that it understood the impropriety involved, the Troika compelled Greece’s government to immunize the HFSF board members from criminal prosecution for not participating in the new share offer and for the resulting disappearance of half of the taxpayers’ €41 billion capital injection.
The Troika celebrated the hedge funds’ interest as evidence that its bank bailout had inspired private-sector confidence. But the absence of long-term investors revealed that the capital inflow was purely speculative. Serious investors understood that the banks remained in serious trouble, despite the large injection of public funds. …
… despite capital injections of approximately €47 billion (€41 billion in 2013 and another €6 billion in 2015), the taxpayer’s equity share dropped from more than 65% to less than 26%, while hedge funds and foreign investors (for example, John Paulson, Brookfield, Fairfax, Wellington, and Highfields) grabbed 74% of the banks’ equity for a mere €5.1 billion investment. Although hedge funds had lost money since 2013, the opportunity to take over Greece’s entire banking system for such a paltry sum proved irresistibly tempting.
⇧ Financing a Multifamily Home [2-4 units] – The New York Times
For buyers willing to take on the role of landlord, multifamily properties can be one of the more affordable ways into pricey housing markets.
⇧ US CPI 1775-2015 @WSJecon
⇧ A Simple Way to Decrease Income Inequality – Evonomics
This is an excellent article by Heleen Mees, though I will say that Thomas Piketty is also right. It’s a combination of factors, the ones pointed out by both Heleen and Thomas.
I do lean slightly more to Heleen’s side of it but see a great deal of Thomas’ point in Heleen’s observations anyway.
They need to talk/collaborate.
⇧ Private Profit with Public Guarantee: The Real Issue with Fannie and Freddie | Beat the Press | Blogs | Publications | The Center for Economic and Policy Research
… the issue was not the $180 billion bailout (about which elite types routinely and misleadingly say we made a profit) the issue was the huge amount of bad MBS that helped propel the housing bubble.
This was a direct result of the perverse incentives created by a system where private shareholders and top executives stood to profit by passing risk off to the government. This incentive does not exist today. This incentive does not exist today. (The line is repeated because policy folks have a hard time understanding it.)
⇧ Stiglitz’s Sticky Prices by Kaushik Basu – Project Syndicate
We know that people often shirk if there is no penalty for doing so, and that the common penalty in the workplace is the risk of losing one’s job. But if one assumes a full-employment equilibrium, as described in textbooks, with the market working without friction, this penalty is ineffective. Threatening workers with the loss of their job will have no effect if they can immediately find another.
The way to create incentives not to shirk is to pay workers above the market wage, making the loss of a job more costly. Of course, if this works for one firm, it will work for others, and so wages will rise, and eventually the supply of labor will exceed demand. In other words, there will be unemployment. And then, even if all firms are paying the same wage, the threat to fire a worker will be effective, because a worker who loses a job will face the risk of remaining unemployed. As a result, the market will reach an equilibrium where unemployment exists, but wages do not drop. This is, in short, the Shapiro-Stiglitz equilibrium.
Could demand for goods and services affordable by more workers earning more cause the creation of more jobs enough to avoid the equilibrium? What impact would the ratio of profits going to capital versus labor have on the equation?
⇧ What Should the Fed Do and Have Done? | Larry Summers
Inflation is running well below 2 percent and there is not yet much evidence of acceleration. Decades of experience teaches that the Phillips curve can shift dramatically so reasoning from the unemployment rate to inflation is problematic. Declining prices of oil and other commodities suggest inflation expectations may actually decline. Furthermore, if one believes that productivity is understated by official statistics one has to as a matter of logic believe that inflation is overstated.
It seems to me looking at a year when the stock market has gone down a bit, credit spreads have widened substantially and the dollar has been very strong it is hard to say that now is the time to fire a shot across the bow of financial euphoria. Looking especially at emerging markets I would judge that under-confidence and excessive risk aversion are a greater threat over the next several years than some kind of financial euphoria.
… Contractionary policy is contractionary and if there is a risk of a slowdown or recession in the next few years that is surely an argument against contractionary policy.
On balance the risks of raising rates seem a little more likely to play out and much more serious than the risks of standing still on rates.
Wow, has Larry Summers ever changed (for the better)!
He’s still talking the bankers’ game though.
⇧ Sydney tornado in Kurnell pictures show devastating aftermath | Daily Mail Online
A tornado in southern Sydney has left homes and businesses without roofs and several people with minor injuries after record wind speeds up to 213km/h swept through the suburbs.
⇧ As December Heat Ends History’s Warmest Year, Media Still Shy Away From the Cause — FAIR
As wave after wave of record-breaking high temperatures grips huge swaths of America, media coverage of the December warmth has rarely been willing to discuss its cause. Reporters may be willing to point to a monster El Niño, but hardly have mentioned it’s launching its assault off a higher baseline temperatures from human-caused climate change, resulting in some jaw-dropping record highs.