Linking ≠ endorsement.
⇧ Deputy killed, 2 deputies injured, serving eviction notice in Park County; Suspect shot and killed – 7NEWS Denver TheDenverChannel.com
Three Park County sheriff’s deputies were shot, one was killed, while serving an eviction notice to a Bailey man who had a contentious relationship with law enforcement.
⇧ Jackson water customers should take precautions, MSDH says | Jackson News – WAPT Home
Random water samples were taken in June 2015 from 58 homes in Jackson, 13 of which showed lead above “actionable” levels of 0.015. The Mississippi State Department of Health notified the city of the findings last month. New samples were taken from the 58 sites and an additional 42 sites, city officials said. All but two of the resampled initial 13 sites had levels below the action level and some had no lead detection, authorities said. The final two locations where samples were taken are either vacant or are using water from a private well, city officials said.
⇧ Real estate soliciting banned in 2 Toms River neighborhoods
The Township Council voted 5 to 0 Tuesday night to ban real estate agents from going door to door soliciting homes for sale in two sections of North Dover. The ban will be in effect for five years.
⇧ Luzerne County sells 18 tax-delinquent properties – Times Leader – timesleader.com
The apartment building in the batch of 18 sold this week was purchased by Helena Laurency for $888.
It’s unclear why the 2012 taxes were not paid when New York-based Service Legend purchased the property for $7,500 in August 2013 from Exact Development, Inc.
Exact had purchased the property in December 2010 for $70,000 from Joseph A. Fessler, county records show.
If you’re thinking as I am, you’re wondering how much it will cost to rehab it and then what rent rates it will fetch.
⇧ Bill would address blight at Frederick City properties in foreclosure | Annapolis 2016 | fredericknewspost com
Krimm’s bill seeks to have secured parties registered when they first file a foreclosure action. It also allows local governments to impose a $1,000 penalty if secured parties fail to register, and expands the ability of local governments to take care of nuisances on foreclosed properties and adding those costs to the tax bill.
⇧ The Reality Of The Commercial Real Estate Boom – Forbes
… most of the good news is restricted to multifamily units, downtown offices, hotels, and a couple of specific manufacturing structures. Investment in natural gas infrastructure is skyrocketing, and railroad capex has also shown strong growth. But the vast majority of manufacturers, hard-hit by the rising dollar, are cutting back. In the industrial sector at large, commercial property price indexes have plateaued. Energy companies have shut down more than half of all their oil rigs and slashed the number of gas rigs to their lowest level in 28 years. In 2015 alone, three major mining companies declared bankruptcy.
Outside the industrial sector, decline is widespread.
⇧ Dreaming of That 4-Hour Work Week? This App Will Help You Get There!
There’s no longer a need to drive over to the local library or post office, or have a notary meet you at home after work.
… As long as you have an internet connection, you can get your documents notarized anywhere in the world.
The process is also remarkably simple. Below is an outline that comes directly from the NotaryCam website.
Upload your document.
Call/request a live eNotary.
eNotary will confirm your ID.
eSign your document.
Notary will eNotarize your document.
Documents are routed and stored securely.
Pay $25 per signature in U.S./$79 per signature international.
⇧ A Lesser Known Home Price Index for Unique Market Insight
The hedonic index I want to talk about today is the FNC Residential Price Index. FNC Inc. “pioneered real estate collateral information technology” that they sell to mortgage lenders and appraisal management companies. Their algorithm uses a lot of information from appraisals in addition to the public data that everybody else uses.
FNC publishes their index for 30 major metropolitan areas.
⇧ The Investor’s Guide to Qualifying for a Conventional Loan
Example: Michelle’s gross income is $10,000 factored by a 36% DTI, which means her debt cap cannot exceed $3,600.
Once the DTI cap is determined, the banker will subtract Michelle’s current debt obligations from her debt cap number.
Example: Michelle’s debt cap is $3,600. She has a current mortgage of $1,000 per month (sound of Bay Area and NYC residents rolling their collective eyes), and she pays $600 per month in student loans. So $3,600 minus $1,600 leaves Michelle with $2,000 for additional mortgages.
Excellent. Michelle knows she can afford another mortgage. Time to find a property!
Not so fast. …
⇧ The Tax Implications You MUST Know Before House Hacking
… added benefits of renting out your home are that you can depreciate the portion of the home you don’t personally occupy and you can deduct normally non-deductible expenses for owner-occupied properties, such as insurance costs. You will use the ratio determined above to allocate these expenses.
⇧ Negative interest rates are a calamitous misadventure
As I wrote from the beginning, negative interest rates require that strings be attached to banker bailouts. The banks must be “allowed” to fail or they must lend to Main Street by working hand-in-hand with enterprises and organizations to make them profitable.
As I also said all along, fiscal spending is the vastly better way and it should be done via the government issuing debt-free money.
⇧ Opec has failed to stop US shale revolution admits energy watchdog
“… Over the past 30 years we have never seen oil investment dropping two years in a row,” he said.
“It is easy for consumers to be lulled into complacency by ample stocks and low prices today, but they should heed the writing on the wall: the historic investment cuts raise the odds of unpleasant oil security surprises in the not too distant future,” he said.
Ultimately, a fresh oil price spike or just a return to prices of $80 sows the seeds of its own destruction for the industry. It is likely to accelerate the shift to electric cars as the technology comes of age, and the COP21 climate accords start to bite.
That is a story for the 2020s.
⇧ House flipping: Deja vu all over again
In Las Vegas, … house flips are making up 10.4 percent of home sales, the highest in the nation, and the share is rising. Las Vegas flipping is now at about 80 percent of its 15-year peak.
⇧ What Happens When You Believe in Ayn Rand and Modern Economic Theory – Evonomics
This is a really good article.
A trip to a local pizzeria was described this way:
We walked through the gated walls and past a man in casual slacks with a pistol belt slung haphazardly around his waist. Welcome to an Ayn Rand libertarian paradise, where your extra-large pepperoni pizza must also have an armed guard.
This is the inevitable outcome of unbridled self-interest set loose in unregulated markets.
Yet devotees of Ayn Rand still argue that unregulated self-interest is the American way, that government interference stifles individualism and free trade. One wonders whether these same people would champion the idea of removing all umpires and referees from sporting events. What would mixed martial arts or football or rugby be like, one wonders, without those pesky referees constantly getting in the way of competition and self-interest?
Perhaps another way to look at this is to ask why our species of hominid is the only one still in existence on the planet, despite there having been many other hominid species during the course of our own evolution. One explanation is that we were cleverer, more ruthless and more competitive than those who went extinct. But anthropological archaeology tells a different story. Our very survival as a species depended on cooperation, and humans excel at cooperative effort. Rather than keeping knowledge, skills and goods ourselves, early humans exchanged them freely across cultural groups.
When people behave in ways that violate the axioms of rational choice, they are not behaving foolishly. They are giving researchers a glimpse of the prosocial tendencies that made it possible for our species to survive and thrive… then and today.
Dr. Denise D. Cummins is research psychologist, an author, and a fellow of the Association for Psychological Science. Her most recent book is “Good Thinking: Seven Powerful Ideas That Influence the Way We Think.”
⇧ The Fairness Divide: Intervention That Liberals and Conservatives Can Agree On – Evonomics
… the distinction was made very clear as long ago as 1776, with publication of Adam Smith’s founding document of western society, The Wealth of Nations, wherein he asserts that the state should take actions to increase the number of skilled and confident competitors, in order to stimulate a vibrantly competitive and creative capitalism. Investing in infrastructure and schools and sanitation would — Smith avowed — allow more children to rise up and participate in vibrant markets for goods, services and labor.
The economist-idol who has been quasi-deified by the American Right — Friedrich Hayek — in fact said pretty much the same thing. Hayek deemed valid those taxpayer supported interventions that will clearly increase the number and fraction of citizens who are skilled and confident market participants! A fact that is now repressed by today’s self-described “Hayekians.”
(Indeed, to be even more ironic, this is an area of agreement between Hayek and Karl Marx.)
… partly influenced by [Adam] Smith, the American Founders, in the 1780s, seized up to a third of the land in the former colonies, owned by aristocratic families, and sold or redistributed it to make the playing field more level. States also banned primogeniture and fiercely enforced equal inheritance so that rich family fortunes would break up among many heirs. The Founders’ economic meddling and redistribution was thus vastly greater than ever attempted later, by either Roosevelt!
I like the article but strongly disagree that there is any inherent need for competition.
⇧ The Economy Isn’t A Machine. It’s Organic and Constantly Evolving. – Evonomics
… a different way to see the economy. It views the economy not as machine-like, perfectly rational, and essentially static, but as organic, always exploring, and always evolving — always constructing itself.
I never saw it otherwise. I never bought into homo economicus or equilibrium.
⇧ mainly macro: The austerity winds have changed
The Economist is even talking about helicopter money (and quite right too), which is effectively a fiscal stimulus. It is just a matter of time before political commentators in the UK pick this up.
I suspect those who fear the electoral consequences of an anti-austerity line have in part begun to believe in Osborne’s political invincibility. In truth Osborne was always gambling by taking an austerity stance. He was out of tune with international opinion in 2009. He got lucky when the Greek crisis broke, but is now in great danger of overplaying his hand.
The Conservative response to McDonnell’s proposed plans tell us a lot. The spin is that Labour is planning to borrow forever. That spin is indeed consistent with Osborne aiming for surplus, but it is also incredibly weak and can be knocked down by a feather. Every company knows it makes sense to borrow to invest when interest rates are virtually zero.  If Osborne applied the same rule to companies as he proposes for the government, innovation and growth would grind to a halt. The 79-97 Conservative government borrowed on average over 3% of GDP each year. I could go on and on.
The austerity winds are changing once again, and Osborne has become isolated. In truth, any shadow chancellor worth his salt would exploit this by arguing against his new round of austerity. My only fear is that Labour will step back from doing so because the issue of austerity has become caught up in Labour’s civil war. This would be truly ironic, as no Labour MP who challenges Corbyn in an election on the grounds that Corbyn is anti-austerity has any hope of succeeding. Let us hope sense prevails, and Labour can at least unite in opposing Osborne’s unnecessary cuts.
So, why mention helicopter money and government borrowing at low rates? If there’s helicopter money, why even give “low rates” air? Doing so only makes sense if you believe people are too stupid to choose debt-free over paying interest. Are they, or are we too stupid to explain things to them so they will choose free money and without hyper-inflation?
⇧ mainly macro: Sanders versus Clinton: lessons from the UK
The Sanders campaign, and reactions to it, continue to remind me of our similar experience in the UK. As I have already suggested, the common root of the support for Corbyn and Sanders comes from the anachronism of how a crisis created by the financial sector became transformed into the need to reduce the role of the state.
That’s putting it so politely. What it is, is a scam undertaken by hyper-greedy people with deep sociopathic tendencies: dangerous people who ruin the planet, who have no qualms about devouring widows’ houses while pretending to be pious.
⇧ Undocumented Immigration May Affect the Housing Market | Zillow Porchlight
As far as I’m concerned, this is another reason there’s no way around subsidizing the construction of affordable housing on a massive scale. Pay American workers what it will take to get them working building housing. Pay them via debt-free-currency issuance.
Supply and demand can be equalized. It won’t cause hyperinflation if done correctly. If prices rise too much, then pay for more supply of whatever it is that’s going up in price. That’s how the economy should be run. That’s why money should be created and spent into circulation (without issuing bonds and without borrowing from any bank).
⇧ This Is What A Real Wall Street Shill Sounds Like – The New York Times
Paul’s not trying to run down Bernie Sanders’ economic plan here (a plan Paul simply doesn’t understand), so I’m linking to this article because Paul correctly calls out Marco Rubio for falsely claiming it was the government and not deregulation in the first place that caused the crash.
⇧ This might be Ted Cruz’s worst idea – The Washington Post
Think about it like this. Just saying that the price of gold isn’t allowed to change isn’t enough to actually make it happen. That’s because supply and demand still exist, and, if you don’t do anything about them, they’ll make the price go up or down as is the case. The only way to stop them from doing so is to make the dollar go up or down instead—which means raising or lowering interest rates. The simple story is that higher rates make your currency a more attractive place to hold money, and that, in turn, makes your currency worth more.
Okay, I totally agree that returning to the gold standard would be nothing short of insane, but interest rates are definitely not the only way to make prices go up or down. Ted Cruz is stuck in a libertarian bubble, but Matt O’Brien has been at the central-bankers’ Kool-Aid too much and needs to think outside that bankers’ box, which Simon Wren-Lewis is doing, as are so many others. Maybe we could even get Paul Krugman to write up (as in promote) money without bonds and interest rates.
⇧ Realistic Growth Prospects – The New York Times
… nobody knows the secret of raising productivity growth.
Secret? What secret? It’s not a secret.
Ending the Great Depression via military mobilization and production was not merely reducing the gap; but even if that’s all it was, it does not mean that we are stuck with just reducing a gap. The “gap” is an arbitrary construct. Productivity is technologically bound/limited, and technological advancements are not actually limited. It is simply a matter of spending, organization, desire, will, and vision.
We’ve had blinders on put there by bankers earning usury.
The issue has never been that we can’t create enough money. The issue has always been people holding us back because not to do so would remove the restrainer’s wealth, power, and control relative to the rest of us.
That’s all it is. That’s all it’s about.
⇧ Fed’s Bullard says largest banks may still be too big: CNBC | Reuters
Bullard said he agreed the problem has not been resolved, and endorsed Minneapolis Fed President Neel Kashkari’s decision to launch research on what Kashkari referred to as “transformational” ideas about how to deal with the largest financial firms.
⇧ CREXi Brings Commercial Real Estate Dealmaking Online | TechCrunch
“You have to use 15 different kinds of platforms,” he added. “There’s a lot of emails, a lot of fax machines, a lot of flying to meet somebody.”
⇧ At Charlotte real estate awards, it’s clear the good times are rolling | The Charlotte Observer
One live survey question during the program, answered by smartphone app, asked attendees when they think the Charlotte real estate market will peak. The most popular answer was 2017, indicating a slight majority of those in attendance think we have at least another year left before the market declines. The second-most popular answer was 2018 — even more optimistic — and the possibility that we’re already at the top of the market came in third.
⇧ China’s Banks May Be Getting Creative About Hiding Their Losses – Bloomberg Business
“The receivables portfolio in Chinese banks is opaque so we can’t make an assumption on the asset quality,” said Christine Kuo, analyst at Moody’s in Hong Kong. “Provisions for receivables are indeed very low compared to that for loans. We tend to think that the Chinese government is likely to provide support if there is any sign of a crisis.”
⇧ High Chance of China Hard Landing, Says Adviser to Japan’s Abe – Bloomberg Business
“I really don’t think that China’s economic fundamentals are good and it’s just real estate markets and stock markets that are panicking,” Honda said. “China has to go through massive structural reforms and its impact on other economies is quite large. That’s different from other nations.”
⇧ You Cannot Print Your Way to Prosperity – The Daily Reckoning
Monetary cranks throughout history have thought that just printing more money would result in greater wealth and prosperity. Every time this was tried it resulted in failure.
I’m sorry, but Ron Paul is an economic illiterate. “Printing money” for excess reserves is not fiscal spending! It is especially not printing money without issuing any corresponding bonds (debt).
There is a multiplier that comes with governmental spending targeted correctly. After all, does Ron Paul think that funding WWII by putting the public sector first via military employment sank the economy? It did exactly the opposite.
We could do exactly the same thing only better and without the war!
⇧ Here’s why oil rout is hurting the global economy instead of helping – MarketWatch
It isn’t wrong to assume that those losses would rebound to the benefit of oil consumers, Weinberg says. But the rub lies in the fact that consumers in oil-importing countries may be more likely to stash those savings away while workers in oil-exporting countries would have been more likely to spend that lost income. That means it can take “years or decades” before that savings is translated into spending.
⇧ Sensitive financial data ‘missing’ from central bank report on capital flowing out of China’s slowing economy | South China Morning Post
Figures on the “position for forex purchase” are regularly published in the People’s Bank of China’s monthly report on the “Sources and Uses of Credit Funds of Financial Institutions”. The December reading in foreign currencies was US$250 billion.
But the data was missing in the central bank’s latest report.
⇧ German Economy Takes a Blow From Weakening Global Demand – Bloomberg Business
“The German economy appears to be in the midst of a slowdown,” said Oliver Kolodseike, an economist at Markit. Manufacturing is “near stagnation,” he said.
⇧ Krugman and the Gang of 4 Need to Apologize for Smearing Gerald Friedman – New Economic PerspectivesNew Economic Perspectives
I had not read this, by Bill Black, or read Jamie Galbraith, before writing independently that Paul Krugman has failed to comprehend the magnitude of Bernie’s plan and also that it is a mistake for Paul to appeal to authority (a logical fallacy).
… Friedman’s study is utterly conventional in terms of the macro models that Krugman has been praising for years in his column. The results he calculates, that Krugman dismisses as “fantasy” and “voodoo” are in fact the normal product of the normal models Krugman and the Gang of 4 rely on. Friedman, Jamie, and I all have many doubts about those models, but not Krugman and the Gang of 4. Why does the standard model generate such powerful results for employment and growth? It does so because Bernie’s plan to spur the economy is far larger than current policies or anything program to spur the economy supported by Hillary. As Jamie phrases it:
What the Friedman paper shows, is that under conventional assumptions, the projected impact of Senator Sanders’ proposals stems from their scale and ambition. When you dare to do big things, big results should be expected. The Sanders program is big, and when you run it through a standard model, you get a big result. That, by the way, is the lesson of the Reagan era — like it or not. It is a lesson that, among today’s political leaders, only Senator Sanders has learned.
Yesterday, I read an article by Paul Krugman wherein he complained bitterly about the treatment he has been receiving while he went on to deride Sanders-supporting economists as likely supporting Bernie not on principle but because they are holding out for a seat at the top table in the White House.
Bill Black has pointed out Paul’s poor logic (his inconsistency). It seems Mr. Krugman needs to take greater care not to be hypocritical.
I like much of Paul Krugman’s posts; but ever since he started attacking Bernie Sanders, I’ve found him difficult to stomach. He appears to me to have been protesting too much: “methinks thou protesteth too much.”
Anyway, Paul’s to the left of the far right-wing economists and useful as such; but he’s no Bill Black or Jamie Galbraith, both of whom I would choose to help me in the White House way before turning to Paul Krugman.
⇧ The charts that suggest the housing bubble is out of control
“Over the past few years, over 40 per cent of all new mortgages originated have been interest-only mortgages.
“This is truly Ponzi financing, where home buyers only make money if their houses keep rising in value,” he writes, later describing interest only loans as a “disaster waiting to happen.”
I’ve been waiting for the bubble to burst now for years. I think only China has kept it all propped up. They can’t continue doing that.
⇧ Business Standard-Portugal adopts anti-austerity budget despite concerns
In four years, over 78,000 public sector jobs were cut — more than 10 per cent of the total — alongside other steps the creditors said were needed to return the public finances to balance and put the economy back on track.
Portugal’s public debt is forecast to hit 130 per cent of GDP.
True to the socialists’ campaign promises that brought them to power in November, Costa’s budget restores civil servants’ salaries, eases a surtax tax on employees’ incomes, and breathes new life into the welfare system.
However, in a bid to appease Brussels’ demands, the government also announced a hike in taxes on fuel, vehicles and tobacco.
If the money weren’t issued as debt (bonds), there wouldn’t be any public debt to be forecast to hit any percent of GDP.
⇧ Big Banks and the White House Are Teaming Up to Fleece Poor People | Foreign Policy
This is how Wells Fargo advertises its Direct Deposit Advance Loan, which carries an annual percentage rate of 120 percent: “These short term loans … can assist you with getting through a short term financial crisis by providing you with options and flexibility…. [for example] a medical bill, car repair, or similar unplanned expense.” How sweet of them.
The entire banking system is insane and should be dumped. We should go back to the drawing board on how to manage our society. Poverty is forced on people by other people, other people who are hyper-greedy/sociopathic. We could end poverty and do so very easily. Why aren’t we doing it?
⇧ When nominal meets real GDP — Prime Economics
The OBR’s optimism – displayed to the Chancellor’s political advantage for the Autumn Review last November, seems maybe a little… optimistic.
⇧ Lacker, Kaplan, Fischer – Tim Duy’s Fed Watch
I really do not understand how Fed officials can continue to dismiss market turmoil using comparisons to past episodes when those episodes triggered a monetary policy response. They don’t quite seem to understand the endogeneity in the system.
My sense is that there remains a nontrivial contingent within the Fed that really, truly believes they need to hike sooner than later for fear that overshooting the employment mandate will result in overshooting the inflation target. This contingent is attempting to look at the financial system as separate from the “real” economy. That will not work. No matter how good the underlying fundamentals, if you let the financial system implode, it will take the economy down with it. I don’t know that the Fed needs to cut rates, or that they needed to cut rates as deeply as they did during the Asian Financial crisis, but I do know this: The monetary authority should not tighten into financial turmoil. Wait until you are out of the woods. That’s Central Banking 101. And I suspect that is ultimately the direction the Fed will take.
I agree with all of that with the exception of having any view as to the direction the Fed will take. I thought they were completely wrong to start raising rates when they did and even to start tapering when they did. However, they don’t have any fiscal authority.
The doves wanted the Congress and President to stimulate much more so the Fed could have avoided QE, etc. Who listens to the Fed when it’s not about monetarism though.
They’re geniuses (until they say the government should spend more rather than relying so heavily on the Fed).
⇧ Introducing ‘Kuznets waves’ in income inequality | VOX, CEPR’s Policy Portal
… I see four powerful forces that keep on pushing inequality up. I will just list them here (they are, of course, discussed in the book):
- Rising share of capital income which is in all rich countries extremely concentrated among the rich (with a Gini in excess of 90);
- Growing association of high incomes from both capital and labour in the hands of the same people (Atkinson and Lakner 2014);
- Homogamy (the educated and the rich marrying each other); and
- Growing importance of money in politics which allows the rich to write rules favourable to them and thus to maintain the inequality momentum (Gilens 2012).
We can’t wait. Waiting won’t work. Technology will displace labor and I mean skilled labor, even highly skilled labor, much sooner than later. We must not foolishly wait until it is upon us and tens of millions are struggling on stingy “handouts” of government money (when the government is supposed to be of, by, and for the people). Whose money is it in the first place? The bankers act like it’s theirs.
⇧ EconoSpeak: The Sanders Fiscal Stimulus and Verdoorn’s Law
Usually we think of productivity gains as coming mainly from technological advancements, something that is very hard for government policy to affect.
That’s Noah Smith making another huge, fundamental mistake. What he means is that governments find it difficult to come up with ways.
The truth is that the government has the ways and even the means but is blocked by myopic private-sector interests: the plutocrats.
The government decided to go to the Moon before we had the technology to do it. We made it there within the decade. The government funded DARPA, which created the Internet, literally. The government created the interstate superhighway system, the Tennessee Valley Authority, and so much more.
The ways are not lacking. The political power is in the wrong hands. That’s all.
And, yes, Verdoorn was right.
⇧ Not All Fed Presidents On Board With March Pause – Tim Duy’s Fed Watch
John Williams with Tim Duy responding via actual economic history:
Of course, I am aware of, and closely monitoring, potential risks. But I want to be clear what that means. It’s often said that the economy isn’t the stock market and the stock market isn’t the economy. That’s very true. Short-term fluctuations or even daily dives aren’t accurate reflections of the state of the vast, intricate, multilayered U.S. economy. And they shouldn’t be viewed as the four horsemen of the apocalypse. Remember, the expansion of the 1980s wasn’t derailed by the crash of ’87, and we sailed through the Asian financial crisis a decade later. I say “remember”—some of you here will actually remember and others will remember it from your high school history class.
This paragraph was almost painful to read. Revisionist history. It is as if Williams completely forgets the role of monetary policy in both instances. What did the Fed do in November of 1987? Did they continue hiking rates? What did the Fed do in 1998? Did they continue hiking rates? No, in both instances they actually cut rates. And it was that monetary response that helped the economy “sail through” these episodes.
⇧ Robots Among Us | Oregon Quarterly
In 2013, a study by the McKinsey Global Institute predicted that by 2025, robots will produce an output equivalent to 40 to 75 million workers ….
One solution, Thoma says, is to create a more robust public-sector economy to employ displaced workers. Another is to redistribute wealth through new social insurance policies, such as a guaranteed minimum income. These socialist reforms would face stiff political resistance, of course. But Thoma says there might be cause for optimism. “I can see the owners saying, ‘We’re either going to lose everything in a revolt, or we are going to have to make some compromises,'” he says. “Many of the Depression-era’s social insurance policies were brought about for the same reason. Bernie Sanders is a sign we’re moving there again.”
That’s right. However besides the inevitability of revolt if the people are being starved, the people have to have money to buy what robots make or the capitalists won’t make any money either.
Eventually, there simply won’t be capitalism.
⇧ Thoughts on a Pro-Growth Policy Mix
Where have you read these ideas before about ramping up both supply and demand at the same time to avoid inflationary problems? Right here on this blog.
You’ll notice that Narayana Kocherlakota, a former Fed president, agrees with Bernie Sanders that growth of 5%+ is doable.
Do you think Paul Krugman believes Narayana Kocherlakota is practicing or advocating voodoo economics?
Well, Narayana Kocherlakota is not doing that. He’s putting forth ideas and concepts and knowledge that has been deliberately suppressed by those who aren’t interested in the cooperative way forward but who think hyper-competitiveness and low, or no, ethical standards is the height of human success as measured by personal net worth.
⇧ Here’s Why Bernie Sanders’ 5% Growth Plan Isn’t Crazy After All | The Fiscal Times
As I see it, accepting that our capacity to grow is limited when in fact there is considerable room for growth is a much bigger error than attempting to grow and finding that the gap is small.
You see, Mark isn’t sure. I am. Nevertheless, he wants to err on the side of helping the poor since the downside he thinks may be possible would be manageable anyway.
Therefore, his heart is in the right place even though he’s not sure about the stimulative impacts of a huge program.
Frankly, I think Bernie’s plan is aiming way too low on the amount we should create and spend right into the economy; but, he has to sell it to people who haven’t had a clue and still have one ear listening to the naysayers brainwashed, at best, by the billionaire class.
Oh, I should mention that Paul Krugman has lauded Mark Thoma before, who is also a New Keynesian, though he’s been studying heterodox economics (in the form of MMT) on the side it seems. More power to him.
We are quickly moving beyond MMT though.
⇧ Quantitative Easing: Walking the Walk without Talking the Talk?
1. In a liquidity trap, monetary policy is not or will rarely be sufficient to have any substantial effect—active fiscal expansionary support on a large scale is essential for good macroeconomic policy.
2. In a liquidity trap, monetary policy can have substantial effects, but only if the central bank and government are willing to talk the talk by aggressive and consistent promises of inflation—backed up, if necessary, by régime change.
3. We are barking up the wrong tree: there is something we have missed, and the models that we think are good first-order approximations to reality are not, in fact, so.
I still favor a mixture of (2) and (1), with (2) still having the heavier weight in it. Larry Summers is, I think, all the way at (1) now.
Larry’s right, given the current system. We need to change the system. Short of doing that, we need to do fiscal spending even if it means (gag) borrowing.
⇧ Growth Begets Growth: Reflections on Total Factor Productivity
Narayana Kocherlakota again:
In terms of evidence: As I describe here, the most striking evidence comes from the Great Depression in the US. Total factor productivity fell dramatically at the beginning of the Depression and was in fact 15% below its normal trend by 1933. Over the following three years, in conjunction with the various forms of demand stimulus undertaken by the Roosevelt administration, TFP grew more than 5% per year faster than normal. This super-normal growth rate of TFP was a key contributing factor to the near double-digit annual growth in real GDP from 1933-37.
… growth is a product of policy choices and circumstances, not historical determinism. To me, our current circumstances – notably low real wages and low real interest rates – are such that the government can and should make choices that generate much higher growth than is considered normal by historical standards.
There it is. He agrees with everything I’ve been writing on this blog about what we should do. Well, almost everything, though I do remember him mentioning somewhere (?) debt-free money financing of government spending.
⇧ The Melting-Away of North Atlantic Social Democracy
… I find myself strongly tempted to agree with what Piketty said at the January 2015 American Economic Association meeting about billionaires:
We know something about billionaire consumption, but it is hard to measure some of it. Some billionaires are consuming politicians, others consume reporters, and some consume academics…
⇧ It’s the 15th Century All Over Again – Bloomberg View
… the element of the 15th-century crisis that seems most relevant today. Gold and silver are no longer the basis of the money supply, and central banks can in theory create all the money they want. But somehow or other we’ve ended up in a situation in which countries are resorting to extreme measures to get people to spend money, and global trade is sputtering as more stuff is produced than people are willing or able to buy. It feels a little like a bullion famine, even if it can’t be. Can it?
No, it can’t be; but it is that the poor are poor. Give them money. They’ll spend it.
⇧ You Can’t Have a Prosperous Economy Without an Entrepreneurial Government – Evonomics
… capital development of the economy requires ‘patient, long-term committed finance’. Indeed the IT revolution in the US, was financed initially by patient public finance provided by a network of strategic and mission-oriented agencies: like DARPA in the Department of Defense, NIH in the Department of Health, NSF, NASA, and the Small Business Innovation Research program (which has given more early stage high risk finance to companies than the entire venture capital sector).
And more recently the green revolution (what many hope will be the next big thing after the Internet) is being funded by similar agencies like ARPA-E in the Department of Energy, or guaranteed loans such as that provided to Tesla (for close to $500 million by the tax payer). In some countries, like Germany and China, such patient finance comes from the public banking sector, KfW in Germany and the China Development Bank in China. Both are leading the way in their country’s green economy transformations ….
… because we pretend that investment is for the private sector, and the public sector is there to only regulate, subsidize or save the day when things go wrong (bringing into the public sector the ‘bad’ toxic side of the equation, allowing the ‘good’ to be absorbed privately), this leads to a self-fulfilling prophecy where precisely because we don’t see a real ‘public role’ beyond, it becomes under financed, but also under “imagined”.
When a sector lacks imagination, it dies. It becomes irrelevant, and of course easier to attack.
⇧ Op-ed: The Bank of Japan Is Moving Too Slowly in the Right Direction
This article, by Joseph E. Gagnon, takes the same position I have: Japan has been way too timid.
⇧ Fix and flip after the repairs – YouTube
This flip was a nightmare, but it is done and selling next week! I bought it for $75,000 and it is selling for around $220,000. Needed about $60,000 in work and took way too long to get done.
I like it that Mark is so honest and open about his experiences.
⇧ Reverse interest rates | Analysis Review – YouTube
My personal view is that there’s been a great deal of premature hand wringing over negative rates and that the rollout of negative rates has not been accompanied by proper requirements upon the banks.
As for spurring lending, it’s not going to happen at tiny negative rates.
Regardless, as the video suggests without saying it outright, negative rates is part of the currency wars.
⇧ Why The European Periphery Needs A Post-Euro Strategy
As for the proposed ‘eurozone finance ministry’, it has been argued that an effective fiscal union would require tax-raising powers at the EMU level in the order of at least 10 per cent of the EMU’s GDP; fiscal transfers from richer to poorer countries; a federal authority with the capacity to engage in deficit spending; the support of the ECB in the operation of fiscal policy; a proportionate transfer of democratic legitimacy, accountability and participation from the national to the supranational level; etc.
Unfortunately, the fiscal union proposed by Weidmann-Villeroy, and by Schäuble-Lamers before that, is very different: it revolves around the creation of a European ‘budget commissioner with powers to reject national budgets if they do not correspond to the rules’, in Schäuble-Lamers’ own words, but doesn’t foresee the creation of a federal institution with legislative and spending powers. This would subject the EMU to an even tighter deflationary, contractionary and mercantilist straitjacket, effectively depriving member states of whatever small leeway they would have left under the current rules to respond to another (likely) financial crash. It’s not hard to see why such a development would be not only economically self-defeating but politically destabilising as well.
Thomas Fazi offers up some possible explanations for why the Germans would want that. One thing he left out is that perhaps they simply aren’t nearly as bright as they would have others believe.
⇧ Germany Opposes Any G-20 Fiscal Stimulus; Focuses on Reform – Bloomberg Business
Wolfgang Schaeuble, speaking hours before meeting with his counterparts from the G-20 developed and emerging markets, … said that the space for monetary policy has been exhausted. He warned that using debt to fund growth just leads to “zombifying” economies.
If that was a blanket statement, he’s wrong. However, there’s a clear and better alternative to government spending than increasing public debts. Just issue debt-free currency (as others and I have been harping for years). When will it go viral to stay? That’s what needs to happen.
⇧ The Tax Exemption That Can Save Thousands for Buy & Hold Investors
Homestead exemptions and homestead caps are fairly easy to obtain and may save you a substantial sum in taxes.
⇧ Calculated Risk: A comment on the Labor Force Participation Rate
The problem I have with Bill’s approach is that trends are difficult to sort out as to the impact economic downturns can have, and have had. If we were to invest heavily via the public sector using debt-free money, who’s to say that stay-at-home dads wouldn’t come out of their homes, so to speak, and join, or rejoin, the labor force?
⇧ The Problem With Evidence-Based Policies by Ricardo Hausmann – Project Syndicate
A very worthwhile piece by Ricardo Hausmann:
We include some mechanism in the tablet to inform the teacher in real time about how well his or her pupils are absorbing the material being taught. We free all teachers to experiment with different software, different strategies, and different ways of using the new tool. The rapid feedback loop will make teachers adjust their strategies to maximize performance.
Over time, we will observe some teachers who have stumbled onto highly effective strategies. We then share what they have done with other teachers.
Notice how radically different this method is. Instead of testing the validity of one design by having 150 out of 300 schools implement the identical program, this method is “crawling” the design space by having each teacher search for results. Instead of having a baseline survey and then a final survey, it is constantly providing feedback about performance. Instead of having an econometrician do the learning in a centralized manner and inform everybody about the results of the experiment, it is the teachers who are doing the learning in a decentralized manner and informing the center of what they found.
That is exactly the model of the economy (the whole democratically run economy) I have put forth: centralized, yet decentralize; centralized enough to spread the information about where, when, why (as places and circumstances differ) what is working best.
⇧ Wanted: Goal-Oriented Non-Ideological Fiscal Policymaker
Narayana Kocherlakota’s economic thinking sure is evolving quickly. It’s so nice to see someone breaking out of the box.
I really like it that he’s seeing the “balance” between supply and demand and that ramping up both via fiscal policy is the way to go.
The government should be expected to avail itself of those supply-side tools in order to achieve its growth objective. (This switch from demand-side stimulus to supply-side stimulus is why I use the term “non-ideological” in the title.)
What I’m proposing has its risks. The US attempted to do aggregate demand management using fiscal policy in the 1960s, and the result – but only after some very bad monetary policy choices – was the Great Inflation.
But our situation is a lot closer to 1937 than it is to 1965.
You’re hired to think.
⇧ Uncovering the Bad Math (or Logic) of an Economic Analysis Embraced by Bernie Sanders – The New York Times
Please note the terms “conventional” and “tend” here: “… his numbers don’t represent conventional economic thinking. And they’re at odds with empirical studies documenting that temporary fiscal stimulus does tend to have temporary effects.”
Here’s the most important part of the article, which Justin Wolfers should be commended for including, as others who oppose Gerald Friedman’s approach are not necessarily fair-minded enough to include Gerald’s basis at all.
But he [Gerald Friedman] also rejected this critique, arguing that his figures are based on an alternative view of the world, stating: “To me, when the government spends money, stimulates the economy, hires people who spend, that stimulates more private investment. That remains, and at the next year, you’re starting at the higher level.” He admits that this “is not standard macro,” and described it as the understanding of an earlier generation of economists — a sub-tribe of Keynesians he called “Joan Robinson Keynesians.” (Joan Robinson was a contemporary of John Maynard Keynes at Cambridge.)
When I pressed Mr. Friedman on whether he was right to conclude that standard assumptions suggest that Mr. Sanders’s economic program will have such large effects, he said, “I have to stop saying ‘standard.’ ” It became apparent in our conversation that he simply hadn’t realized that he had mischaracterized mainstream economics, leading him to describe his disagreement with Ms. and Mr. Romer as “a measure of my ignorance of modern macro, and my disagreements with modern macro.”
Even that is as characterized by Justin and not Gerald directly. I’ve been wondering when Gerald will publish a full, thoughtful response to all the piling on. I assume he will. I would. I also assume it will be good.
Let me also add that “standard” is being thrown around as if to have used standard approaches means that absolutely all of one’s analysis must meet the supposedly monolithic New Keynesian standard.
Lastly, I read Joan Robinson’s approach years ago and found it highly intuitive.
What this whole debate has boiled down to is an argument by mostly New Keynesians against all more leftist schools of economics still considered heterodox.
I just quoted Narayana Kocherlakota calling for a less ideological approach. New Keynesianism is an ideology. Paul Krugman calls himself a liberal, a progressive; but concerning his economics, it’s only in quite-weak, relative terms. Keynes was not very left on the economic-progressive spectrum. Personally, I think he was decidedly to the right of the center. New Keynesianism is Keynes with sticky prices. It’s really just more of the save-capitalism-from-itself school. Could we do worse? Of course we could. However, we can obviously do better.
As much as Paul Krugman hates it, people, especially young people, just aren’t voting for Bernie Sanders because Bernie is a Keynesian. They’re voting for him because he’s attached “socialist” to his personal ideological label and with “democratic” in front of it.
What we should really be focusing on is not that a President Sanders might find his spending plan insufficient and that, that would embarrass the Democratic Party that doesn’t make wild promises the way Paul Krugman says the Republicans do. What we should be focusing on is a plan that will sustainably fund proper growth to lift everyone up in living standard and quality of life whether the plutocrats want that or not.
Is Hillary Clinton the person to do that? I simply don’t see her in that role at all. Her track record says she would not do it and that if she were to even try, she’d fail miserably. I can, however, see Bernie Sanders starting that movement in earnest (which I think he’s largely done along with a number of others too many to mention here) and being able to garner huge support from the swelling ranks of youth who will mature while he is in office.
We can have that plan to sustainably fund proper growth to lift everyone up in living standard and quality of life whether the plutocrats want that or not, but where is Paul Krugman on it? He’s saying that we can’t have it. He’s clearly stated that all we can hope for at best is maybe 2.5% over the long haul. He simply wrong. He simply lacks vision. He simply thinks nations plateau with no way to avoid it. He’s stuck in the box.
⇧ A New Deal for Europe by Thomas Piketty | The New York Review of Books
… it was the hindrance of eurozone-wide democracy by a set of rigid rules that led us to the brink of the abyss in the first place, and it’s time to be done with that approach.
If France, Italy, and Spain (roughly 50 percent of the eurozone’s population and GDP, as against Germany, with scarcely more than 25 percent) were to put forth a specific proposal for a new and effective parliament, some compromise would have to be found. And if Germany stubbornly continues to refuse, which seems unlikely, then the argument against the euro as a common currency becomes very difficult to counter. Currently, a Plan B involving the abandonment of the euro is being touted by the far right, a policy that is increasingly tempting to the far left. Why don’t we start by actually giving a chance to genuine reforms that would make the eurozone work for the common good?
⇧ 2016 Trends: Supply Growth and Rent | Apartments com
Unsurprisingly, the decline in rent is tied to the increasing supply of apartments delivered in market. Our data doesn’t show that this is the end of the cycle yet, but it does tell us that high levels of supply and aggressive pricing vs. affordability are starting to create storm clouds.
⇧ 4 ways smart cities will make our lives better | World Economic Forum
As demonstrated in a new report, the rapid and pervasive development of digital technologies, along with an understanding of circular economy principles, will drastically change life for the average urban citizen much sooner than we think.
⇧ Want to meet the demands of Millennials? Good luck with that | HousingWire
The title made me laugh.
Just look at the scorn Quicken Loans received when it launched Rocket Mortgage — a program that seeks to make the mortgage process easier and quicker, but doesn’t shortcut any of the necessary underwriting required for a mortgage.
Talk about getting slapped for some innovation!
Well, certain industries have to have a great deal of info before offering a good or service (hint, hint). Until everything about a given person and all the items in the world are in data and accessible to goods and services providers, people are just going to have to cough up info or go without.
Anyway, I’m sure improvements will continue; but it pays to be realistic and to be willing to work and stick at it. That’s old-fashioned, but the future hasn’t overtaken it yet.
Okay, Dad, you can shut up now. Make that Grampa (or is it Grumpy?).
⇧ [This is not your mainstream economist] The Federal Reserve and the Global Fracture
This man is also hired!
Michael Hudson: The Federal Reserve supports the status quo. It would not want to create a crisis before the election. Today it is part of the Democratic Party’s re-election campaign, and its job is to serve Hillary Clinton’s campaign contributors on Wall Street. It is trying to spur recovery by resuming its Bubble Economy subsidy for Wall Street, not by supporting the industrial economy. What the economy needs is a debt writedown, not more debt leveraging such as Quantitative Easing has aimed to promote. But the Fed is in a state of denial that the U.S. and European economies are plagued by debt deflation.
The Fed uses only one policy: influencing interest rates by creating bank reserves at low give-away charges. It enables banks to make easy gains simply by borrowing from it and leaving the money on deposit to earn interest (which has been paid since the 2008 crisis to help subsidize the banks, mainly the largest ones). The effect is to fund the asset markets — bonds, stocks and real estate — not the economy at large. Banks also are heavy arbitrage players in foreign exchange markets. But this doesn’t help the economy recover, any more than the ZIRP (Zero Interest-Rate Policy) since 2001 has done for Japan. Financial markets are the liabilities side of the economy’s balance sheet, not the asset side.
The last thing either U.S. party wants is for the election to focus on this policy failure. The Fed, Treasury and Justice Department will be just as pro-Wall Street under Hillary. There would be no prosecutions of bank fraud, there would be another bank-friendly Attorney General, and a willingness to subsidize banks now that the Dodd-Frank bank reform has been diluted from what it originally promised to be.
… In 2008 the Federal Reserve had a choice: It could save the economy, or it could save the banks. It might have used a fraction of what became the vast QE credit — for example $1 trillion — to pay off the bad mortgages and write them down. That would have helped save the economy from debt deflation. Instead, the Fed simply wanted to re-inflate the bubble, to save banks from having to suffer losses on their junk mortgages and other bad loans.
Keeping these debts on the books, in full, let banks foreclose on defaulting homeowners. This intensified the debt-deflation, pushing the economy into its present post-2008 depression. The debt overhead is keeping it depressed.
One therefore can speak of a financial war waged by Wall Street against the economy. The Fed is a major weapon in this war. Its constituency is Wall Street. Like the Justice and Treasury Departments, it has been captured and taken hostage.
The important point is that the Fed (backed by the Obama Administration) refused to use this $4 trillion to revive the production-and-consumption economy. It claimed that such a policy would be “inflationary,” by which it meant raising employment and wage levels. The Fed thus accepted the neoliberal junk economics proposing austerity as the answer to any problem — austerity for the industrial economy, not the Fed’s own Wall Street constituency.
Lower interest rates did spur the “carry trade,” as they had done in Japan after 1990. Banks and hedge funds bought foreign bonds paying higher rates. The dollar drifted down as bank arbitrageurs could borrow from the Fed at 0.1 percent to lend to Brazil at 9 percent. Buying these foreign bonds pushed up foreign exchange rates against the dollar. That was a side effect of the Fed’s attempt to help Wall Street make financial gains. It simply didn’t give much consideration to how its QE flooding the global economy with surplus dollars would affect U.S. exports — or foreign countries.
… a looming problem for most countries is what may happen when ending QE increases the dollar’s exchange rate. If U.S. interest rates go back up, the dollar will strengthen. That would increase the cost to foreign countries of paying dollar-denominated debts . Countries that borrowed all dollars at low interest will need to pay more in their own currencies to service these debts. Imagine what would happen if the Federal Reserve let interest rates rise back to a normal level of 4 or 5 percent. The soaring dollar would push debtor economies toward depression on capital account much more than it would help their exports on trade account.
… The economics curriculum has been turned into an exercise for students to pretend that a hypothetical parallel universe exists in which the rentier classes are job creators, necessary to help economies recover. The reality is that financial modes of getting rich by debt leveraging creates a Bubble Economy — a Ponzi scheme leading to austerity and shrinking markets, which always ends in a convulsion of bankruptcy.
What seems at first glance to be democracy has been hijacked by politicians who accept the financial class war ideology that the way for an economy to get rich is by austerity. That means lowering wages, unemployment, and dismantling government by turning the public domain over to the financial sector.
By supporting the banking sector even in its predatory and outright fraudulent behavior, U.S. and European governments are reversing the trajectory along which 19th-century progressive industrial capitalism and socialism were moving. Today’s rentier class is not concerned with long-term tangible investment to earn profits by hiring workers to produce goods. Under finance capitalism, an emerging financial over-class makes money by stripping income and assets from economies driven deeper into debt. Attacking “big government” when it is democratic, the wealthy are all in favor of government when it is oligarchic and serves their interests by rolling back the past two centuries of democratic reforms.
The moral is that debts that can’t be paid, won’t be. The question is, how won’t they be paid? By writing down debts, or by foreclosures and distress sell-offs turning the financial class into a r uling oligarchy? That is the political fight being waged today — and as Warren Buffet has said, his billionaire class is winning it.
Michael Hudson would make an excellent US economic “czar.” Somehow, I think Paul Krugman would disagree.
⇧ Real estate statistics point to precarious state of Chinese economy – World Socialist Web Site
Tao Dong, a Credit Suisse economist, said in January: “China’s property market was the biggest growth engine for its economy in the past decade … It is largely over now, and for China, there is no alternative.”
Credit Suisse recently warned: “The key catalysts for a hard landing in China would be a fall in property prices of greater than 15 percent, China’s loan-to-deposit ratio rising above 100 percent or capital flight accelerating, leading to a devaluation of the yuan.”
⇧ ?The housing market’s one problem could be a doozy – CBS News
… the number of homes for sale has fallen. With demand for homes up and supply down, prices have risen faster than incomes. Because many homes have become unaffordable for would-be buyers, further gains may be unsustainable.
⇧ Robots will steal your job – Business Insider
We are approaching the time when machines will be able to outperform humans at almost any task. Society needs to confront this question before it is upon us: if machines are capable of doing almost any work humans can do, what will humans do?
A typical answer is that we will be free to pursue leisure activities. [But] I do not find the prospect of leisure-only life appealing. I believe that work is essential to human well-being.
I’m not concerned about that aspect at all. Just because we wouldn’t have to work doesn’t mean we couldn’t work. We could, and we just wouldn’t have to do it for money to pay for the things we do now to live. Money will be given to everyone and only used for keeping track of fair distribution not based upon output or productivity but on simply being a member of the human family. It won’t even be “money” as we know it. Eventually, even it won’t be needed.
Look, if the robots are inevitably going to take over and be evil overlords, then are we the only intelligent species in the cosmos? The cosmos is how old? No other species ever developed AI capable of self-learning and creating more of itself: more robots? Where are they? Why have we been left alone?
Maybe there are robotic ethics out there in the cosmos at work. You know: The Prime Directive or some such.
⇧ 421a NYC | Durst Organization | Hallets Point NYC
… the future of the rest of the project will depend on either the renewal of 421a or the implementation of a replacement program to alleviate the development’s “crushing” property taxes, said Barowitz.
The developer tax break expired on Jan. 15 after the Real Estate Board of New York and the Building and Construction Trades Council — the rival industry groups charged by Gov. Andrew Cuomo with hashing out a compromise on prevailing construction wages at 421a job sites — failed to agree a deal.
“Without a new 421a or a replacement program, we can’t continue with the project,” Barowitz told DNAinfo.
⇧ Government officials create mortgage program to save Detroit | HousingWire
“Kresge has expanded its use of social investments — loans, guarantees and equity investments — to complement traditional grantmaking. This new mortgage program is an excellent example of how philanthropy can partner with public and private sector investors to unlock capital and move more resources to underserved communities,” said Rapson.
⇧ Houston’s Biggest Real Estate Struggle? – Capital Markets
You can have a great story with strong fundamentals and awesome returns, but good luck getting anything done; the debt markets have shut down. It’s a nationwide problem facing Houston especially.
⇧ Mortgage modification fraudsters admit guilt in brazen, predatory scheme | HousingWire
In order to induce homeowners to pay these fees, Moarefian and Shiau made a series of false representations, including: stating that the homeowners already had been approved for mortgage loan modifications on “extremely favorable” terms; stating that the mortgage loan modifications already had been negotiated with the homeowners’ lenders; stating that the homeowners qualified for and would receive financial assistance under various government mortgage relief programs, including the Troubled Asset Relief Program and the Home Affordable Modification Program; and promising that if, for some reason, the mortgage loan modifications fell through, the homeowners would be entitled to a full refund of their fees.
But, the homeowners had not been pre-approved for mortgage loan modifications with lenders, mortgage loan modifications had not been negotiated with the lenders, homeowners had not qualified for and did not receive any financial assistance through government mortgage relief programs, and homeowners did not receive a refund of their fees upon request.
⇧ U.S. Q1 2016 U.S. Residential Property Vacancy Analysis | Newsroom and Media Center
Investment properties account for three-quarters of all vacant homes
Investment properties accounted for 76.7 percent (1,044,599) of all vacant properties nationwide.
⇧ 5 Real Estate Financing Hacks for Your Next Property
… 22% of the respondents expect getting a mortgage to become harder in 2016 among other challenges towards homeownership.
If you already own your home and have plans to invest in rental real estate, but aren’t quite sure about getting the necessary funding, this post is a goldmine of knowledge for you.
⇧ Our banks are beyond the law
Rarely does the heart bleed for insurance companies, but today we confess to mustering a little compassion. [Ouch for the carriers.]
If the market manipulation claims have substance, and they must have some credence or the banks would be purple with indignation, we are talking about a rip-off of all 24 million Australians. After all, this is about rigging the price of money.
A soft outcome in this investigation will only buttress community suspicions that Australia’s banks are beyond the law.
⇧ Where does the Chancellor now stand, as calls for public spending and ending reliance on monetary policy grow ever louder?
A commitment to raising public investment collectively would boost demand while remaining on a fiscally sustainable path. Investment spending has a high-multiplier, while quality infrastructure projects would help to support future growth, making up for the shortfall in investment following the cuts imposed across advanced countries in recent years. …
Anthony Hilton in the Evening Standard set out his stall in a piece headed “the government must spend its way to recovery”. He drew on a letter to the FT from earlier in the week by Professor Lord Eatwell, the Cambridge economist, “Response to obvious policy failure is — very much more of the same,” (here). Hilton rejected the reliance on monetary policy as “as now part of the problem rather than part of the solution”, and then reasserted the validity of public spending arguments. …
Politicians have known all along that they can make a difference, but they are too weak and too quarrelsome to act.
… Actions aimed at avoiding the (contrived) public debt level of 90 per cent of GDP have ended up making 90 per cent of GDP a reality.
⇧ Germany Isn’t Investing as in the Past and That’s a Problem – Bloomberg Business
All the pieces appear to be in place for a surge in corporate investment in Germany — except one critical element.
While low borrowing costs, robust domestic consumption and capacity strains mean companies should be itching to spend, the confidence to do so is lacking. Market turmoil, signs of a weaker global demand and Germany’s own aging population are giving bosses plenty of reason to hold back, leaving capital spending as a share of output clinging stubbornly to a five-year low.
… The IMF suggested reforms such as raising the participation of women in full-time work, increasing the dynamism of the services sector, and doing more to help the country’s transition to greater use of renewable energy.
Funding, on the other hand, should not be an issue. Borrowing costs have never been lower and lending conditions as assessed by the ECB are more favorable than their historical average. …
German manufacturing was “near stagnation” in February, with a gauge of factory activity falling to a 15-month low, Markit Economics said on Monday in its purchasing managers’ survey.
⇧ Investors home in on multifamily real estate | Albuquerque Journal
“Albuquerque looks very attractive because of the affordability of its rental housing, said Meister. “We are sort of a steady Eddie.
“Multifamily investors may not turn a huge profit when they sell here, but well-managed Albuquerque rentals generally cash-flow nicely.”
⇧ Why Presidential Candidates Aren’t Talking About Housing Affordability (Yet) – Zillow Research
Of course, simple timing isn’t the only reason housing hasn’t been the touchstone issue it was in prior election seasons. Housing policy tends to be more prominent in state and local campaigns, and presidential candidates have thus far chosen to focus more on security and social issues. But while it may make sense for candidates to focus on other issues early in the primary campaign, it’s likely these concerns will garner more attention as the primary season advances and a larger share of the primary electorate is grappling with housing affordability problems.
That’s not wise campaign management. It’s smartest to talk about all the issues. People talk across state boundaries. Higher polls in one state can edge up polling in others even where issues differ.
⇧ Are the Kids Finally Moving Out? | Keeping Current Matters
According to the Urban Land Institute’s report, Emerging Trends in Real Estate, household formations will increase dramatically. They project that 3.68 million additional households will be formed in the next three years. This brings household formations back to pre-recession numbers of 1.2 million a year.
Show me the wages.
⇧ Multifamily Tenant Retention Strategies
Not every property can handle this upscale approach; but, the ideas are worth knowing about, and some of them worth doing even in class-B rentals.
… consider the cost of replacing a tenant:
- Vacancy loss
- Maintenance and repairs
- Unit refreshes and make ready costs
- Marketing and advertising
- Leasing fees and commissions
When you establish and practice solid multifamily tenant retention strategies you will reduce the high cost of resident turnover. And you’ll receive some nice side benefits for your property as a result of implementing these strategies.
⇧ Single-Family Built-for-Rent Construction | Eye On Housing
According to data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design and NAHB analysis, the market share of single-family homes built-for-rent, as measured on a one-year moving average, stood at 3.5% of total single-family starts for the final quarter of 2015.
⇧ In Contrarian Play, Multifamily Investors Still Taking a Chance on Houston – CoStar Group
Despite the collapse in oil pricing, multifamily investors have not shied away from acquiring Houston apartment projects.
Although last year’s deal volume of about $3 billion was $500 million less than in 2014, it was still $500 million higher than in 2013, according to CoStar data.
The average sale price per unit for Houston multifamily property also continued to climb from about $50,000/unit at the start of 2013 to about $110,000/unit at the end of 2015.
What will oil do, and how much will the Huston area continue to diversify away from it?
⇧ Report: Candidates Are Ignoring Housing’s Importance | Builder Magazine | Economics, Economic Development, Economic Conditions
Lots of interesting tidbits:
Millennials are being prevented from buying homes dues to rising housing costs and college debt burdens. Bernie Sanders’ promise to forgive student loans gift would be an enormous gift to the housing industry.
· Housing construction has traditionally been a major driver of economic activity in the United States. For this reason, America’s housing crisis also represents an economic crisis, affecting everyone.
· Rebuilding the middle class depends on restoring home ownership. This is the capitalist solution to income inequality.
“You would think that housing affordability would be the No. 1 issue in this year’s presidential contest, in light of the concern candidates from both parties have shown over the plight of America’s middle class,” says Kotkin. “But nowhere amongst the campaign rhetoric do we hear anything about this nation’s very real housing crisis. If they care about middle-class Americans, they should put solving this growing problem at the top of their agendas.”
⇧ Calculated Risk: Real Prices and Price-to-Rent Ratio in December
On a price-to-rent basis, the Case-Shiller National index is back to August 2003 levels, the Composite 20 index is back to April 2003 levels, and the CoreLogic index is back to July 2003.
In real terms, and as a price-to-rent ratio, prices are back to 2003 levels – and the price-to-rent ratio maybe moving a little sideways now.
⇧ Los Angeles Could Vote on Funding $1.85B Homelessness Plan – Curbed LA
What a way to run a railroad.
⇧ Bank of America launches 3% down mortgage program
Are mortgage standards getting too loose again?
⇧ Support For Sanders’ Single-Payer Plan Fades With Control, Cost Concerns | Kaiser Health News
A poll like this is easily manipulated. Were the people informed that overall costs would go down and substantially?
“… it would “reduce health insurance administrative costs” … and that it would “eliminate all private health insurance premiums, co-pays, and deductibles paid by employers and individuals”….” ( https://kff.org/global-health-policy/pol l-finding/kaiser-health-tracking-poll-fe bruary-2016/ )
How much would costs fall? That’s not explained but should have been via international data.
Name any advanced nation with universal government-paid coverage reasonably similar to Medicare that has higher costs for similar or better outcomes than the US. It can’t be done because there is no such nation.
Every advanced nation with universal care has better outcomes at lower costs.
⇧ Turning Polluted Properties Into Profits – The New York Times
Mr. Winefield’s background as an environmental engineer, with knowledge on how contaminated sites get cleaned up, helps. But what made the Garden Grove property a viable investment was the discovery of five old insurance policies from the late 1970s and early 1980s.
Under the terms of these comprehensive general liability policies, the insurer, in this case, the American International Group, was obligated to pay for the cleanup of any environmental damage that was deemed sudden and accidental during the time of the coverage. (Insurers changed the language of these policies in the mid-1980s to exclude environmental damage like this.)
Continue reading the main story
After 10 months of work, at a cost of $150,000 of his own money, Mr. Winefield said, A.I.G. agreed to pay for the cleanup in September 2014. That was when he and his partner moved to close on the property. Matt Gallagher, a spokesman for A.I.G., declined to comment on the case.
For many of these sites, the viability of the investment hinges on finding these older insurance policies.
⇧ Two-thirds of Canadians in poll think government should intervene in housing market – Business – CBC News
More government please, not less:
Two-thirds of Canadians included in a recent poll said the government should get more involved in the housing market to ensure the system is fair.
It’s not clear, however, what form of intervention that should be. The questions didn’t specify a particular level of government or method of intervening.
⇧ An Investment in Real Estate can Yield Citizenship or Residency for Your Client
Currently, about twenty countries offer real estate investment programs that yield citizenship or residency. The benefits and minimum investment requirements will vary from country to country ….
Is this unsavory?