Linking ≠ endorsement.
⇧ Era of zero, negative interest rates could last for years – Barclays | Business Standard News
Barclays said the natural rate of interest across the developed world, where borrowing costs are neither stimulative nor restrictive given an economy’s potential growth and inflation rates, is lower than where nominal rates currently stand.
The study finds that real equilibrium policy rates are near-zero across the developed world and may need to fall further below zero in the euro zone and Japan for interest rate policy there to become “sufficiently accommodative”.
If the Fed raises while the rest go negative, those others will win the currency war somewhat.
Are negative rates a punishment to incentivize banks to lend, or are higher rates a reward from cronies that ostensibly incentivizes the banks? Either way, supposedly the banks can’t find borrowers. I have a feeling they’d find them if rates were high enough. The problem is that standards would likely suffer (with the current banker-mentality, how else?) and a large bubble would be created again that would inevitably burst.
Some people say that it would just be the business cycle and it’s the suckers who deserve it who don’t know when to get out.
Personally, I think financialization of everything is a disease killing intelligent, sustainable management.
⇧ Report: Clinton’s Tax Plan Would Reduce Incentives To Work | The Daily Caller
I’m not a Hillary economics fan in the least, but people earning over $1 million a year paying higher taxes would not kill the incentive to work.
Anyway, it’s my understanding that Hillary is calling for tax cuts for the middle class: in other words, a slight redistribution of wealth from the top to the middle, which would definitely be better than not.
⇧ The huge divide in the presidential race that no one’s talking about – The Washington Post
Here you go. It mentions Hillary’s planned tax cut for the middle class. Of course, Bernie’s plan is better; but:
To parry Clinton’s attacks, Republicans are going to need to make a hard sell on the growth argument — that tax cuts will massively speed up economic expansion. They need voters to believe their cuts will super-charge the economy and kick out a lot of revenue for the government. They’ll also need to detail more spending cuts than just “waste, fraud and abuse.”
That may be a tough sell. Voters remember the swelling deficits that followed the Bush tax cuts a decade ago.
When handed a tax cut, the rich simply do not up their spending enough to make up the difference. The resulting deficit is then blamed on too much government spending, especially on programs that help everyone else. It’s a game, a very serious and deadly game played by the deficit hawks shilling for sociopathic plutocrats.
⇧ Analysis: Clinton proposes $1T tax hike, but middle-class tax cut plan coming – POLITICO
This one is much more detailed.
⇧ Real Estate Investing: Don’t Be Fooled By Comps – Getting Real
… sophisticated buyers don’t just look at the structure of an investment property to determine its value. In fact, that is subordinate to the financials because at the end of the day they are looking at an investment and all that really matters is how much money are they going to put in and how much are they going to get out every year. Therefore, what it really comes down to is what price is going to give investors the return that they are seeking. It’s basically the same as pricing a bond, which is based upon the yield that investors want.
So you should throw traditional comps out the window and instead focus on the returns that investors got on recent purchases in the area and then figure out what the property in question needs to sell for in order to achieve a comparable return.
Well, I respectfully disagree. Comps are a great starting place for finding an under-priced property upon which one then should run the numbers, as suggested in the article, along with doing all the due diligence one ought.
⇧ Here’s why you should worry about the housing market | New York Post
Home flipping is usually hottest when prices are nearing a peak, prompting concerns that another housing bubble could be forming in some spots.
“When home flipping numbers go up, it is usually an indication that the housing market is in trouble,” said Matthew Gardner, chief economist at Windermere Real Estate, who was quoted in the RealtyTrac report.
“The problem with a rise in home flipping is that these sales artificially inflate home prices, making housing even less affordable for buyers and increasing the risk of a bubble,” he said.
There’s a bubble; but, it’s built upon, among other things, extreme under building and extreme student debts. So, if it pops, who gets hurt compared to the last crash?
⇧ Professor ranked in top 25 real estate authors – The Auburn Plainsman
Did you know there are eggheads in the real estate sector?
… rankings are based on the number of publications from 2011—15 in the top three peer-reviewed real estate journals, which are “Journal of Real Estate Finance and Economics,” the “Journal of Real Estate Research” and “Real Estate Economics.”
“Justin is really good with understanding what we would call the literature,” Johnson said. “He could read significant numbers of papers and see where items are missing in the literature. He has a natural ability to do that.”
Benefield is also excellent with econometrics and makes virtually no errors in his work, and he is an exceptional writer as well, according to Johnson.
“He can boil down all the high-end academics to something that somebody can understand and use to make a decision in their life,” Johnson said. “So we would call that having impact in academia.”
⇧ Real estate: Bay Area flippers get more bang for their buck
Although flippers can fix up distressed homes and add value to neighborhoods, … there is “definitely such a thing as too much flipping that dominates a market and creates its own momentum that’s not based on real value.
Who’s buying the finished product and why? It matters a great deal as to whether, and to what degree, a bubble may, or may not, be forming.
⇧ Forget the Loft: The Newest Trend in Luxury Real Estate Is Walls – Bloomberg Business
Do you think this will be worked into rentals? There are luxury rentals.
⇧ Sadiq Khan: ‘Make London property ownership transparent’ | Politics | The Guardian
Off-shore companies, primarily based in tax “safe havens” such as the Cayman Islands, can purchase property in London without having to disclose their owners.
This allows owners to remain anonymous, giving cover to money coming from illegal sources — leading to concerns of London property being used for money laundering.
⇧ Trudeau’s Message to World: Let Government Spending Do the Work – Bloomberg Business
Canadian Prime Minister Justin Trudeau:
… Canada grapples with the oil-price shock.
“It’s to me even more of a reason why we need to be investing intelligently in infrastructure ….”
Well, why are you talking about debt-to-GDP rather than converting Canada back to issuing a debt-free currency?
Does the PM not know there’s a suit going on in Canada to accomplish it? If he doesn’t know, why is that? Is it over? Did they lose? Not as of the date of this blog post. (See: “COMER — Committee on Monetary and Economic Reform”: “THE PEOPLE VS. THE BANK OF CANADA”: https://www.comer.org/ )
⇧ Oregon Just Set a New Minimum-Wage High. Here’s Where Your State Stands – Real Time Economics – WSJ
Vermont’s was the previous leader. That state is on pace to have a $10.50 an hour minimum in 2018, and automatic cost-of-living increases ….
Automatic cost-of-living increases should be federal law.
⇧ Japan — another week of humiliation for mainstream macroeconomics | Bill Mitchell — billy blog
If the Bid-to-Cover ratio fell to zero — that is, private bond dealers offered no bids for an auction — then the government could simply instruct the Bank of Japan to buy the issue. A simpler accounting device would be to stop issuing JGBs altogether and just instruct the Bank to credit relevant bank accounts to facilitate the spending desires of the Ministry of Finance.
Exactly! Why mess around?
What Japan doesn’t have is an inflation problem. So spend until recovery. Don’t borrow, even from your self. It just looks stupid and needlessly confuses easily confused people.
⇧ Post-Keynesian Economics Study Group | PKSG
Post Keynesian Economics has at its core the concepts of effective demand and distributional conflict: individuals face fundamental uncertainty about the future; there is a central role for `animal spirits’ in the determination of investment decisions; inflation is the result of unresolved distributional conflicts; money is an endogenous creation of the private banking system; unemployment is determined by effective demand on the goods markets; financial markets are prone to periodic boom-bust cycles.
“… money is an endogenous creation of the private banking system ….” That’s the core tenet. It’s amazing that it isn’t generally accepted as fact yet. It’s been known for centuries. Mayer Amschel Rothschild sure knew it: https://en.wikipedia.org/wiki/Mayer_Amsc hel_Rothschild
⇧ 2008 Revisited? by Nouriel Roubini – Project Syndicate
With a couple of important exceptions, a decent rundown of global economic issues by Nouriel Roubini:
… the recent episode of global financial market turmoil is likely to be more serious than any period of volatility and risk-off behavior since 2009. …
… Russia is becoming more aggressive on Europe’s borders, from the Baltics to the Balkans.
… monetary policies are becoming increasingly unconventional, reflected in the move by several central banks to negative real policy rates; and such unconventional policies risk doing more harm than good as they hurt the profitability of banks and other financial firms.
Russia is reacting. It has not been the instigator of instability. It has no interest in territorial conquests via military adventures. It just doesn’t want to be subjected to anti-democratic regime change and further breakup.
Negative rates will hurt if the banks don’t start focusing on business building (borrower education and direct assistance/partnering) rather than securitizations and such. The banks should make money the old-fashioned way. They should earn it (even though they are the ones creating the credit in the first place).
⇧ SocGen: Global Deflationary Fears Just Hit an All-Time High – Bloomberg Business
Public perception of how inflation is expected to evolve is important to monetary policymakers, because such expectations tend to be self-reinforcing.
… SocGen suggests the notion that more central bank easing might be impotent, or worse yet, counterproductive, is behind the increase in concern about deflation.
“The lack of confidence on the efficacy of reflation policies and successive waves of quantitative easing might be weighing significantly on sentiment,” concludes Bokobza.
Central bank monetarism has been the wrong approach all along.
We had a bit of fiscal stimulus in the US. It worked. Rather than do plenty more of it, as we should have, the deficit hawks prevailed. We’ve been on a very slow-growth trajectory ever since. We could have been booming long ago and without too much inflation.
When will the people learn so they won’t let the leadership get away with holding them down for nothing but stupid, selfish reasons on the part of economic royalists?
⇧ Fresh recession will cause eurozone collapse, warns Swiss bank
“The viability of the euro is contingent on the current recovery,” said Peter Foley at Credit Suisse.
“If the euro area were to relapse back into recession, it is not clear it would endure.”
If the bankers and governments there don’t do the right things right away, including democratically and fiscally, then it’s clear the euro shouldn’t endure.
The whole project was only ever going to be any good if highly democratic. It’s not there.
⇧ Death and Despair in China’s Rustbelt – Bloomberg Business
In a snow-covered valley in northeast China, an hour from the North Korean border, a street with brightly-painted apartment blocks hides a story of fear and anger as dangerous to the country as its rollercoaster stock market or sliding currency.
The frozen alluvial river plain that was once at the forefront of the Communist Party’s first attempt to build a modern economy has now fallen behind, leaving a valley of brutal murder, protests, anger, suicide and regret.