Linking ≠ endorsement.
24) Angry Bear – Millennials like socialism — until they get jobs. Or until a pollster tells them that it would mean tax increases but doesn’t tell them, for example, that the tax increases would replace healthcare insurance premiums and out-of-pocket medical expenses. And doesn’t tell them that “more government services” means something other than, say, trash collection twice a week instead of once a week.
⇧ United States Gross National Product | 1950-2016 | Data | Chart | Calendar
This is GNP [ https://www.investopedia.com/terms/g/gnp .asp ], not GDP. I prefer GNP, always have.
Gross National Product in the United States increased to 16631.70 USD Billion in the fourth quarter of 2015 ….
Rather than showing it as “16631.70 USD Billion,” I would change the format to “16.6317 USD Trillion.”
⇧ Affordable housing crisis has engulfed all cities in southern England, says Lloyds | Money | The Guardian
There is no longer a city in the south of England where house prices are less than seven and a half times average local incomes, according to analysis by Lloyds Bank that reveals how the home affordability crisis now stretches far beyond London.
Oxford is again identified as the least affordable city in the UK, with average prices at 10.68 times local earnings. Winchester is a close second at 10.54, with London third at 10.06.
In the 1950s and 1960s, buyers could typically find homes with mortgages of three to four times their income. But the Lloyds figures show that there is now just one city in the UK that fits that profile: Derry in Northern Ireland. House prices in the city currently fetch 3.81 times local incomes.
⇧ Radical economic ideas grab attention amid low-inflation torpor
… in a modern economy, there’s no good reason to have unemployed labour or capital. For the MMTers mass unemployment is a great evil and its daily, human cost dwarfs other economic challenges.
They acknowledge there are limits to government spending. Resources in the real economy can be constrained and taxes are an essential tool to ensure demand for the currency and to cool the economy if it overheats. But there’s plenty of scope for governments to print and spend money without causing inflation or triggering a financial crisis.
Mitchell says a fundamental problem is that most people, including politicians, wrongly equate government finances with managing their own household budget.
“The way mainstream economics is taught plays on that analogy all the time in the sense that the government has a financial constraint just like you and I,” he said.
“A government that issues its own currency, like the Australian government, has no financial constraint. That’s the starting point.”
Sydney University Professor, Tony Aspromourgos, who is an expert on public debt and Keynesian economics, said some fundamental tenets of Modern Monetary Theory are perfectly sound, but it doesn’t follow that the level of government debt and debt servicing costs are irrelevant to economic policy.
“It’s a big step to say it doesn’t matter what the level of public debt is because governments can always fund it by printing money,” he said.
“Full employment is of course a vitally important economic policy objective. But the use of fiscal policy to pursue that goal needs to be reconciled with plausible public debt trajectories.”
The article points out that MMTers “acknowledge there are limits to government spending. Resources in the real economy can be constrained and taxes are an essential tool to ensure demand for the currency and to cool the economy if it overheats.” That shows Tony Aspromourgos is mistaken that MMT holds that the level of debt doesn’t matter. MMT economist do understand inflation. They simply point out that “going broke” or “being bankrupt” does not apply.
First, unemployment isn’t the problem. Lack of income is.
Second, government debt and interest payments should not be an issue, as the government can and should issue the money directly rather than going through any borrowing process and regardless of where, or how much of, the proceeds of the loan end up (with the government again or with private or other investors).
Obviously, I’m an MMTer with qualification/enhancements.
⇧ United Nations News Centre – Major milestones reached on renewable energy investments, UN reports
Let’s completely replace carbon burning without delay.
25 March 2016 — Coal and gas-fired electricity generation last year drew less than half the record investment made in solar, wind and other renewables capacity – one of several important firsts for green energy recently announced in a United Nations-backed report.
“Renewables are becoming ever more central to our low-carbon lifestyles, and the record-setting investments in 2015 are further proof of this trend,” said UNEP Executive Director Achim Steiner in a press release. “Importantly, for the first time in 2015, renewables in investments were higher in developing countries than developed.”
… Were it not for renewables excluding large hydro, annual global CO2emissions would have been an estimated 1.5 gigatonnes higher in 2015.
“It has broadened out to a wider and wider array of developing countries, helped by sharply reduced costs and by the benefits of local power production over reliance on imported commodities,” he noted.
In 2015, more attention was drawn to battery storage as an adjunct to solar and wind projects and to small-scale PV systems. UNEP highlighted that energy storage is of significant importance as it is one way of providing fast-responding balancing to the grid, whether to deal with demand spikes or variable renewable power generation from wind and solar. Last year, some 250MW of utility-scale electricity storage (excluding pumped hydro and lead-acid batteries) was installed worldwide, up from 160MW in 2014.
⇧ How the weak Canadian dollar impacts desert real estate
Pahl is one of scores of Canadian snowbirds, real estate agents say, who is taking advantage of the currency disparity this season. As the Canadian dollar (or “loonie”) languishes well below the U.S. dollar — one Canadian dollar bought 75 U.S. cents on March 25, according to Bloomberg, and the loonie fell below 70 cents this winter — Canadians have all but stopped buying desert homes, local specialists say. Many, like Pahl, are selling their homes instead.
⇧ Income Inequality & the Causes of Poverty | Positive Money
Because almost all of our money is ‘on loan’ from banks, someone has to pay interest on nearly every pound in the UK. This interest redistributes money from the bottom 90% of the population to the very top 10%. Meanwhile, inflated house prices and financial instability all lead to a growing gap between the poor and the rich.
The same applies in the US and concerning government debts held by other than that government’s entities.
⇧ Ireland’s Recovery Has Nothing to Do With Austerity | Foreign Policy
… Ireland’s economy grew by 7 percent last year, faster than China’s. With a general election on Feb. 26, the governing coalition has been quick to claim credit for this turnaround, as have policymakers in Berlin and Brussels who celebrate Ireland as the poster child of the harsh medicine they prescribed in the country’s financial assistance program. “See,” they say to Greeks and others, “if you do what you’re told, it works.” But while Ireland’s economic recovery is impressive, it has happened despite the European Union and International Monetary Fund’s policies that the government faithfully followed, not because of them.
… government policy made matters much worse. In late September 2008, in the turmoil following the collapse of Lehman Brothers, the previous Fianna Fail administration extended a two-year government guarantee to all the creditors of Ireland’s busted banks. In effect, this put taxpayers on the hook for the banks’ astronomical losses. By late 2010, when the government finally saw sense and sought not to extend the guarantee, it was strong-armed into bailing out banks’ creditors anyway by eurozone policymakers. In an outrageous abuse of power, the then president of the European Central Bank, Jean-Claude Trichet, threatened, in effect, to force Ireland out of the eurozone should it not comply.
Why, then, has the Celtic Tiger rebounded? In part, because the economies of Ireland’s two biggest export markets, Britain and the United States, have recovered, so export-led growth has resumed. A weaker euro has also helped. Above all, as research by Aidan Regan of University College Dublin shows, many of the export sectors in which the dynamic Irish economy increasingly specializes — notably biotech, pharmaceuticals, and business and computer services — have boomed. And they boosted output and employment while r aising wages, not slashing them.
… it remains nonsense that the EU policies that the Fine Gael-Labour Party government faithfully followed triggered recovery. Nor is it true that economies with very different structures and an unbearable burden of government debt, such as Greece, could emulate Ireland’s success if only they followed instructions.
⇧ KRE Group, Oxford Realty and Verde Capital Acquire 288-Unit Rental Property in Plainsboro, NJ | The News Funnel
The partnership has a number of renovations planned for Deer Creek, including luxury finishes such as granite kitchen countertops, stainless steel appliances and in-unit washer/dryers. Unit layouts will also be reconfigured to create more open, contemporary living spaces.
⇧ Real Life Story: Water Damage in a Rental Property
Kathy’s advice to owners is to make sure they understand both the tenant and owner responsibilities for issues related to flooding, as outlined in the management and lease agreements.
⇧ Welcome to the next housing crisis: chronic undersupply of homes for a growing country – Vox
A country that’s always prided itself on open spaces, abundant housing, and ample opportunity now has too few homes and is building too few to keep up with its needs. That’s the bad news.
The good news is that unlocking the stuck glue of housing supply would solve multiple economic problems at once. Most obviously, people could have more and better places to live. But beyond that, a surge in house building would also be the jobs engine the country needs — decently paying blue-collar work that isn’t going to be outsourced to China.
… Instead, construction of new homes remains at an abnormally low level.
… a large share of Americans are simply too burdened by low wages, past foreclosure, depleted savings, and overhangs of other debts (student loans, medical bills, etc.) to buy starter homes. And while investors were willing to pick up vacant or bank-owned single-family homes for pennies on the dollar during the peak slump years to operate them as rentals, nobody is excited enough about the business of operating single-family rental homes to actually go out and build vast new tracts of modest-size single-family homes destined for the rental market.
Developers have run into problems in that land is too expensive to justify cheaper housing and there’s a lack of skilled construction workers and people wanting to do the work.
Therefore, governments must subsidize the development and must see to it that people are trained and properly paid. Otherwise, we enter a dystopian nightmare.
⇧ Safety First: The Smart Home That Sells | RISMedia’s Housecall
This is a great article with one exception. It doesn’t mention cyber-security issues associated with smart, connected technology, which is a huge issue.
I’m not opposed to smart homes, quite the contrary; but it is vitally important that we develop cyber-secure smart-home tech and that people not rush into products that may be insufficiently designed and tested to withstand cyber attacks an hacking.
⇧ ECB TLTRO 2.0 — Lending at negative rates | Bruegel
Euro-area banks’ loans to non-financial corporations and households started to fall in 2012, and TLTROs appear to have stopped this decline. Since 2014 the stock has remained constant, but the programme has not managed to put us back to a high growth path of lending to the real economy.
… The initial interest rate applied to TLTRO 2.0 will be fixed for each operation at the rate applied in the main refinancing operations at the time of allotment (currently 0%).
However, banks whose net lending between 1 February 2016 and 31 January 2018 exceeds a certain benchmark will be charged a lower rate for the entire term of the operation. This lower rate will be linked to the interest rate on the deposit facility at the time of the allotment of each operation. This is currently negative, meaning that for some banks, borrowing under the TLTRO 2.0 could effectively take place at a negative rate.
… while banks will certainly benefit from having liquidity available at negative rates in a potentially turbulent period for bond issuance, the rationale behind TLTRO lending was different. The whole idea (quoting from the ECB itself) was to “enhance the functioning of the monetary policy transmission mechanism by supporting bank lending to the real economy”.
This article doesn’t convince me that the rationale behind TLTRO lending was different. It seems to me that the terminology is not sufficiently defined to come to that conclusion. Regardless, I favored the introduction of negative rates in lieu of fiscal stimulus being foolishly blocked by hawks.
⇧ The Job Market Is Pulling In People Who Didn’t Want To Work Before | FiveThirtyEight
Taken together, the data suggests that the people entering the labor force aren’t “discouraged workers” who gave up looking for work and are now returning. Rather, the improving job market is pulling people off the sidelines and into the labor force.1 They might be stay-at-home parents who
decide to go back to work, students who take on a part-time job or early retirees who decided to supplement their retirement income.
That’s because there’s still way too much labor slack (low wages).
⇧ Yes, robots will steal our jobs, but don’t worry, we’ll get new ones
Research as well as recent history suggest that these concerns are overblown and that we are neither headed toward a rise of the machine world nor a utopia where no one works anymore.
Provided we make the proper democratic choices, we are actually headed toward both and where the “rise of the machine” is not malignant but the opposite. The issue isn’t whether but when. It would take an near-existential event to set us back enough that would take more than a couple of generations: 40-60 years.
Obviously, I’m no Luddite.
⇧ Clarification of ‘Helicopter’ Money Column
Ah, this is getting interesting, which is actually a rare experience for me.
The Fed owes banks an extra annual payment equal to $100 billion times the interest on reserves in that year. It will simply pass that cost on to Treasury by reducing its remittances by the same amount.
Now, if the government never borrows anything, it doesn’t need the Fed to exist. Fed remittances becomes moot.
Why do we have the layer on the economy called commercial banking made up of private-sector corporations? Why are licensed bankers the ones who decide who gets funding (in this case, credit)? Why isn’t it the common people who decide what gets funded?
That’s the central issue.
Look at all that has gone terribly wrong with the former. We’ve never been allowed to do the latter. Why not? Well, the answer to that is obvious: because it would work and work better than the current banking system and the bankers would lose their cushy (too-big-to-faill) positions and gigantic compensation packages.
⇧ 24 Charts: Chaotic China
there’s even a threat to the government’s ability to stay in power at that point.
People talk about that right now. I was on a panel for a bank with Asian connections in Boston [several] weeks ago. Afterwards, a young Chinese woman came up to my wife, and she’s the type who would come to the United States, get an education, work five years, and then go back to China for their career.
She told my wife, “I’m not going back. None of my friends are going back. My friends in China are saying this government might not last.” Yeah, there’s a lot of talk about that right now among Chinese themselves. There is a real issue about where this is going to go.
⇧ “Free” Trade, Jobs And Income Inequality: It’s Not As Easy As We Might Think
Charles Hugh Smith:
Financialization and central bank intervention greatly rewarded those with the skills and sociopathologies needed to participate in the resulting debt/fraud booms.
U.S. corporations reaped the gains from offshoring jobs, and these gains flowed to top management and those who own corporate shares, i.e. the top 5%.
… we’ll need to tackle central bank and central-state policies that have pushed finance and speculative churn to supremacy over the productive economy.
⇧ China Warns Officials: No Unrest, Or Lose Your Job – China Real Time Report – WSJ
Party chiefs face a difficult task. Over the next five years, they need to shut down millions of tons of industrial capacity that’s making China’s economy inefficient. This means downsizing scores of steel, coal and other large industries that currently employ hundreds of thousands of workers. They have promised to do this without large-scale layoffs. Those displaced, Mr. Li said, would be given new jobs or government assistance.
… Data from labor rights watchdog China Labour Bulletin show a 200% increase in the number of strikes, industrial action and other protests occurring in China from July last year to January this year.
… Chinese … have taken to the streets to protest a new era of economic dislocation. The slowing economy has wiped out at least 156 billion yuan ($24 billion) worth of investments in wealth management products across the country, mostly involving small investors.
The Chinese people need to throw off the yoke of the Chinese Communist Party one-party dictatorship now under the increasing dictatorial control of one person: Xi. He has no right to withhold full democracy from the Chinese people. Who does he think he is?
The people would do much better if they had decision-making authority via very direct democracy of a decentralized/centralized nature (a balanced combination of the two where the central government is primarily a clearing house/disseminator of sorts).
⇧ The Church of Economism and its discontents — Ecologise
Economists themselves have acknowledged the ultimately religious nature of their discipline. In 1932, Frank Knight, the most scholarly and broad-thinking of the founders of the influential market-oriented Chicago school of economics, literally argued that economics, at a fundamental level, had to be a religion, the basic tenets of which must be hidden from all but a few:
The point is that the “principles” by which a society or a group lives in tolerable harmony are essentially religious. The essential nature of a religious principle is that not merely is it immoral to oppose it, but to ask what it is, is morally identical with denial and attack.
There must be ultimates, and they must be religious, in economics as anywhere else, if one has anything to say touching conduct or social policy in a practical way. Man is a believing animal and to few, if any, is it given to criticize the foundations of belief “intelligently.”
To inquire into the ultimates behind accepted group values is obscene and sacrilegious: objective inquiry is an attempt to uncover the nakedness of man, his soul as well as his body, his deeds, his culture, and his very gods.
Certainly the large general [economics] courses should be prevented from raising any question about objectivity, but should assume the objectivity of the slogans they inculcate, as a sacred feature of the system.
Let me say that Frank Knight’s position is extremely similar to Leo Strauss’s (who was also at the University of Chicago). What these men put forth is the false notion that human beings in general are too stupid to be told what’s really going on and should be lied to via a “noble” lie. Obviously, I find that idea to be reprehensibly self-centered and shallow.
The moral dimension of economism becomes apparent in how it is invoked to justify the status quo. Since the neoliberal transition that accompanied the election of Ronald Reagan, Margaret Thatcher, and Helmut Kohl, it has become increasingly common, in both private conversation and political rhetoric, for people to argue that markets correctly determine who gets what. The achievement of great wealth is a sign of merit, even moral probity, whereas poverty is a result of individual moral failings. Because wealth is “earned,” it should not be taxed, even to provide for basic needs such as public education. The wealthy are the “job creators” on whom the system depends, and increased taxation would hinder them in performing the “good work” of getting rich. Economism, by rationalizing market outcomes, becomes the new “opium of the people,” playing the role Marx once attributed to religion in keeping people from rising up against the system.
⇧ The state has lost control: tech firms now run western politics | Opinion | The Guardian
It seems that democratic capitalism — this odd institutional creature that has tried to marry a capitalist economic system (the implicit rule by the few) to a democratic political one (the explicit rule by the many) — has run into yet another legitimation crisis.
This term, made popular by the German philosopher Jürgen Habermas in the early 1970s, aptly captures the dissonance between the stated objectives of our political institutions — the need to promote equality, justice, fairness — and today’s harsh political reality, where the very same institutions often stand in the way of upholding those values.
Habermas’s initial conception of legitimation crisis emphasised its cultural dimension, for, as he assumed at the time, the smoothly running welfare state, despite all the naysaying by the radicals, was reducing social disparities, empowering the workers and ensuring that they got a growing share of the still-expanding economic pie.
That argument did not age well. As became obvious a decade later, governments were increasingly forced to resort to a panoply of means to continue satisfying both capital and labour — a trajectory that has been well documented by Habermas’s main opponent in Germany, the sociologist Wolfgang Streeck.
… the Davos crowd, is to hope for a miracle that would help convince the public that the structural crisis we are in is not structural and that something else — big data, automation, the “fourth industrial revolution” — will step in to save us or, at least, delay the ultimate rupture, a process that Streeck, brilliantly, has characterised as “buying time”.
I agree with that.
… technology firms are rapidly becoming the default background condition in which our politics itself is conducted. Once Google and Facebook take over the management of essential services, Mar garet Thatcher’s famous dictum that “there is no alternative” would no longer be a mere slogan but an accurate description of reality.
The worst is that today’s legitimation crisis could be our last. Any discussion of legitimacy presupposes not just the ability to sense injustice but also to imagine and implement a political alternative. Imagination would never be in short supply but the ability to implement things on a large scale is increasingly limited to technology giants. Once this transfer of power is complete, there won’t be a need to buy time any more — the democratic alternative will simply no longer be a feasible option.
“Once this transfer of power is complete, there won’t be a need to buy time any more — the democratic alternative will simply no longer be a feasible option.” I disagree. The people will remain in a position to “nationalize” such entities. Frankly, I don’t think that “transfer of power” will occur in the first place. I sure hope it won’t.
⇧ Housing market improving, despite lack of livable houses | News | herald-dispatch com
Eight homes are currently under construction by Habitat, the most ever by the organization at one time. Habitat executive director David Michael believes the 600-sq foot homes could be the solution to housing problems restricting the Huntington market.
“There isn’t much financial investment in one of those houses to have a Habitat house built,” he said. “We could almost start and finish two of the (small) houses for one of the traditional, three-bedroom houses.”
During discussions with applicants, Michael said several requested a small home, which he said are perfect for the elderly, disabled or a couple without children.
⇧ Multifamily Investment Strategy for 2016 | CRE Show
Naysayers point out oversupply and rising construction costs as concerns. Is Schroder worried about new supply? Not really. “From a macro standpoint, you can look at a few cities and say ‘we’re starting to get concerned about the supply coming online’ but then you really need to drill down to the submarkets,” he said, using Nashville as an example. Many institutional investors have said that you can’t invest in Nashville because there’s too much supply. “But if you dig deeper, you will see the new supply is almost all within either the Gulch or the Germantown neighborhood—two very attractive hot markets.”
In short, if you get granular in a submarket, you might be surprised at how many opportunities are hiding behind the new supply scare. As long as you know the specifics of the submarket, avoid areas with oversupply, and invest where demand is still strong, you will be successful.
⇧ LA Starter Homes Completely Out of Reach of LA Starter Home Buyers – Curbed LA
… from 2012 to 2016, starter home inventory across the country has “dropped precipitously,” as our friends at Curbed write.
This national trend is hitting big urban areas in California hard; three of the cities and counties where Trulia found the starter home inventory had “vanished” most dramatically were San Diego, Orange County, and San Francisco. Is it any surprise high housing costs are making people leave the state?
⇧ Angry Bear – Millennials like socialism — until they get jobs. Or until a pollster tells them that it would mean tax increases but doesn’t tell them, for example, that the tax increases would replace healthcare insurance premiums and out-of-pocket medical expenses. And doesn’t tell them that “more government services” means something other than, say, trash collection twice a week instead of once a week.
… it does say something pretty clear about Ekins and the Cato Institute. It says that they either can’t distinguish between apples and elephants, or that they pretend not to.
Oh, they pretend.
So, which would you rather have:
- No government and no taxes and no public services whatsoever, or
- Huge government, high taxes, and gigantic, fantastic public services that you don’t otherwise have to pay for because taxes already have?
Now, just imagine a world in which we’d have huge government, no taxes (per se), and gigantic, fantastic public services that we don’t have to pay for at all because government has already funded it all via debt-free money. Too good to be true? It isn’t.
⇧ Investors Are Taking a Larger Share of the Existing-Home Sales Pie – DSNews
“Now that there are fewer distressed homes available, it appears there’s been a shift towards investors purchasing lower-priced homes and turning them into rentals.”
⇧ Bernie Sanders says Denmark is socialist. Forbes Magazine says it’s the most business-friendly country. Who’s right? – The Washington Post
This is not big brother socialism. This is really smart capitalism.
It is not “big-brother” socialism, not that socialism is necessarily “Big Brother.” However, it is not smart capitalism either. If it were capitalism, it would be privately provided but is not.
All market economies face the problem that some crucial collective goods will be underprovided — or not provided at all! — if they only rely [on] the private sector. Skills are one such collective good. Individual firms have good, self-interested reasons not to invest heavily in training of workers who may or may not stay in the firm long enough for the employer to reap the benefits of the investment. To provide collective goods like a highly skilled workforce, we need collective solutions.
See what I mean? It’s big government providing high-skills training, something I’ve been advocating here for decades. I’d go further and publicly employ the trained workers rather than leaving them unemployed. That’s only until tech could take over all the work, which it would if we want.
Finally, for those who are not already convinced that Denmark is not socialist, we close by referring you to the conservative Heritage Foundation, which ranks Denmark’s economy as more “free” than that of the United States.
… as if socialist equates with anti-free. Ha! Democracy is freer than capitalism. Workers don’t have a say under capitalism. They only have say to the extent there’s democracy. Owners who are capitalists don’t give workers 100% democracy unless they also give the enterprise to the workers too. That has happened; but employee owned enterprises are really hybrids, not purely capitalist.
So, we’ve heard here from two political scientist correcting Bernie Sanders about the definition of socialism (I’ve done the same) while those same political scientists muff, at best, the definition of capitalism. I’m not the least bit surprised.