Linking ≠ endorsement.
⇧ Why All Entrepreneurs Should Track Leading Indicators (With Examples!)
• What is my business’s biggest source of profit?
• What is the biggest factor influencing this source of profit?
• What actions does my business take to influence these factors?
• What action is most important/crucial?
⇧ China’s Little Emperors Prop Up Aussie Housing Market – Bloomberg
… channels to get money out of China, where top-tier city homes prices have been surging, remain open, even amid a crackdown by Beijing on capital outflows. As Bloomberg reported in November, Chinese nationals can break down cash into small amounts to avoid official scrutiny, and enlist friends, relatives and even employees to send out the money on their behalf.
Capital outflow restrictions are expected to be short term ….
They are? That’s news to me, which I don’t believe is correct. In addition, Xi can’t afford to be thwarted this way, so expect an even harder crackdown or Xi losing control completely and being overthrown, which wouldn’t be a bad thing provided real democracy is put in his place.
⇧ UNAOIL: World’s biggest bribe scandal
Who seriously believes that private enterprises are more trustworthy than governments?
Questions are emerging about how Unaoil operated for so many years with impunity, using bank accounts in New York and London to launder funds and pay bribes ….
Do we really need fewer regulations or no regulations at all? I don’t think so. I think laissez-faire would be the ultimate nightmare. There is no such thing as a capitalist utopia (and I don’t mean a “nowhere” nowhere; political scientists will get it).
⇧ Yanis Varoufakis: ‘Europe is too important to be left to its clueless rulers’
Mick Brown speaks with Yanis Varoufakis:
The argument that Britain can leave and stay in the single market is fallacious, he says. ‘To have a single market you need three things: common industry standards; common labour market rules; and common environmental protection standards. And to have these you need common legislation; you need a common judiciary that will enforce these laws, and an executive for implementing them.
But aren’t your apocalyptic warnings of what might happen if Britain leaves equally ‘the politics of fear’? ‘No. I’m talking about the politics of hope. If we want democratic sovereignty we have to hope that it is possible to create a common European identity that will allow us to have a common sovereignty in a common parliament.’
That’s exactly why I’ve opposed all the so-called “free-trade” deals the US has entered over the decades and the ones planned right now.
⇧ With ‘Gigs’ Instead of Jobs, Workers Bear New Burdens – The New York Times
Is a “gig” independent contractor a greater risk as a tenant?
Is the economy such that landlords and managers really have little choice but to rent to gig workers? Would it be unethical or illegal not to?
The justice system would have to work out any event of alleged illegal discrimination against gig workers as a class.
Where the lines on all of this are to be drawn is a huge question.
More so than in many advanced countries, employers in the United States carry a lot of the burden of protecting their workers from the things that can go wrong in life. They frequently provide health insurance, and paid medical leave for employees who become ill.
They pay for workers’ compensation insurance for people who are injured on the job, and unemployment insurance benefits for those who are laid off. They help fund their workers’ existence after retirement, at one time through pensions, now more commonly through 401(k) plans.
⇧ The Spiral of Inequality | Mother Jones
Paul Krugman on Mother Jones, no less:
The reason why government policy has reinforced rather than opposed … growing inequality is obvious: Well-off people have disproportionate political weight. They are more likely to vote—the median voter has a much higher income than the median family—and far more likely to provide the campaign contributions that are so essential in a TV age.
The political center of gravity in this country is therefore not at the median family, with its annual income of $40,000, but way up the scale. … …never mind what politicians say; political parties are competing to serve the interests of families near the 90th percentile or higher, families that mostly earn $100,000 or more per year.
… A family at the 95th percentile pays a lot more in taxes than a family at the 50th, but it does not receive a correspondingly higher benefit from public services, such as education. The greater the income gap, the greater the disparity in interests. This translates, because of the clout of the elite, into a constant pressure for lower taxes and reduced public services.
The relatively decent society we had a generation ago was largely the creation of a brief, crucial period in American history: the presidency of Franklin Roosevelt, during the New Deal and especially during the war. That created what economic historian Claudia Goldin called the Great Compression—an era in which a powerful government, reinforced by and in turn reinforcing a newly powerful labor movement, drastically narrowed the gap in income levels through taxes, benefits, minimum wages, and collective bargaining. In effect, Roosevelt created a new, middle-class America, which lasted for more than a generation. We have lost that America, and it will take another Roosevelt, and perhaps the moral equivalent of another war, to get it back.
Of course, even to talk about such things causes the right to accuse us of fomenting “class warfare.” They want us to believe we are all members of a broad, more or less homogeneous, middle class.
I agree with all of that but not Paul’s prescriptions. He lauds unionism, but unionism was the capitalists’ means to hold back democratic socialism and was doomed to fail for the very reasons it did fail in the US.
⇧ Tired of rising rent? Maybe you should consider becoming a landlord
… rental housing is in demand. As CNBC has reported, single-family rental homes made up about 9 percent of the U.S. housing stock before the housing bust. Now they are about 13 percent and still rising, according to Moody’s. Some 13 million of the 22 million new households that will form between 2010 and 2030 will likely be renters, instead of buyers, according to the Urban Institute.
⇧ Model Home Fortified Against High Winds to Be Built in Tulsa
… “IBHS engineers believe property damage to homes from EF-0 and EF-1 tornadoes can be virtually eliminated if they are built or retrofitted using FORTIFIED standards.”
That represents quite an improvement, but we could, and should, do better.
The real problem with housing in tornado zones is that everyone wants his or her home to look “traditional.”
If people were willing to forego that and to go for designs that don’t look at all traditional but that would work even against EF5 storms, we could certainly build them: reinforced with concrete and steel and very heavy-duty hurricane-type shutters would go a long, long way.
⇧ No Criminal Charges in Deadly California Balcony Collapse
O’Malley said there was insufficient evidence of any criminal negligence to bring manslaughter charges.
I don’t know enough about the fine details to have a view concerning the correctness of that finding.
⇧ ‘Not fit to lead’: letter attacking Xi Jinping sparks panic in Beijing | World news | The Guardian
“It speaks to the paranoia that surrounds Xi’s leadership,” said Lam, author of a recent book on the Chinese president called Chinese politics in the era of Xi Jinping. “In the process of amassing all this power, he has made multiple enemies, more than his predecessors.
“So now you have this paradox,” added Lam. “The more power he obtains, the more paranoid he gets.”
⇧ Drones taking real estate photos to new heights | Business | qconline com
“The three big challenges for the drone operator are trees, wires and people,” said Walton, who has taught drone safety classes for real estate photographers and operators.
“They’re kind of hip right now,” said agent Ken DeLeon of DeLeon Realty. A pull-away drone shot can establish the “grandeur and size” of a property, he noted. But it can also inadvertently focus on less stylish aspects of a home, like “big air conditioner condensers up on the roof,” he said.
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⇧ National Mortgage News – Why Real Estate Is Not Immune to Inflation Threat
The pessimists are already talking about 3% inflation later this year if energy prices don’t retreat. Most likely, Federal Reserve monetary experimentation will inflict a new great inflation on the U.S., although this is much more likely to occur in the next business cycle rather than the current one. Before that, we’ll get the shock of an economic slowdown — or even recession — which will exert some pause.
This post, by Brendan Brown, is the strangest inflationista post I’ve seen. The Fed’s action will cause hyper-inflation but only after a disinflationary or deflationary recession?
Inflationistas are those who were claiming that the Fed’s bond buying (QE) would cause massive inflation. It didn’t, obviously. They then claimed that equity-price increases represents that inflation. However, they were talking about consumer-price inflation before.
Anyway, high inflation is nowhere in sight, not now and not after a recession that hasn’t even occurred yet.
There isn’t much of a real estate bubble right now because people aren’t fighting to buy the limited supply enough to cause a bubble and lending standards can’t get low enough that people can afford to buy anyway. Plus, people’s memories aren’t wiped out concerning the last massive bubble. They don’t want to go there again.
⇧ Singapore Home Prices Have Longest Drop in Almost 2 Decades – Bloomberg
After Singapore’s house prices stopped climbing, climbing, climbing, we stopped hearing about Singapore very much. I remember that many “experts” were sure that the downturn in China wouldn’t negatively impact Singapore. Well, Singapore clamped down on itself too. It has been no surprise at all that prices have gone down for so long.
⇧ How Austerity Has Crippled the European Economy
Various studies, mostly based on the latest research into the so-called ‘fiscal multiplier’, have attributed the euro area’s below-average post-crisis economic performance (compared to the rest of the world) to the policies of fiscal consolidation of recent years. One such study concluded that fiscal consolidation in the eurozone over the 2011-13 period reduced GDP by 7.7 per cent. Another study concluded that, had the peripheral economies of the EMU implemented fiscal austerity only half as severe over the 2010-13 period, Greek GDP would be nearly 14 per cent higher, Spain’s GDP would be nearly 10 per cent higher, whilst Portugal’s and Ireland’s economies would have shrunk by 5.5 per cent and 3.5 per cent less respectively. The study also concludes that across the five PIIGS, the number of unemployed would be 1.2m lower if fiscal austerity had been less severe. The European Commission’s rhetoric and the accompanying policy measures suggest no awareness of either the depth of the problems or the extent of policy change required to tackle them. There has been a verbal recognition that past policies have failed and that a big change is needed if GDP and employment growth are to be restored and maintained, but this has led only to half-hearted and uncoordinated responses.
The key obstacle remains continued adherence to the eurozone’s fiscal rules. The overall fiscal stance has moved from restrictive to neutral, meaning that while state budgets are no longer used to depress economic activity across the EU as a whole, they are not employed to stimulate expansion either. Moreover, the slight relaxation comes with warnings of the need for accelerated structural reforms — vaguely defined but including measures that have cut wages and hence consumer demand — and ‘growth-friendly fiscal consolidation’. In practice that means continuing a degree of austerity.
⇧ Housing Bubbles and Low Interest Rates: DéJà vu All over Again? | EconoMonitor
Frankly, I think the Taylor Rule is about as useful as the Phillips Curve, which isn’t much without “new normal” updates (very slow to catch on).
Rules and curves need to be more closely and flexibly watched to see how well or poorly those rules and curves reflect current reality.
We can’t use a lagging indicator’s trend line from 40 years ago and expect to nail the inflation rate with interest rates today. Too many other factors/variables have changed or been introduced.
⇧ Finally, clean energy opportunities meet the risk-return requirements of investors. Now what?
The global climate agreement adopted in Paris in December is far more than just a roadmap for tackling climate change. It’s also a blueprint for rethinking how we bring energy to 1.3 billion people who live without electricity—a significant barrier to eradicating global poverty. On both of these fronts, clean energy, not fossil fuel energy, is a critical linchpin.
If we cannot solve these twin challenges—reducing our global carbon footprint and bringing the energy impoverished into the global economy sustainably—dangerous climate impacts and wide-ranging economic disruption are unavoidable.
⇧ Can the United States End Housing Instability among the Poor? – How Housing Matters
This article is a must-read for all landlords and managers so they may understand and appreciate, if they don’t already, their role in something that is absolutely vital to the overall health of the entire economy.
Housing worries dominate the lives of millions of U.S. households. At present, 11.8 million renter households spend more than half of their income on housing, and more than 2.8 million renters think their household will likely face eviction in the next few months. Yet housing instability rarely entered the national dialogue until the publication of Matt Desmond’s Evicted.
Now, the editorial board of the Milwaukee Journal Sentinel has endorsed a right to housing. As they describe it, the United States can deliver on this right by “expanding the federal Housing Choice Voucher Program at a cost of $22.5 billion, providing tenants with legal representation in civil court when they face evictions, providing tax credits, and creating more affordable housing units.”
The article is full of very important points and tons of food for thought.
There’s plenty of money to be made supplying affordable housing if the government will step up. The people have to get behind it to move the politicians to do the right things that will save society in oh so many ways.
⇧ America’s Missing $15 Billion in Corporate Taxes | Investopedia
The most elite IRS auditors work on big companies, earning at most about $150,000. Each finds on average $19 million of taxes due per year. That’s a return of $126 to $1.
Economic theory and business practice would dictate hiring many more auditors until each dollar of salary generated about $1.10 of net revenue.
But that’s not how Congress sees things.
Welll, there’s more to the cost of conducting an audit than just salaries, but I take David’s point. It surely doesn’t take $19 million in costs to support one such auditor just breaking even. So, many more auditors could be hired long before the break-even point would be reached.
⇧ Why Do Raindrop Sizes Matter In Storms? – YouTube
Not all raindrops are created equal. The size of falling raindrops depends on several factors, including where the cloud producing the drops is located on the globe and where the drops originate in the cloud. For the first time, scientists have three-dimensional snapshots of raindrops and snowflakes around the world from space, thanks to the joint NASA and Japan Aerospace Exploration Agency Global Precipitation Measurement (GPM) mission. With the new global data on raindrop and snowflake sizes this mission provides, scientists can improve rainfall estimates from satellite data and in numerical weather forecast models, helping us better understand and prepare for extreme weather events.
⇧ How to Hack an Election
If you spend all your time on “business,” you might want to come up for air to discover what democracy is up against around the world.
“On the question of whether the U.S. presidential campaign is being tampered with, he is unequivocal. ‘I’m 100 percent sure it is,’ ….”
Dirty tricks is an art form in the US. Our intelligence community has given lessons to guys like this, all to stop real democracy.
Using this stuff against IS makes perfect sense, but they go after people simply wanting fundamental fairness because they mistakenly think fundamental fairness is bad for “business.”
This is a risk-management issue. We do need to make the world safe for democracy: real democracy, consistently.
The best way to do it is via the truth, not dirty tricks.
⇧ What real estate crash? Manhattan apartments now average $2 million – Yahoo Finance
Have people been calling it a collapse? I don’t recall seeing much if anything along those lines.
Do you think there’s any psyching the market going on with this report?
Were all the negatives overly stated so the not-as-bad story would sound downright positive. So, jump in and buy, buy, buy?
Well, it was released on April Fools, but I believe they were serious.
⇧ United States Geological Survey confirms it: Fracking causes earthquakes | ExtremeTech
Earthquakes induced by fracking are different than natural quakes, according to the USGS, in “source, frequency, propagation, and ground shaking characteristics.” (Source, here, denotes not just cause but also the depth of the epicenter.) Induced earthquakes are shallower, tend to stay below 5.5 in magnitude, and tend to swarm. Evidence suggests that the risk of induced earthquakes can persist for years after the actual fluid injection stops. While local and state officials may be slow to react to scientific advance, the risk of induced earthquakes cannot be ignored. Earthquakes at that magnitude can do significant damage; the feature image of this story shows the aftermath of one quake that struck Oklahoma in late November, 2011.
⇧ Unemployment Report Shows Signs of Life in Labor Participation Rate | The Economic Populist
The labor participation rate ticked up another one tenth of a percentage point to a still very low 63.0%, yet there is now a clear pattern of increased participation. That said, while this report has many strong positive indicators it is a long way off to get those who fell off the labor force cliff in the last eight years to climb back up it again.
U-6 now stands at 9.8%, a 0.1 percentage point increase from last month. U-6 is a broader measure of unemployment and includes the official unemployed, people working part-time hours because that’s all they can get and a subgroup not counted in the labor force but are available for work and looked in the last 12 months. The U-6 rate still leaves out some people wanting a job who are not considered part of the labor force, so while it is called an alternative rate, but it still ignores many who should be counted as unemployed. U-6 is still incredibly high.
This month’s CPS report by itself has some real positive signs, not just the phony and artificially low official unemployment rate. The real question is what happens in the next few months with so many macroeconomic indicators showing economic weakness. This question accompanies the usual caveat of the CPS being notoriously volatile with 100,000 data size swings routine from month to month.
⇧ Jobs Report Gives Yellen Only Half of What Fed Chair Wants – Bloomberg
A slowly improving economy is pulling discouraged Americans into the workforce, although some are having to settle for part-time jobs for now.
That’s the message from the March employment report issued by the Labor Department Friday in Washington. Payrolls grew by 215,000 workers last month following a gain of 245,000 in February, according to employers the government surveyed. The separate poll of households showed the jobless rate ticked up to 5 percent from 4.9 percent as people streamed into the labor force looking for work, and not all were successful.
The gain in hiring shows businesses remain confident in U.S. prospects even amid the slowdown in global growth and turmoil in financial markets that Federal Reserve Chair Janet Yellen this week said prompted policy makers to signal a slower pace of rate hikes in 2016. The gradual approach in tightening monetary policy to allow the labor market to heat up further was reinforced by readings showing the world’s largest economy still wasn’t strong enough to provide more full-time work.
QuickTake Under the Hood of the Jobs Numbers
“This makes Yellen look smart,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York.
Yes, she was smart to come back to focusing on slack again. She had mistakenly deviated.
“‘I am particularly thinking about abnormally high levels of involuntary part-time employment,’ Yellen said.” That’s exactly what she should be focused on.
She’s should completely stop worrying about the banking industry’s profit margins. Her job is good jobs first and inflation fighting second. That’s why she should not try to anticipate inflation so much but rather stop worrying and realize that the Fed can react to actual increases in price inflation without letting inflation get out of control. To think it could get out of control is irrational at this point and a fear-mongering tactic by some on Wall Street who want everything privatized.
⇧ U.S. task force to look at massive California natural gas leak | Reuters
A months-long leak at the Aliso Canyon storage field made scores of people ill and forced the temporary relocation of more than 6,600 households from the northern Los Angeles community of Porter Ranch.
Scientists said the global warming potential of the release, which began last October and was not plugged until February, was equal to the annual carbon emissions of nearly 600,000 cars.
⇧ Can two leftwing gurus save Europe? Chronicles by Thomas Piketty; And the Weak Suffer What They Must? by Yanis Varoufakis — review | Books | The Guardian
… to follow Piketty through the ups and downs of the post-Lehman era is to see an unwelcome issue for the left emerge. He asks: “Will Europe manage to become the continental power and the space for democratic sovereignty that we’ll need in order to take control of a globalised capitalism gone mad?” Or will it facilitate the subjugation of governments to markets and, in the resulting chaos, fail?
… Even as the ECB has pressed the panic button, opting for radical and expansive measures to stimulate economies via printing money, Germany has voted against every one of these moves.
There is no sign on the horizon of a single European debt, nor of a monetary policy aimed at social justice, nor of institutions that would address even a modicum of the agenda Piketty proposes.
The problem is the ship is sinking. When that happens you should man the pumps. But the European centrist elite does not want to: it is “against the rules” to man the pumps — that is, to embrace the radical stimulus Piketty and Varoufakis want. The logical thing to do is man the lifeboats.
… But the European left will soon have to make choices: between humanitarian values and the illegal pushback strategy Brussels has agreed with Ankara on refugees; between saving Europe’s economy and saving what is left of Europe’s banks; between saving the steel industry and obeying arcane rules on state aid nobody really believes in.
⇧ Balancing public budgets: the impossible in search of the undesirable — Prime Economics
The successfully long-running medicine show of Chancellor George Osborne seems at last to have hit the buffers, over-burdened by banal rhetoric, missed targets, and ever-more blatant pandering to the rich. …
Along with many others I have demonstrated that expenditure cuts represent the least effective — as well as the most inequitable — method of deficit reduction. The Chancellor himself has proved this for all to see.
… With a national currency, as is the UK case, a government can borrow from itself via the central bank for any expenditure. Servicing this debt is costless, involving a simple transfer of revenue from one public body (the central government) to another (the central bank).
… “boom-and-bust” cannot be eliminated, with active fiscal management the duration and amplitude of cycles are subject to policy influence.
John is limiting his vision. Given enough transparency and direct democracy from the bottom up, busts could definitely be eliminated. John is trapping himself by limiting himself to the context of a mostly capitalistic economy. What we really need is democracy, not capitalism, per se.
⇧ Remembrances of Depression Economics – The New York Times
I can hardly even stomach reading Paul Krugman on Bernie Sanders, whom Paul gets completely wrong (comes across to me as grinding a subconscious axe); however, when it comes to mixed-economy, Keynesian, macro (putting aside Paul’s mistaken equilibrium notions), he gets it quite right.
… the past 7 or 8 years have if anything been a vindication, not a refutation, of basic macroeconomics. If policy has been terrible — and it has — don’t blame the analysts.
⇧ globalinequality: The Schumpeter hotel: income inequality and social mobility
… one cannot [correctly] argue that societies with high inequality in incomes are societies with high equality of opportunity. On the contrary, observed high inequality today implies low equality of opportunity.
⇧ Yellen Pivots Toward Saving Her Legacy – Tim Duy’s Fed Watch
… the overall thrust of her argument is that although labor markets have continued to improve and rising wages suggests the economy is reaching full employment, the risks to stable inflation expectations are now too on the downside. And if expectations become unanchored, the Fed will fail to meet it’s 2 percent inflation target anytime soon. Moreover, the Fed would be faced with trying to re-establish expectations in the absence of their conventional tools. That might be a tall order.
Bottom Line: Rising risks to the outlook placed Yellen’s legacy in danger. If the first rate hike wasn’t a mistake, certainly follow up hikes would be. And there is no room to run; if you want to “normalize” policy, Yellen needs to ensure that rates rise well above zero before the next recession hits. The incoming data suggests that means the economy needs to run hotter for longer if the Fed wants to leave the zero bound behind. Yellen is getting that message.
I think Tim missed it here, albeit only slightly. He’s underestimated the degree to which Yellen still sees labor slack. To me, she’s reawakened to that.
Everything else follows. Jobs (full-time, high employer-demand) and wages first. Inflation and higher rates follow. It’s fundamental.
It’s only secular stagnation if we let it be. She needs to rally Congress for fiscal stimulus to get the economy out of the doldrums all the sooner. Then she can raise rates with ease, not that the Federal Reserve System is the one we need. It isn’t.
⇧ Defiant China slaps steel tariffs on Britain as trade war looms
Wow, this approach by Xi and his fellow dictators running the Chinese Communist Party ranks right up there with China’s approach to the South “China” Sea for being a stick in the eye of so many other nation-states and blocs.
When coupled with Xi’s financial and economic can kicking and his absolutely authoritarian crackdown on the now not-free-at-all press in China, I can’t fathom anyone believing that the CCP and Xi have a clue about what they are doing or that it will all end well or even muddled through unless China radically changes to real democracy.
⇧ United States Government Budget | 1948-2016 | Data | Chart | Calendar
Do you see any reason to be clamoring for austerity here? I sure don’t.
The United States recorded a Government Budget deficit equal to 2.50 percent of the country’s Gross Domestic Product in fiscal year 2015. It is the lowest budget deficit in 7 years.
⇧ United States Capacity Utilization | 1967-2016 | Data | Chart | Calendar
Lots of slack:
Capacity Utilization in the United States decreased to 75.40 percent in February from 77.08 percent in January of 2016. Capacity Utilization in the United States averaged 80.45 percent from 1967 until 2016, reaching an all time high of 89.40 percent in January of 1967 and a record low of 66.89 percent in June of 2009.
⇧ United States Unemployed Persons | 1950-2016 | Data | Chart | Calendar
The number of unemployed persons in The United States increased to 7966 Thousand in March of 2016…. …unemployed persons are individuals who are without a job and actively seeking to work.
⇧ United States Non Farm Payrolls | 1939-2016 | Data | Chart | Calendar
Total nonfarm payroll employment … reaching … a record low of -1967 Thousand in September of 1945.
Do you know why? The answer is public employment, which is no sin, quite the contrary depending upon what work is being done. If the work is good and productive, then public employment is just fine. https://www.historyplace.com/worldwar2/t imeline/ww2time.htm#1945 We could easily have no unemployment and without inflation problems too.
⇧ When Things Fall Apart
Anatole Kaletsky, Chief Economist and Co-Chairman of Gavekal Dragonomics, and one of the most underrated economists and intellectuals of our time:
If the world is too complex and unpredictable for either markets or governments to achieve social objectives, then new systems of checks and balances must be designed so that political decision-making can constrain economic incentives and vice versa. If the world is characterized by ambiguity and unpredictability, then the economic theories of the pre-crisis period — rational expectations, efficient markets, and the neutrality of money — must be revised.
Moreover, politicians must reconsider much of the ideological super-structure erected on market fundamentalist assumptions. This includes not only financial deregulation, but also central bank independence, the separation of monetary and fiscal policies, and the assumption that competitive markets require no government intervention to produce an acceptable income distribution, drive innovation, provide necessary infrastructure, and deliver public goods.
People sense that their leaders have powerful economic tools that could boost living standards. Money could be printed and distributed directly to citizens. Minimum wages could be raised to reduce inequality. Governments could invest much more in infrastructure and innovation at zero cost. Bank regulation could encourage lending, instead of restricting it.
But deploying such radical policies would mean rejecting the theories that have dominated economics since the 1980s, together with the institutional arrangements based upon them, such as Europe’s Maastricht Treaty. Few “responsible” people are yet willing to challenge pre-crisis economic orthodoxy.
The message of today’s populist revolts is that politicians must tear up their pre-crisis rulebooks and encourage a revolution in economic thinking. If responsible politicians refuse, “some rough beast, its hour come at last” will do it fo r them.
I’m not saying that I agree with the notion of democratic capitalism. I don’t believe there is any such thing. I actually believe it’s an impossibility by any stretch of the imagination.
⇧ 2016: The End of the Global Debt Super Cycle – Palisade Reseach
The Fed was once again worried that the crash in technology stocks would cause a systemic financial crisis so they embarked on an interest rate cutting program that saw the Fed Funds Rate drop from 6.5% to 1% from 2000 to 2003. This in effect morphed the tech stock bubble into a housing bubble. …
What you won’t hear in this article is any criticism of the massive deregulation that really caused the housing bubble. The housing bubble was not, repeat, was not, caused by Alan Greenspan lowering interest rates.
A new tool was introduced by The Fed, called Quantitative Easing, which allowed The Fed to purchase mortgage backed securities and other long dated debt to push down long term interest rates and encourage lending. …
Wrong again. The Fed did not embark on QE to encourage lending. It introduced QE to bailout the insolvent banks that had become insolvent due to making bad loans to people who couldn’t afford them and all due to lax regulations those banks were clamoring for and obtained.
During and following The Global Financial Crisis consumers in some developed countries deleveraged but the rest of the economy, namely governments and businesses, leveraged up. From the first quarter of 2008 to the second quarter of 2015 total debt in the U.S. increased from $30 trillion to $40 trillion. Globally, total debt grew from $142 trillion in the fourth quarter of 2007 to $200 trillion in the second quarter of 2014, an increase of $58 trillion. Total global debt as a percentage of global GDP grew from 269% in 2007 to 286% in 2014. The massive central bank intervention during The Global Financial Crisis prevented a deleveraging of the global economy and actually encouraged more leverage to stimulate growth. Once again the planet was borrowing from future growth to prope l current growth. This was indeed a short sighted solution to an existential crisis faced by the world. Kicking the can down to 2016 has now come to its logical end.
… We also believe The Fed will embark on QE4, although it is not clear what assets they will purchase. What is clear is that rate cuts and QE4 will offer brief pauses in financial asset declines but will not ultimately arrest those declines.
We also believe the next President needs to strip The Fed of their dual mandate of price stability and full employment. The Fed should no longer be tasked with ensuring full employment ….
What a backwards approach that would be! Also, the President doesn’t have the authority to strip the Fed of that mandate.
⇧ Imagine What Fiscal Policy Could Do For Innovation | iMFdirect – The IMF Blog
If we simplify the prediction and take progressive countries to mean the United States (the country that defined the technological frontier during the relevant decades) we can picture Keynes’s prediction as in Chart 1. The chart shows in log scale the upper and the low-end of the range indicated by Keynes. Perhaps ironically the initial performance was not inspiring. But, since the early 1950s, the U.S. economy has actually performed above the upper end of Keynes’s bands. We interpret this story as indicating that, while the details of innovation are fundamentally unpredictable, innovation is determined by human incentives and can be anticipated in broad outline.
Innovation and change are the key drivers of long run standards of living and prosperity. R&D, a key driver of innovation, responds to economic incentives and public policies. IMF research shows that a little well-designed public support can go a long way. For example, we show that fiscal support to R&D, justified by domestic spillovers, and costing 0.4 percent of GDP can deliver 5 percent higher GDP in the long run. If international considerations are taken into account the cost would increase to 0.5 percent of GDP, but the benefits would increase proportionally even more, to 8 percent. Smart fiscal policies matter. They matter a lot. Public and private sectors can work together in complementary ways to boost innovation and growth.
⇧ Debunking America’s Populist Narrative
J. Bradford DeLong:
Broadly, the narrative goes something like this. American middle- and working-class wages have stagnated because Wall Street pressed companies to outsource the valuable jobs that made up America’s manufacturing base, first to low-wage Mexicans and then to the Chinese. Moreover, this was a bipartisan effort, with both parties unified behind financial deregulation and trade deals that undermined the US economy. First, the North American Free Trade Agreement (NAFTA) led to the export of high-quality manufacturing jobs to Mexico. Then the US established permanent normal trade relations with China and refused to brand its government a currency manipulator.
The reason this narrative is wrong is simple. There are good reasons why the US adopted policies that encouraged poorer countries to grow rapidly through export-led industrialization. In helping Mexico, China, and other developing countries grow, the US is gaining richer trading partners. Furthermore, there is a strong case that US national security will be improved if, 50 years from now, schoolchildren around the world learn how America helped their countries prosper, rather than trying to keep them as poor as possible for as long as possible.
Wrong. The US did not seek richer trading partners. The main reason the US gave was to break socialism/communism and to create democracies because it was claimed (falsely), capitalism (well, open markets) would lead to the consumers wanting the rest of what the West (the US system) has to offer. The reason the US gave, however, was not the real reason. The real reason was to benefit those at the top, who could, and did, keep prices high while having much lower costs due to lax or non-existent environmental, labor, safety, and other regulations and laws in the nations where it sent US jobs.
In addition, those of us who opposed the horrifically bad deals, such as NAFTA, were not at all trying to keep other nation poor but were wanting those other nations to move to the level of regulations we had to protect the environment and workers.
It was not globalization that caused incomes to stagnate. Trade with countries like China and Mexico is just one factor affecting income distribution in the US, and it is by no means the most important one. The reason that incomes have stagnated is that American politicians have failed to implement policies to manage globalization’s effects.
Well, that actually supports my points, not Brad’s.
It is not difficult to see where the blame lies. As Mark Kleiman of NYU’s Marron Institute points out, the Republican Party’s rigid and die-hard ideological opposition to “taxing the rich [has] destroyed, on a practical level, the theoretical basis for believing that free trade benefits everyone.” It is difficult to argue for redistributing the benefits of globalization when you believe that the market channels gains to those who deserve them. Nor can you ameliorate the painful effects of globalization if you believe that social-insurance programs turn their beneficiaries into lethargic “takers.”
It is not globalization, poor negotiation tactics, low-wage Mexicans workers, or the overly clever Chinese that bear responsibility for what is ailing America. The responsibility lies instead with politicians peddling ideology over practicality — and thus with the citizens who elect them, as well as those who don’t bother to vote at all.
That’s my point. The ideology was what was behind the bad deals. The ideology was kept out of the discussions for the most part. The pushers merely told the opposition what it wanted to hear. Many people fell for it. Many people who didn’t know better, helped pushed all of it and are rationalizing and spinning now about having done it.
Brad hasn’t debunked anything here. He’s done the exact opposite.
⇧ 2nd March Hailstorm in North Texas Deemed an Insurance Catastrophe
Claims resulting directly from the identified catastrophe in the counties listed above will be allowed additional time for processing ….
⇧ Severe Storms Move East Leaving 7 Hurt, Damage in Oklahoma
At least seven people were injured and authorities were evaluating the damage in northeastern Oklahoma after severe storms spawned multiple tornado touchdowns ….
⇧ 3 Tornadoes Leave Behind Damage in Kentucky County
… most of the damage came from the EF-2 tornado. The twister destroyed 16 barns and damaged 10 others as well as two homes.
No injuries were reported from the storm.
⇧ Florida Trailer Park Residents Evacuated by Possible 60-foot Sinkhole
Florida is highly prone to sinkholes because there are underground caverns of limestone, a porous rock that easily dissolves in water.
⇧ FEMA Denies Individual Assistance to Florida Tornado Victims
Some residents of … Florida … who sustained damage during two tornadoes that touched down in February will not receive individual assistance ….
⇧ First Robot—Run Insurance Agency Opens for Business
Hint: This was published on April 1st. However, … it’s why I’m in favor of a basic income that doesn’t simply replace welfare-state benefits. It can, and will, happen here and not just in insurance but in everything we want it to, which may end up being nearly everything.
⇧ San Francisco Magazine | Modern Luxury | How Many Units Do We Need to Build Before These $%#!?! Prices Go Down?
In 2014, San Francisco gained 3,514 housing units, the most the city has added in one year since 1964. And yet prices still rose: Median rent climbed 17 percent between 2014 and 2015, and median home-sale prices went up 14 percent in the same period. Of course, a single boom year can hardly be expected to undo a housing deficit that’s been building since the ’90s, when housing prices began growing significantly more than inflation. So how many homes would the city have to build for prices to cease rising—or, heaven forbid, actually drop? To keep housing prices from outpacing inflation, San Francisco would need to add at least 4,600 residences per year ….
⇧ ‘Attack The Property’ — Russian Activists Campaign For London Real Estate Transparency
One needs to be careful when reading this type of article. People behind them quite often have hidden agendas. https://en.wikipedia.org/wiki/Alexei_Nav alny#Nationalism
I’m all for transparency in real-estate ownership, but to focus on just the Russians is suspicious. As we’ve seen by the links on this blog, people from many nations have hidden that they own real estate outside their own countries. Some may have legitimate reasons for it. Generally however, it’s a bad practice used by people covering up corruption.