News: Real Estate, Risk, Economics. Aug. 27, 2018

⇧ WWIII or heaven on earth? Magnum opus: Humanity at crossroads

I'm not completely on board with this article, but it is food for thought and debate.

The effects of industrialization were seen in the process of rapid urbanization of formerly relatively small villages and towns where the new plants came. These turned into dirty and unhealthy industrial cities. Still people from the country were forced to go and work there. Because of this a new social class emerged: the workers, or the industrial proletariat. They lived in overcrowded slums in poor housing with little sanitation. The average life expectancy was low, and infant mortality high. The elite accepted the filth of the factories as the inevitable price for their success. The chimneys were symbols of economic power, but also of social inequality. You see this social inequality appear after each revolution. The gap between the bottom and the top of society becomes very large. Eventually there are inevitable responses that decrease this gap. It could be argued that the Industrial revolutions have created the conditions for a society with little or no poverty.
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Investors get euphoric when hearing about mergers and take overs. Actually, these mergers and take overs are indications of the converging processes at the end of a transition. When looked at objectively each merger or take over is a loss of economic activity. This becomes painfully clear when we have a look at the unemployment rates of some countries.

New industrial revolutions come about because of new ideas, inventions and discoveries, so new knowledge and insight. Here too we have reached a point of saturation. There will be fewer companies in the take off or acceleration phase to replace the companies in the index shares sets that have reached the stabilization or degeneration phase.
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Humanity is being confronted with the same problems as those at the end of the second industrial revolution such as decreasing stock exchange rates, highly increasing unemployment, towering debts of companies and governments and bad financial positions of banks.

Transitions are initiated by inventions and discoveries, new knowledge of mankind. New knowledge influences the other four components in a society. At the moment there are few new inventions or discoveries. So the chance of a new industrial revolution is not very high. History has shown that five pillars are indispensable for a stable society.

At the end of every transition the pillar Prosperity is threatened. We have seen this effect after every industrial revolution.

The pillar Prosperity of a society is about to fall again. History has shown that the fall of the pillar Prosperity always results in a revolution. Because of the high level of unemployment after the second industrial revolution many societies initiated a new transition, the creation of a war economy. This type of economy flourished especially in the period 1940 — 1945.

Now, societies will have to make a choice for a new transition to be started.

My feeling is that we are on the cusp of many new scientific and technological discoveries with real-world applications. The real question is how we are going to deal with it all in terms of the real sharing-economy.

I say real there because what's typically being referred to as the "sharing economy" is a falsehood. The sharing economy before anarcho-capitalists co-opted the terminology meant real sharing without payment.

Therefore, are we going to share without payment the benefits of the new discoveries, or are we going to allow a very few to monopolize the benefits to themselves and let the rest died? Some people believe there will be wars to "decrease the surplus population," to invoke Scrooge before his revelation.
⇧ Jury Holds Nevada Liable for 2017 Wildfire That Destroyed Homes

... strong winds re-ignited a prescribed burn.
⇧ Environmentally-Caused Disease Crisis? Pesticide Damage to DNA Found 'Programmed' Into Future Generations

Be careful about using non-organic herbicides and pesticides in both your business and personal life.
⇧ Wirefire smoke: What can I do to protect myself and my family from outdoor smoke?

• Avoid physical exertion outdoors if smoke is in the air.
• If you have asthma or other lung diseases, make sure you follow your doctor's directions about taking your medicines and follow your asthma management plan. Call your health care provider if your symptoms worsen.
• Stay indoors and keep indoor air as clean as possible. Take the following steps when indoors:
• Keep windows and doors closed. Track the outside air quality and open your windows for fresh air when the air quality improves. Pay attention to the heat indoors. Close curtains to reduce heat gain during the hottest part of the day. Use fans to circulate the air.
• Run an air conditioner, set it to re-circulate and close the fresh-air intake. Make sure to change the filter regularly.
• Use an air cleaner with a high-efficiency particulate air (HEPA) filter to reduce indoor air pollution, this will reduce the number of irritating fine particles in indoor air. A HEPA filter with charcoal will help remove some of the gases from the smoke. Don't use an air cleaner that produces ozone. See "California's air cleaning devices for the home fact sheet" (PDF) http://www.arb.ca.gov/research/indoor/acdsumm.pdf .
• Don't add to indoor pollution. Don't smoke. Don't use food broilers, candles, incense, fireplaces, or gas stoves. Don't vacuum unless your vacuum has a HEPA filter, because vacuuming stirs up particles already inside your home.
• Consider leaving the area if the air quality is poor and it's not possible to keep indoor air clean, especially if you or those you are caring for are having health problems or are in a sensitive group.
• For more information about keeping indoor air free of smoke: "Improving Ventilation and Indoor Air Quality during Wildfire Smoke Events" (PDF) https://www.doh.wa.gov/Portals/1/Documents/Pubs/333-208.pdf .

Add your com ment. Including the article/link number will help.
⇧ Bank of England's chief economist warns A.I. could threaten 'large' amount of jobs

Some commentators — particularly within the tech industry — argue that the introduction of a universal basic income will be necessary to offset the effects of mass job losses. Finland had trialed the scheme, which promotes a universal welfare system in place of all existing benefit programs, but earlier this year said it would not extend the program and end payments to recipients at the start of 2019.

Well, I'm a real outlier. I've said repeatedly that there will be nothing tech won't be able to mimic. It will all be self-reinforcing. IA will create further AI, self-repair, replace, and enhance. Whether it will be evil or not is entirely up to us.

The mainstream just refuses to employ the concept of "living" income rather than the libertarian "basic." As I said, it's entirely up to us whether it will be evil or not.
⇧ Cities deal with 'new normal' of year-round wildfires

"We used to have a fire season, now we're saying fire season is year-round," Pam Leschak, a national program manager at the USDA Forest Service, told Smart Cities Dive. "Just about any month in the year, you'll find there's wildfires happening somewhere in the U.S. With accumulation of fuels, with climate change, with more people moving into the wildland-urban interface and building in high-risk areas, this is the new normal."

And for cities that have been caught up in wildfires, or are at risk in the future, the time is now to prepare for any future disasters, while recovery presents its own challenges.

Global warming, global warming, global warming, ...
⇧ Population Immiseration in America

The pattern is unmistakable: rapid, almost linear growth to the late 1970s, stagnation and decline (especially for unskilled labor) thereafter. Here's a more detailed breakdown of men's wages since 1979, broken down by wage percentile (10th is the poorest, 95th is the richest):

Why did this happen? I answer this question in a series of posts, Why Real Wages Stopped Growing (see it in Popular Blogs and Series). The TL;DR answer is that it was a combination of immigration, loss of manufacturing jobs overseas, massive entry of women into the labor force (thus, this factor both inflated household income and, perversely, depressed wages for men), and changing attitudes towards labor. A model incorporating these influences does a pretty decent job of capturing both the turning point of the 1970s and fluctuations afterwards: ...
⇧ Use Color to Make a Small Kitchen Look Larger

If white appeals to you, make sure you choose a high-gloss paint.
⇧ Fed's Rate-Hike Path Under Powell Is in Focus With Minutes Today

Fed officials say they still don't know how far they will be able to shrink the balance sheet. It ballooned to $4.5 trillion after years of bond purchases in the wake of the financial crisis, which created a pile of cash reserves held by banks on deposit at the Fed.

They raise rates to strengthen the dollar, which sends hot money flowing out of emerging countries into safe-haven US Treasuries just when the Fed is off loading them. That's a neat trick but not a good thing long term.
⇧ 'Unaffordable' Hong Kong home prices could fall by double digits
⇧ Central bank digital currency: Why it matters and why not

The proposal to issue digital central bank money for use by the general public enjoys surprisingly strong support among finance practitioners but equally often faces scepticism, particularly in central bank circles. A typical line of argument put forward by the sceptics emphasises that the traditional approach has served us well, and that a change of regime could have disruptive effects.

But the 'traditional approach' has evolved over the years and will continue to evolve; and in the absence of a clear counterfactual, it is difficult to assess whether it really has worked 'well'. Moreover, from a macroeconomic point of view, RFA need not have disruptive effects and if it does have such effects, they might well occur in other areas or have different signs than what is commonly suggested. For example, RFA could increase the incentive to extend credit but might undermine the political support for implicit financial assistance to banks.

Why have private/commercial banks make the decisions as to where the money goes? Why not let the people vote on where the money goes? Inflation could still be contained every bit as much if not more. I say more.
⇧ 'The lost summer': the emotional and spiritual toll of the smoke apocalypse

When the streetlights come on in the middle of the day, ash rains down from the sky and the smoke blocks out the midnight sun, people begin to wonder if this might become more common. Cunsolo calls this "anticipatory grief."

If we don't end the carbon burning that's causing global warming that's increasing these fires and numerous huge weather events worldwide, we will rue the day more than I think most people can even begin to imagine. I'm not saying I can grasp it. I'm saying I think it will be really awful, so bad I don't want to think about it but must to try to stop it.
⇧ Wildfire Risk Rises as Temperature Increases

And low humidity is "the key driver of wildfire spread," according to University of Colorado fire scientist Jennifer Balch who says the western U.S. soon will start to see wildfires of 1 million acres (1,562 square miles).
⇧ The Vancouver Detached Real Estate Market Officially Plunges Into Negative Territory

Well, they had to do something about the skyrocketing prices that most Canadians simply weren't able to begin to afford.
⇧ The End of the Global Housing Boom

More attention has been needed in the lower-income brackets.
⇧ 12-year low for delinquencies Black Knight data reveals

People are being more careful with their money.
⇧ U.S. Drought Monitor Update for August 21, 2018
⇧ Venezuela: Response to Trolls [by great economist and humanitarian, Mark Weisbrot]

... as I noted at the time, Venezuela had more than $36 billion in international reserves, a sizeable current account surplus of $11 billion (2.9 percent of GDP) and was not facing any imminent balance of payments crisis. There wasn't any reason for thinking that the government would ride its overvalued fixed exchange rate all the way to hyperinflation.

On the contrary, there were other reasons to assume, in November 2013, that the government would take the necessary measures before reaching hyperinflation. In 2002, for example, despite serious political turmoil (including a military coup and devastating opposition oil strike), then president Hugo Chávez floated the currency. Central Bank reserves actually increased during this period. And in 2014, the government announced that it was going to unify the exchange rate, although it did not follow through. In May 2016, as Toro noted, a team of economists from the Union of South American Nations (UNASUR), went to Venezuela and proposed a plan, which included unification of the exchange rate and other measures that could reasonably be expected to stop the acceleration of inflation. I was part of that team. It was not at all clear at that time whether the government would adopt the plan or not.

I have long wondered why it didn't.

Mark is absolutely correct that it should have and that there was no way to know for sure it wouldn't. He's also perfectly right the sanctions make inflation and such all the harder to fight from within Venezuela's government.

It doesn't matter whether or not someone like's Maduro, Mark is still correct concerning the statements he made when offering the plan and now defending himself from those who aren't interested in sticking to the actual facts.
⇧ U.S. Household Wealth Is Experiencing An Unsustainable Bubble

Jesse Colombo:

The mainstream narrative about rising wealth inequality is that it is a problem that is inherent to capitalism itself and that the only solution is increased regulation of the economy, raising taxes for the rich, and so on. Unfortunately, this mainstream narrative is false because it completely ignores the role the Federal Reserve plays in creating inflation and asset bubbles that benefit the rich over the poor.

The wealthy own a disproportionate amount of assets such as stocks, bonds, and housing, the middle class are often house-rich and asset-poor, while the poor typically rent their housing and have few asset to speak of. When the Federal Reserve creates an asset price bubble or inflates the value of household wealth, the wealthy see most of the gains (even if they are just on paper) while the middle class and poor see very little.

As my readers know, I have one foot in each camp. I'm positive deregulation contributed hugely to the dot-com boom and bust and even more so to the Great Recession. However, I totally agree that bad Fed policies and practices also contribute. By the way, the Fed is a regulator. Therefore, the Fed simply often regulates in the wrong direction, as in bad timing for one. They loosen too much and for too long. They tighten too much and too soon.

Anyway, they are unwinding their gigantic portfolio and raising rates right when doing both, along with Trump piling on tariffs, is helping to drive money into exactly the holdings the Fed is letting go. Whether the Fed can pull it off depends on whether the Fed can avoid shooting itself and the US and global economies in the feet. It's track record is not good.

Unfortunately, Trump's massive tax cuts for corporations and tiny tax cuts that are still planned to disappear for the poor will contribute to the recessionary winds.
⇧ Chinese Investors Become Net Sellers in US in Q2

It took longer than I thought it would, but here it is.
⇧ Residential Real Estate Indicators You Must Know

Pretty basic, which isn't a bad start ...

I'd add to keep an eye on the global and national economies, though. Overextended landlords could be hit right along with everyone else. When tenants can't afford to pay, landlords still have to repay loans or lose it.
⇧ Federal Jury Convicts Four Family Members on Charges Related to an Arson and Insurance Fraud Scheme

Between April of 2012 and January of 2016, the defendants, along with others, participated in various ways in three separate but interrelated schemes involving arson, mail and wire fraud, and money laundering. Their overall purpose was to enrich themselves by fraudulently obtaining insurance proceeds on houses they intentionally burned. The houses were insured for amounts greatly exceeding their value and the value of any contents. The houses were located at Matoaka in Mercer County, Huntington in Cabell County, and Ikes Fork in Wyoming County.
⇧ Survey: 10% of Texans Displaced by Harvey Still Haven't Gone Home

Federal and state officials aren't keeping track of how many people remain displaced.
⇧ Texas Seeking Money for 'Coastal Spine,' Government Protection from Climate Change

... to shield some of the crown jewels of the petroleum industry, which is blamed for contributing to global warming ....

What strings are attached in terms of winding down the carbon industry? None.
⇧ Probing the smart city for vulnerabilities

The smart devices and systems enabling smart city technologies connect to the Internet — and they have some extra vulnerabilities that could lead to real-world issues.
⇧ Cost of New E.P.A. Coal Rules: Up to 1,400 More Deaths a Year

The Trump administration has made deregulation a centerpiece of its political strategy, and the E.P.A. has led the charge. The proposed weakening of the rules on coal-burning plants follows a plan to let cars emit more pollution. Transportation and the power sector are the two largest contributors of carbon emissions.

I think the estimates are extremely low and obviously don't take into account all the damage and deaths and injuries resulting from extreme weather due to burning carbon as fuel.
⇧ How China's Mobile Ecosystems Are Making Banks Obsolete

We could one day have a national non-profit digital ecosystem operated as a cooperative, a public utility in which profits returned to the users in the form of reduced prices. Users could create their own money by "monetizing" their own credit, in a community currency system in which the "community" is the nation or even the world.

I still like democracy better.
⇧ Tons of Major Quakes Have Rattled the World Recently. Does That Mean Anything?
⇧ The rise of renter nation and why it's here to stay

With the median rent nationwide up to $1,440, what was once a lifestyle conducive to saving for a down payment, renting is now a burden that often keeps renters from saving for down payments on homes that continue to climb in value.

For the time being, it looks like renter nation is here to stay.
⇧ The Latest Tax Reform Update and What It Means for Real Estate Investors [nicely concise]

I have to hand it to Amanda Han. She is a very clear writer. She takes a highly complicated topic, lets you know it's complicated, and then boils it down to a very simple explanation that does not mislead or underestimate the possibilities both positive and negative.
⇧ Greece was never bailed out — it remains locked in an EU debtor's prison

... they made a desert and called it peace.

Someone or some group needs to break the Greeks out of the debtor's prison.

Yanis Varoufakis should run against those who refused to exercise Yanis's Plan B.

The Greeks should take back Greece's once nationalized treasures too.

I don't think the EU is going to democratize soon enough if ever. It's looking more and more like the EU will fall and that democracy will finally have to rise from the ashes.
⇧ Central Banks Hear Warnings on Trade, Low Trust at Jackson Hole

Powell, who took the reins at the Fed in February from Janet Yellen, also spelled out an approach to risk management that will weigh evidence on the economy's performance rather than overly rely on what academic models say is needed.

He noted that "our best assessments" of what the economy has been doing have changed significantly, and that models provide at best a "hazy" aide to navigating policy.
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Part of the fallout of superstar firms is the resentment of economic elites among workers not employed by dynamic, growing companies, said Raghuram Rajan, a University of Chicago professor and former governor of the Reserve Bank of India. He added that central bankers were the "quintessential elite."

I don't agree with Raghuram Rajan's economics, but he is definitely honest about the fact that central bankers on the whole put the interests of the commercial-banking elite and mega-corporations way above the interests of the common people and shouldn't if they are to carry out their ostensible mandates. Of course, they are captives and became central bankers mostly because of their exact willingness to not fix the problem but rather keep the masses down.
⇧ The cost of focusing on general equilibrium theory

The chance of discovering a real-world Pareto optimal policy that can be shown to harm no one in some infinitesimal way is essentially nil.
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... modern economists have moved away from Classical economist's utilitarian moral philosophy that underlay Classical economist's support of markets.
⇧ Europe in a new world order

Do you see issues of democracy versus dictatorship mentioned at all on the linked page? That's right. You don't.

Therefore, should the prescriptions in the paper be followed? No. We need democracy everywhere. Democracy is the most important thing. It is vastly more important than mere "trade."

If we achieve global democracy, everything else will be sorted out. If we don't, it won't.