Real estate, cybersecurity and other risks, economics, & more: links & commentary for May 20, 2019

How Homes Are Being Built, Raised to Withstand Extreme Weather

Cost remains key for homeowners. The hurricane-strong house, as Azaroff has labeled it, is about 7% to 9% more expensive to build. But with energy and insurance savings, the upgrades should pay for themselves in 8-10 years, according to Azaroff.


California May Go Dark This Summer; Most Aren’t Ready

Canning said his community is working on its own solution. He’s looking at developing a small network of microgrids consisting of solar panels and batteries, which would allow his community to function when PG&E pulls the plug.


Washington’s New Short-Term Rental Law Requires Liability Insurance


La. Supreme Court Upholds Forum Selection Clause in Insurance Contract

The company purchased insurance through a policy that included more than 100 properties in 20 states. Insurance brokers often build sell such pooled policies, linking unrelated insureds with common operations into risk groups, to obtain more favorable terms, according to a footnote in the decision.
...
Hughes said the cases that Johnson mentioned did not involve insurance contracts. Louisiana Revised Statute 23:868, unchanged for 66 years, specifically applies to insurance contracts and prohibits any provisions that deprive Louisiana Courts jurisdiction of action.

If Hughes is right, the court erred. Insurance policies are never supposed to trump valid statutory law. All insurance brokers, claims adjusters, and insurance companies are required to know that.


Cyber Risks to Exceed Natural Disasters for Insurers: Scor CEO

Kessler said the cyber risk could exceed $600 billion per year “in the worst case scenario.” That compares with the yearly cost of natural catastrophes, which he said is about $230 billion.


With Billions at Stake, Utilities Fight to Charge Coal-Ash Costs

It’s a high-stakes battle for utilities, which have so far escaped any shareholder wrath over cleanup expenses because investors assumed the costs would be baked into customers’ rates. ...
...
This has become a common refrain from officials across states — that utilities are to blame for letting their own bad situation fester, and for pumping waste into unlined pits for years that could let toxins seep into groundwater. Cleanup costs, therefore, should be borne by the companies and their shareholders ....

I'm on the side of the consumers. Making the consumers absorb the cost is bailing out companies that employed bad environmental practices. Shareholders should not have their bets guaranteed by consumers.


San Francisco May Ban Police, City Use of Facial Recognition

Joel Engardio, vice president of grassroots group Stop Crime SF, wants the city to be flexible.

“Our point of view is, rather than a blanket ban forever, why not a moratorium so we’re not using problematic technology, but we open the door for when technology improves?” he said.

Such a moratorium is under consideration in the Massachusetts Legislature, where it has the backing of Republican and Democratic senators.

Civil rights are extremely important but so is real crime-prevention and catching the truly guilty.


Researchers Find Low Integrity CEOs Cost Firms Money

Some CEOs view paying for unethical practices as a mere cost of doing business. Their businesses end up making an overall profit, as many unethical practices are never found out. Even auditors have been shown to cooperate with the unethical practices.


Vulnerability Reduction Scorecard Helps Cities Save Lives and Resources

There are three phases within the scorecard process:

Assemble all relevant community plans that guide development decisions in hazard areas by creating a digital map with overlapping layers where the plans are “stacked” one on top of the other.
Evaluate and analyze the stacked map to identify geographic areas or populations that are most vulnerable.
Score the different areas of the municipality based upon their level of hazard vulnerability and degree of integration of hazard mitigation methods.

“The genius of the Resilience Scorecard tool is that looking over the stacked overlays, one can easily see the areas that have been targeted for capital investment and redevelopment, but are unfortunately right in the crosshairs of severe repetitive loss from recurring flooding disasters,” Berke said.


Georgia Insurance Chief Suspended As He Fights Fraud Charges

The indictment alleges Beck stole more than $2 million through ‘‘an elaborate invoicing scheme,’’ BJay Pak, U.S. Attorney for the Northern District of Georgia, said Tuesday.

The indictment says the scheme lasted for five years, until last August, after Beck won the Republican primary for insurance commissioner. Pak said none of the alleged fraudulent activity occurred after Beck took office.

Thousands of dollars of the alleged fraudulent payments went to Beck’s campaign fund, Pak said. Other money went to personal expenditures, investments and the payment of taxes, he added.


Stay or Go? As Weather Gets Wilder, States Urged to Prepare for Displacement

Figures released by the Internal Displacement Monitoring Centre (IDMC) in Geneva on Thursday showed disasters had caused an average of 24 million new displacements each year since 2008, more than three times the number for conflict and violence.

In a report, the IDMC said extreme weather accounted for more than 87 percent of all disaster displacement, warning the problem was likely to get worse.

Anthropogenic Global Warming (AGW) is causing millions of displacements. How long will it be before they become permanent refugees? We need to end AGW.


Lenders Scolded for Climate Ignorance in ‘Insane’ Florida Deals

Florida’s economic crash could begin with banks or home-buyers worrying that annual insurance policies in some places will become prohibitively expensive, or disappear completely, Glendon said. That would shake the housing market and hurt property tax revenue, leaving Florida without an obvious way to pay for infrastructure to replace what’s literally or figuratively under water.
...
Similar warnings are starting to reverberate among other financial institutions. BlackRock Inc. last month published a 20-page explanation of how climate-risk has become a necessary assessment in understanding shifting levels of risk and value.

The report concludes that 58% of U.S. metropolitan areas will face climate-related damages amounting to 1% or more of GDP by 2060-2080, and that “a rising share of muni bond issuance over time will likely come from regions facing economic losses from rising average temperatures and related events.”


X Prize Developing Wildfire-Fighting Contest


Why Less Data May Be More for Employers Using Wearables in Workplace

This is a deep dive.

While many risk managers are aware of the potential privacy risks, they may not be considering other potential landmines involving litigation, labor contracts, accommodations for disabled employees, sharing of medical information, reputational damage, incorrect data, even injuries from the devices themselves, they said.


National Labor Board Memo Says Uber Drivers Are Contractors, Not Employees

The general counsel said in the memo that Uber drivers set their hours, own their cars and are free to work for the company’s competitors, so they cannot be considered employees under federal labor law.

I disagree that those are the parameters for determining whether someone is or isn't an employee. Flexible hours are often allowed of employees. Many pizza delivery people own their own cars but are still employees. "Moonlighting" for a competitor is allowed unless there's a contract for employment barring it.


New Washington Law Requires Plan for Statewide Disaster Resilience

Smart move.

“This is a crucial first step in being prepared to mitigate disasters that we face in Washington state, including earthquakes, wildfires and flooding,” Kreidler said in a statement.


A.M. Best Warns of Ratings Downgrades If Terror Reinsurance Act Not Renewed

... A.M. Best said it will compile a list of rated insurers in mid-2019, and ask those with “material terrorism exposure” as well as “significant reliance on TRIPRA” to show in detail how they’ll mitigate their exposure if TRIPRA is not renewed.

Insurers that would be significantly hit by TRIPRA’s absence and don’t present a plan to reduce terrorism risk exposures will face ratings downgrades by the end of 2019.


Milliman: Hurricane Katrina Litigation Could Cause Spike in Mississippi Homeowners Rates

“The basic allegation in each complaint is that insurers underpaid, partially denied, or denied wind claims by classifying them as flood claims,” the report states, noting that insurers did so with the knowledge that the HAP program would likely reimburse damage identified as flood “because of the insufficient flood insurance on the properties, and that the existence of HAP would lower the chance that policyholders would take action against their insurers for underpaying or denying the claims.”

It will be interesting to see if the complaints prevail. The article didn't say what evidence has been alledged.


Arrest Made in Arson Fires to Homes Owned by South Carolina Gov

McMaster and his wife own 20 rental homes around Columbia and rent many to students at the University of South Carolina. Tax records show the couple earns about $300,000 a year from the rentals, according to the Post and Courier.


Bills Proposing Climate Change Studies Stall in Texas Legislature

Abbott, along with Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen, didn’t respond to requests for comment on why requiring for state-level climate change planning isn’t a priority for them.
...
Recent polling by the University of Texas and the Tribune found that 48 percent of Texans say the U.S. government should be doing “a great deal” or “a lot” about climate change. Twenty-one percent said the government should be doing nothing.

Obviously, politicians are beholden to the oil and gas sectors.


ZombieLoad Attack: Watch out! Your processor resurrects your private browsing-history and other sensitive data

After Meltdown, Spectre, and Foreshadow, we discovered more critical vulnerabilities in modern processors. The ZombieLoad attack allows stealing sensitive data and keys while the computer accesses them.
...
Can I detect if someone has exploited the ZombieLoad attack against me?
We do not have any data on this. The exploitation might not leave any traces in traditional log files.

Can my antivirus detect or block the ZombieLoad attack?
While possible in theory, this is unlikely in practice. However, your antivirus may detect malware which uses the attacks by comparing binaries after they become known.

Not very comforting.


Red Balloon Security, Inc. is disclosing two vulnerabilities affecting the products of Cisco Systems, Inc. (“Cisco”). [https://www.redballoonsecurity.com/; the https://thrangrycat.com site is part of Red Balloon Security]

While the flaws are based in hardware, 😾😾😾 [yes, the Pouting Cat Faces are in the original. They = "Thrangrycat," which is the suggested name of the exploit; cute?] can be exploited remotely without any need for physical access. Since the flaws reside within the hardware design, it is unlikely that any software security patch will fully resolve the fundamental security vulnerability.
...
An attacker with root privileges on the device can modify the contents of the FPGA anchor bitstream, which is stored unprotected in flash memory. Elements of this bitstream can be modified to disable critical functionality in the TAm. Successful modification of the bitstream is persistent, and the Trust Anchor will be disabled in subsequent boot sequences. It is also possible to lock out any software updates to the TAm’s bitstream.
...
This vulnerability affects Cisco products with an FPGA based TAm. Cisco released the following list of more than 100 product families with this vulnerability.
....
We chose to communicate 😾😾😾 through a visual representation of symbols, rather than “words.” Naming vulnerabilities using emoji sequences instead of other pronounceable natural languages have several advantages. First, emoji sequences are universally understood across nearly all natural languages. Choosing 😾😾😾 instead of a name rooted in any one language ensures that the technical contents of our research can be discussed democratically and without latent cultural or linguistic bias. Second, emojis are indexical to the digital age. Third, clear communication is the foundation of friendship, and such a foundation must begin with proper ontological agreement. Just as the universal language of mathematics is largely expressed through interlinguistic symbology, so too is 😾😾😾. Fourth, cats are seen as almost paradoxical beings. While they exist in our lives as the ultimate creatures of leisure, cats are also fierce predators. “Cats are the most highly specialized of the terrestrial flesh-eating mammals. They are powerfully built, with a large brain and strong teeth. The teeth are adapted to three functions: stabbing (canines), anchoring (canines), and cutting (carnassial molars).” (Lariviere, Serge; Stains, Howard James. “Feline.” Encyclopedia Britannica. Feline). For an incomplete list of felines in various mythologies, see this webpage.

Okay.


Advisory: Security Issue with Bluetooth Low Energy (BLE) Titan Security Keys

This issue affects the BLE version of Titan Security Keys. To determine if your key is affected, check the back of the key. If it has a “T1” or “T2” on the back of the key, your key is affected by the issue and is eligible for free replacement.


published_time" content="2019-05-14T09:55:00" WhatsApp Finds and Fixes Targeted Attack Bug

WhatsApp is urging its global users to update their app after fixing a serious remote code execution (RCE) vulnerability which was being exploited in a highly targeted attack, potentially by a nation state.

The Facebook-owned mobile comms giant, which has over 1.5 billion users, rolled out a fix on Friday [May 10th] for the buffer overflow vulnerability in WhatsApp VOIP stack.


Wanna know more?

One call on WhatsApp is enough to establish surveillance

A recently discovered zero-day vulnerability in the world’s most popular messenger — WhatsApp — allowed hackers to eavesdrop on users, read their encrypted chats, turn on the microphone and camera, and install spyware that allows even further surveillance, such as browsing through the victim’s photos and videos, accessing their contact list, and so on. What’s even worse, to exploit the vulnerability, all the hacker needs to do is call the victim on WhatsApp.
...
Our best suggestion at the moment is to make sure your WhatsApp is up to date. To do that, go to the Apple App Store or Google Play Store, look for WhatsApp and hit Update. If there’s no “Update” button, but you see the “Open” button instead, that means you have the latest version of WhatsApp, and it is already patched against such attacks.

Yep, I got behind on my cybersecurity reading. I was too busy doing cybersecurity (among other things).


A deeper dive, well-written:

New Intel firmware boot verification bypass enables low-level backdoors

By replacing a PC's SPI flash chip with one that contains rogue code, an attacker can gain full, persistent access.

While the attack requires opening the laptop case to attach clip-on connectors to the chip, there are ways to make it permanent, such as replacing the SPI chip with a rogue one that emulates the UEFI and also serves malicious code. In fact, Hudson has already designed such an emulator chip that has the same dimensions as a real SPI flash chip and could easily pass as one upon visual inspection if some plastic coating is added to it.
...
Such a physical compromise could occur in different ways, for example in an Evil-Maid-type scenario where a high value target, like a company's CEO, travels to a foreign country and leaves their laptop unattended in their hotel room. Bosch tells CSO that replacing the SPI memory chip with a rogue one designed to execute this attack would take 15 to 20 minutes for an experienced attacker with the right equipment.

Another possibility are supply chain attacks or the so-called "interdiction" techniques where computer shipments are intercepted in transit, for example by an intelligence agency, are backdoored and then resealed to hide any tampering. The documents leaked by Edward Snowden showed that the NSA uses such techniques, and it is likely not the only intelligence agency to do so.

Some devices do have tamper-evident seals or mechanisms, but someone with the right resources and knowledge can easily bypass those defenses, Bosch tells CSO.


Blocking Hyperlink Auditing Tracking Pings with Extensions

As Chrome, Edge, Safari, Firefox developers feel that this tracking feature is a performance improvement, they have all decided to enable this feature by default without a way to disable it. They feel that if they disable this feature, site owners will switch to JavaScript trackers, which are worse for performance.

With most popular browsers now enabling this feature by default, with Firefox doing so in the future, the only way to disable hyperlink auditing is through the use of browser addons and extension.

uBlock Origin can do some heavy lifting if you delve into it and set it up correctly.


Linux Kernel Prior to 5.0.8 Vulnerable to Remote Code Execution

Linux machines running distributions powered by kernels prior to 5.0.8 are affected by a race condition vulnerability leading to a use after free, related to net namespace cleanup, exposing vulnerable systems to remote attacks.


"secure by design and secure by default" I like that. Security standard for surveillance cameras set for launch

“The standard includes ensuring that passwords have to be changed from the manufacturer default at start-up, and that the chosen passwords should be of sufficient complexity to provide a degree of assurance, placing controls around how and when remote access should be provisioned.


A very deep dive, very informative:

A Cisco Router Bug Has Massive Global Implications

Cisco is announcing a patch for the IOS remote-control vulnerability the Red Balloon researchers discovered. And the company says it will also provide fixes for all product families that are potentially vulnerable to secure-enclave attacks like the one the researchers demonstrated. Cisco declined to characterize the nature or timing of these fixes ahead of the public disclosure. It also disputed that the secure boot vulnerability directly impacts the Trust Anchor. According to its security bulletin, all fixes are still months away from release, and there are currently no workarounds. When the patches do arrive, Cisco says, they will "require an on-premise reprogramming," meaning the fixes can't be pushed remotely, because they are so fundamental.


Linksys Smart Wi-Fi Routers Leak Info of Connected Devices

Mursch says that there is still good news even though Linksys might not want to fix the flaw seeing that 14,387 of the total of 25,617 vulnerable routers "currently have automatic firmware updates enabled." This means that if the company will patch the vulnerability in the future, over 14K of them will receive the security update and will be protected automatically.

There's also bad news too though, since "typical recommendation of keeping your router’s firmware up-to-date is not applicable in this case as no fix is available," as Mursch concludes.

Additionally, "Disabling remote web access as a workaround is not an option because Linksys Smart Wi-Fi routers require it for the Linksys App to function."


Microsoft Patches ‘Wormable’ Flaw in Windows XP, 7 and Windows 2003

Microsoft today is taking the unusual step of releasing security updates for unsupported but still widely-used Windows operating systems like XP and Windows 2003, citing the discovery of a “wormable” flaw that the company says could be used to fuel a fast-moving malware threat like the WannaCry ransomware attacks of 2017.


Over 12,000 MongoDB Databases Deleted by Unistellar Attackers

More to the point, the two most important measures which will prevent the attacks are to enable authentication and to not allow the databases to be remotely accessible.


This is a different issue from the Cisco one above.

Cisco Upgrades Remote Code Execution Flaws to Critical Severity

Cisco upgraded three remote code execution (RCE) vulnerabilities impacting the web management interfaces to critical severity with a CVSS base score of 9.8 after initially rating them as high with a base score of 8.8 when the advisories were first published on May 15.

Cisco Prime Infrastructure (PI) and Cisco Evolved Programmable Network (EPN) Manager are network management tools used by administrators "for provisioning, monitoring, optimizing, and troubleshooting both wired and wireless devices."


How to design a stimulus package

As most modern research on business-cycle stabilisation has focused on monetary policy, not much is known about the properties of an adequate stimulus package. Indeed, because the Federal Reserve has been in charge of stabilisation for several decades, the design of optimal monetary policy has attracted an enormous amount of research, while the design of optimal stimulus packages has been relatively neglected.
...
Several properties of a well-designed stimulus package stand out – because they challenge existing preconceptions. The first is that the size of the stimulus does not follow the bang-for-the-buck logic often invoked in policy discussions. Instead, the relationship between multiplier and stimulus spending is hump-shaped – stimulus spending should be zero for a zero multiplier, increasing in the multiplier for small multipliers, largest for a moderate multiplier, and decreasing in the multiplier beyond that.

This sounds like it's based upon a counterfactual analysis. We didn't have a large stimulus, so how is it known that it would have resulted in diminishing returns to the extent suggested? Wouldn't as much or more depend upon exactly how the money is spent? How was the stimulus targeted? Was it long enough for one?

How is GDP measured? What counts? Does the coal industry? The coal industry is nothing but externalities. Every single ounce of effort going into it could easily be diverted to outputs that are at least constructive on balance. The coal, oil, and gas industries are all net losses. They subtract from real GDP. They cost more than they return.

Naturally, there would be a limit to the positive impact of simply flooding the economy with new money due to resource constraints; however, it seems more variables and more historical data are needed.

Regardless, proper planning can bring demand on right along with the ability to supply.


Europe and the class cleavage

... the European Union, as built in recent decades, is based on widespread competition between countries, on fiscal and social dumping in favour of the most mobile economic actors and functions objectively to the benefit of the most privileged. Until the European Union takes strong symbolic measures for the reduction of inequalities, for example a common tax which impacts the richest, enabling the taxes of the poorest to be lowered, this situation will continue.
...
... there is no reason why present-day Europe should remain imbued with a Hayek-type vision. Today the European banner serves the interests of those whose aim is to impose their class politics. But it is up to us to remind people that Europe could be organised in a different manner as was already the opinion of Wooton, Beveridge or even Robbins almost 80 years ago.


The Disconnect between Inflation and Employment in the New Normal

Governor Lael Brainard

At "Certain Uncertainty: Tax Policy in Unsettled Times" National Tax Association 49th Annual Spring Symposium, Washington, D.C.
...
The emerging contours of today's new normal are defined by low sensitivity of inflation to changes in labor market slack, a low long-term neutral rate of interest, and low underlying trend inflation.
...
While low inflation and low interest rates have many benefits, the new normal presents a challenge for the conventional approach to monetary policy, in which the Federal Reserve could rely on changes in the level of the federal funds rate to achieve its inflation and employment goals. ...
...
... the overall labor force participation rate has remained constant despite the long-term aging of the population that would otherwise be pushing participation lower.
...
Given that the large majority of working-age households, those at the middle and lower ends of the income distribution, rely primarily on wage income, advancing our employment mandate has served the country well. In today's new normal, with the low responsiveness of inflation to labor market tightness, there appears to be little evidence so far of a tradeoff with our price-stability objective. The sustained strengthening of the labor market also adds to the productive capacity of the economy by attracting people on the sidelines to join or rejoin the labor force and move into employment.
...
Of course, there are also risks. The past three downturns were precipitated not by rising inflation pressure, but rather by the buildup of financial imbalances. Extended periods of above-potential growth and low interest rates tend to be accompanied by rapid credit growth and elevated asset valuations, which tend to boost downside risks to the economy.9 It is not hard to see why a high-pressure economy might be associated with elevated financial imbalances, especially late in the cycle. As an expansion continues, the memory of the previous recession fades. Profits tend to rise, experienced loss rates on loans are low, and people tend to project recent trends into the future, which leads financial market participants and borrowers to become overly optimistic. Risk appetite rises, asset valuations become stretched, and credit is available on easier terms and to riskier borrowers than earlier in the cycle when memories of losses were still fresh.
...
One tool other central banks have been using to help temper the financial cycle is the countercyclical capital buffer (CCyB). The CCyB provides regulators with the authority to require large banks to build up an extra capital buffer as financial risks mount.10 Although the CCyB was authorized as part of the post-crisis package of reforms, so far, the Federal Reserve has chosen not to use it. Turning on the CCyB would build an extra layer of resilience and signal restraint, helping to damp the rising vulnerability of the overall system. Moreover, because the CCyB is explicitly countercyclical, it is intended to be cut if the outlook deteriorates, boosting the ability of banks to make loans when extending credit is most needed and providing a valuable signal about policymakers' intentions. This feature proved to be valuable in the United Kingdom in the wake of the Brexit referendum.
...
Finally, let us turn to the apparent softness in underlying trend inflation. One hypothesis for the flat Phillips curve is that central banks have been so effective in anchoring inflation expectations that tightening resource utilization is no longer transmitted to price inflation.11 [That is not the reason.] Another possibility is that structural factors such as administrative changes to health care costs, globalization, or technological-enabled disruption have been dominant in recent years, masking the operation of cyclical forces.12 Regardless, because inflation is ultimately a monetary phenomenon, the Federal Reserve has the capacity and the responsibility to ensure inflation expectations are firmly anchored at—and not below—our target.
...
Of course, it is not entirely clear how to move underlying trend inflation smoothly to our target on a sustained basis in the presence of a very flat Phillips curve. One possibility we might refer to as "opportunistic reflation" would be to take advantage of a modest increase in actual inflation to demonstrate to the public our commitment to our inflation goal on a symmetric basis.17 For example, suppose that an unexpected increase in core import price inflation drove overall inflation modestly above 2 percent for a couple of years. The Federal Reserve could use that opportunity to communicate that a mild overshooting of inflation is consistent with our goals and to align policy with that statement. Such an approach could help demonstrate to the public that the Committee is serious about achieving its 2 percent inflation objective on a sustained basis.


I sometimes disagree with Jeffrey D. Sachs. Not this time. The following two paragraphs are the two best paragraphs I've ever seen from him.

A majority of Americans are neither happy with the way things are going in their country nor naive enough to believe that the 2017 tax cut is a solution to their woes. Unlike many macroeconomists, they know there is more to life than a short-run increase in GDP growth or decline in the unemployment rate. These are at best blurred snapshots that neglect the future, overlook inequalities of outcomes, and fail to reflect the high and rising anxieties of Americans living with overpriced healthcare, massive student debts, and lack of job protection. Nor do they reflect falling life expectancy and the rising burdens of substance abuse, suicides, and depression.

It’s time that economists, pundits, and politicians start looking holistically at life in our times, and take seriously the long-term structural changes needed to address the multiple crises of health care, despair, inequality, and stress in the US and many other countries. US citizens, in particular, should reflect on the fact that many other countries’ people are happier and less worried, and are living longer. In general, those other countries’ governments are not cutting taxes for the rich and slashing services for the rest. They are attending to the common good, instead of catering to the rich while pointing to illusory economic statistics that hide as much as they reveal.

Here's the full article: America’s Illusions of Growth


When American Capitalism Meant Equality

... I looked at how American leaders handled the financial crisis of rolling bank runs occurring from 1929-1933, which was the last time we dealt with such a profound political challenge. What I noticed were profound ideological differences that played out in the response to the crisis. In short, in the 1930s New Dealers broke up banks and restructured the economy. This time, we didn’t.

My conclusion, after researching how New Dealers thought about the world, versus how the New Democrats surrounding Obama thought about the world, led me to the observation that the meaning of American capitalism changed. We transitioned from a relatively egalitarian New Deal state to today’s unequal and concentrated corporate apparatus. This change was accompanied by a parallel shift in how Americans thought about themselves as economic and political actors.
...
“The balance of political power,” Dutton wrote, had gone “from the economic to the psychological to a certain extent—from the stomach and pocketbook to the psyche, and perhaps sooner or later to the soul.” In 1975, a generation trained on these ideas arrived in the Democratic Party. This was Bill Clinton’s generation, the so-called Watergate Babies. In 1978, the Republican version of the Watergate Babies came into office in the form of the New Right (a class which included a young Newt Gingrich).

From 1975 until the early 1980s, these new, increasingly dominant factions of both parties restructured politics around the view that concentrated financial power—monopoly power—was mostly inevitable and efficient. Jimmy Carter changed rules in finance, trucking, airlines, and telecommunications, allowing private concentrated capital to regulate these spheres of the economy rather than democratic institutions. Reagan continued this trend, which came to be known as ‘deregulation.’ Reagan also eliminated antitrust enforcement. Democrats noticed the government cuts and attacks on unions, but they largely missed the shift in antitrust.
...
... The Reagan and Carter deregulatory efforts, along with the removal of New Deal era rules on finance, opened the door Milken walked through. Just the prospect of takeovers changed the way corporations operated. Between 1984-1985, 398 of the 950 largest companies in North America restructured—only 52 in response to actual takeover bids—mostly by loading up on debt.
...
... Barack Obama was asked why America hadn’t taken over the banks and restructured them, like Sweden had in the early 1990s, when it suffered a similar banking crisis. Sweden based its bank resolution model on what FDR had done in the 1930s. When Obama was asked this question, people were talking about the idea of Too Big to Fail banks as the first popular anti-monopoly slogan put forward since Brandeis’s Other People’s Money.

Obama said that Sweden’s plan was a good idea—for Sweden. But there was a problem. Sweden was a small country with a small number of banks. America, by contrast, is really big.

Besides, he added, “We also have different traditions in this country.”

"Too Big to Fail" was widely used concerning American Motors when Lee Iacocca was in his hay day. It was the argument put forth for bailing out the company.

As for Obama, he also said he didn't want to look back. He said that in terms of not prosecuting banksters. However, I'm sure it applied in terms that he didn't want to take on the banks.

FDR took them on and convinced them that the country needed the New Deal, which it did. They didn't like it but went along for their own survival.

Obama was no FDR. I say that as one who believes FDR didn't go nearly far enough.

Anyway, Matt's article is chalk full of history you should at least be exposed to. Most people are way too young to remember the general moods Matt discusses. I remember when the New Deal was still sacred. It was amazing to me when people such as Milton Friedman were actually taken seriously. We ended up with the Great Recession/Depression, which vindicated my thinking all along.

I dipped my toe in libertarian economics but always pulled it back out before losing my economic mind.


10 Smart Tips for Finding Cheap Houses (Yes, They Still Exist in This Country)

I would have said "inexpensive" rather than "cheap," but that's the salesman in me coming out.


Rental Property Numbers So Easy You Can Calculate Them on a Napkin (With Real-Life Example!)

Repairs: Again, this is an estimate, but it should not be left out. Just like with vacancy, I err on the side of conservative. If a house is a turnkey property or recently rehabbed and gets a good report from the inspector, I use 5% of the monthly rent. If the property is not in top shape, conservative could mean closer to 25%. Use your judgment on deciding what percentage to use for your estimate, but don’t overestimate the quality of your property and estimate too low.


Why Buying Into Section 8 Myths Is Leaving (Big!) Money on the Table [With Photo Tour]

I buy properties in relatively safe, quiet, and peaceful neighborhoods. Most of my Section 8 tenants are escaping neighborhoods that are quite the opposite.

Therefore, a housing voucher is their golden ticket to a neighborhood free of drugs, gangs, and other negative influences. Their voucher is a gateway to a better quality of life for the entire family. So when they move into one of my houses, they usually stay for many, many years.


Here's the article to which the one right above was redirecting before I archived the one above: 5 Reasons Why Section 8 Tenants Are the Best Renters


Want to Pay Less in Taxes? You Need This Designation (& May Already Qualify!)

... cost segregation reduces tax liability by using the depreciation captured as a written loss on your taxes. Cost segregation losses are considered passive losses (real estate losses) and can only be used to offset passive income. However, if you are a REP, you can use cost segregation’s losses against ordinary income!


Trump’s Plans for Protecting Polluters Have Been a Devastating Success

At the EPA, a 2017 memo signed by the agency’s former director for civil enforcement instructed regional enforcement officers to seek permission from Washington before ordering certain air and water pollution tests. These tests are often necessary to determine whether companies violated environmental laws. The result was to clog the case-building pipeline, causing such fact finding activities to decline in at least two of the agency’s most active regional offices. The messaging has caused confusion and dampened spirits among many of the agency’s investigators. The agency additionally inspected fewer industrial facilities during 2018 under Trump than at any time in the preceding decade.
...
All administrations shuffle enforcement priorities, and some observers have posed contextual quibbles over the data documenting the decline. But the overall scale at which the Trump administration is pulling back on enforcement actions against corporate actors, banks, and polluters would be shocking under any other administration. As fewer cases gestate within the agencies’ ranks, companies will be emboldened to violate with greater impunity laws meant to protect public health, safety, and financial well-being. That’s bad news for all of us.


415.26 parts per million: CO2 levels hit historic high

The last four years were the four hottest on record and, in spite of the Paris deal and increasing public awareness of the problem, mankind continues to break its own emissions records, year on year.


Single-use plastics a serious climate change hazard, study warns

“With the petrochemical and plastic industries planning a massive expansion in production, the problem is on track to get much worse.”

The key actions which the authors say are required are:

• Immediately end the production and use of single-use, disposable plastic.

• Stop development of new oil, gas and petrochemical infrastructure.

• Foster the transition to zero-waste communities.

• Implement a system where polluters pay for the impact of their products – known as extended producer responsibility.
...
Forty per cent of plastic packaging waste is disposed of at sanitary landfills, 14% goes to incineration facilities and 14% is collected for recycling. Incineration creates the most CO2 emissions among the plastic waste management methods.
...
Refining the material is the most greenhouse gas intensive part of the plastic lifecycle, and major expansions in the US and elsewhere will accelerate climate change, the report says.
...
In 2019 the lifecycle of global plastic production – from extraction to disposal – was equivalent to the impact on the climate of 189 500MW coal-fired power stations. By 2050, the report predicts, the global plastic footprint will be equivalent to 615 coal plants running at full capacity.


Tornadoes, High Winds Destroy Homes in Texas, Oklahoma and Louisiana

Severe thunderstorms continued to rumble across parts of the U.S. Sunday, damaging buildings in Louisiana after spawning reports of tornadoes through north-central Texas and eastern Oklahoma on Saturday.


These States Have Had the Most Violent Tornadoes Since 1950

Less than 1 percent of all tornadoes were assigned the EF4/F4 or EF5/F5 rating from 2000 to 2010.

Despite their infrequency, tornadoes that produce this extreme damage account for more than half the deaths from all twisters.


Spring's Record-Late Arrival in Parts of the U.S. Has a Serious Consequence

Snowmelt and heavy rainfall brought significant river flooding to parts of the Plains and Midwest in March. Many farming fields were ruined and will not be planted this year, according to the National Climatic Data Center (NCDC).


It's the Most Favorable Time of Year For the Most Violent Tornadoes in the U.S.

We examined NOAA's tornado database from 1950 through 2017 for the 628 violent (F/EF4+) tornadoes to see if there is a peak time of year, and found there's a broad peak from April through early June.


Europe Is Now a Bigger Trade Villain Than China

The reduction in China’s external imbalance has been dwarfed by the emergence of a new glut emanating from Europe. Measured in dollars, Italy’s excess production in 2018 was larger than China’s. Excess output from the 19 members of the euro area is now worth about 0.6% of world production—a half-percentage point higher than in 2007.

Add in Denmark, Switzerland, and Sweden, which have broadly similar policies, and Europe’s total surplus has been bigger than China’s ever was since 2013. (China’s neighbors, meanwhile, have maintained their large collective surplus.)

The sustained increase in Europe’s external surplus has little to do with “competitiveness” or “reforms.” Instead, it is a function of the region’s battered domestic economies: Consumption and investment fell, which depressed imports, while exports rose in line with global demand.

Many ideological problems emanate from Europe, but China still poses the bigger hurdle in that regard. Due to the excesses of deregulation in the US, increased laissez-faire capitalism has given democracy a bad reputation. Many people are thinking incorrectly that democracy doesn't work. They point to the rising, harmful rate and degree of inequality as their reason for thinking so. However, it was the weakening of democracy that allowed the deregulation that led to the inequality. The cure is stronger democracy, not the totalitarianism of China. Statistically and historically, democracy is better for overall economic and societal success and health. Dictatorships hit a plateau proper democracies don't.


Fed Challenged Over View That Leveraged Loans Won't Cause Crisis

The leveraged lending market — a subset of almost $1.2 trillion in borrowing that often funds mergers and acquisitions involving heavily indebted companies — grew 20% last year. The Fed, in a report issued last week, pointed to decreasing protections for lenders, with the risk typically passed on to investors in the form of collateralized loan obligations.
...
Global regulators are trying to learn more about who is buying CLOs that could suffer in a downturn, Quarles said, but he reiterated that U.S. banks aren’t very exposed. At the same time, he and others have noted that bank regulators have limited say in the riskiest end of the market, pointing to nonbanks as the lenders making the most hazardous deals.


SF’s homeless population breaks 8,000

The initial estimate of San Francisco’s most recent Homelessness Point-in-Time Count, conducted in January, reveals that SF’s homeless population swelled by more than 500 persons since 2017, for an overall estimate of more than 8,000.

This is a direct reflection on our system. There's no good reason for not housing everyone in decent housing.


A Major Coal Company Went Bust. Its Bankruptcy Filing Shows That It Was Funding Climate Change Denialism.

In 2016, Greg Zimmerman, an environmental activist, stumbled upon a presentation titled “Survival Is Victory: Lessons From the Tobacco Wars.” The slide deck was the creation of Richard Reavey, a vice president for government and public affairs at Cloud Peak Energy, and a former executive at Phillip Morris. Reavey argued that fossil fuel firms, particularly coal, should emulate the tactics of big tobacco, which similarly spent decades battling scientists and regulators over claims that its product harmed public health.

In the New York Times coverage of the episode, Reavey told the paper that his firm “has never fought climate change — never fought it, never denied it or funded anyone who does.” The bankruptcy filing from last week, however, suggests otherwise.

The longer we allow global-warming denial to interfere with making the right political decisions, the more it will cost all of us in money, health, and safety.


Loads of stats:

Explained, the economic ties between Europe and Asia

Asia and Europe are now leading trade partners, with $1.5 trillion of annual merchandise trade, overtaking each continent’s trade with the United States. A new study gathering an unprecedented range of bilateral data between country pairs pinpoints the economic, social and political ties between 51 Asian and European countries.
...
... Sustainable connectivity is the new name of the game.
...
... better connected countries are also associated with larger impacts on the environment, which translates into higher greenhouse gas emissions and domestic material consumption. Policy-makers are faced with the challenge of minimizing the environmental impact of connectivity, and ensuring that its benefits are inclusive for all members of society.


James Bullard Discusses Nominal GDP Targeting

I think the question about both nominal GDP targeting and price-level targeting is whether the additional gains that you would get are going to be that big compared to what you already are getting from inflation targeting.
...
It’s the kind of thing where you might say, “OK, we switched to nominal GDP targeting.” Nobody notices in the entire economy. No one pays any attention, and you don’t get any of these effects at all. I think that would be the kind of thing that is very practical and could possibly happen, because private-sector people might say, “Well, I don’t understand it,” or “I don’t see what the difference is between this and inflation targeting. It’s all too subtle.”

Pointless. They translate into the same thing.


This simple trick could make it a lot harder for corporations to skip out on their tax bill

Donald Trump and his Republican entourage promised big benefits to workers from their massive corporate tax cut of 2018—but many workers discovered they ended up paying more than they had in previous years.

What’s more, the investment boom projected by the tax cuts proponents have utterly failed to materialize. “The good news is that there is a way to tax multinationals in a way that addresses both tax competition for real activity and for paper profits,” Zucman writes.

Individual countries can avoid profit-shifting by taxing the consolidated profits of firms proportionally to where they sell products.

“Concretely, if Apple AAPL, -0.57% sells 20% of its products in the United States, the U.S. federal government would say that 20% of Apple’s global profits are taxable in the United States,” the economist argues.
Can’t move your customers

“This would put an end to profit shifting because firms cannot affect the location of their customers (they can’t move their customers to Bermuda; and if they try to pretend that they make a disproportionate fraction of their sales to low-tax places, this form of tax avoidance is easy to detect and anti-abuse rules can be applied),” Zucman says.

“This would also put an end to competition for real activity, because in such a system there is no incentive for firms to move capital or labor to low-tax places; the location of production becomes irrelevant for tax purposes,” he says.

I like it.


This one reinforces my point above concerning China, laissez-faire-leaning economics, and the reputation of democracy.

Inequality driving 'deaths of despair'

Widening inequalities in pay, health and opportunities in the UK are undermining trust in democracy, says an Institute for Fiscal Studies report.

The think tank warns of runaway incomes for high earners but rises in "deaths of despair", such as from addiction and suicide, among the poorest.

It warns of risks to "centre-ground" politics from stagnating pay and divides in health and education.

The report says such widening gaps are "making a mockery of democracy".


Disclaimer: I've always been a strong advocate of a national industrial policy.

A New Paper from IMF Researchers Puts Industrial Policy Back in the Limelight

To achieve their high growth rates, the “Asian miracles” relied on what development experts call industrial policy, in which governments encourage the growth of certain industries ahead of others, and sometimes even certain firms ahead of others, because they have higher future growth potential. ...
...
If nothing else, the paper is a reminder that economists at the IMF, often perceived as ideologically homogeneous, can sometimes disagree with one another quite vigorously.

The IMF regularly advises developing countries to adopt policies that hew close to its “standard growth recipe” — macroeconomic stability, privatisation, and so on. Cherif and Hasanov’s paper says that those same policies “constitute the lowest gear” of growth models, or “the snail crawl approach” to development.
...
Still, the IMF’s receptivity to economic models outside the usual frameworks shouldn’t be overstated. Professor Wade cautioned that Cherif and Hasanov are employed in a marginal part of the IMF, and that their paper may have next to no readership among the rest of the IMF staff, let alone any influence on thinking.

“The neoclassical paradigm is very well-defended,” he said, “and most of the debate Minouche refers to is well within the bounds of the neoclassical paradigm.”

What the article misses is that people outside the IMF read these things and then cite them, as you can see right here. That helps to spread non-neoclassical models and ideas. I am squarely opposed to the neoclassical model and always have been. It was a huge mistake for the US to have ever gone down that path. We've been paying for that mistake now for a good four decades.


This is pointing out the obvious that most people completely miss.

Economics from the Top Down

If you’re a free market ideologue, you need to wrestle with this growth of hierarchy. No society on earth has industrialized using small-scale competition. Instead, concentrated power seems to be the name of the game.
...
... imagine that Walmart is purchased by a free market ideologue. Utterly convinced that the market knows best, the ideologue dismantles Walmart’s hierarchy and replaces it with a free market. In the new Walmart, each of the 2 million employees become private contractors. These contractors bid for every task and obey only the highest bidder. There is no CEO, no chain of command, no formal positions of any kind. Every task and every responsibility is up for auction.

How long will the new Walmart last? You probably agree, not very long. Without the chain of command, Walmart would probably [not probably but would definitely] collapse. ...
...
I’ve assumed here that the ‘free market’ is equivalent to small-scale competition. I’ve characterized the ‘free market’ as a sea of individuals, each bartering and trading with one another. But the savvy reader likely knows that the phrase ‘free market’ is often used in an Orwellian sense.

You’ll here billionaires like the Koch brothers praise the ‘free market’. Their language evokes pleasant images of entrepreneurs and small businesses. But in reality, the Koch brothers (and other free-market advocates) usually seek policies that benefit big business (i.e. large hierarchies). So the term ‘free market’ is doublespeak for the unfettered power of large hierarchies.


Where are we in the economics of industrial policies?

A new generation of work has been moving us beyond the largely ideological debates of the past to a more contextual, pragmatic understanding. The most recent strand is rooted in two developments. One of these is the indisputable economic success of China, a country that has made liberal use of a diverse array of industrial policies: cheap loans, public ownership, local-content requirements, export subsidies, and technology-transfer requirements. The other is the dissatisfaction with Washington Consensus-type policies, which in Latin America and elsewhere produced weak returns in terms of structural change and productive diversification.
...
... Consider a setting where market imperfections are widely distributed throughout the economy. An implication of second-best theory is that reducing the distortion in industry A may make things worse if industry B is a general-equilibrium substitute for it and also has a large distortion. That is because expanding industry A results in a contraction of industry B. But when industry A is an input (an upstream industry), it will tend to be a general-equilibrium complement to other distorted industries. So reducing the distortion in A makes things better for B (and C, D, E, etc.) as well, since it leads to an expansion of all those industries. This is a case where the second-best interactions magnify the original gain rather than countering and reversing them. Therefore, the more upstream an industry is, the more beneficial it is to support it.

Liu (2017) formalises and generalises this intuition to show that it rationalises industrial policies that subsidise more upstream industries. He then applies the framework to South Korea during the 1970s and contemporary China. He finds in both cases that industrial policies were in conformity with the first-order implications of the theory.

This has clear implications for the Green New Deal (GND) in terms of avoiding and mitigating resource-constraint issues. I've advocated for the GND and said that proper planning is the key. In arguing as such, I've clearly stated that proper planning must start with the first inputs in the entire supply chain in order to arrive at the proper outputs where supply and demand are balanced via democratic choices in the first place and adequate funding in the form of monetary financing, which is printing money with no governmental borrowing.

Rather than people only voting with dollars in laissez-faire price discovery, we'd actually primarily vote with our votes for what we want collectively. Proper planning is key, but complete transparency is key to that. We can't have the best economy if things are hidden from us by private corporations and captured governments.


Low Inflation Cloaks Consumer Pain Inflicted by Trump's Tariffs

“The costs of the tariffs have fallen entirely on U.S. businesses and households,” [hogwash] Goldman Sachs Group Inc. economists wrote in a recent note, where they made similar calculations about the levies’ impact on inflation.
...
Meanwhile, Trump has sought to enlist the Fed in his trade fight, urging policy makers Tuesday to “match” what he said Beijing would do to offset the hardship caused by U.S. tariffs.

That's exactly what I said in my post of May 13, 2019, that the Fed should do. "Should the Fed turn on a dime with every increase or decrease in tariffs on Chinese goods? Yes."


“There is no reason for the U.S. consumer to pay the tariffs,” Trump tweeted Monday. Tariffs can be “completely avoided if you buy from a non-tariffed country, or you buy the product inside the USA (the best idea). That’s zero tariffs.”

Trump often points to the China trade deficit — or the disproportionate amount of imports from the Asian nation — as a reason for the duties. China is the No. 1 trading partner with the U.S., with $659.8 billion of total goods being traded between the two countries in 2018, according to USTR data. Exports, however, totaled $120.3 billion, while imports totaled $539.5 billion. That brings the goods trade deficit with China to $419.2 billion.

The laissez-faire camp is dreading Trump's tariffs actually working. They trot each other out to make "expert" statements against the trade war. Meanwhile, they avoid like the plague any positives associated with the tariffs, whether short or long term.

They hate the idea of thinking of the US as one. They don't want a unified all-American approach. That's because that approach is governmental. You see, if the government does anything right and does it concerning something the private sector could never do, then the People will get the right idea that the government can do things right that the private sector could never do.

The laissez-faire crowd only thinks collectively when it suits them. For instance, it suits them that the huge entity Amazon is treated as a person under the law. It suits them that Amazon is completely hierarchical rather than a free market internally. However, when it comes time to view the US as one and China as one, they hate it. It doesn't work to their individual advantage.

Therefore, they only tell negative stories about trade wars via tariffs.

Look, we the People of the United States are already paying a "tax" on what we import and buy from China. We are paying the $419.2 billion quoted above. We are paying in many other ways all associated with the "free traders" having taken high-paying, middle-class jobs from the US to other places, especially China. We are paying for it by a China that's being extremely belligerent concerning the South China Sea and Taiwan, etc., and a China that's telling the world that democracy is evil.

You decide. Do you want low priced items from China that hide all the costs you don't usually think about, or do you want to get this trade war over with, with China having capitulated so that we're actually free from the machinations of the Chinese dictatorship?

Is Trump taking all the right stances and getting Europe and the rest of the world on board via arguments that can't be refuted? Unfortunately, no. Will he get wind of this? Yes.


Fantastic, short article:

3 Things More Important to Trade Than Tariffs, by Matthew C. Klein

Tariffs are only one of many forces that affect the relative prices of goods and services. In practice, currency movements, concessional financing terms, and the labor share of income are often far more important, yet receive far less attention from ostensible trade experts.


Universal Basic Income (UBI) is a libertarian idea to do away with welfare programs. Progressives have always been for a Universal Living Income (ULI), which is substantially above the poverty line. I'm getting the impression that the UBI is being morphed into the ULI by progressives. They are co-opting the term and redefining it.

Something the article doesn't mention is that John McDonnell has acknowledged that taxes would not have to go up to pay for it. The government (the central bank) could simply issue the money.

Universal Basic Income: The UK May Host One of the Biggest Trials Yet


Multifamily lenders balk at N.Y.’s proposed tenant-friendly reforms

The goal of the proposals is not to make it harder for landlords to conduct maintenance or make large capital improvements, but to root out bad actors who created business models based on evictions and subsequent rent hikes, Weisberg said.

It's a tightrope.


Privatizing public power is a terrible idea!

Trump Wants to Sell Public Power Agencies to Wall Street

Trump’s A Budget for a Better America asserts that “Reducing or eliminating the Federal Government’s role in electricity transmission infrastructure ownership, thereby increasing the private sector’s role, and introducing more market-based incentives, including rates, for power sales from Federal dams would encourage a more efficient allocation of economic resources and mitigate risk to taxpayers.”

The budget provides zero factual support for these claims.

Privatizing would drive rates way up, hurting average payers while further enriching the already rich. Trump knows it. So, why does he want to do it? Backing and donations.


I want one.

GE’s Record-Breaking 12MW Offshore Wind Turbine Wins Backing of Swedish Utility Vattenfall

Swedish utility Vattenfall announced plans to deploy GE Renewable Energy’s 12-megawatt Haliade-X offshore wind turbine at future projects in Europe — a big win for the world’s largest wind turbine, and for GE’s otherwise lagging offshore wind business.

First announced last year and due to begin commercial deliveries in 2021, the Haliade-X will be capable of generating enough power from a single turbine to supply 16,000 European households, or an estimated 67 gigawatt-hours per year if sited in typical conditions in the German North Sea, GE said.
...
Haliade-X will use 107-meter blades, the longest ever manufactured.


Trump's tariffs are equivalent to one of the largest tax increases in decades

However:

... consumers and businesses can reduce this tax hit by substituting away from high-priced goods and Chinese production. Some of that production could come back to the U.S. or simply move to other countries.


Employee wellbeing, productivity, and firm performance: Evidence from 1.8 million employees

The work presented here is suggestive of a strong, positive correlation between employee wellbeing, productivity, and firm performance. The evidence-base is steadily mounting that this correlation is, in fact, a causal relationship (running from wellbeing to productivity). ...

... Interventions aimed at raising productivity should target the key drivers of wellbeing at work, such as social relationships, making jobs more interesting, and improving work-life balance ....


Stimulus needed:

Why printing money makes sense (Note: this is from October 12, 2010)

... suppose that we had a super-effective counterfeiter: someone who could make near perfect copies of $50 or $100 bills. Suppose this person printed up $2tn of counterfeit money and began to spend it on all sorts of items. Our counterfeiter buys up houses and cars. They pay for incredibly lavish parties and trips. They hire all sorts of servants, groundskeepers and investment advisers.

What would be the effect of this counterfeiting scam on the economy?

In the current situation, it would provide an enormous boost to GDP and create millions of jobs. After all, everyone thinks the money is real. It is no different whether the counterfeiter and his underlings spend $2tn of counterfeit money or if firms suddenly start investing their hoards of cash or households begin to spend again as though the housing bubble had never collapsed.

That may sound troubling, but this is because the current economic situation is so extraordinary. In normal times, the economy is, at least partially, supply-constrained. Collectively, we want more goods and services than the economy is capable of producing. If our counterfeiter manufactured his $2tn in normal times, it likely would cause a serious problem of inflation. There would be more demand for cars, houses and other goods than the economy was able to supply. This would push up prices and wages, leading to a cycle of inflation that would persist until policy measures were taken to slow the economy – or the counterfeiter was caught.


The 5 Percent New Grocery Store Rent Premium

Citing the oft-observed "Whole Foods effect", whereby the presence of the grocer increases real estate values in the vicinity, Newmark Knight Frank has released an analysis of how the introduction of a new grocery store raises rental rates in nearby apartments.