A Buying Frenzy Has Been Encouraged
A weekend topic starting with a piece by Matt Barrie with Craig Tindale. “I recently watched the federal Treasurer Scott Morrison proudly proclaim that Australia was in ’surprisingly good shape.’ Indeed, Australia has just snatched the world record from the Netherlands, achieving its 104th quarter of growth without a recession, making this achievement the longest streak for any OECD country since 1970. I was pretty shocked at the complacency, because after 26 years of economic expansion, the country has very little to show for it.”
“For over a quarter of a century our economy mostly grew because of dumb luck. Luck because our country is relatively large and abundant in natural resources, resources that have been in huge demand from a close neighbour — China. As a whole, the Australian economy has grown through a property bubble inflating on top of a mining bubble, built on top of a commodities bubble, driven by a China bubble.”
“Unfortunately for Australia, that ‘lucky’ free ride is just about to end. Societe Generale’s China economist Wei Yao recently said: ‘Chinese banks are looking down the barrel of a staggering $1.7 trillion worth of losses.’ Hyaman Capital’s Kyle Bass calls China a ‘$34 trillion experiment’ which is ‘exploding.’ where Chinese bank losses ‘could exceed 400 per cent of the US banking losses incurred during the subprime crisis.’”
“The initial rally in commodities at the beginning of 2016 was caused by a bet that more economic stimulus and industrial reform in China would lead to a spike in demand for commodities used in construction. That bet rapidly turned into full-blown mania as Chinese investors, starved of opportunity and restricted by government clamp downs in equities, piled into commodities markets. This saw, in April of 2016, enough cotton trading in a single day to make a pair of jeans for everyone on the planet, and enough soybeans for 56 billion servings of tofu, according to Bloomberg.”
“Market turnover on the three Chinese exchanges jumped from a daily average of about $78 billion in February to a peak of $261 billion on April 22, 2016 — exceeding the GDP of Ireland. By comparison, Nasdaq’s daily turnover peaked in early 2000 at $150 billion.”
“While volume exploded, open interest didn’t. New contracts were not being created, volume instead was churning as the hot potato passed between speculators, most commonly in the night session, as consumers traded after work. So much so that sometimes analysts wondered whether the price of iron ore is set by the market tensions between iron ore miners and steel producers, or by Chinese taxi drivers trading on apps.”
“In April 2016, the average holding period for steel rebar and iron ore contracts was less than three hours. The Chief Executive of the London Metal Exchange, said ‘Why should steel rebar be one of the world’s most actively-traded futures contracts? I don’t think most people who trade it know what it is.’”
“Unfortunately, in 2017, China isn’t as desperate anymore for iron ore, where close to 50 per cent of Chinese steel demand comes from property development, which is under stress as house prices temper and credit tightens. In May 2017, stockpiles at Chinese ports were at an all time high, with enough to build 13,000 Eiffel Towers. Over the last six years, the price of iron ore has fallen 60 per cent.”
“With an economy that is 68 per cent services, as I believe John Hewson put it, the entire country is basically sitting around serving each other cups of coffee. Successive Australian governments have achieved economic growth by blowing a property bubble on a scale like no other. A bubble that has lasted for 55 years and seen prices increase 6556 per cent since 1961, making this the longest running property bubble in the world (on average, ‘upswings’ last 13 years).”
“In 2016, 67 per cent of Australia’s GDP growth came from the cities of Sydney and Melbourne where both state and federal governments have done everything they can to fuel a runaway housing market. The small area from the Sydney CBD to Macquarie Park is in the middle of an apartment building frenzy, alone contributing 24 per cent of the country’s entire GDP growth for 2016, according to SGS Economics & Planning.”
“This can only be described as completely ‘insane.’That was the exact word used by Jonathan Tepper, one of the world’s top experts in housing bubbles, to describe ‘one of the biggest housing bubbles in history.’ ‘Australia,’ he added, ‘is the only country we know of where middle-class houses are auctioned like paintings.’ Our Federal Government has worked really hard to get us to this point.”
“The government decided to further fuel the fire by ’streamlining’ the administrative requirements so that temporary residents could purchase real estate in Australia without having to report or gain approval. It may be a stretch, but one could possibly argue that this move was cunningly calculated, as what could possibly be wrong in selling overpriced Australian houses to the Chinese?”
“I am not sure who is getting the last laugh here, because as we subsequently found out, many of those Chinese borrowed the money to buy these houses from Australian banks, using fake statements of foreign income. Indeed, according to the AFR, this was not sophisticated documentation — Australian banks were being tricked with photoshopped bank statements that can be bought online for as little as $20.”
“UBS estimates that $500 billion worth of ‘not completely factually accurate’ mortgages now sit on major bank balance sheets. How much of that will go sour is anyone’s guess.”
“At the end of July 2017, according to Domain Group, the median house price in Sydney was $1,178,417 and the Australian Bureau of Statistics has the latest average pre-tax wage at $80,277.60 and average household income of $91,000 for this city. This makes the median house price to household income ratio for Sydney 13x, or over 2.6 times the threshold of ’severely unaffordable.’ Melbourne is 9.6x.”
“This is before tax, and before any basic expenses. The average person takes home $61,034.60 per annum, and so to buy the average house they would have to save for 19.3 years — but only if they decided to forgo the basics such as, eating. This is neglecting any interest costs if one were to borrow the money, which at current rates would approximately double the total purchase cost and blow out the time to repay to around 40 years.”
The Globe and Mail. “In Vancouver, the detached house owner is often vilified. So too, is the resident who protests density. They are vilified by what one academic is calling ‘the housing supply myth,’ which is the belief that we need more housing in order to lower costs. It’s an argument commonly used by politicians, industry, and some academics and citizen activists. ‘There is an intuitive appeal to that argument,’ says Dr. John Rose, who spent the last year on education leave, researching the popular belief that Vancouver has a lack of housing supply. ‘We understand this idea of supply and demand, intuitively, even if you haven’t taken an economics course.’”
“However, he has concluded that Vancouver does not have a shortage of housing units. In fact, we have a surplus. And, as anybody in Metro Vancouver knows, prices have not plummeted as a result. ‘If we are looking back at the last 15 to 20 years, we have been providing more than enough units of housing – and it’s still unaffordable. And yet, you see this argument being thrown out there by various quarters, that we have this housing shortage.”‘
“He also looked at supply in housing markets elsewhere in Canada, the United States and Australia. ‘As a resident of Metro Vancouver and observing all this construction around me, I thought: ‘How do we have a housing shortage?’”
“And despite a surplus of housing stock, affordability has significantly worsened – a contradiction to the supply mantra. ‘We would think that if a market got less affordable, maybe that meant supply was getting tighter and tighter. But that’s baloney. That’s garbage,’ he says. ‘So my answer to the supply argument is that it’s tenuous for all the markets, because you can basically see no relationship – and this is over a 15-year period. Here we’ve had more than enough supply and yet the housing costs have gone crazy.’”
“Josh Gordon, assistant professor at Simon Fraser University’s School of Public Policy, has regularly spoken out against the more-supply argument. ‘There’s simply no evidence of a slowdown in construction or supply,’ says Dr. Gordon. ‘The construction industry in Vancouver is operating at full throttle. There are around 40,000 units under construction, which is twice the historical average for the post-2000 period. The idea that we should get more supply into the pipeline is a bit silly. The role of the supply argument is, to a large extent, to distract the public and policy makers from action on the demand side, specifically in terms of foreign capital.’”
“There are supplyists who are notoriously confrontational, particularly on social media, and Dr. Rose knows that his findings will be challenged. ‘Bring it,’ he says. ‘Here’s the data. If you want to argue against it, go ahead. It’s publicly available. And when I did this research, I had my independence. Nobody owns this. I get no sponsorship from any industry, any sector. I’m a free agent.’”
“‘I think that’s a benefit of this research. It’s not coming from a school of business that is being funded by the real estate industry, or somebody who’s passionate about densification and smart growth. I think there’s some romanticizing going on, about what the ideal city should look like, and unfortunately it gets sucked into this debate about affordability. I’m just saying look at the numbers, and we see Vancouver has plenty of supply. And can we build ourselves out of this? Not in this current model.’”
A letter to the editor in the Islington Tribune. “In the 1970s I had to travel to Portugal before I saw people begging on the streets. Now, I only have to walk down Stroud Green Road to see evidence of real housing need. But we are assured that an increase in housing supply will enable everyone to afford a home. This theory might apply to some commodities, under certain conditions, but not housing in 2017.”
“Our neoliberal governments have infected our basic need for homes with, first, their desire for a ‘property-owning democracy’ and then for us to acquire property assets to use as collateral for further debt with which to fuel the economy and keep them in power. Since the ’70s those same governments have allowed banksters to create the majority of new money, not to risk on manufacturing, agriculture or even house-building, but primarily for the purchase of existing housing.”
“In consequence, house prices have risen without the accompanying increase in productivity and the distributed incomes that would have generated genuine affordability. A buying frenzy has been encouraged, a race to get on the property-asset ladder while the bubble is still inflating. Dropping interest rates, in a misguided attempt to encourage the sort of investment that would actually increase wealth, has only served to divert the savings of ‘the haves’ into property.”
“The primary purpose of London’s housing is now to act as a treasure chest. Rather than blame the free market, government has put up a smokescreen of ‘initiatives,’ including the concept of so-called ‘affordable housing,’ that do nothing to address the underlying problem, which is their failure to manage the money supply.”
The first two articles are worth reading in full. The letter to the editor is by Chris Graham.
Is your junk blowing up?
Financial Times
High Yield Bonds
Junk bond funds suffer biggest outflows since 2014
Corporate vehicles suffer withdrawals of $5.1bn in week to November 15
yesterday
Eric Platt and Joe Rennison in New York
Investors retreated from high-yield bond funds last week as selling pressure intensified across the $1.3tn asset class and spurred the fastest pace of outflows in more than three years.
Funds that invest in junk-rated corporate bonds suffered withdrawals of $5.1bn in the week to November 15, the largest single week of outflows since market turbulence around the Russian invasion of Ukraine in August 2014, according to data from EPFR.
For the year, more than $8bn has been pulled from the asset class.
…
“Picking up pennies in front of a steamroller” was a popular saying about 6 months ago here on the HBB
‘The initial rally in commodities at the beginning of 2016 was caused by a bet that more economic stimulus and industrial reform in China would lead to a spike in demand for commodities used in construction. That bet rapidly turned into full-blown mania as Chinese investors, starved of opportunity and restricted by government clamp downs in equities, piled into commodities markets. This saw, in April of 2016, enough cotton trading in a single day to make a pair of jeans for everyone on the planet, and enough soybeans for 56 billion servings of tofu’
The MSM does cover these things but never connects the dots. Remember the 100 years of concrete in 3? That was way before 2016. Remember their government hyped stock bubble? The bond bubble? The freaking garlic bubble!
All that money and where to put it? I watched Copper for awhile. The traders in the pits “helped” it along. The illusion of demand kept feeding the beast.
Follow NEO. This is another vehicle ripe for manipulation.
Flight money is still in full throttle.
What was that phrase about the A shares that they were using as a rallying in China a few years back? I’ve already forgotten it and google isn’t helping me, although in searching I did come across this lovely article:
China’s New Investment Hype: Soccer Stocks https://www.forbes.com/sites/jnylander/2015/05/04/chinas-new-investment-hype-soccer/#566affcc323b
May 4, 2015
China’s soccer league is plagued by corruption, match-fixing and betting fraud. Despite the country’s huge populations, its national men’s team is ranked lower than Haiti and Mali in FIFA’s latest scorecard.
Still, shares in Chinese soccer related companies have more than doubled over the past year, Bloomberg said in a report.
Since President Xi Jinxin first outlined a 50-point road map in March 2014 to make China a soccer superpower, the country’s nine listed firms with ties to the league have surged an average 158 percent.
“To invest in China, you need to follow policies,” Tao Ye, a sports-industry analyst at Minsheng Securities in Beijing, told the news bureau. “Soccer reform is getting a big push from the top and that’s why relevant stocks have gained so much.”
Makes perfect sense to me.
‘The construction industry in Vancouver is operating at full throttle. There are around 40,000 units under construction, which is twice the historical average for the post-2000 period. The idea that we should get more supply into the pipeline is a bit silly. The role of the supply argument is, to a large extent, to distract the public and policy makers from action on the demand side, specifically in terms of foreign capital.’
This is why I’m not interested in doing the supply argument with posters any more. San Francisco just capped off a 72 year high in housing construction. Boston - 60 year high. And you want to tell us we have to build more? How many years have they been saying this? It’s just a myth.
The cheap and easy obama dollars need to find somewhere to die.
The irony to some:
The higher the interest rates go, the more affordable housing gets.
Dr. Rose has an interesting hypothesis.
I tend to believe him.
I (in particular) am not saying more luxury housing needs to be built in SF, or NYC, or LA, or SD, or any of the places that have had a massive influx of capital from large domestic and international investors.
What I am saying is that building 1.2MM housing units nationwide is well below the amount we need given population grown and the age of our existing housing stock, and that until this number rises considerably, a major, nationwide housing price/rent correction is unlikely.
Here’s what I’m not understanding about this “supply shortage” meme that’s essentially every single market in the United States. How in the world have rent prices been able to increase so much in the face of a glut of houses? What is going on here? Is it simply a case of speculators holding mass properties, not even renting them? I don’t get it.
I’m with you on this. I would love to see a histogram on US households and number of properties own. Like, what percentage of households own 2, 3, 4, 5, 6+ properties? It was interesting to read this morning that Vancouver put AirBnB restrictions on.
The AirBnB thing makes no sense to me, either. For every successful AirBnB rental, there’s an empty hotel room, yet hotel rates are through the roof, too, and vacancies are low. We haven’t had some sort of massive population increase. It’s confounding. I really am at a loss as to what’s going on with this economy.
It could be that housing is more price sticky and resistant to supply/demand. It could also be that external capital flows and relaxed lending standards are more than compensating for supply/demand factors. I personally think that housing is unique because it is difficult and impractical for potential consumers to sidestep the market and find reasonable alternatives. It’s not simply a matter of producing more because it’s not like a widget that can easily be shipped to and fro and stocked on some shelf or delivered via Amazon. To some degree, renters and individuals who need to buy are at the mercy of the market. When the price of tulips goes parabolic, you stop buying tulips. It’s a bit more difficult to take the same approach with housing, either buying or renting.
So you’re saying there’s a shortage. Meh, not buying it. I can find empty houses everywhere around here, and other states I am intimately familiar with.
Consider this:
There are people who can’t afford hotel rooms and eating out for 5 for a week in NYC.
However, they can afford an apartment that has a kitchen for a week.
While you could always find an apartment to rent if you looked hard enough, AirBNB has made it easy (and so more people do it).
Same story with Uber…in many markets, getting a cab was a huge hassle (dispatcher, delays, etc.). More reliable means more use.
You could “see” 100 houses in your personal experience and it would be irrelevant to reality. It’s like saying AH4R impacted the market by purchasing 50,000 foreclosures! 50,000 houses is a rounding error in the housing totals.
“……How in the world have rent prices been able to increase so much in the face of a glut of houses?”
There is no glut. If there was, prices would drop. There are many reasons for the demand, which sets prices in the margins….which causes distortions in “value”.
In Vancouver, the marginal demand is the Chinese, who like the international city as a place to “park” wealth. Sure, building 40,000 units in Vancouver (probably over a 2-year period) should accommodate 50,000 new residents/year…or 2% population growth. However, demand from offshore buyers using housing as a safe deposit box soaks up much of the production. IT IS STILL DEMAND.
Until the demand side of the equation is addressed, supply is still a problem.
There is likely a large shadow inventory of non-performing assets being discreetly managed such that current assets retain or increase their market value. I’m located in an agriculture region of Washington state, and I pedal past several properties that have been dead for years regardless of which street I choose to ride down on my to work or back home.
……sounds like no demand to live in the area.
“…sounds like no demand to live in the area.”
That’s true.
While real wages have been flat around here for years, but I suspect that changes to FASB-157 play a role.
FASB-157
Suspension of MTM accounting was only for certain assets, not all assets.
This change was only for hard-to-value and sparsely traded assets. “CDO-squareds” qualify….homes on the books of banks do not.
‘There is no glut. If there was, prices would drop’
https://sacramento.craigslist.org/search/hhh?query=free+rent&availabilityMode=0
1 - 120 / 1567
Exactly. Where there is extra supply, prices go down!
…or maybe lack of another type of supply & demand….the first non-duplicated post
420 friendly FREE RENT FOR LIVE IN GIRLFRIEND OR FEMALE (SACRAMENTO)
https://sacramento.craigslist.org/roo/d/420-friendly-free-rent-for/6358191748.html
I might have to send this guy an anonymous email in the style of Jessica Rabbit!
“There is no glut…”
Says the resident housing speculator who bought like 10 houses or something. Your opinions mean zero to me. I was asking those whose entire financial beings were not dependent upon bubble housing prices.
My “entire financial beings” is not dependant on bubble pricing. I feast on the carcasses of those people, just like Ben does and just like you could too! It just takes a little initiative and willingness to invest at the bottom and accept cash flow based on supply and demand. It has been a life changing event. Or you can rent. That works for people too.
I would like to bet on black. May I borrow $1 million please.
No. You’re not offering very good collateral! 😎
Look at all places where there has been a softening in home prices. What is the common denominator?
Above typical number of housing units that have been built…OR, with few examples, a collapse in a concentrated economy (Bakken Shale).
“Look at all places where there has been a softening in home prices. What is the common denominator?”
You have to have real income to service your mortgage.
In the bubble areas the gains in real property values outpace real income growth. Hence, speculation.
40,000 more?
In retrospect, what difference does it make considering there are 25 million excess empty and defaulted housing units just in the US.
The supply problem is not one of quantity but rather quality of construction. Change the rules to cut the legs out from under foreign money launderers who speculate in empty luxury apartments, and the building industry will build fewer empty luxury apartments and more housing units for U.S. citizens to live in.
Housing shortage: Solve it with a building boom?
Construction continues at a CityMark Development of 21 townhomes located on Bankers Hill near Balboa Park (K.C. Alfred / UT)
Roger Showley
Question: Can San Diego build its way out of the housing crisis?
http://www.sandiegouniontribune.com/business/growth-development/sd-fi-econometer19nov-20171116-story.html
Interesting! Almost all the Housing Analyst quoted in the article agree there is a housing shortage and a concerted program fostering new construction will solve it!
Wow….from the article….
“The only time that supply has kept up with demand has been when both the public and private sector have been firing on all cylinders. That hasn’t happened since the 70s. The only way to solve this is more supply.”
….oops…..the above reply should be posted after the article below. Still relevant to all the supply/demand questions today.
Business
Nationwide boss urges building boom to solve UK housing crisis
Simon English
2 days
The Evening Standard
Lender Nationwide says competition in the mortgage market is “intense”
DANIEL LEAL-OLIVAS/AFP/Getty Images
Britain needs a building blitz to solve its housing crisis, Nationwide Building Society’s boss said on Friday.
https://www.standard.co.uk/business/nationwide-boss-urges-building-boom-to-solve-uk-housing-crisis-a3693886.html
The irony here is 27% of their housing inventory is empty or defaulted. That’s alot of empty inventory. For a relative comparision, 20% of US housing inventory is empty.
HA, is that you? SFR vacancy is under 2%. Get your analysis together. You have no basis for your statements. HA!
DebtDonkey
Oakton, VA Housing Prices Plummet 14% YOY As Inventory Skyrockets
https://www.movoto.com/oakton-va/market-trends/
HA! Please read what you post. Your own link shows inventory is down 25% from last year…..
“…..as inventory skyrockets”
No wonder you are so confused. You believe fewer homes for sale is a skyrocketing inventory. HA!
Yes, it’s HA - he’s down to using only two or three different handles lately - must be back on the meds.
crime_is_uncontained
Andover, MA Housing Prices Crater 17% YOY
https://www.movoto.com/andover-ma/market-trends/
oam, since you don’t want to answer how rent seeking causes income inequality, i’ll take a guess. i don’t want to put words in your mouth but you’re forcing me to guess what you mean. i think i’ll get it close.
there are different forms of rent seeking but you are probably thinking about government bribery. you correctly think that the briber benefits monetarily from the bribe more than he would have without it. since he’s getting more dollars you’re thinking he’s driving income inequality. but it’s actually the opposite. corruption is a drag on the economy. in general, people earn fewer dollars because of it. so while the briber sees more dollars, everyone else sees less. by this process income inequality narrows. rent seeking has the opposite effect you think it does.
i keep trying to tell you that income inequality is a natural function of rising prosperity. you continue to disbelieve it. rising income inequality doesn’t signal something bad, it signals something good.
I think we agree that rent seeking is bad for an economy in that it does not contribute to the production of a useful good or service. It does nothing to make anyone’s life better other than the person receiving said rent. I like this example:
“Rent-seeking implies extraction of uncompensated value from others without making any contribution to productivity. The classic example of rent-seeking, according to Robert Shiller, is that of a feudal lord who installs a chain across a river that flows through his land and then hires a collector to charge passing boats a fee (or rent of the section of the river for a few minutes) to lower the chain. There is nothing productive about the chain or the collector. The lord has made no improvements to the river and is helping nobody in any way, directly or indirectly, except himself. All he is doing is finding a way to make money from something that used to be free.”
I agree with you that income inequality is a function of a capitalistic system. Some level of inequality is tolerable, even necessary. But extreme income inequality is not healthy for a market economy and could be indicative of monopoly, monopsony, tilted rules in favor of the moneyed class, regulations designed to harm consumers and enrich entrenched interests, etc.
You keep coming back to rent seeking. I’m not focused on rent seeking as a root cause of inequality per se. Sure, it has its role, but I view much more fundamental the r and g relationship, which is why I references the Sal Khan’s simplified model. The share of national income going to labor has been on the decline for some time:
https://www.bls.gov/opub/mlr/2017/article/estimating-the-us-labor-share.htm
“I think we agree that rent seeking is bad for an economy”
we do.
“But extreme income inequality is not healthy for a market economy”
you’re going on a gut feeling and it’s wrong. what’s the logic behind your claim?
“I’m not focused on rent seeking as a root cause of inequality per se.”
you mentioned nothing else as causing income inequality.
“Sure, it has its role”
it’s only role is to narrow income disparity through weakening the economy.
“The share of national income going to labor has been on the decline for some time:”
then why is labor able to buy more today than it was able to buy a hundred years ago?
Extreme income inequality is problematic because there is evidence that it hinders economic growth:
https://www.weforum.org/agenda/2015/06/why-income-inequality-is-bad-for-growth/
Aside from that though, extreme concentration of wealth can lead to the wealthy buying political favors and protecting their interests or industries at the expense of others and to the detriment of society at large. Extreme inequality fosters political instability, and can, in extreme circumstances, lead to wars, revolutions, riots, and internal strife. Why do you think DJT won? Many reasons, of course, but not least of which 80% of Americans have seen their wages stagnate for about 50 years. They feel like they’ve been left behind, and indeed they have.
Also, it prompts the question, what caused such extreme inequality? Is this a result of natural market forces? I think not. I just so happened to finish off my 20-mile run this morning listening to this wonderfully appropriate article that appeared in the New York Times:
https://www.nytimes.com/2017/11/17/upshot/income-inequality-united-states.html?_r=0
In other words, one of the many reasons why inequality has grown so drastically in the US as compared to other market economies is basically a zero-sum game that has nothing to do with growing the pie and everything to do with protecting one’s turn:
you mentioned nothing else as causing income inequality.
Actually, I’ve said nothing about rent seeking. You were the one that brought that up. I’ve pointed out several times now that one likely culprit of rising inequality is the differential between return on capital and on income (r > g). I even linked to Khan academy explaining the “r > g model”:
https://www.khanacademy.org/economics-finance-domain/macroeconomics/gdp-topic/piketty-capital/v/piketty-spreadsheet-1
This is a very good example of how inequality can grow organically in a market economy based on differences between capital income and labor income. Keep in mind, this is very different than general “rent seeking.”
then why is labor able to buy more today than it was able to buy a hundred years ago?
This is because of technology, innovation, and increases in productivity. We naturally expect that innovation would improve purchasing power; we don’t disagree there I presume. But what I’m referring two is completely different. There are two different things happening at the same time: 1) the economy (e.g. “the pie”) can grow while 2) the workers share of that pie (e.g. their cut) can shrink. This is what has been going on for some time now unless you belong to a very privileged group or were clever enough to pick wealthy parents to be born to.
Some amount of income inequality is to be tolerated if it all economic participants lives are better off. This is the whole “rising tides lifts all boats” thing. But this clearly is not what has happened in the past 50 years:
https://www.nytimes.com/2017/09/16/business/economy/bump-in-us-incomes-doesnt-erase-50-years-of-pain.html
“Extreme income inequality is problematic because there is evidence that it hinders economic growth:”
you can use articles to back up what you say, but not as a substitute for your own words. tell me in your own words how it hinders economic growth.
“Aside from that though, extreme concentration of wealth can lead to the wealthy buying political favors and protecting their interests or industries at the expense of others and to the detriment of society at large.”
that’s a problem with government (political power), not wealth.
“Extreme inequality fosters political instability, and can, in extreme circumstances, lead to wars, revolutions, riots, and internal strife.”
once again.. HOW??
“Why do you think DJT won? Many reasons, of course, but not least of which 80% of Americans have seen their wages stagnate for about 50 years. They feel like they’ve been left behind, and indeed they have.”
if memory serves, the average wage in the year of the FED (1913) was around 20 cents an hour. a hundred years later it was around 27 dollars an hour. the best yardstick for making this measurement is gold. in 1913 it was $20.67 an ounce. in 2013 it was $1,100 to $1,200 an ounce. the average work week was about 60 hours in 1913 and less than 40 in 2013. taking everything into account, you had to work over 90 hours for an ounce of gold in 1913 and less than 50 in 2013. i had worked out the exact figures long ago and these are just approximations now. it comes out that you had to work twice as long for an ounce of gold in 1913 than in 2013. and although there have been bigger fluctuations over a shorter time period as 50 years, wages have certainly not been stagnant over that period of time for those 80% you sppke of.
i could go into more detail but it would make this post much too long.
“In other words, one of the many reasons why inequality has grown so drastically in the US as compared to other market economies is basically a zero-sum game that has nothing to do with growing the pie and everything to do with protecting one’s turn:”
i accidentally posted before i had finished. i’ll try to remember where i was and continue.
“In other words, one of the many reasons why inequality has grown so drastically in the US as compared to other market economies is basically a zero-sum game that has nothing to do with growing the pie and everything to do with protecting one’s turn:”
this is just some keynesian’s opinion and it’s wrong.
“Actually, I’ve said nothing about rent seeking.”
you seem to be very careless in a debate when all is on record. go to the november 15th thread and search for ‘rent seek’. there are 4 instances and the first one is in a paragraph you wrote. in other words, you brought it up, not me.
“There are two different things happening at the same time: 1) the economy (e.g. “the pie”) can grow while 2) the workers share of that pie (e.g. their cut) can shrink. This is what has been going on for some time now unless you belong to a very privileged group or were clever enough to pick wealthy parents to be born to.”
you always try to escape with qualifiers. i showed above that what you claim isn’t true by comparing average wages. that includes the rich and the poor.
and i’m not saying what you claim couldn’t happen. i’m just saying it didn’t happen. but if we keep going down the socialist road it will.
you can use articles to back up what you say, but not as a substitute for your own words. tell me in your own words how it hinders economic growth.
The economy as a whole is comprised of all its economic agents. The more workers you have in an economy, the more productive it can be. If workers are unhealthy, then their output will be constrained and they could be a drag on the economy (look at the SSDI roles of our own economy as evidence). Income inequality impairs growth when segments of the population lack the sufficient resources to meet their basic needs such as healthy food, safe place to live, clothing, medicine, etc.
Not only that, income inequality can deprive a huge segment of the population of capital necessary to make their lives better, say, by starting a business or taking a risk. There are many people who have great ideas for goods or services that have the potential to be life-changing, but they lack the resources to make that happen.
I remember when Romney was the GOP nominee and he quipped that students should do anything they could to start a business, including borrowing from their parents. Well, how does that work when your parents don’t have anything to borrow? I mean, yes, I agree with him that business creation is the engine of economic growth. But this off-the-cuff remark was very revealing about how insulated his world was to that of of the bottom 50% of Americans who have very little wealth or capital.
first of all, are you going to admit that YOU were the one that brought up rent seeking, not me?
“The more workers you have in an economy, the more productive it can be.”
this says nothing. an economy of 1,000 people working as hard as they can, could be less productive than 1 person. it depends on the efficiency of labor. not the numbers of people.
“Not only that, income inequality can deprive a huge segment of the population of capital necessary to make their lives better, say, by starting a business or taking a risk.”
more worship of your ‘fairness god’. you’re nothing if not consistent. nobody is stealing from anyone using income inequality. i know you think that’s what’s going on, but it isn’t.
“There are many people who have great ideas for goods or services that have the potential to be life-changing, but they lack the resources to make that happen.”
ever heard of ‘angel investors’ or ’starting small’ or just ‘waiting’ until you save up a little? besides, the best hope they have is to live in a prospering society. they won’t prosper with keynesianism.
“But this off-the-cuff remark was very revealing about how insulated his world was to that of of the bottom 50% of Americans who have very little wealth or capital.”
you reek of wealth redistribution.
this says nothing. an economy of 1,000 people working as hard as they can, could be less productive than 1 person. it depends on the efficiency of labor. not the numbers of people.
Actually, economic output depends on both. Both are important aspects of the equation: units of labor and productivity per labor unit. They are not mutually exclusive. But productivity is more synonymous with capital and less with efficiency. A pre-industrial society without modern farm technology can only become so much more efficient by employing different shovel techniques and sowing techniques. To make orders of magnitudes of productivity gain it takes capital investment (and invention) to get the types of machinery that will leverage unit labor and yield a higher economic output. But all things being equal, adding labor units will increase economic output. This is why when women started entering the labor force in 1970 en masse we had economic growth as a total, even though wages have still stagnated per capita.
first of all, are you going to admit that YOU were the one that brought up rent seeking, not me?
I re-read the original post and it looks like you are right. I did reference rent seeking. I also referenced the difference between r > g (differential returns on capital vs income). Rent seeking is partly explains income inequality, but I suspect it is is vastly dwarfed by the relationship between capital and income returns.
Let me put it another way. A couple of years ago the private equity group my father owns was able to provide a bridge loan (hard money loan). The developer was going to lose the land on prime real estate if he didn’t get the funds. The loan was secured by the land, so it was an easy call for my father to make. He made the loan and in about 2 months he profited over $1M. This was of course a function of the risk he took but also because he had the capital in the first place. A wage earner at median salary is never going to have those types of opportunities to get a return (even in other fields outside of real estate) simply because they lack capital. Numerous studies show that the investment returns and opportunities that are available to the wealthy (and I include myself here) are quantitatively different.
ever heard of ‘angel investors’ or ’starting small’ or just ‘waiting’ until you save up a little?
Well, it is pretty hard for those on the lower rungs of the ladder to save up when food, housing, transportation are increasing faster than wages.
Besides, business startups are near a 40-year low, and income inequality is at an all-time high, do you think this is just a coincidence?
you reek of wealth redistribution.
Wealth resdistribution is happening alright, but it’s happening upwards in the direction of the wealthy and owners of capital. All of the available economic data show this. Absent some dramatic policy changes, soon the middle class will be hollowed out and the serfs will be living crumbs their beneficent overlords graciously bestow upon them.
There are ways to incentivize accumulation of capital at the lower end of the spectrum. Good tax policy and well-designed social programs can blunt some of the upward wealth redistribution that has been going on for some time.
If you took a look at the BLS chart I referenced above you’d see that in 1962 labor’s share of economic was 66%. It hit a low of 56% in 2012 and has climbed up a couple of points to 58% in 2016. It seems like we may be in for some more trickle down economic stimulus, so maybe the upward gains we’ve had in the last 4 years start to reverse themselves.
While I appreciate your zealous defense of what you believe is correct economic policy, I think you should read some alternative perspectives, even for no other reason other than to strengthen your conviction that you are in the right. Listen to some heretics. Argue the other side, it’s good for the brain. The fixation on anti-Keynesian econ policy, the pejorative usage of “wealth redistribution”, your affinity for gold, and railing against socialism/communism makes you come across as overly dogmatic and wedded to your views. I see an echo of myself when I first read Atlas Shrugged in college and frequented Mises.org and was enthralled with Ron Paul and Libertarianism in its purity. There are some redeeming elements of all of those, but I would just urge you to be open-minded. I certainly don’t claim to have all the answers, but in my dialogue with you, you strike me as if you do.
“But this off-the-cuff remark was very revealing about how insulated his world was to that of of the bottom 50% of Americans who have very little wealth or capital.”
you reek of wealth redistribution.
I think he’s just saying that they should be able to earn enough to pay the rent.
Do you really believe wages are going to triple or quadruple to meet grossly inflated shelter costs?
Of course not.
Shelter costs will continue falling to dramatically lower and more affordable levels meeting wages.
“Actually, economic output depends on both.”
really? and what if only one person knows how to make a product, for example, starlite or a stradivarius? then how important are numbers of people compared to the efficiency of labor?
when you talk about productivity, the only thing that’s relevant is the efficiency of labor. the numbers of laborers aren’t important.
“I re-read the original post and it looks like you are right. I did reference rent seeking.”
thank you for being honest about it. everyone makes mistakes, but i think you’re trying to keep too many balls in the air at once. you’re trying to go too fast. you have to admit that accusing someone else of doing the exact thing you’ve done is a pretty big error.. especially in a debate.
“Well, it is pretty hard for those on the lower rungs of the ladder to save up when food, housing, transportation are increasing faster than wages.”
but the solution isn’t wealth redistribution, it’s having a prosperous society. we need to reduce regs, walk back taxes and cut spending.
“Wealth resdistribution is happening alright, but it’s happening upwards in the direction of the wealthy and owners of capital.”
if this is true, then why aren’t you for ending wealth redistribution?
the policy changes you want will make everyone poorer, especially the very ’serfs’ you are championing.
“I certainly don’t claim to have all the answers, but in my dialogue with you, you strike me as if you do.”
yes, i’m always for freedom and free markets. but everything i know is under constant refinement.
when i was younger i believed that government should be proactive and protect my property and rights. only recently have i come to see that that’s wrong. i don’t want government to ‘protect’ my rights, i want government to ‘defend’ them.
the difference is between being proactive and reactive. proactive bad, reactive good. it’s a refinement in my thinking. talk to the average joe and he won’t think there’s much of a difference. but there is a difference. and it’s both subtle and huge.
it’s much harder to protect against crime than it is to defend against it. ‘protection’ when it comes to a free society, is simply the wrong way to think.
one of the reasons crime isn’t going down faster is that we are proactive with it. we are trying to prevent it. instead we should be reactive with crime. we should be punishing it. quickly.
that’s why i don’t want government to ‘protect’ me. i want it to defend me when i’m unjustly attacked. i don’t want a nanny, i want an ally.
so, yes i have answers to improve things. but if i had ‘the’ answer i wouldn’t need to refine it. there’s always room for improvement.
‘The euro zone economy remains dependent on cheap credit and the European Central Bank is using the extension of its massive bond buys to push out any expectation for a rise in borrowing costs, ECB President Mario Draghi said on Friday. Draghi said the ECB was becoming increasingly confident that the euro zone’s economic recovery would continue but sluggish growth in wages meant monetary policy needed to remain easy.’
“A key motor of the recovery remains the very favourable financing conditions facing firms and households, which are in turn heavily contingent on our policy measures,” Draghi said.’
‘The ECB is on course to buy 2.55 trillion euros worth of bonds after deciding last month to continue buying bonds until September, or beyond if needed. It also pledged to keep its interest rates at their current, record low levels “well past” the end of its bond buys.’
Draghi said ECB research found “little evidence” that its policy was harming banks and any future damage would be offset by its favourable effect on the economy. He also tackled accusations, particularly from Germany, that the ECB’s ultra-easy policy was fuelling a new credit bubble and said the recovery was instead “feeding on itself”.
“The recovery … has not come against the backdrop of re-leveraging in any economic sector,” he said. “We see more signs that growth is ‘feeding on itself’, i.e. spending multipliers and endogenous propagation are again supporting activity,” he added.’
‘The ECB is on course to buy 2.55 trillion euros worth of bonds after deciding last month to continue buying bonds until September, or beyond if needed. It also pledged to keep its interest rates at their current, record low levels “well past” the end of its bond buys.’
Does Mario have this much saved up? Of course not. This is counterfeiting. Out in the open, largely unopposed counterfeiting. If you or I did it, we’d be locked up. Why? What’s wrong with it?
‘In the 1970s I had to travel to Portugal before I saw people begging on the streets. Now, I only have to walk down Stroud Green Road to see evidence of real housing need. But we are assured that an increase in housing supply will enable everyone to afford a home’
I ask any of you old enough to remember: did you see this many homeless when you were young?
I ask any of you old enough to remember: did you see this many homeless when you were young ??
As many ?? No…Where there homeless ?? Yes….They concentrated themselves in the Freight Railroad track area’s and under bridges…I saw them all the time since I spent much time as a youngster walking the tracks….The difference today I think is the sheer volume of them…They appear to be everywhere…
Women too. People sleeping in their cars.
Women too. People sleeping in their cars ??
I thought about that for a bit…Way back then I don’t recall seeing any women…They were all men…
I have a friend back in Massachusetts in a very nice small town. He has noticed an amazing increase in people sleeping in their cars over the past year. He goes for nightly walks and he sees them all. One that he finds particularly striking is a couple of women in their 70’s, at least one of whom does not appear to be in very good health. The healthier one keeps watch until the streets are almost empty before allowing herself to sleep.
Heartbreaking. This could be your grandma, mother, or aunt.
Someone want to tell me how these ladies brought it on themselves or just should have planned better in life? They don’t appear to be addicts or mentally ill or in any way troublesome people. Just a couple of elderly women who can’t find anywhere to live.
Gosh, maybe they should sign up for an overpriced shack. They may not be able to find a rental, but I’m sure someone would loan them money to buy.
Theres a woman thats been living in her CAR near one of the libraries I patronize. Probably in her 60’s, thai dye shirts and a rat tail (?) haircut. Anyway, I guess her car got to the point where it couldnt move and she had to give it up, so now I see her around but not sure where shes living. Figured her for a hippie, so not too much sympathy (if she did tons of drugs, etc.) but she looks clean and doesnt act crazy so I’m not sure how she ended up this way. Ironic that there are hippie girls in their 20s living in their cars and vlogging the benefits of not paying rent; I’m actually a fan of that, screw paying some of these crazy rents that the vampire money changers are charging.
Down by the harbor there are lots of people living in their cars - you can tell because the car is packed floor to ceiling with their stuff. They always seem to have a beer or a joint in hand, so sympathy meter still not budging - even the ones who dont have cars but get around on bikes - see this one guy puffing on a joint every other time I see him. Priorities.
I think that is why I’ve read an increasing number of stories about this where people are figuring out that they are going to have to move to a new location if they are going to survive financially:
“America’s 75 million baby boomers have piled up more debt while holding less savings than generations before them, a mix that is crimping their hopes of a comfortable retirement.
People in the U.S. ages 65 to 74 hold more than five times the borrowing obligations Americans their age held two decades ago, according to an analysis of federal data by the Employee Benefit Research Institute, a nonpartisan, nonprofit policy researcher.”
“Paying it off won’t be easy. Median savings for U.S. households nearest retirement age has dropped 32% in the past decade to $14,500, according to an analysis of federal data by the Economic Policy Institute, a left-leaning think tank.”
“The financial crisis weakened many households through lost jobs, pay cuts, home-price declines or a combination of all three. Credit-card debt and medical bills have climbed for many nearing retirement. Some people had children late in life, pushing college tuition costs toward the tail-end of their careers.”
“This is the first time where we have seen such a high degree of debt held by people at such a late stage of life,” said Torsten Slok, chief international economist at Deutsche Bank AG.”
“As a result, many senior citizens will either have to work longer, move to less expensive places or pare back their spending—choices that economists say are likely to put a drag on the U.S. economy.”
https://www.wsj.com/articles/with-15-left-in-the-bank-a-baby-boomer-makes-peace-with-less-1487259894
Gee, I wonder if the socialist policies of Mass have anything to do with their misery? Nah. Has to be Trump’s fault.
“The difference today I think is the sheer volume of them…They appear to be everywhere…”
+1 Everywhere is right. In San Jose, CA the police used to usher them back downtown, but now I see them in the suburbs along major boulevards and expressways.
Metro Denver allegedly has some 6,000 homeless.
Panhandlers are everywhere. A few are in wheelchairs or missing limbs. Most of the younger ones look able bodied. Too much heroin or meth to get a job.
Too much heroin or meth to get a job ??
Or a previous conviction that has severely limited their ability to get a job…Whats left ?? Stealing, begging, dumpster diving and drugs…
“Too much heroin or meth to get a job.”
I was on a jury where the perp had hepatitis, so he couldn’t work in the fast food places either. Another SSDI recipient.
I ask any of you old enough to remember: did you see this many homeless when you were young?
Nope, but back then menial jobs paid a living wage, and rents weren’t stratospherically high and we hadn’t offshored most of the jobs those people did.
When I was young they weren’t called “homeless”, they were called “hobos” and “bums”. The mentally ill were locked up. And being a “single mother” typically meant that a woman was a widow.
When I was young they weren’t called “homeless”, they were called “hobos” and “bums”. The mentally ill were locked up. And being a “single mother” typically meant that a woman was a widow ??
+1…Thats how I remember it also…
But WHY is this? Is it because of the high rents, or is it the “low unemployment” lie where we have masses of people who can’t find work, or a combination of both?
I asked above how these rents have been able to increase so much. I don’t get it because I know there is a glut of housing in a lot of these markets. I’m starting to think there is actually a shortage of rentals due to the banks sitting on millions of empty houses.
Did you know there is almost zero storage available around here, and those prices have gone into the stratosphere, too? It used to be you could find a 10×10 for $75, easy. Now they’re $200 or more, and all the storage facilities are expanding. Again, I have no idea what’s going on.
One word - GREED
Oakton, VA Housing Prices Plummet 14% YOY As DC Market Craters
https://www.movoto.com/oakton-va/market-trends/
‘Since the ’70s those same governments have allowed banksters to create the majority of new money, not to risk on manufacturing, agriculture or even house-building, but primarily for the purchase of existing housing.’
‘In consequence, house prices have risen without the accompanying increase in productivity and the distributed incomes that would have generated genuine affordability. A buying frenzy has been encouraged, a race to get on the property-asset ladder while the bubble is still inflating. Dropping interest rates, in a misguided attempt to encourage the sort of investment that would actually increase wealth, has only served to divert the savings of ‘the haves’ into property.’
How many thousands of articles start off with “shack prices continue to out-strip incomes” or “rents far exceed income gains”?
“shack prices continue to out-strip incomes” or “rents far exceed income gains” ??
Just speaking for my area, the music stops when the job market turns the other way…Looking at my small sample size, I know a lot of 30 & 40 somethings, through my three children and more likely through my relationships developed in Coaching youth sports for a couple of decades…
Some are homeowners but most are not..The ones that did purchase likely did because they started a family…I have heard many of them say they will not purchase, and they are saving as much money as they can…If their job prospects turn the other way, they are out-a-here with what ever amount of savings they have been able to save..Many have already left even though they left a good job…A few have actually purchased a home out of state in a location they think they could move to…The places they are looking at are all over the map with one common thread…Affordable single family homes with the ability to get some kind of decent employment…
This describes our situation perfectly. I’ve often mused about the home purchase decision. It seems to me that one is not just buying a house, you are also buying the neighborhood, the local government, the economy, the crime, the schools, the drug problems, and your neighbors to some extent. It’s quite a big risk. I remember seeing these stately homes in Detroit being sold at ridiculously low prices because the economy had hollowed out. What is to say that this couldn’t happen on a smaller scale to any number of thriving suburban or urban locality? One almost has to be clairvoyant to be able to predict economic stability in one’s home purchase destination in order to know if your purchase will hold its value.
“It seems to me that one is not just buying a house, you are also buying the neighborhood, the local government, the economy, the crime, the schools, …
… the schools …
Q: Should one be able to buy into the school system he/she wants his/her kids to attend or should the kids be forced bused to some other school?
Q: Should one be able to buy into the school system he/she wants his/her kids to attend or should the kids be forced bused to some other school?
A: That is an interesting question. My wife is a teacher and we’ve talked a lot about this actually. She used to teach in the wealthiest, highest performing district in the state. The school she was at had a certain number of permits available for children who wanted to get into the school. This particular school had the capacity and was willing to accept a certain number of students because they came with extra funding per student from the state and they didn’t have to hire any extra teachers to compensate. But demand for these permits was always outstripped by available slots. I think they were awarded in a lottery system.
My general thinking on the issue is that in my perfect world I would get rid of funding schools by local property taxes and have a complete equalization of funding at the state level. I feel like many parents stretch beyond their means in order to purchase a home in a local with good schools. While I understand why they would do this (what parent doesn’t want the best for their child?), I think the collective action of everyone trying to get little Johnny into the best school is inflating home prices excessively and to the detriment of society at large.
But if a school district has space and is willing to accommodate an extra student however this happens (parent would be on the hook to get the student there), then I’m all for it. It doesn’t strike me as right to force a child to attend the school in their district. This is kind of a moot point for our son since he’s being home schooled.
I think the collective action of everyone trying to get little Johnny into the best school
That seems to be the reasoning behind school choice in the DC area. Everyone seems to have this mistaken idea that a good school will bring a bad kid up. More likely, that bad kid will bring the school down.
Sorta like what happens to neighborhoods.
There is tremendous variation among pedagogy and performance within a school. All the literature I’ve read leads me to believe I should care much more about the teacher a child has than the school. A talented teacher in a “bad school” is better than a low performing teacher at a “good school.”
Ghettoization of this country by ozero and his (((handlers))) has helped drive up the cost of safe neighborhoods with good schools. Everyone is trying to escape the 13% of the population that commits well over 50% of the assaults, rapes and murders, not to mention all the petty crimes - all the while the (((politicians))) make excuses and redefine crimes so theres little to no punishment for anything short of murder in the urban hellholes and deep blue states of this country. No-go zones everywhere nowadays, thanks to the marxist progressives and their useful idiots.
Scores of malls were destroyed once a public bus stop was created that connected them to the ghetto, allowing easy access to the parasites. The rise of amazon is due in large part to this.
Every day Colin Flaherty documents this on his youtube channel - and gets death threats for doing so. Mainstream media absent as always, too busy manufacturing fake news.
Oh, and denizens of that same 13% showed their true nature, robbing stores in china while there for a basketball game. Entitled college students who probably couldnt test at an 8th grade level and have pockets full of money but nonetheless felt it appropriate to rob from no less than 3 stores. Once again, Trump is right and should have left them rotting in jail.
When is the trash going to be taken out before it completely destroys this country?
“a race to get on the property-asset ladder while the bubble is still inflating.”
Deliberately engineered, all because of Yellen’s ingenious theory that the problem with the poor is that they simply don’t have enough money -
“The Importance of Asset Building for Low and Middle Income Households” Speech by Janet Yellen, Sept 18, 2014: https://tinyurl.com/y77tbv2
I largely agree with Yellen’s assessment here. A major problem with the poor is that they don’t have enough money. The caveat of course is that they need “assets” not ridiculous mortgages. Otherwise, nothing she said strikes me as fundamentally wrong.
“A larger lesson from the financial crisis, of course, is how important it is to promote asset-building, including saving for a rainy day, as protection from the ups and downs of the economy. I surely hope that our nation will not face another crisis anytime soon as severe as the one we recently experienced. But for many lower-income families without assets, the definition of a financial crisis is a month or two without a paycheck, or the advent of a sudden illness or some other unexpected expense. Families with assets to draw on are able to deal with these developments as bumps in the road. Families without these assets can end up, very suddenly, off the road. According to the Board’s recent Survey of Household Economics and Decision making, an unexpected expense of just $400 would prompt the majority of households to borrow money, sell something, or simply not pay at all.”
A major problem with the poor is that they don’t have enough money.
This implies that if you just gave the poor money, they would not be poor. Problem solved.
Turns out that it isn’t as simple as that.
There was a study of the Georgia Land Lottery (a natural experiment) where people were given land at random. The study after the fact was whether there was a long-standing positive outcome from the influx of wealth. From a paper that studied the outcomes generations later:
“Although winners had slightly more children than non-winners, they did not send them to school more. Sons of winners have no better adult outcomes (wealth, income, literacy) than the sons of non-winners, and winners’ grandchildren do not have higher literacy or school attendance than non-winners’ grandchildren.”
In other words, just because you might be the Beverly Hillbillies, you are still hillbillies.
I saw the same thing in my own family. Three siblings a couple of generations back all inherited the same amount of money.
One sibling understood money and investing…he only ever spent the income and carefully invested when markets were down and everyone was scared. He lived a long life, at very high quality, and left a large amount of that wealth to his children and grandchildren.
One sibling didn’t understand money, and despite living in Palo Alto, always felt she was poor, lived in crappy conditions, and ultimately left everything to her kids, who also didn’t understand money, and lived in equally horrid conditions (no working shower in their house for last 5 years of last child’s life), and died with an estate of probably $10MM or more.
One sibling loved the idea of spending money, and spent it all, on stupid sh*t with no lasting value. He ultimately died while in the care of his daughter at her house (my mom). Had nothing left.
Just giving someone assets isn’t the answer to them not being poor long-term. It’s just a band aid to current suffering.
And what is the answer then?
Two ideas (both from the Koch’s).
Eliminate barriers to allow people to work. That’s taking away all the licensing requirements for jobs where they are completely unnecessary (barbers, florists, makeup artists, cosmetologists, bartenders, etc.).
Eliminate all corporate welfare. These allow companies to maintain strong market positions for longer (less competition from other companies, more outsized profits). We need more corporate competition, so they compete for employees. That drives wages higher.
I’m not familiar with the Georgia Land Lottery study, I’ll have to look into that. It looks like it occurred in 1832 and 1901. I’m not sure how much I’d extrapolate that to current policy.
By contrast, consider the effect of “free money” given out to Cherokee natives from gambling revenue:
https://www.wired.com/story/free-money-the-surprising-effects-of-a-basic-income-supplied-by-government/
“When the study began, about 67 percent of the American Indian kids were living below the poverty line. It wasn’t until after the casino opened that Costello began to notice that household income among the Cherokee families was going up. It was subtle at first, but the trend turned sharply upward as time went on, eventually lifting 14 percent of the Cherokee children in the study above the poverty line. Household income for those families who were not Cherokee, meanwhile, grew at a slower rate.
Before the casino opened, Costello found that poor children scored twice as high as those who were not poor for symptoms of psychiatric disorders. But after the casino opened, the children whose families’ income rose above the poverty rate showed a 40 percent decrease in behavioral problems. Just four years after the casino opened, they were, behaviorally at least, no different from the kids who had never been poor at all. By the time the youngest cohort of children was at least 21, she found something else: The younger the Cherokee children were when the casino opened, the better they fared compared to the older Cherokee children and to rural whites. This was true for emotional and behavioral problems as well as drug and alcohol addiction.”
So, we get lower poverty, lower crime, lower substance abuse rates, lower emotional and behavior problems, kids staying in school longer, etc. I’m not saying a universal basic income is a panacea or some magic bullet, but any policy that we can make to help ensure gainful employment and capital accumulation is a step in the right direction.
By the way, I don’t think those Koch ideas are useful for driving wages higher.
Poverty and crime go hand in hand. If nobody in this country had money problems, crime would be minuscule as compared to today. Ditto for substance abuse.
…and what about all the lives affected by those visiting casinos? Lifting a few on the backs of others is no solution…..just rearranging chairs on the Titanic. Now if the Cherokees had created an industrial economy that produced needed goods and services, I would be applauding!
I agree with you, Jingle. The tribe, as a sovereign state, had the ability to put a casino on it’s land by partnering with Harrah’s. I don’t think they had the resources to do much else because they had such little capital to begin with. I’m not in favor of expanding gaming, but if one is to allow it (along with all the concomitant vices said gambling brings), then at least fund the proceeds to society at large rather than enriching the few. I suspect that the tribe is getting a pittance compared to the private interests, but even that has had an impact.
At least Vegas uses its gaming revenue to fund schools, transportation, universities, and public safety. Having said that, I’m glad we don’t live in Vegas, even though my wife has contemplated teaching in Mesquite for the big bump in pay she would get.
+ 10, J, Q, K, A
I’m not sure how much I’d extrapolate that to current policy.
It’s not policy. It’s human nature. People are terrible at managing their own money and planning for the future (it’s why money typically doesn’t last many generations). People need a constant source of money…for MOST of us, this is called a job. For some of this it is government support.
So, if you create a casino that CONTINUALLY funnels money to people who used to be poor, you can solve poverty problems.
But we can’t all steal from those who can’t do math to funnel money to the poor to solve poverty nationwide.
You need to remove barriers to work, and remove barriers to competition among businesses. The other option is to increase government handouts.
I prefer the former.
You need to remove barriers to work
I agree. I support well-designed job retraining programs, apprenticeships, affordable child care, affordable housing AND smart (not indiscriminate) deregulation.
I think the bigger issue is that we need to remove barriers to capital accumulation among the lower quartiles. I wish there was a government-sponsored savings program (similar to iBonds or series E bonds) that paid earned a guaranteed 200 basis points over CPI that was available for every American who had W2 income and was capped at a couple thousand a year. I’d like to see the US government incentivize capital formation at the lower rung, because that is what will be the beginning of a true safety net instead of living one or two paychecks away from disaster.
I’d like to see the US government incentivize capital formation at the lower rung, because that is what will be the beginning of a true safety net instead of living one or two paychecks away from disaster.
Have you ever heard of prize-linked savings accounts? Theyare mainly illegal in the US. Why should they be illegal?
My point is that you tend to favor more government to solve these problems, as generally, I see the problem as too much government.
I work for the federal government. Trust me, you don’t want us managing anything! We have a plethora of small-minded bureaucrats (that couldn’t get a job in private industry if their life depended upon it) who are climbing all over themselves trying to get into the next job pay grade (since that’s the only way you can get more money).
I’m there because I needed a job back in 2009, after getting laid-off in 2008. And I’ve been there ever since and it may be difficult for me to go back to a ‘real’ job, for a number of reasons.
What I find fascinating is that big-government people use the black/white narrative whenever you talk about reducing the size of government - if you aren’t for ever-increasing government, you are “anti-government.”
The federal government pay has been flat for nearly 10-yrs, so the capable people have left for greener pastures leaving behind those with challenges and skill deficits. It seems that the LGBT meme is the latest brainwashing for employees.
‘In May 2017, stockpiles at Chinese ports were at an all time high, with enough to build 13,000 Eiffel Towers’
And these same “neo-liberal” globalists will lecture us from their 5 star hotels about climate change and how we need to close coal plants while China and India open thousands of them.
I worked at DoE as a contractor. They handed out $17 billion of Recovery Act funds from 2009 to 2012-13 in grants, cost-share, cooperative agreements, for renewable energy projects.
For every failed Solyndra, there were a hundred smaller projects that blew all their Obamabux with little or nothing to show for it.
The contractor team handling administrative/financial closeouts of these projects are all getting laid off 12/31/17. One of them called me last month looking for a job, LOLZ.
One of them called me last month looking for a job ??
If tax reform fails in its present form, whats left to “Goose” the punch Bowl ??
while China and India open thousands of them
Meanwhile, the smog is so thick in New Delhi that United temporarily cancelled flights there.
A few years ago, some Chinese colleagues from Beijing visited our Broomfield campus and were astonished at how clear and the sky was, one even said that it was “unnaturally clean”. And this was in brown cloud Denver.
were astonished at how clear and the sky was, one even said that it was “unnaturally clean” ??
Fire Up those Coal plants !!! Dig-baby-dig !! We can’t have none of that clean air, water and Clear Blue Sky stuff…We need to be more like the “naturally dirty” Beijing…
We have some coal plants in Arizona. Should we just shut down those towns? Of course, if a certain state hadn’t stolen our river we could be using hydro-electric.
We have some coal plants here too. I don’t see any reason to shut them down, but I also don’t see any reason to go full retard like New Delhi or Beijing (while their leaders give big speeches about pollution and climate change.
I’m also glad we dodged the diesel car bullet in this country. The air pollution has become so bad in Europe that they are preparing to ban diesel cars, which only became popular because they taxed gasoline so heavily.
For the life of me, I can’t see why anyone would want a car in London. Between the endless gridlock, lack of parking, high prices for cars (they are heavily taxed and are much more expensive than here), special taxes for driving in London AND the outrageous cost for fuel you’d have to be nuts to have a car in that, or any major European city.
Of course, if a certain state hadn’t stolen our river ??
L/A…They stole ours also out of the northern Sierra…IMO, its the main reason for our decline in the Delta…
California Aqueduct;
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwiOzszV8MjXAhUHxmMKHYIOCxoQFggoMAA&url=https%3A%2F%2Fen.wikipedia.org%2Fwiki%2FCalifornia_Aqueduct&usg=AOvVaw1NTYlUJYLh2hQVnKwctdXe
We have some coal plants here too ??
I suppose we still have plenty in California also…The key point is what “direction” are we headed…Under Trump & Rick Perry it does not look to promising…Can’t we slowly move away from coal and convert to NG fire plants…Maybe take a closer look at nuclear again…
Nukes r nice
I also don’t see any reason to go full retard like New Delhi or Beijing
+1000
Elsewhere, methinks this is where the smart money is going:
Norway Idea to Exit Oil Stocks is Shot Heard Around the World
https://www.bloomberg.com/news/articles/2017-11-17/norway-idea-to-exit-oil-stocks-is-shot-heard-around-the-world
I wouldn’t be sad to see Saudi Aramco’s IPO to price quite low.
LOL…did anyone actually read the article? It’s near the end but this paragraph is key:
“While environmentalists heralded the fund’s proposal, the move has more to do with hedging risk than saving the planet. Norway derives about 20 percent of its economic output from oil and gas. Finance officials have long debated whether reinvesting those profits back into petroleum producers leaves Norwegians overly exposed to the volatility of oil prices.”
It has nothing to do with singing kumbaya with greens and everything to do with diversification. What Norway is doing is the equivalent of an employee investing his 401k money in his employe’s stock. It’s insanely risky. And selling it off and diversifying doesn’t mean the employee suddenly hates his employer.
Concentrated bets make (or lose) wealth, while diversified bets preserve it. It’s true that this is probably more of an economic decision than an ideological one for Norway. But my take-away is that for a long time oil has been considered a sure thing. The sudden need to diversify now strikes me as crucial: I think they can foresee that we’re going to reach a tipping point pretty soon. That the world’s largest sovereign wealth fund wants to diversity now makes me think that they are trying to “sell at the top.”
This isn’t about being an environmentalist or being a tree-hugger, EVs are on the verge of becoming more economic than internal combustion engines, and that would have huge implications for Norway’s fund.
“EVs are on the verge of becoming more economic than internal combustion engines, and that would have huge implications for Norway’s fund.”
As long as the govt subsidizes EVs, they are not “more economical”. Tesla alone has received $5B in tax dollars and it barely breaks even.
EVs are the ultimate in virtue signaling for socialists and nothing else. It’s a scam.
There is virtue in saving money, but I guess you might not care about that. That is point of Norway’s decision, it is an economical one. People are going to shift to EVs not because they care about the environment, but because it makes financial sense. Go ahead though, keep buying big trucks and ICE cars, they’ll go down in value much quicker once people realize that EV cars have far less maintenance costs, no oil changes, less moving parts, and cost 1/4 or 1/3 the fuel price when gas is $2.50.
The BanVan runs on rocket fuel.
“Meanwhile, the smog is so thick in New Delhi that United temporarily cancelled flights there.”
“And this was in brown cloud Denver.”
I have seen the brown cloud Denver pictures you have posted, what causes that?
I don’t think there are any massive fires in the fields around Denver like Palm Beach or New Delhi are there?
SUGAR CANE BURNING NOT SO SWEET FOR FLORIDA’S RESIDENTS
By David Guest | Friday, December 04, 2015
To most people, winter in South Florida evokes familiar postcard images of blue sky, sunny beaches and waving palms. But for people who live and work amid the sugar-growing fields around Lake Okeechobee, the season means frequent episodes of black smoke, sooty lungs and burning eyes.
From October to April, sugar-growing corporations light massive fires in their fields to remove the outer leaves around cane stalks before harvesting. The burning creates a foul odor in the air and ash rains down on farming towns in Glades, Hendry and Palm Beach counties. Some days, the dark sugar cane smoke travels for miles eastward, where it pollutes waterfront communities in Palm Beach.
https://earthjustice.org/blog/2015-december/sugar-cane-burning-not-so-sweet-for-florida-s-residents
NEW DELHI AIR POLLUTION CAUSES UNITED AIRLINES FLIGHT CANCELLATIONS
BY SUMMER MEZA ON 11/11/17 AT 5:18 PM
Delhi’s air quality has worsened drastically in recent weeks in part due to dropping temperatures. Pollutants get trapped near the ground, condensing the particles into a thick smog rather than allowing them to disperse into the atmosphere. Farms in nearby towns have also contributed to the pollution problem, as farmers illegally burn crop residue to clear fields, reports NDTV.
http://www.newsweek.com/united-cancel-flights-delhi-air-pollution-708961
Couldn’t resist posting the Jeff Beck sugar cane song.
https://www.youtube.com/watch?v=ewXtSqwEO-Y
Must’ve been all kinds of high when they recorded this one.
The great Jeff Beck. (cough)
I am going to Bejing in February. It will be interesting to see reality based on the stories I hear.
You should be able to see it at near its worst at that time. Will be you be there for Chinese New Year? I will be in Shanghai then.
Coal ————-> Sixth Extinction
So….there is a published list showing mercury contamination in fish. Marlin are on the list. The pitch is that it’s a food chain thing, i.e. the top predators concentrate the mercury. Interestingly enough large blue-fin tuna are not on the list.
So….where is the mercury coming from? Coal factory air emissions. We are poisoning the oceans. A good ten years ago, China had 10,000 new plants planned. Its mainland is being transformed into a gulag of waste.
It’s not a big problem for sixty year old Americans who see it as an issue that future leaders will solve. Rightttttt !
The Chinese I know say the wealthy ones are in flight. However, back to the ocean problem. It’s shared. It’s becoming a toxic dump. All the rest is self-evident. I’m not a tree hugger. A fisherman from the past.
“‘In May 2017, stockpiles at Chinese ports were at an all time high, with enough to build 13,000 Eiffel Towers’
And these same “neo-liberal” globalists will lecture us from their 5 star hotels about climate change and how we need to close coal plants while China and India open thousands of them.”
Right. And a lot of that Chinese pollution doesn’t stay in China (or India in their case), it affects the entire world.
Does China ever share their statistics in regards to premature death due to environmental hazards, etc? I would imagine that filthy, filthy air has to be doing serious damage to everyone and everything living there.
I was thinking that money printing is on the cusp of losing its efficacy.
That it can only keep working if some entity is willing to assume more debt.
Who would that new marginal borrower be?
student loans are already at $1.45T (11% default rate)
auto loans > $1.9T (subprime default rate now 3.9%)
govt debt > $19.5T (current deficit already $666B)
mortgage equity withdrawal resurgance seems unlikely due to tighter lending standards and older demographic of homeowners
corporate debt > $19T
(all time highs)
And….
The great DJT QE unwind commenced on October 1st, 2017
The great DJT QE unwind commenced on October 1st, 2017 ??
LOL….And at the same time he is trying to Goose the economy and line the pockets of the “already haves” with 1.5 trillion of borrowed money…Black-man President deficit spend = BAD….White man President deficit spend = GOOD…
Infinity. Not infinity plus, just infinity.
Banks start the climb and then twenty years later no one remembers what banks are climbing, or why banks are climbing, or where on the climb banks are at.
Then the banker retires and another worker picks up where the first one left off.
We create a moebius strip of debt with no beginning and no ending.
AC/DC founder and guitarist Malcolm Young dead at 64
https://www.yahoo.com/gma/ac-dc-founder-guitarist-malcolm-young-dead-64-144506235–abc-news-music.html?.tsrc=bell-brknews
Dirty Deeds Done Dirt Cheap
If you want to get on a stage and scream
Look out, it’s rough and mean
It’s a long way to the top if you wanna rock ‘n roll.
Ride On.
Rock and Roll Ain’t Noise Pollution
From today’s summary:
“Unfortunately for Australia, that ‘lucky’ free ride is just about to end. Societe Generale’s China economist Wei Yao recently said: ‘Chinese banks are looking down the barrel of a staggering $1.7 trillion worth of losses.’ Hyaman Capital’s Kyle Bass calls China a ‘$34 trillion experiment’ which is ‘exploding.’ where Chinese bank losses ‘could exceed 400 per cent of the US banking losses incurred during the subprime crisis.’”
Greenspan had the attitude that the job of the Federal Reserve was not to hobble Wall Street with regulation, but to go in and clean up the mess:
“Yet Mr Greenspan also held a fear and a hope. His fear was that participants in the financial game would always be too far ahead of the government’s referees and that the regulators would always fail. His hope was that “when risk management did fail, the Fed would clean up afterwards.”
This has to a large degree involved subtle wealth transfer via rock bottom interest rates and QE, from the rest of the society, to Wall Street. And the current thinking is, this doesn’t have consequences (for politicians or the Federal Reserve). If/when China runs this playbook, it’s a different society with different people, they will likely at a minimum sink into stagnation. They are a more heavily controlled and docile population. But, the Cultural Revolution with its massive bodycount, was not that long ago.
Effortlessly achieving prosperity and control of the economy with manipulation of the money supply has been a siren song of rulers through the millenia.
And it occurs to me that once one discovers a legal means to transfer wealth to oneself, one will not stop until one has to.
A nation of broke @ss loosers:
https://www.cnbc.com/2017/11/17/shoppers-are-still-paying-off-debt-from-2016-holidays.html
Millennials, LOLZ.
As some one once told me: “If the government can live within its means, why should I?”
Of course, the obvious answer is: someday you won’t be able to work. There is also the fact that the Federal Reserve doen’t have your back.
Mills don’t like cars,houses or stocks
Not true. Millennials are loading up on massive car payments, mortgages, etc.
“In 2016, 67 per cent of Australia’s GDP growth came from the cities of Sydney and Melbourne where both state and federal governments have done everything they can to fuel a runaway housing market. The small area from the Sydney CBD to Macquarie Park is in the middle of an apartment building frenzy, alone contributing 24 per cent of the country’s entire GDP growth for 2016, according to SGS Economics & Planning.”
This is another aspect of the problem with government GDP figures. Malinvestment and bubbles inflate GDP, making things look rosy and making it appear that stopping the mania would be a problem, since it would “lower GDP”.
Every time another apartment is built, every time a speculator sells a shack to someone, every time a pension fund buys an apartment complex, GDP goes up.
Apollo Beach, FL Housing Prices Crater 28% YOY As Housing Correction Gets Underway
https://www.movoto.com/apollo-beach-fl/market-trends/
I watched an auction fail yesterday with a single genuine bid at $1005000.
Nice part of Melbourne and a very substantial home.
a minute after the genuine bid, the auctioneer raised it $100k.
then…crickets!
when you look at listings it seems that a 20km radius around Melbourne only contains $1M homes
Its a joke.
and lately, it seems, nobody is laughing.
I earn good money, have 400k in the bank and still cant afford a respectable home without assuming enormous risk.
‘Fragile’ is a word that is in my mind lately.
So yeah, I’m short housing in Melb and the premium is only suffering low interest rates.
What Id like know is what retard is still buying houses that are possibly 2x over priced?
If you’re paying more than $50/sq ft(and adjust downward for condition and defects), you’re paying too much.
Oh hilarious Housing Analyst, you’re an expert on not only exactly what it costs for land and to build a house in America, but also in Australia?
Give me a break.
crime_is_uncontained
“Sydney House Prices Continue To Fall In October”
http://www.news.com.au/finance/economy/australian-economy/sydney-house-prices-continue-to-fall-in-october/news-story/186dabbc9b5bb1153e83aad87ec18b51
thanks for the data point hide. it’s always nice to get boots on the ground perspectives.
Spicer, MN Housing Prices Crater 13% YOY
https://www.zillow.com/spicer-mn/home-values/
*Select price from drop down menu under first chart.
central banks have your back.buy grossly overpriced assets.
Ghost City and Coal
http://econ274.academic.wlu.edu/2015/11/ordos-city-%EF%BC%88%E9%84%82%E5%B0%94%E5%A4%9A%E6%96%AF%E5%B8%82%EF%BC%89/
As for why the actual supply doesn’t show up as being available to house someone. I think it’s baby boomers that are living a long time and not wanting to move. Many houses only have one person living in them. It’s probably a historical aberration. Also, that same demographic group owns empty vacation homes.
We do need housing for the masses of poor. The government needs to step in with cradle to grave healthcare, food and housing. There are not enough jobs to go around. Automation should also be controlled and regulated.
Government already followed that DonkeyLogic. It failed
“The government needs to step in with cradle to grave healthcare, food and housing.”
Sounds expensive.
Cheaper than locking people up or paying for homeless people to stay in hospitals (I take care of them every day).
How were they cared for 100-yrs ago?
How were they cared for 100-yrs ago?
Root hog, or die.
For the first time in a long time I took a spin around Realtor.com looking at the Northern Palm Beach County areas I used to search Palm Beach Gardens /Jupiter / Tequesta
Prices are pretty damn close to 2005 - 2006 and that got pretty ugly.
It’s always interesting to me how when prices of just about anything increase it’s a bad thing in the MSM. Price of gas up? Bad. Price of milk up? Bad. Price of bread up bad? And when prices fall it’s a good thing. Price of computers is always falling and that’s celebrated. And so on.
But housing is the exact opposite. If real estate is up 25% it’s celebrated. The fact housing is 25% more expensive is somehow a good thing.
FakeNews is alive and well, and not just when related to politics. The MSM simply lies about everything.
yeah kind of crazy. a house is not a consumable good. It is an asset and americas atm.
Actually, over the last couple of years, we have been constantly treated to tales of woe due to falling gas prices. We are exhorted to not look to our own benefit, but rather to that of the industry and jobs.
Same with farm prices. We are told to worry about the poor farmers instead of our own pocketbooks. We are told there’s a “hidden cost” to low prices.
Strange it is that a rapidly depreciating consumption item like housing is viewed differently.
Everything except housing is a consumable good. Of course you want the price of a consumable good to drop.
Portland, OR 97209 Housing Prices Crater 5% YOY
https://www.zillow.com/portland-or-97209/home-values/
*Select price from dropdown menu under first chart
Growing up in Old Greenwich Connecticut in the 60s and 70s was pretty special.
We walked to and from grammar school starting in fourth grade. We would play in the neighborhood after school until we got called home for dinner and to do our homework. We rode our bikes (without helmets mind you) to Binney Park to play football or baseball or downtown for lunch on Saturdays.
And maybe best of all, we played with toy guns that sounded real without fear of being shot because the cops had not been trained with “No More Hesitation” targets and to get home safe at all cost instead of looking at each situation (including kids playing with BB guns) differently.
1960s SOUND OF POWER TOY RIFLES COMMERCIAL
https://www.youtube.com/watch?v=V3xSgxlzoIg
That was the case pretty much everywhere in the country. I grew up in the 80s and had a very similar experience.
Consumables (also known as consumable goods, nondurable goods, or soft goods) are goods that, according to the 1913 edition of Webster’s Dictionary, are capable of being consumed; that may be destroyed, dissipated, wasted, or spent. John Locke specifies these as “consumable commodities.”[1] People have, for example, always consumed food and water. Consumables are in contrast to durable goods.
In financial accounting, an asset is an economic resource. Anything tangible or intangible that can be owned or controlled to produce value and that is held by a company to produce positive economic value is an asset. Simply stated, assets represent value of ownership that can be converted into cash (although cash itself is also considered an asset).[1]
“I grew up in the 80s and had a very similar experience.”
I guess you’re right. This scene from the move “Big” (which I am really surprised I could find) always brought me back to those times in my life.
And that was before I knew the Zoltar fortune-telling machine scene at the end of the movie was at Playland in Rye, New York where I went a bunch of times when I was a kid.
Best scene from “Big (1988)”
https://www.youtube.com/watch?v=nFDH6GeCM1c
Aw, man, that’s my favorite scene, too. And I remember Playland well. My parents seemed to enjoy it as much as we kids did. My fave ride was the Wild Mouse.
Ah heck… gotta watch that movie.
We went to Playland for our graduation from grammar school trip. Going all the way up there from NYC, we didn’t know where we were. I took my daughter there a few times before we moved away.
As a kid, every summer my family rented bungalows at Rockaway Beach (Queens), so the Playland there was my favorite. Neighbors to continued to go to Rockaway as adults referred to it as “Rockapulco”.
The best was Palisades Park - the bandstand set up on the Palisades and the wave pool. The worst was the time we spent all our money and had to walk home over the George Washington Bridge from Jersey. It took hours. I think I was about 10 or 11.
I wonder if they still have the pet donkeys there…..
I could have used one to get home.
houses are an appreciating asset.
Miami Beach, FL Housing Prices Crater 9% YOY
https://www.movoto.com/miami-beach-fl/market-trends/
That may be but last week the Canes introduced Notre Dame to the Turnover Chain
https://www.youtube.com/watch?v=VAaPGcOQTPk
Nice… a big fat gold chain. There’s a lesson in there for NFL hopefuls. Don’t waste your cash on a rapidly depreciating consumption item like a house. Buy gold or or better yet, save every last dollar you can get your hands on.
A toast to you Mr. President Trump and the citizens of AZ. AZ is gonna get a whole lot less Flakey.
https://nypost.com/2017/11/19/trump-slams-jeff-flake-on-twitter-calls-his-career-toast/
Bankrupt Toys ‘R’ Us wants to pay $16 million in executive bonuses
https://www.ksl.com/?sid=46199314&nid=157