Hangovers From The Massive Stimulus
A weekend topic starting with Pork Business. “The coming year is pivotal for agriculture because we will find out if we have entered a stabilization zone or if we begin another leg down, says Terry Barr, senior director, CoBank. Barr, along with fellow ag economist David Kohl, highlighted key differences in the current setback in farmland values and the 1980s collapse at the American Society of Farm Managers and Rural Appraisers annual conference. ‘World economies are still in transition after what their central banks and governments did to stimulate their economies out of the financial crisis,’ Barr notes. ‘This means we will have sustainable, moderate growth in demand for commodities but not what’s needed for another explosive burst.’”
“Central banks have added $14 trillion to their balance sheets. The U.S. Federal Reserve added $3.5 trillion alone. Overall, the next three to five years will still be challenging for agriculture as the world works through the hangovers from the massive stimulus injected into world economies to ward off the financial crisis.”
“‘The 1980s was a credit bubble, now we’re in an asset bubble,’ notes Kohl, professor emeritus, Virginia Tech. ‘This recent run-up in farmland values has much more equity and working capital behind it. Marginal land is the first to correct, and we’re seeing those values down as much as 25% in some areas.’”
“With a glut of grains, oilseeds and commodities, Kohl says it will take a surprising change in production to lift commodity prices. ‘The good news is global economic growth is synchronized. The emerging market economies are moving higher together, but they need to grow at a 7% to 9% annual pace to lift U.S. commodity prices.’ Fortunately, the exposure of U.S. agriculture to energy prices has decreased as the U.S. has become a major oil producer. ‘About $8 to $10 spent on ag inputs is spent on something related to oil,’ Kohl notes. ‘But the U.S. is no longer dependent on crude oil imports and has become a major producer. It use to be $60 to pump U.S. crude oil. Now it is closer to $40 a barrel and will soon be $20 a barrel.’”
From Agrimoney. “US farmland prices have continued their downward trend to start 2018, but the pace of decline has slowed, a university study showed, in the latest of a series of reports hinting that the market downturn may be passed its worst. A farmland index compiled by Creighton University came in at 42.2 for January, remaining below the 50.0 level indicating a neutral market, but up 2.4 points month on month. Indeed, the figure was the highest for any month since July 2014, in the early stages of the farmland price slide which, on Creighton figures, has continued unbroken for a little over four years.”
“January was the ‘50th straight month the index has fallen below growth neutral,’ said the university, which draws its report from a survey of lenders in major agricultural states, from North Dakota to Colorado.”
“‘We think this is just kind of a stabilising time,’ Randy Dickhut, senior vice president of real estate operations for Farmers National, told the Omaha World Herald. However, the underlying momentum remained downward he adding, saying that ‘I’d still say there’s a trend that it will soften more. We don’t think we’re done going down.’”
The Omaha World-Herald. “The rural Midwest remains in an economic slump, and worries about the future of the North American Free Trade Agreement are adding pessimism to the outlook for 2018, a Creighton University survey of rural bankers showed. About four out of 10 said loan defaults would be their greatest economic challenge in 2018, said Creighton economist Ernie Goss. The bankers, from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming, have indicated economic growth in three months out of the past three years. Slumps continued in farmland prices for the 50th straight month and in farm equipment sales for the 53rd straight month.”
“But bankers in some areas said land values were holding steady, and so far few farm owners have reduced rents that farm operators are paying.”
From Agweek. “As we begin 2018, it’s interesting to look back on where farming has been recently and where farming is going. As we go to press, the price of the three big commodities at the local elevator is as follows: Wheat is $5.80 per bushel, soybeans are $8.65 per bushel, and corn is $2.89 per bushel. Using benchmark yields for farmers in my neck of the woods, that means a farmer with 50 bushel wheat would gross just shy of $300 per acre in revenue. Thirty bushel soybeans would gross just shy of $260 per acre in revenue. And 125 bushel corn would gross a little more than $350 in revenue.”
“Look back to 2011, the base price for hard red spring wheat was $8.38 per bushel, soybeans were at $12.50 per bushel and corn was just north of $6 per bushel. So, the same farmer with 50 bushel wheat was grossing roughly $420 per acre, $375 per acre for soybeans, or a whopping $750 per acre for corn.”
“Here’s my question: Why haven’t land values come back to earth more pronouncedly when revenue per acre off that land has decreased between 30 and 50 percent? Why aren’t land rents coming down more than they have? Why isn’t land selling for far less per acre than it is?”
“In terms of distribution of farmland and the economics of raising certain commodities on this farmland, one must assume that even at today’s commodity prices, there must be some higher value to farmland than that according to ‘just the numbers.’ One factor propping up the farmland prices and rental rates is the presence of out-of-state bidders on in-state farmland. I have seen several sales where investors from outside the state — California, as one example — have ‘like-kind exchange’ money that they need to spend within an IRS-prescribed timeframe, so they are willing to pay more for farmland than local farmers who actually know the true value of the farmland.”
“I think the most interesting part of farm economics in the next two to three years is going to be watching commodity prices and seeing where farmland and rental values track vis-à-vis these prices. I don’t know which “incentives” will drive the discussion, but it appears to be something different than just a simple supply and demand relationship.”
From Net Nebraska. “In winter, farmers across the U.S. visit their banks to learn whether they have credit for the next growing season, relying on that borrowed money to buy seed, fertilizer and chemicals. But prices for corn, soybeans and wheat are low enough that some producers have had a hard time turning a profit, and financial analysts expect some farmers will hear bad news: Their credit has run out.”
“That’s what happened to the Delaneys, a family now trying to save their farm near Fremont, in eastern Nebraska. Several years ago, when crop prices surged, the family gathered in this office and planned to grow the farm. ‘More acres, more income. That’s the old philosophy,’ said Tom Delaney, who runs the farm with his son, Tim, and daughter-in-law, Jody. They built it up to 2,500 acres — more land than most farms in the area — but when grain prices fell it was more than they could afford.”
“Nearly two years ago, Delaney says two lenders from their bank, Farm Credit Services, told them their farm was in a financial tailspin. The lenders ‘basically said we’re not going to back you up anymore and you need to sell out,’ Delaney said. The family couldn’t cut costs enough to convince the bank that they could pay back their $1.8 million debt.”
“The U.S. Department of Agriculture estimates about 12 percent of crop farms are highly leveraged — including new farms that haven’t built up assets or farms that grew too fast, like the Delaneys. That level of debt makes farms vulnerable as banks tighten producers’ credit.”
“The Delaneys have downsized to about 500 acres, switched to growing non-GMO crops (which bring in more money than traditional crops) and revamped their farm since losing their loan. There’s now a hog pen, where pink and red Berkshire hogs root around the dirt and make a clatter as they lift and drop the flaps on their feeder bins. These animals are another part of the Delaneys’ rebuild, with a plan to raise about 2,000 hogs a year for Heritage Foods, which supplies upscale grocer Whole Foods.”
“Tom Delaney shrugs and reaches into the pen to pat a pig on the back. ‘If that’s what it takes to pay the bills it’s what we’re gonna do,’ he says. The farm is still in debt and the bank could foreclose on it, but it is earning a profit again. The Delaneys say this is their chance to save the family farm — if they can find a bank that feels the same way.”
From Farms.com. “A mega-home being constructed on protected farmland in British Columbia has driven the price of the property up by an astronomical amount. The seven-bedroom nine-bathroom mansion on No. 2 Rd. in Richmond, B.C. is worth $765,000, according to BC Assessment, a Crown corporation that classifies and values property in the province. Last year, the 26.6 acres of land was valued at $88,336. With the addition of the home, the value of the land jumped by 9,245 per cent to $8,255,000.”
“The home will fall within the boundaries of the Agricultural Land Reserve (ALR), which contains 4.6 million acres of provincially owned farmland. Residents like Laura Gillanders are concerned that not only will the property value continue to rise after the home is complete but also that the land prices will disable farmers from being able to produce crops.”
“‘By next July that home could be worth millions more,’ Gillanders told Farms.com. ‘But the real story here is that the land went from being farmed to not being farmed. And the value shows that this is a non-farm house. If it was a farmhouse being built to maintain the farm, they would still be farming. The income is clearly not generated from agriculture.’”
“Large developments on ALR land in the Richmond area are becoming common. In February, a speculator purchased a four-acre blueberry farm with about $80,000 in annual crop revenue and with farm status (meaning the owner only pays municipal taxes), for $2 million. The individual received a permit to build a 12,000 square-foot home. From there, the value of land kept rising.”
“‘They re-listed it for $2.77 million with an advertisement saying the owner could have a huge backyard, private driving range, a 24-seat theatre and that it was all permitted on ALR land,’ Gillanders said. ‘The land was relisted in the fall for $4.5 million. Now a foreign investor is flipping the land for $7.7 million and the house isn’t even built yet.’”
‘World economies are still in transition after what their central banks and governments did’
Yet they never are held to account for it. The dishonest main-stream media will never connect the disaster in commodities to the central banks. Oh, they’ll boo-hoo over a farmer here or there on NPR, but then it’s back to the office and swooning over the “elites”.
‘Central banks have added $14 trillion to their balance sheets. The U.S. Federal Reserve added $3.5 trillion alone.’
It doesn’t really work to call this “massive”. One trillion would be massive. And we don’t know how much fiat was created: there isn’t any auditing here, not public anyway. I recall reading the Chinese did much more QE than all this combined. QE is kind of a cute term really. Cuddly, reassuring. But watch its distortions tear through markets around the globe, for almost a decade now and it’s still going:
‘Last year, the 26.6 acres of land was valued at $88,336. With the addition of the home, the value of the land jumped by 9,245 per cent to $8,255,000′
What happened to the “audit the Fed” movement?
They keep having nail gun accidents.
Interesting that the rest of the world created 10.5 trillion. A true race to the bottom.
“elites”
I was talking to the old patriarch farmer last fall. He told me that some reporter had come out in June to see how the farm worked. She asked to see the apples. The farmer took her to the apple orchard. The reporter was puzzled: why were the apples so small? The ones in the store were much bigger. The farmer patiently explained that these apples wouldn’t be ready for three more months. The reporter still didn’t get it. Retelling this story, the farmer said to me, “and these people are supposed to be THE ELITES.”
If another bridge is ever put over the Potomac River, this is one of the Ag Reserve farms that would be in the crosshairs.
Reporters aren’t “the elites,” they’re nothing more than toadies, water-carriers for them. The “elites” consist of bankers, politicians, super wealthy CEO’s, wealthy families and anyone with deep connections to these people. The common denominator is wealth and power.
A woman I know who graduated from college with a major in journalism did not know how William Randolph Hearst made his fortune.
I asked her if she ever heard the statement: “You supply the pictures and I’ll supply the war” and she said “no”.
Correction: “You furnish the pictures and I’ll furnish the war.”
Iowa farmland values quadrupled in ten years
Cropland values through time, selected states.
http://dreamdirt.com/blog/wp-content/uploads/2016/09/iowa-land-prices-decline-september-2016.jpg
https://www.card.iastate.edu/images/ag_policy_review/winter-2014/11-1.png
From the graphs - looks like the party hit a -10% speed bump in 2016.
Wonder what the 2017 numbers are going to look like?
And 2018 - Bazinga!!!!
The Iowa farmland graph looks just like the Bitcoin graph.
Except you don’t have to pay property taxes and insurance on Bitcoin
At least farmland can feed you.
Who’s buying all this farmland? Hopefully not the Chinese.
And you don’t need to waste ungodly amounts of electricity to maintain your farmland…
“History doesn’t repeat itself but it often rhymes,”
1985
https://www.youtube.com/watch?v=joNzRzZhR2Y
Interesting. A 14% increase in population from the mid 80’s to 2010 correlated with a 700% increase in land value. A 5% drop in the population correlated with a 50% drop in land values from about 1980 to the mid-80s.
Iowa population chart: https://fred.stlouisfed.org/series/IAPOP
It’s like the land prices are multiples of the population movement. Speculators trying to front run the populace. Enabled by…? Development of the MBS by Lew Ranieri, allowing more money to pour into the mortgage market, fanning real estate speculation.
https://en.wikipedia.org/wiki/Mortgage-backed_security#History : “In 1971, Freddie Mac issued its first mortgage pass-through, called a participation certificate, composed primarily of private mortgages.”
Also 1971, Nixon closes the gold window: https://mises.org/blog/today-1971-president-nixon-closes-gold-window
Another sort-of inverse correlation is interest rates. They spiked in the early 80s as well: Fed Funds rate: https://fred.stlouisfed.org/series/FEDFUNDS
But as interest rates went up in the 70s, so did land prices.
Inflation was running high in the 70s too after the close of the gold window. I’d like to find a central bank chart but here’s one which might be a starting point: http://www.businessinsider.com/chart-inflation-since-1775-2013-1
Note: correlation doesn’t equal causation, and there are many spurious correlations out there. Interesting data points however.
Note: correlation doesn’t equal causation
I was gonna mention that. I can see how population changes could follow the land price changes rather than leading them.
I guess that explains why the grocery store no longer sells 10 ears of corn for $1.
I wonder if this start-up will disrupt farm land prices…
https://www.plenty.ag/press/
I like these guys:
http://gothamgreens.com/greenhouse-grown
If you’re paying more than $500 an acre you’re paying too much.
The rich buying a “farm” and putting up a mega mansion but keep paying the lower farm property taxes is an old scam.
Usually done by liberals/progressive who want bigger and bigger government but expects to be exempt from paying for it (2banana’s Law)
++++
“Large developments on ALR land in the Richmond area are becoming common. In February, a speculator purchased a four-acre blueberry farm with about $80,000 in annual crop revenue and with farm status (meaning the owner only pays municipal taxes), for $2 million. The individual received a permit to build a 12,000 square-foot home. From there, the value of land kept rising.”
++++
Bruce Springsteen: A tax-dodging farmer
And, when he’s not busy being all that… he’s a tax-dodging liberal hypocrite worth over $200 million who pretends to be a farmer to save hundreds of thousands of dollars on his property taxes that would have otherwise funded the welfare programs he pretends to care about.
He owns another 200 adjoining acres. But because he has a part-time farmer come and grow a few tomatoes (organic, of course) and has horses, his tax bill on the remaining 200 acres is just $4,639 bucks.
http://humanevents.com/2012/03/12/bruce-springsteen-a-taxdodging-farmer/
Bruce Springsteen:
Writes song about economic plight of Youngstown.
Supports candidates who create economic plight of Youngstown.
Yup.
Rockstars gotta eat
Yep, look up the map of Ag registered property in “urban” LA. In my neck of the woods real ranchers will rent cattle to the rich libtards so they can get low property taxes. One clown supposedly has a grass growing operation to keep his taxes low.
Libtards lie like normal people breathe.
Florida has similar laws - if you own a cow and some acreage, you are a farmer.
Something like that anyway -I’m sure Palmy and Jeff can provide more accurate detail.
Indeed……Bob Graham’s family’s cattle ranch near MIA.
Is he friends with Bono? LOL
All of these guys become that which they used to loathe. Look no further than Bob “Only a Pawn in their Game” Dylan and his neighbors’ complaints over his wretched, stinky, overflowing Sani-Can sh!t buckets where his illegal alien servants relieve themselves because they’re not even allowed inside any buildings.
As people become obscenely wealthy, they completely lose touch with reality. It’s been decades in the making for guys like Bruce Springsteen.
That being said, the people are not the problem, the laws are. Can you really expect somebody to say “no, I am not going to take that tax break?” C’mon, now…
“As people become obscenely wealthy, they completely lose touch with reality.”
This is precisely why we need to lower their taxes. Poor devils.
A bunch of these mansion dwellers just got a tax hike:
Bob Dylan
Residence Malibu, California, U.S.
And they call it economic war on California. Poor babies.
How do explain the many individuals who become obscenely wealthy yet do NOT lose touch with reality?
Springsteen’s “metamorphosis” has not been years in the making.
He owned one half-dozen mansions 30 years ago.
The guy’s a fraud. He has been for decades.
Does a a six-year-old story qualify as “fake news?”
Not if he still owns the property, or a similar property.
If those facts are not alleged, is it fake news?
And bear in mind, the story is six years old, the facts upon which the story is based are more than six years old.
The story is six years old, the facts are six years old, so the article itself was real news at the time.
And does it matter whether Springsteen is still playing the tax game or not? The point is that he *did* in the past. Which means he was a hypocrite at some point. Did he ever sell the land and release a statement how sorry he was to take advantage of the tax laws like that?
Springsteen gladly took money from millions of witless individuals across many, many years, all the while perpetuating the lie that he was on the side of the little guy, the downtrodden.
Springsteen is a flimflam man. A con.
The Nicholas Cage School of Investing and Real Estate ALERT
As an additional course extra credit topic - any guesses what the many alligators cost a month?
++++++
Nicholas Cage once blew $150 million on a private island and a dinosaur skull
CNBC | 1/20/2018 | Emmie Martin
Best known for his roles in movies such as “National Treasure” and “Leaving Las Vegas,” Nicolas Cage was once a top earner in Hollywood, worth $150 million.
But Cage didn’t hold on to his fortune for long. He squandered it away on a string of expensive and often eccentric purchases, eventually facing foreclosure on several properties and owing the IRS $6.3 million in property taxes.
Now worth around $25 million, Cage is taking roles left and right to help pay off his debts.
Cage once owned 15 residences, including a $25 million waterfront home in Newport Beach, California, a $15.7 million countryside estate in Newport, Rhode Island, and an $8.5 million abode in Las Vegas, pictured below.
He also purchased, for $3.4 million, the infamous LaLaurie mansion in New Orleans, known as one of the most haunted houses in America.
Over in Europe, Cage purchased not one but two castles for $10 million and $2.3 million, respectively
$3 million got him a deserted island in the Bahamas.
“Nicolas Cage was once a top earner in Hollywood, worth $150 million.
But Cage didn’t hold on to his fortune for long. He squandered it away on a string of expensive and often eccentric purchases, eventually facing foreclosure on several properties and owing the IRS $6.3 million in property taxes.
Now worth around $25 million, Cage is taking roles left and right to help pay off his debts.”
Q. How do you make a small fortune?
A. Invest a large fortune in real estate.
and owing the IRS $6.3 million in property taxes
I think you meant income tax.
How does one owe IRS money for property taxes? Last I checked property tax is collected by cities and counties, not the federal gubmt.
I read the CNBC article by Emmie Martin, and she’s reporting on a (two year’s old) story by John Persinos in thestreetdotcom.
https://www.thestreet.com/story/13363526/1/6-lessons-from-nicolas-cage-s-real-estate-catastrophe.html
“What’s more, the IRS came after him for $6.3 million in back property taxes.”
If you use federal lands for farming, grazing, whatever, is a portion of what you pay the feds segregated as “property tax?” I don’t know.
These stories may have been written by complete effin idiots with no understanding of what they’re reporting on, or they could be dishonest creeps trying to protect elites like Nicholas Cage.
“He squandered it away on a string of expensive and often eccentric purchases, eventually facing foreclosure…”
Sounds like Michael Jackson.
Speaking of him, I recall seeing pictures of “Neverland” (his big estate in CA), and there was cattle grazing on the property. I guess earlier posts today explain why they were out there (tax breaks).
Kinda like I have been saying for a few weeks.
Operation QE Unwind + Interest rates going higher + DJT New Tax Laws = Housing Bubble is going to get….
+++++
What Will Rising Mortgage Rates Do to Housing Bubble 2?
Wolf Richter • Jan 20, 2018
The US government bond market has further soured this week, with Treasuries selling off across the spectrum. When bond prices fall, yields rise. For example, the two-year Treasury yield rose to 2.06% on Friday, the highest since September 2008.
In the chart, note the determined spike of 79 basis points since September 8, 2017. That was the month when the Fed announced the highly telegraphed details of its QE Unwind.
The three-year yield, which had gone nowhere for the first eight months of 2017, rose to 2.20% on Friday, the highest since October 1, 2008. It has spiked 82 basis points since September 8:
But it has impacted the mortgage market. On Friday, the average 30-year fixed-rate mortgage with conforming loan balances ($417,000 or less) for top-tier borrowers, according to Mortgage News Daily, ended at 4.23%, the highest in nine months.
But historically, 4.25% is still very low. And likely just the beginning of a long, uneven climb higher.
A one-percentage-point increase takes on larger proportions in a place like San Francisco, where it might take a mortgage of $1.25 million to buy a median home. At 3.5%, the monthly payment is $5,613. At 4.5%, it jumps to 6,334, an increase of $721 a month and an increase of $8,652 a year.
This will come in addition to the rethink triggered by what the new tax law will do to the housing market.
When things start getting shaky, central banks around the globe will fire up their printing presses
They always do. That’s how we got here. One problem is it’s deflationary:
‘It use to be $60 to pump U.S. crude oil. Now it is closer to $40 a barrel and will soon be $20 a barrel’
I’m not saying this wouldn’t have happened without easy money, but it might not have and certainly happened faster. Every time the price of oil gets up above break even the frackers lock in futures and they are good for another year. A year in which they will drive exploration costs lower still. Here’s the thing: without all the money sloshing around they would have gone broke 3 years ago. But they were able to stay alive because there was so much capital available at low interest rates.
Airlines make less money when fuel is cheaper - more deflation. Grocery stores make less profit when food is cheaper.
When the Chinese went crazy creating money it set off a commodity boom. 83 million acres of cropland was produced and when the China thing flopped, prices of almost every thing crashed. And it will stay down until a bunch of farmers go under and that land reverts. In Asia fish farming was increased 60% in the same period.
This past week we read of some tier-one or two airbox prices in China dropping 50-60% in a year. This was some of the most expensive RE on the planet. How many defaults are going to come out of that?
But…but… helicopters
Helicopter Ben
Here’s the thing: without all the money sloshing around they would have gone broke 3 years ago. But they were able to stay alive because there was so much capital available at low interest rates.
Wasn’t there some guy in Russia who said that OPEC (and Russia) deliberately crashed the price of oil to drive the high-cost American frackers out of business? Whoops.
The Russians and Saudis are trying to curtail production to get the price back up. The problem is that American frackers are more than happy to fill the gap. Saw an article the other day predicting that the US could become the #1 producer in 2018.
Wasn’t there some guy in Russia who said that OPEC (and Russia) deliberately crashed the price of oil to drive the high-cost American frackers out of business? Whoops.
It’s my understanding that the Saudis have been playing this internecine game of bucking OPEC consensus when they’ve tried to coordinate and constrain demand to push price back up. The Saudis budget has been under stress, but they’re trying to inflict pressure on Iran and Russia (and maybe US frackers) in an attempt to try to drive out the high cost producers.
In the short term, the sharp decline in the global price of oil from more than $100 to less than $40 in less than a year has forced the Saudis to draw down their considerable reserves and to borrow money, but from their perspective it has also had benefits. It has imposed economic hardships on Iran and Russia, and has discouraged new production of oil from other, more expensive sources, such as shale in the United States and Canada’s tar sands. Oil that is profitable to produce at $100 per barrel may not be profitable at $50. If these new sources languish while Saudi Arabia’s share of the world’s market increases, that’s fine with Riyadh. The Saudis know that eventually, as shale and tar sands fuel leave the market because they are too expensive to produce, the diminished supply will drive the price back up and bring those sources back on line.
https://www.forbes.com/sites/realspin/2016/01/12/saudi-arabia-oil-production/2/#492ffbbe7edb
If we had $100 barrel of oil, we’d really be accelerating the transition to EVs instead of internal combustion engines.
Oops, I meant to say “when they’ve tried to coordinate and constrain supply to push price back up.”
Electric vehicles=failure
Fuel cell=failure
Internal combustion engines = days are numbered
EVs + renewables + autonomous driving = ultra cheap/clean transportation
At least seven countries plan to ban the sale of cars with internal combustion engines sometime in the next few decades, and the specter of losing out on markets like the UK, France, and most of all China (the world’s biggest car buyer) has pushed the auto industry to mobilize.
https://www.wired.com/story/the-potential-pitfalls-of-electric-cars-in-5-charts/
What’s flown under the radar is the $20 rise in crude prices over the course of the past couple months, in the face of the largest glut of crude oil in the history of the planet.
Every year about this time, gasoline prices begin to rise the industry readies itself to service refineries and make the switch to summer crude. It’s all very predictable.
That said, the $20 rise is a quite a lot.
Works for me. I bought energy and commodity mutual funds back when Albuquerquedan was telling us how oil was soon to go back above $80/bbl. Eventually his prediction will be correct, except for the timing.
I keep cheering the price of oil higher. This makes me happy.
I keep cheering the price of oil higher. This makes me happy.
Why in the world does that make you happy?
You want pressure off of OPEC countries?
The Texans are in charge now. They’ve got 2 trillion barrels just discovered and are drilling cheaper every month. Capitalism won, cartels lost.
He wants peak oil to force us into electric cars from wind and solar power-sourced electricity. Good luck with that. It took 20 years just to get the lead out of gasoline (by the time all the old cars were finally junked).
When you can keep constant power in Vermont, and when you figure out how to put a battery next to an American-made solar panel so that it gives constant 24 hr of electricity instead of 5 hours of weak electricity and 19 of nothing, THEN you will have the right to think about electric cars.
In this at least, Kunstler is right. We are *not* going to have a smooth transition to non-fossil. It’s going to be a major upheaval.
Oxide has it right. For me, the biggest tragedy of collapsing oil wasn’t the lost trucking jobs and oil jobs in North Dakota, it was that Americans rushed en masse back into SUVs and Trucks. Give me gas back at $4, or better, $5 per gallon and let’s keep this transition away from fossil fuels going. I don’t care which company wins per se (China announced their NIO EV with is 1/2 the cost of a Tesla model X).
I pay 7 cents per KWH for electricity where I live. I figure that if I drive about 12,000 miles per year, then I would save about $750 per year in fuel costs (gas vs electricity). That doesn’t factor in any maintenance as EVs are much less costly to maintain (notably, no oil changes). Once the economics work to be more environmental, then the transition begins in earnest. It seems like we’re right on the cusp now. Total cost to own for a new midsize sedan is about what Chevy Bolt would be. Add in $4-$5 gas, and it’s a no-brainer.
Well then, no problem. We’ll let China figure out how to do it, and then we can steal the technology from them, same way they stole almost everything from us.
+1000
China doesn’t impose the crushing environmental regulations upon its citizens and industry that the US does. Thus it makes sense that they’d go the route of cell technology, which is highly environmentally damaging.
Let China ruin their land figuring it all out. Once they’ve perfected their cell industry 100 years from now, then we can steal it.
I see no reason to encourage the rest of the USA to resemble China, California or Detroit.
It’s all very predictable.
If it’s all so very predictable, the futures market ought to be acting to smooth it out; in other words, arbitrageurs before the fact should drive up prices sooner by going long, arbitrageurs during should suppress the increase by going short for the predicted decline. Why isn’t that happening?
When you can keep constant power in Vermont, and when you figure out how to put a battery next to an American-made solar panel so that it gives constant 24 hr of electricity instead of 5 hours of weak electricity and 19 of nothing, THEN you will have the right to think about electric cars.
I agree there are still issues to work out. But the cars themselves will function as the battery you are talking about when they are connected to the grid. So I think you can check that one off. I think a house battery makes sense too and will also provide storage.
In Colorado: When things start getting shaky, central banks around the globe will fire up their printing presses.
Ben Jones: They always do. That’s how we got here. One problem is it’s deflationary:
Fed economist: ‘No evidence that QE works’ as central bank starts unwinding program
• The Federal Reserve is expected this week to announce a roll-off of its $4.5 trillion balance sheet.
• St. Louis Fed economist Stephen Williamson said there’s little to indicate that the quantitative easing program that expanded the balance sheet worked as it was intended.
by: Jeff Cox
Tue, 19 Sept 2017
With the U.S. central bank likely to announce this week that it will start unwinding its $4.5 trillion balance sheet of bonds and other securities, much of which accumulated in the QE era, the debate about the program’s impact continues.
In fact, one of the Fed’s own economists recently penned a report indicating that QE has come up short of its goals.
“Evaluating the effects of monetary policy is difficult, even in the case of conventional interest rate policy,” St. Louis Fed economist Stephen D. Williamson wrote. “With respect to QE, there are good reasons to be skeptical that it works as advertised, and some economists have made a good case that QE is actually detrimental.”
https://www.cnbc.com/2017/09/19/fed-economist-no-evidence-qe-works-as-balance-sheet-unwind-starts.html
Central banks are influenced by multiple factors: Politicians, stated goals, personal agendas, trans-national factors.
Years ago, there were a flurry of stories showing correlations of how high homeownership rates correlated with economic stagnation. Totally ignored, for obvious, but unflattering reasons.
Realize there is a dichotomy in leadership (and this starts with the lowest level managers up to leaders of governments and central banks): The regal public face presented to followers, and the private face, the one that has bodily functions. There are “bodily function” reasons that large companies and organizations do things as opposed to the regal pronouncements for public consumption.
Your post makes me think of this piece:
Is The World Overdoing Low Interest Rates?
Peter Coy & Paul Gordon
Bloomberg
https://www.bloomberg.com/news/articles/2017-06-06/are-low-interest-rates-bad-for-growth
Low interest rates are supposed to accelerate economic growth. But if central banks cut rates too much, they could actually slow the economy. So says a counterintuitive theory that’s making the rounds in academic and banking circles.
“Fed actions may be having little effect, or even effects opposite to those the Fed intends,” Charles Calomiris, an economist at Columbia Business School, wrote in an article in the winter issue of the libertarian Cato Journal called “The Microeconomic Perils of Monetary Policy Experiments.”
When interest rates are ultralow, banks’ profit margins on loans are so small that they have no real incentive to take on the risks of lending. Instead they put their money into safe assets such as Treasury bills, which yield almost as much as loans would. That suppresses the volume of loans, especially the ones that banks retain on their books such as commercial and industrial loans.
https://www.bloomberg.com/news/articles/2017-06-06/are-low-interest-rates-bad-for-growth
Remember….. Nothing accelerates the economy and creates jobs like falling prices to dramatically lower and more affordable levels. Nothing.
Oceanfront Miami Beach, FL Housing Prices Crater 9% YOY As National Housing Demand Plummets To 20 Year Low
https://www.zillow.com/oceanfront-miami-beach-fl/home-values/
wsj.com
A-hed
Let Me Tell You Some More About Bitcoin—Hello? Hello?
The wild virtual currency has obsessive fans and investors. Behind them are loved ones who are really, really tired of hearing about it; ‘I tune it out.’
By Kirsten Grind
Jan. 19, 2018 11:02 a.m. ET
Raphaela Lucsok put up with her husband investing about $100 in bitcoin that the couple couldn’t afford. She didn’t argue when he quit his stable job for a bitcoin startup and even went along with his insistence to eat only at the (very few) restaurants that accept the digital currency.
She took a stand recently when he started bringing his phone to bed to monitor bitcoin’s price.
…
Well, I guess it could be worse.
There could be hundreds of Beanie Babies in the bed with her…
Or Yap coins.
https://www.google.com/search?q=yap+stones&tbm=isch&source=iu&ictx=1&fir=_VaOf6T29nkgpM%253A%252CAEUyF3wRA79M_M%252C_&usg=__ebDvIN7A3b8oK-DRd6fhKqTuDlE%3D&sa=X&ved=0ahUKEwjX0c6okOfYAhVLy1QKHVf2BWUQ9QEIQDAD#imgrc=_VaOf6T29nkgpM:
Or Hillary Clinton.
Or Donald Trump.
https://slate.com/news-and-politics/2018/01/author-of-fire-and-fury-michael-wolff-suggests-trump-is-having-an-extramarital-affair-now.html
It gets better…
https://www.salon.com/2017/11/10/legends-of-the-pee-tape-trumps-bodyguard-can-neither-confirm-nor-deny/
“A farmland index compiled by Creighton University came in at 42.2 for January, remaining below the 50.0 level indicating a neutral market, but up 2.4 points month on month. Indeed, the figure was the highest for any month since July 2014, in the early stages of the farmland price slide which, on Creighton figures, has continued unbroken for a little over four years.”
“January was the ‘50th straight month the index has fallen below growth neutral,’ said the university, which draws its report from a survey of lenders in major agricultural states, from North Dakota to Colorado.”
…
Creightor!
Creightor!
Very nice.
Santa Rosa, CA Housing Prices Crater 11% YOY On Record High Housing Inventory
https://www.zillow.com/santa-rosa-ca-95403/home-values/
https://snag.gy/m5EzRB.jpg
There are many “farms” in NJ and NY owned by rich NYC libs who avoid taxes by owning a “farm” but produce nothing on the “farm”. This has been going on forever.
A relarively new scam is tree farms. Yep plant a few trees on your property and presto you are now a tree farmer, with all sorts of govt freebies and tax breaks.
with all sorts of govt freebies and tax breaks ??
You mean like this;
According new estimates for Farm Bill spending over the next few years released by the Congressional Budget Office, total government aid to farmers will swell to $23.9 billion in 2017.
https://www.npr.org/sections/thesalt/2016/02/01/465132866/farm-subsidies-persist-and-grow-despite-talk-of-reform
Similarly, there are tax-favored “farms” nestled in upscale Bay Area communities. If you want Uncle Sugar to provide your household with some handouts, figure out how to qualify yourself as a farmer or a real estate investor.
And what handouts do you expect the gentleman farmer to get who has a few chickens and pigs?
I grew up on a few acres with animals (4-H and food). There was nothing from Uncle Sugar for us.
A friend of mine is doing this. She and hubby bought a country estate and got some chickens. Next up: five pigs and an acre of conifers, and presto, she’s running a farm. You would think that state legislatures would beef up the requirements for this stuff. Like, produce receipts for actually selling your farm goods before allowing such a reduction on the taxes.
I had college loans coming out of undergrad. In order to defer paying my college loans due to being in grad school, I had to send in a letter from the registrar confirming that I was taking classes. Every semester. It was a bit of a pain, but prevents a lot of fraud.
If you have a tree farm it could be years before turn them into a income.
And tree farms require yearly pruning and maintenance programs. And that doesn’t even get into pests and diseases which can wipe the whole thing out…
just saw this today..
bitcoin and electricity:
According to a research conducted by a U.K.-based energy comparison tariff service called PowerCompare, the average electricity used to mine bitcoin this year has surpassed the annual energy usage of some 159 countries . […] A single bitcoin transaction consumes enough energy to power the average household for an entire month.(link)
https://hackernoon.com/why-bitcoin-fears-quantum-computers-and-iota-doesnt-697da531a11b
Are you ready for rates to normalize?
Is China About to Sell Off Its Holdings of American Debt?
By Brad Setser On 1/18/18 at 10:46 AM
Anyone hungry for a donut?
Bonds Are Flashing a Red Alert
15th January 2018
Bill Bonner
BALTIMORE – “Investors Prepare for Inflation,” warned the front page of The Wall Street Journal last Wednesday.
“Rising Treasury Yields Ripple Through Markets,” it added on Thursday.
“U.S. Treasurys lead bonds sell-off,” the Financial Times piled on, “as investors fear a faster retreat from crisis stimulus.
These headlines may herald the biggest financial turnabout in 35 years.
Stocks are hitting record highs. But bonds are slipping.
Courage of a Quack
For three and a half decades, inflation and interest rates – which tend to travel in the same direction – have gone down.
Now, they are going up.
The yield on the 10-year Treasury note – an important benchmark for borrowing costs in the economy – fell to 1.37% on July 8, 2016.
Since then…
“Another drop in bond prices sent the yield of the 10-year Treasury note above 2.5%,” says the Journal.
But what does it mean?
Shaping up in front of us is a delicious farce, a comedy of errors and ignorance, like The Three Stooges, but without the “nyuk, nyuk, nyuk.”
Fed chief Janet Yellen either didn’t see the bond sell-off coming… or she didn’t think it was worth worrying about.
There is nothing “flashing red,” she said in her last congressional appearance. “Or even orange.”
Perfect.
We mean, from a slapstick point of view.
Ms. Yellen, then at the San Francisco Fed, didn’t see the crisis of 2008 coming, either. Instead, she turned her back and got whacked on the tushy.
Then, when the crisis hit, she had no idea what she was doing in the hysteria that followed, so she deferred to her fearless leader at the time, the hilarious Ben Bernanke.
This clown later modestly described himself as having the “courage to act.”
Courage?
The markets were correcting the damage done by excess credit provided by Greenspan, Bernanke, and Yellen, et al. But instead of having the cajones to let the correction happen, Bernanke panicked… giving it even more credit.
To the cheers of practically every investor, householder, politician, and economist, he slashed interest rates and bought up bonds with newly minted digital cash (QE).
That is, he was the quack who gave the diabetics what they wanted: more sugary donuts.
…
“The markets were correcting the damage done by excess credit provided by Greenspan, Bernanke, and Yellen, et al. But instead of having the cajones to let the correction happen, Bernanke panicked… giving it even more credit.”
Was Yellen Chairman before or after Greenspan? Cuz this dude seems to think she was before Bernanke. Seems everyone’s 22 years old everywhere…
Bernanke preceded her as chair for sure, but I don’t know which of them was first to join the FOMC.
Is the “et al” intended to include Paul Volker? Does it count the guy before Paul Volker, who I don’t know and am not going to look up? He could’ve just said “and Volker.” Is everyone reading this Bill Bonner fellow familiar with everyone on the FOMC going back… when… the first Greenspan put? 30+ years?
“…who I don’t know and am not going to look up?”
Inflationist G. William Miller
And Volker and this Miller fellow were loose money messiahs like Greenspan/Bernanke/Yellen? Volker wasn’t.
Just really bugs me when I get on the information superhighway and I see something like the passage I quoted which makes me stop and say WTF. I’d like to be able to rely on someone, anyone.
I went down a bit of a rabbit hole today (like I think Karen said she did with googling “[your state] housing authority”) when I saw an article on the Charleston Post and Courier site about a Texas company buying an EPA Superfund site and getting it rezoned for mixed use commercial / residential.
The article said:
“Also, the developer, an affiliate of Texas-based Highland Resources Inc., has said it will invest up to $30 million in additional environmental improvements to the Superfund site before installing sewer lines and other infrastructure.”
What I was trying to figure out was whose $30 mill it was - theirs or the EPA’s? The EPA’s Superfund site was the rabbit hole. One document I found implies that the money is private but it doesn’t say if it’s 100% private or a mix of EPA/Private:
“Moreover, this Proposed Plan is consistent with
EPA’s stated priority in the Superfund Task Force
Recommendations of leveraging private funds to
promote additional cleanup that leads to removal
from the NPL and economic redevelopment of
Superfund sites.”
There’s some toxic plots of land in the US, in addition to the amber waves of grain.
Following money trails is never easy.
Murphy, TX Housing Housing Prices Crater 6% YOY As Housing Correction Expands In DFW Area
https://www.zillow.com/murphy-tx/home-values/
This is a 10 minute video called “California Homeless Problem” that was posted 5 days ago. It was filmed by someone riding on a bike path (presumably wearing a GoPro on their helmet) past hundreds and hundreds of tents and shanties and piles of garbage:
https://www.youtube.com/watch?v=zvCGtxeknSg&feature=youtu.be
Just imagine the open sewage filth… The county should contract with a sanitation company to deploy porta-potty stalls along this route.
Aaaaand another “do as I say not as I do” lib media (((type))) falls on his sword
http://www.latimes.com/business/hollywood/la-fi-ct-la-times-ross-levinsohn-publisher-investigation-20180118-story.html
But there’s no pattern here. None at all. And who could ever imagine a paper that backs (public funded/Marxist controlled) unions didn’t want a union for its workers? Not unlike The NY Times.
Circulation in the west coast paper of record (((propaganda))) has fallen off a cliff over the years.
An interesting chart concerning newspaper circulation…
https://goo.gl/images/diwzSh
That goes far to explain the rise of Trump. Got Tweets?
trumpster says we have a booming economy thx to him. Same old bs
This is how azdude wakes up in the middle of the night screaming Trump…
https://www.youtube.com/watch?v=_zHpqsg4_wc
how is your bankruptcy going?
“how is your bankruptcy going?”
Why would someone who had always paid their bills and has very little debt, money in the bank and good cash flow file bankruptcy?
PS
Hope your “Not my President” march went well yesterday.
Sleep well
https://www.youtube.com/watch?v=_zHpqsg4_wc
how much debt is your boy trump gonna rack up? can he beat the last guy?
Liz The Liar…. Has a nice ring to it.
https://buffalohair.wordpress.com
Elizabeth ‘Liz the Liar’ Warren; This is What US “REAL” Native Americans Think About You..! – You Ridiculous Phony!!
<Calabasas, CA Housing Prices Crater 18% YOY As Poverty And Illegal Aliens Hobble State
https://www.movoto.com/calabasas-ca/market-trends/
Dave Brubeck “Besame Mucho”
https://www.youtube.com/watch?v=P_a2f9HI2JI
Cannonball Adderley feat. Miles Davis - “Autumn Leaves” (Somethin’ Else - 1958)
https://www.youtube.com/watch?v=pfxosTobxlI
Blues Brothers - Sweet Home Chicago
https://www.youtube.com/watch?v=79vCiXg3njY
“we are in a goldilocks economy”- DJT
“corporate tax cuts are gonna enable the stock market to levitate for even longer as money saved from taxes will go into the board rooms to fund buybacks , dividends and M&A.”
If the dollar was already weak on Friday due to the shutdown prospect, how will it fare on Monday?
US shutdown fears pressure dollar, on track for worst run since 2015
- As republicans scramble for funding deal before midnight deadline, some see modest market effect from a U.S. government shutdown.
- Euro nears 3-year high, yen close to 4-month high vs dollar.
- Rising U.S. yields fail to lift greenback.
Published 8:32 PM ET Thu, 18 Jan 2018 Updated 4:24 PM ET Fri, 19 Jan 2018 Reuters
Dan Kitwood | Getty Images
The dollar held steady above a three-year low versus a basket of currencies on Friday, marking a fifth week of falls and its longest losing streak since May 2015 as worries over a possible U.S. government shutdown weighed.
On Thursday, the U.S. House of Representatives passed a bill to fund government operations through to Feb. 16 and avoid agency shutdowns from Saturday when existing allocations expire. The bill has yet to be approved by the Senate, where it faces an uncertain future.
Democratic Senate leader Chuck Schumer met with Republican President Donald Trump on Friday to find ways to avert a shutdown. Schumer suggested some progress was made but they still had “a good number of disagreements.”
…
I guess that could be inflationary as folks have to pay more for imports.
If u look at the basket of currencies the dollar is compared to the euro is like 57%. Has the Euro been going up?
The chinese money isnt even in the basket. Thats where a lot of imports at walmart come from.
Does this mean the pboc will have to do something to keep the peg?
If a chinese merchant sells their product and gets dollars the PBOC has been doing the exchange for the merchant. So if the dollar falls in relation to the yuan or rembini thats trouble for merchants. Thats why the PBOC has printed lots of money to buy dollars that have ended up converted to treasuries.
The real measure of the dollar is vs gold. How is that doing?
isnt it amazing how we have more buyers than sellers after a 10 year bull run?
Castro Valley, CA Housing Prices Crater 6% YOY As Housing Demand Plummets To 20 Year Low
https://www.movoto.com/castro-valley-ca/market-trends/
there are a bunch of broke people in ca who cant afford rent cause there arent a lot of bread winner jobs to go around. these corporations such as mcdonalds and walmart dont pay enough for rent and basic needs. the rich elite on the coasts are doing great. the valley is filled with poverty.
people on the coasts are watching their equity go through the roof literally as dollar bills stack up.
In February, a speculator purchased a four-acre blueberry farm with about $80,000 in annual crop revenue [...] for $2 million.[...] re-listed it for $2.77 [...] relisted in the fall for $4.5 million. [...] is flipping the land for $7.7 million
OMG! That’s amazing. If that doesn’t scream bubble to you, you aren’t paying attention.
us dollar index:
Euro (EUR), 57.6% weight
Japanese yen (JPY) 13.6% weight
Pound sterling (GBP), 11.9% weight
Canadian dollar (CAD), 9.1% weight
Swedish krona (SEK), 4.2% weight
Swiss franc (CHF) 3.6% weight
all fiat?
interest rates will not go up unless the Central banks want them to.
What would be the motive to let them go up?
They have been the main buyers on treasuries since 2008. They are the market. It is worldwide buying.