Something Else Is Going On
A report from NPR. “The big drop in oil prices and a stronger dollar both help the economy and hurt it. Add to that the recent slowdown in global growth. There’s good reason to be concerned, says Jeffrey Snider, head of global investment research at Alhambra Partners. Falling oil prices are a clear sign of a dangerously weak global economy, he says. And, he says, recent data suggest U.S. consumers are saving most of their windfall from lower energy prices, not spending it to fuel growth. ‘That’s an indication of very cautious behavior. Whenever you see oil prices collapse, especially by something like 60 percent, something else is going on, and so therefore, any benefit that might come to consumers in the form of lower energy prices is being overwhelmed by whatever it is that’s causing oil to fall in the first place,’ Snider says.”
“‘You have economies from Europe, Japan, China that are either in or very close to recession or some form of growth that is significantly degraded,’ Snider says.”
The Gulf Times. “Slowing GDP growth in China is leading to weaker demand for commodities, contributing to lower global commodity prices, QNB has said in a report. The slowdown in growth in China is a consequence of past over-investment that has led to a build-up of excess capacity in the economy. Over-investment has contributed to a decline in housing prices and a build-up of financial vulnerabilities in the shadow banking system, which are also dragging down growth.”
“With private consumption and investment both slowing, the growth slowdown is expected to continue, despite government stimulus measures. Based on the historical relationship between real GDP growth in China and global commodities, slower growth and weaker demand from China is likely to lead to lower global commodity prices by around 11% in 2015 and 5% in 2016, broadly in line with the latest IMF commodity price forecasts. ‘This could add to the global disinflationary pressures that are contributing to what we have called the ‘great deflation’ in 2015.’ QNB said.”
The Morning Bulletin in Australia. “There are 22 residential properties on the market for over $1 million in the Rockhampton and Capricorn Coast areas. But will they sell? According to Australia’s property information service RP Data, high value house sales have been few and far between in the past six months with only 10 sales over $600,000 across the region. A recent market overview by Herron Todd White supported these findings and said generally, Rockhampton finished off 2014 with a low level of sales activity and softening prices across the region.”
“‘The year ahead starts with a large amount of uncertainty for most of our resource and mining industries,’ the report said. ‘Numerous industries are reporting salary cuts, job losses and general restructuring and downsizing. Gracemere is still feeling the effects of an oversupply of new housing construction in the past two to three years, creating a significant rise in vacancy rates and a drop in house prices. The recent approval of the Pines housing development, one of the biggest land releases on the Capricorn Coast to date, poses a massive risk of delivering another Gracemere scenario with supply likely to outweigh demand.’”
The Midland Reporter Telegram in Texas. “Karr Ingham, the Amarillo economist who prepares the Midland-Odessa Regional Economic Indicators for the Midland Development Corp. and Security Bank, said that even if oil prices begin to recover immediately, the stage is still set for a deep contraction in the area’s oil and gas industry and this will find its way into the general economy.”
“Jim Smitherman, CEO of Security Bank, said the bank has been seeing decreased demand for loans as oil prices have fallen. As oil prices have plunged, so have collateralized asset values — especially related to energy credits — which pose some risk to banks’ balance sheets, Smitherman said. ‘There is softening of this prospect on credits which hedged oil prices; however, some stress can be expected on financial firms heavily involved in energy. Regarding service company credits, asset values of underlying equipment have seen some price declines as has been seen in recent auctions; this, too, will put pressure on bank asset quality,’ he said.”
“‘There is no doubt many financial institutions, especially those new to the energy cycle, will tighten underwriting standards, further exacerbating the issues,’ he said. As real estate values undergo an expected correction near-term, ‘this will strain banks’ asset quality, especially for banks concentrated in development and construction lending,’ Smitherman said.”
The Telegraph on North Dakota. “It became one of the most-photographed signs in America, proclaiming a brash welcome to the North Dakota crossroads town that became a symbol of a new American oil rush: ‘Welcome to Williston. Boomtown USA.’ As always with booms, those who got in early, got rich – rents spiked to Manhattan levels, land values quadrupled, unskilled labourers earned more than $100,000 (£66,000) a year and some ‘mom and pop’ restaurants took $20,000 a week; for a while it seemed like the party would never end.”
“At the office of Remax Bakken Realty, there is a sanguine view about the long-term viability of the building spree which has seen hundreds of new flats and houses being thrown up around Williston. ‘I predict we’ll see more of a re-grouping than a bust,” says Angela Jennings, a senior associate at the firm, ‘there will be some slowdown, some builders will have to adjust their investment time-horizons, but we’re not seeing panic. No one’s pulling out, the phones are still ringing.’”
The Star Phoenix in Canada. “Total housing starts in Saskatoon were 155 in January, down 59 per cent from 376 in January 2014, with most of the decline occurring in multiple units, which were down 69 per cent to 96 from 308 in January 2014, continuing the slowdown in the housing sector that began about this time last year, according to the Canada Mortgage and Housing Corp. ‘Following a strong performance for housing starts last year, builders will be keen to ensure that demand from new home buyers in 2015 is first channelled toward their complete and unsold inventory,’ said Goodson Mwale, CMHC’s senior market analyst for Saskatchewan.”
“Home builders in Regina are responding to economic uncertainty, compounded by a large inventory of unsold new housing units, Mwale said. ‘When you have all this economic news coming out regarding energy prices and the lower Canadian dollar, there is economic uncertainty in the marketplace,’ Mwale said. ‘When there is uncertainty, businesses will play a wait-and-see game. … That affects their hiring plans; they may want to freeze hiring and see where the chips fall. When there is economic uncertainty, people will want to approach (home buying) cautiously. … Job security is another thing. You need a job to carry a mortgage.’ Mwale noted that inmigration and job growth have slowed down in the last year, which in turn reduces demand for housing.”
“Another major factor is the inventory of unsold new housing units, which is currently at a 30-year high. ‘We ended the year at 476 (unsold new housing units). At the end of January, we were sitting at 443.’ Saskatoon is expected to see housing starts moderate to 3,085 in 2015 and 3,015 in 2016 after 3,531 starts last year. In Saskatchewan, housing starts are expected to decline from 8,257 in 2014 to 7,300 in 2015 and 7,200 in 2016.”
I going to re-post some stuff from yesterdays comments section.
‘Danish consumer prices fell in January for the first time since 1954 after energy prices collapsed, following the eurozone into negative territory while raising hopes it could boost Denmark’s anaemic consumer spending.’
“It is worth underscoring that the current situation is good news for the Danish economy,” Nordea economist Jan Stoerup Nielsen wrote in a note to investors. “As long as lower inflation is due to falling energy prices and fees it is helping to support the purchasing power of Danish households,” he said.’
‘Danish consumers have reined in spending since housing prices began a protracted slide in 2007, leaving the country with one of the world’s highest levels of household debt.’
‘Deflation means they have more money to spend at the end of the month, but it could also lead to consumers putting off buying big ticket items if they expect prices to fall further. However, Handelsbanken economist Jes Asmussen said the deflation was unlikely to last.’
“Looking at the trends in the price of services, wages, house prices and consumer expectations for inflation in Denmark, there is nothing to suggest that the Danish economy is about to be caught in a vicious deflationary spiral,” he said according to business daily Boersen.’
I don’t know Jes, it looks more and more like a deflationary event. I also don’t know how “viscous” it is since you can’t even seem to decide if it’s a good or bad thing. Maybe this is it. No Fed interest rate increases, no Lehman Brothers, just falling prices.
‘As demand dwindles, steel prices in China have fallen 12 percent in the first five weeks of this year - almost as much as in all of 2014. The tonnage of China’s imports of rubber, oil, iron ore and other industrial materials also fell sharply in January. And the global market for bulk freighter charters is in free fall, already below levels in the worst days of the global financial crisis in late 2008 and early 2009.’
“In the past two months, it has been more or less a vertical correction, and this is a proxy for China,” said Basil M. Karatzas, a Manhattan ship broker.’
‘Heavy industry in the country, the world’s second-largest economy, is suffering a much sharper downturn than was apparent or expected even several weeks ago. That slowdown seems to be mirrored to a lesser extent in other sectors. But the full scope of China’s economic weakness is obscured by limited data, as the country prepares for a nationwide, weeklong holiday beginning Feb. 18, in observance of the Lunar New Year.’
“It’s too early to be saying we’re moving toward disaster, but there’s nothing in this data to be cheery about,” said Louis Kuijs, the chief China economist at the Royal Bank of Scotland.’
‘China’s National Bureau of Statistics released inflation data on Tuesday morning in Beijing showing that producer prices have been falling faster and faster since last July, partly because of lower commodity prices.’
‘China has many tools to halt a slowdown, although all of them have potentially undesirable side effects…Some restrictions on housing market speculation have been lifted, at the risk of making homes more expensive.’
‘A slowdown in home construction and car sales has contributed to trouble in the steel and iron ore sectors and in the energy sector. The tonnage of iron ore imports is down 9.3 percent in January from a year ago, while the tonnage of imports of refined products like gasoline and diesel was down 37.6 percent.’
‘Some of the slowdown in industrial commodity imports last month may reflect that many Chinese companies built above-average stockpiles in the autumn as prices were falling, and now find themselves with scant room to store more. They also face losses on their earlier purchases, as prices have continued to drop.’
‘With the purchases slowing, ship charters have slowed to a crawl. Large freighters that cost $8,000 to $9,000 a day to operate, plus $20,000 or more a day in interest payments and other ownership costs, are now leasing for about $4,000.’
‘The daily cost to charter a so-called capesize freighter, a large ship particularly used to supply China, has fallen fastest of all, down 75 percent since mid-November.’
“It’s pretty grim at the moment,” said Tim Huxley, the chief executive of Wah Kwong Maritime Transport, a large Hong Kong shipping line. “The bulk carrier market is at the lowest it has been in 30 years.”
‘The squeeze on U.S. farmers is getting worse as low crop prices and rising costs erode incomes that not long ago were the highest ever. Farm income this year in the U.S., the world’s top agricultural producer and exporter, is heading for a third straight decline and will post its biggest slide since the Great Depression, the government said today.’
‘Net-cash income from all farm activity will tumble 22 percent to $89.4 billion, the biggest drop since 1932 and the lowest since 2009, the U.S. Department of Agriculture said in a report today in Washington. Last year’s slump was 12 percent to $115.1 billion.’
‘The agriculture industry has boomed over the past decade as record land and crop prices boosted sales of seed and farm equipment.’
Lets see what’s mentioned here. 1954. 1932. Long time periods. Then again, when was the last time interest rates were near zero year after year?
I believe that last protracted period of low risk premiums lasted roughly from 1933 through 1948.
‘The squeeze on U.S. farmers is getting worse as low crop prices and rising costs erode incomes that not long ago were the highest ever
Hmmmm….
And prices for farm land is at record highs…
What could go wrong?
Just chop all that farmland up into sections and build McMansions on 5 acre parcels for $1M+. What could go wrong?
unregulated deflation event USA 1921
or gov regulated deflation Japan 1989
which do you choose?
regulated deflation event USA 1933-1948
There was even a “price czar”! (Quiz question: What famous Canadian economist was this?)
‘Danish consumers have reined in spending since housing prices began a protracted slide in 2007, leaving the country with one of the world’s highest levels of household debt.’
Weren’t they just as much in debt when housing prices were rising? Or did their mortgage debt magically grow when house prices fell?
Or was their spending tied to borrowing against the house?
How do you say ‘HELOC’ in Danish?
The latin transation goes something like; CRATERUS MAXIMUS
“‘Deflation means they have more money to spend at the end of the month,”
It doesn’t get any better than falling prices. Good for the individual, good for the economy.
‘Why is a declining rate of inflation bad for economic growth? According to the popular way of thinking, declining price inflation sets in motion declining inflation expectations. This, in turn, is likely to cause consumers to postpone their buying at present and that in turn is likely to undermine the pace of economic growth.’
‘But, in fact, in order to maintain their lives and well-being, individuals must buy present goods and services. So from this perspective a fall in prices as such is not going to curtail consumer outlays. Furthermore, a fall in the growth momentum of prices is always good for the economy.’
‘For example, an expansion of real wealth for a given stock of money is going to manifest in a decline in prices (remember a price is the amount of money per unit of real stuff), so why should this be regarded as bad for the economy?’
‘After all, what we have here is an expansion of real wealth. A fall in prices implies a rise in the purchasing power of money, and this in turn means that many more individuals can now benefit from the expansion in real wealth.’
‘Now, if we observe a decline in prices on account of an economic bust, which eliminates various non-productive bubble activities, why is this bad for the economy?’
‘The liquidation of non-productive bubble activities — which is associated with a decline in the growth momentum of prices of various goods previously supported by non-productive activities — is good news for wealth generation.’
‘The liquidation of bubble activities implies that less real wealth is going to be diverted to malinvestments from wealth generators. Consequently, this will enable investors to lift the pace of wealth generation. (With more wealth at their disposal they will be able to generate more wealth.)’
‘So, as one can see, a fall in price momentum is always good news for the economy since it reflects an expansion or a potential expansion in real wealth.’
‘Hence, a policy aimed at reversing a fall in the growth momentum of prices is going to undermine — not strengthen — economic growth. It is not possible to produce genuine economic growth by means of monetary pumping and an artificial lowering of interest rates. If this could have been done, world poverty would have been erased by now.’
good stuff. it’s a shame you have to go all the way to mises.org to find it.
never heard of this frank guy before. i wonder how long he’s felt this way?
it isn’t the money printing that will kill the dollar. it will be the borrowed money spending. when it’s obvious that the money can’t or won’t be paid back, it will all be over.
“But, in fact, in order to maintain their lives and well-being, individuals must buy present goods and services.”
But individuals only have to buy what they need. What they want (but not really need) can (and will) be put off until prices fall. And if prices of these wants continue to fall then the purchase of these wants will continue to be put off.
So this deflation thingy wrings out the excesses - it wrings out the wants - and it keeps the needs, which means that if you are employed in an industry that fulfills needs then you just may be set and secure. But if you are employed in an industry that fulfills wants then you should expect to get a hosing.
What they want (but not really need) can (and will) be put off until prices fall.
an increasing number of people are already living hand-to-mouth. they are poor and they can’t afford to put off necessities if or until prices fall.
and people that have a little money to spare don’t put of purchases on the hope that prices fall. yes, they’ll put it off for a big upcoming sale, but not for everyday shopping.
Don’t forget substitutions.
yes, the government calls it ‘hedonic adjustments’. like people enjoy buying hamburger instead of steak.
Or carpooling instead of buying a new vehicle, repairing an old vehicle, hot dogs in lieu of ______ as a result of price disparity.
People with cash in their wallet do it all the time. It’s why they have cash in their wallet. FedresScum doesn’t understand this behavior because they’ve never had to make those decisions.
quite right. they have a permanent amount of money coming in or they are already very wealthy from scams fleecing the public.
What’s neat about expansions is the availability of credit, the availability of borrowed money.
With credit one can spend money for things he wants (but not needs) with money he does not have. And this spending for wants creates an economy that grows dependent on spending for wants. But once the borrowed money is snatched away the spending for wants evaporates and the only spending that is left is the spending for needs.
And this spending for wants creates an economy that grows dependent on spending for wants.
wants are often a bigger motivator than needs.
But once the borrowed money is snatched away the spending for wants evaporates and the only spending that is left is the spending for needs.
borrowed money snatched away? borrowed money gets stolen?
anyway, the spending for wants or desires never goes away.
The thing that I keep thinking about is that the “needs” are often the things the government excludes from the inflation numbers (food, fuel, etc.). The “wants” are often time getting cheaper each year anyway, and only going up in cost in theory due to voodoo analysis.
How is there inflation in televisions? The cost is flat to down each year, but I get a better and better TV.
In other words, there is already an incentive to wait for a lot of the “wants”.
ok, your tv isn’t a ‘need’ correct?
would you wait for prices to come down if your tv broke and you wanted another one?
Nope, but we don’t usually wear things out anymore.
I’m willing to wager that MOST people who buy a new TV do so because they want bigger/better, etc. With that kind of purchase, there is no urgency.
what does not wearing things out anymore have to do with it? i gave you an example to show you that we don’t wait for prices to fall when we want something now. and obviously, it wasn’t a need.
the point is that waiting for prices to come down to buy doesn’t happen if you want something now and can afford to buy it.
i’ll tell you something else.. want or desire isn’t demand.
The TV gets bought not only because it is wanted, but because it is also cheaper than it was maybe a few months ago.
“expansion of real wealth for a given stock of money is going to manifest in a decline in prices…so why should this be regarded as bad for the economy?”
Possibly because the vast majority have no real wealth, only debt.
he’s talking about the expansion of wealth. he’s not saying everyone is wealthy.
how can overall price declines be bad for an economy?
He is talking about normal, and we have an economy that has been so perverted by debt as to not resemble normal. Deflation is good for those few of us who have avoided debt, but it’s a grim reaper for debtors and financiers.
He is talking about normal
he wasn’t talking about normal or abnormal. he was simply stating a truth that the expansion of wealth for a given stock of money will manifest in declining prices.
and declining gpl is good for any economy.
I don’t think that word means what you think it means. I use it in the context of C.S. Lewis. I am actually the first person here to ever do that.
Meanwhile, every debt donkey will stand around dazed, rubbing their head and asking “If this is so good, why am I feeling so screwed?”
“…it’s a grim reaper for debtors and financiers.”
I.e. most citizens of the banker’s paradise known as the U.S. of A.
I don’t think that word means what you think it means.
words generally have more than one definition. but it doesn’t matter. he didn’t use the word. and what he said stands whether or not you want to interject it.
I am actually the first person here to ever do that.
which is totally unimportant. if it had any importance at all in economics, you’d have my attention. i wouldn’t be making petty, false accusations because i had some politically correct view.
did you find the quotation in roger’s book yet? i’m waiting. but that’s ok, i’m sure you’ll never find it, because it doesn’t exist even though you claimed it does.
I read yesterday that what we witnessing is a battle between technocracy and capitalism. I don’t think that frames it right. It’s technocracy versus market forces. There is no body or group or nation that opposes the central bankers/planners of the world. They argue a bit amongst themselves, but they meet regularly and decide to do this or that. So what’s stopping them? Why can’t they say, “house prices (for example) will be here, and people will borrow against these houses and spend and the economy will grow”?
One slight flaw in this logic is if house prices are above what the market forces indicate, over-supply will result. It’s may be slow or fast, but it will happen. Market forces; where do they come from? Anytime people are buying and selling, constructing, etc. And almost all the signals of what should be done are communicated through price. What to build, where, how many.
Oil is a good example. The technocrats build a globalist model. China (also run by technocrats) explodes, energy usage goes through the roof, commodities like oil run up in price. This tells the market, more oil. The market delivers, but alas then China runs out of steam, as it had to. All of a sudden, dang we don’t have enough storage for all this oil! And China also has 60 million excess housing units. Same thing will happen everywhere house prices are artificially high, if it already hasn’t.
Only now, the technocrats have upped the ante. Frustrated that these collapsing bubbles have created a mess, they pulled out the big guns. Trillions, more trillions. Unprecedented polices, then some more, for years. But if it’s all based on a flawed conceit that they can set prices and keep them there, forever, one would expect a reckoning. I don’t know why Yellen and Bernanke think they are any better than the Soviets at running a planned economy, but they do. Market forces will dash their plans like a tree root cracking the sidewalk at a ghost city in China.
Excellent.
The yeltsin and bernanke lineage is rooted in communism.
But if it’s all based on a flawed conceit that they can set prices and keep them there, forever, one would expect a reckoning.
there will be. they keep applying bandaids (QEs etc.) but the balloon will pop.
I don’t know why Yellen and Bernanke think they are any better than the Soviets at running a planned economy, but they do.
yes, hubris indeed. they think they are smarter than the people that failed. they think they will do it better.
Market forces will dash their plans like a tree root cracking the sidewalk at a ghost city in China.
agreed. we keep having to learn the same lessons over and over.
“did you find the quotation in roger’s book yet? i’m waiting.”
Don’t be silly.
yeah, it was silly of me or anyone to expect you to back up anything you say.
I’m not running your errands. Do your own research Horatio.
You kids stop fighting or we are NOT going to Dairy Queen!
OK daddy.
@blue skye
you told us that jimmy rogers said ‘the euro would fail’ in the book he wrote in 2003.
why did you say it? apparently you can’t prove it, or you already would have.
“One slight flaw in this logic is if house prices are above what the market forces indicate, over-supply will result. It’s may be slow or fast, but it will happen. Market forces; where do they come from? Anytime people are buying and selling, constructing, etc. And almost all the signals of what should be done are communicated through price. What to build, where, how many.”
This is absolutely true…except when government gets in the way of price signals. If the government allowed the market for housing were to react in SF the way it does in, say Dallas, we would have had even more cranes in the air in SF (starting a LONG time ago), and the additional supply would have pushed prices down.
But instead, there is a delayed supply reaction to higher prices in CA (due to CEQA, NIMBYism, Coastal Commission, etc.), which allows things to get more out of hand before the price signal results in more housing. Thus, bigger booms, and bigger busts.
Tell you what, if you make a donation to support the blog, I will post what you are asking for.
tell you what. you made a claim that i don’t believe. i’m not going to pay anyone for you to support it. just post the quote and the page number.
and make sure it doesn’t say “i don’t THINK it will work’ or words to that effect. it has to be unequivocal.
you post it and if it’s authentic, you win.
here’s why i don’t believe you..
listen to rogers around the 6 minute mark. he says “i’m sceptical, i don’t believe the euro will work”. if he knew it wouldn’t work, he’d have said so. that told me he didn’t understand currencies as well as i do. i would have said ‘it WILL fail’.
https://www.youtube.com/watch?v=ZzAtL-EBuF4
Unfortunate. I thought we could redeem ourselves for the bandwidth we’ve wasted here. It’s embarrassing.
“you win”
That’s unpossible.
” he’d have said so.”
Right. Now that I have promised Beer & Cigar Guy that I wouldn’t make you cry anymore. Put up something and I’ll post what you seem to need.
“If the government allowed the market for housing were to react in SF the way it does in, say Dallas, we would have had even more cranes in the air in SF (starting a LONG time ago), and the additional supply would have pushed prices down.”
Rental_Fraud,
There are 4.4 million excess empty houses and prices falling again in CA, with or without government involvement.
it’s your claim. if you want to be proven right you’ll post it sooner or later.
Q. What happens to the price of oil when you hide the supply in storage containers on land and at sea?
A. It goes up.
Q. What happens to oil production when the price goes up?
A. It goes up, too.
Q. What happens to this oil product when you have run out of cheap storage?
A. It goes on the market, driving prices down further from already abysmally low levels.
Beware: The End of OPEC Could Mean a Plunge to $20 Oil
By Matt DiLallo
February 11, 2015
Just when investors thought the oil rout was over, an analyst at Citi warned that the recent 20% rally in the price of oil is just a “head fake.” Worse yet, Citi sees the price of oil resuming its plunge and going all the way down to $20 per barrel. That’s quite the opposite view of many others as OPEC said it thinks that oil has already bottomed and could zoom higher while the International Energy Agency, or IEA, sees $55 oil being here to stay this year. However, as we’ve seen in this market, anything is possible once OPEC steps aside.
Ruining the rally
A big drop in the U.S. rig count over the past few weeks should lead to a slowdown in U.S. oil production growth, which has largely fueled the rally off the bottom in recent weeks. However, Citi doesn’t see that slowdown being enough to maintain the rally in the price of oil. Instead, it sees the glut getting far worse, which is why it’s predicting a new plunge in oil prices that could take crude all the way down to $20 a barrel for a while. This is because it doesn’t see OPEC stepping in to cut production in order to manipulate prices. Basically, it believes OPEC’s days of ruling the oil market are over as U.S. shale has broken its ability to control the oil market with supplies alone.
…
With the exception of technology items, I’ve never seen anyone put off a purchase of goods or services because of deflation expectations. How did this become “the popular way of thinking”? I’ve also never seen weather influence a major purchase.
Why not?
Example - say you want to buy a roll of Romex wire at your local big box store. Copper prices have been falling. If you don’t need the wire right away, wait another 6 months. Chances are, it will be cheaper then.
if you don’t need the wire for another 6 months, why would you want to buy it now?
‘If you don’t need the wire right away, wait another 6 months’
That’s what I would do in any circumstance. I don’t think most people are using everyday purchases as a futures option. Most people don’t know what’s happening with copper prices.
Like the one guys says, “oh, there’s good deflation”. Then the article ends with “vicious cycle of deflation.” This little game they play with lower prices is a joke. Since when was the central bank or the government supposed to decide what stuff should cost? Making a boogie man out of deflation gives them the excuse to inflate. Here’s another little game; inflation is low so we can print as much money as we want. Inflation is low so we can strangle interest rates. Inflation is low IMO because we are going from one bubble to another, with barely enough time to put in a new stock market high before the wheels come off again and down we go. Oh yeah, rates; since when was it the central banks job to control those? These people have slowly but surely taken over a huge chunk of the economy, like housing finance, made it zero bound and government backed, while we pay through the nose for shelter and they wonder why jobs and wages suck!
I should add that bubbles aren’t the only source of deflation. Globalization combined with excess money creation = overcapacity. That was a technocrat “project” too. What did they think was going to happen when they set it up so any job can be sent to a country that works people to suicide, with crap pay and environmental common sense be damned? Now we hear pay is too high in China so jobs are going to even more broke-a$$ countries.
Let’s think of it a different way. If you knew prices would be 5% higher next year, would a given person accelerate a purchase? It would be logical, yes.
If you that same person knew that prices were going to be flat, they have a higher likelihood of delaying the purchase.
On the margin, some people would react with less demand if they knew prices were going down. And the margin is what sets markets.
what if the prospective buyer was on a budget and saving his money to buy? suppose the 5% increase drives it out of his price range. suppose that with a constant increase he’s NEVER able to buy..
LOL. Too funny!
You guys haven’t realized that “debating” with tj is like wrestling with a pig?
“You both get dirty and the pig likes it.”
“With the exception of technology items, I’ve never seen anyone put off a purchase of goods or services because of deflation expectations. How did this become ‘the popular way of thinking’?”
If you think of the term “deflation expectations” as translating into “lower prices” then this is what sales are all about; If Macys wants to move goods then they put them on sale (aka lowering the price) and there are many people who watch for these sales and wait to buy during these sales and some people will not ever buy unless the item they want (note: want, not need) is put on sale.
Government can’t tax deflation.
That is a wonderful concept. Unfortunately they seem to be trying rather hard to do just that, with all the deficit spending at the government level. It’s a confiscation in the making.
it’s your claim. if you want to be proven right you’ll put it up sooner or later.
don’t know how that post end up here.
‘Following a World Trade Organization ruling, China in January announced it’s abolishing its decade-old export quota system for rare earths. China produces nearly 90% of the world’s REEs and is also the top consumer of the 17 elements used in a variety of hi-tech industries including renewable energy, medical devices and defence. ‘
‘But even before the lifting of quotas the country’s rare earth exports started to expand rapidly. Customs data show export volumes grew 27.3% in 2014 to 28,000 tonnes, according to a China News Service report.’
‘At the same time the average export price of rare earth products plummeted to only 83,000 yuan ($13,000) per tonne. That’s a decrease of 47.8% from the year before and the third year in a row of sharp declines.’
“Sluggish demand downstream” is blamed for the drag on prices. China’s downstream industry consumes 70% of global production which was expected to have grown 9% to 127,000 tonnes last year according to official estimates.’
‘Only two mines produce rare earths outside China. Molycorp’s Mountain Pass mine in California is targeting production of 20,000 tonnes per year and is aggressively ramping up from its 2014 total of just 4,785 tonnes even as it continues to lose money.’
‘Lynas hit its expected target of 11,000 tonnes per year from its Mount Weld mine in Australia and Malaysian plant during the fourth quarter last year, but is also experiencing negative cash flow amid falling prices.’
‘China is due to lift export taxes on rare earths in May, which could add further pressure on prices.’
‘The price of coal, which has declined more than 50 percent since 2011, may fall further this year, which will hurt smaller producers of the fuel, IHS Inc. said.’
“This is a supply-driven recession,” David Price, senior director of coal at the Englewood, Colorado-based consultancy, said at a Cape Town conference Thursday. “We’re going to see some bloodshed on the supply side this year. We’re going to see some very significant production cuts” among smaller producers, he said.’
‘Miners from Colombia to Australia maintained output as prices fell for a fourth year in 2014 amid a global glut of seaborne coal that Deutsche Bank AG says is poised to triple this year.’
‘Coal prices are likely to drop further, Price said. “I think we are going to see some surprisingly low prices this year,” he said. “I don’t think we’ll ever see a sustainable price above $100 again.”
Ben……
Oil in CO and now coal - affect on Housing?
Colorado coal production slips to 20-year low
Colorado coal production — hobbled by mine closures and a weak market — slipped to a 20-year low in 2014, according to state data. The state’s eight mines produced just under 23 million tons of coal in 2014, a 5 percent drop from 2013.
Wyoming coal mining dwarfs Colorado. The Cowboy state produces 40% of the nation’s coal. Colorado only produces 2.5% (2013 numbers).
http://www.nma.org/pdf/c_production_state_rank.pdf
‘As demand has fallen, coal producers around the world show no signs of easing up on output. Lower oil prices have helped cut production costs. And major producers in Australia, Indonesia and Russia are getting a boost from the devaluation of their currencies. That makes their coal cheaper, in dollar terms, on the global export market.’
“Australian mines are in a relatively strong position compared with higher cost suppliers—particularly those in the U.S.—which are at much greater risk of closures this year,” according to Wood MacKenzie.’
‘For coal producers who rely on Chinese imports, the downturn in demand and the drop in prices is costly. South Africa’s mines minister recently estimated the drop cost the country $2 billion in export revenues.’
“(China) will be a major cause of depressed global import demand this year,” said Wood MacKenzie analysts.’
http://www.cnbc.com/id/102417478
Malibu, CA List Prices Dive 10% In 2014
http://www.zillow.com/malibu-ca/home-values/
‘The median price of homes currently listed in Malibu is $2,799,000 while the median price of homes that sold is $1,563,382.’
‘9.1% Listings with price cut 15.4% Sold below listing’
http://www.movoto.com/malibu-ca/market-trends/
‘Malibu’s home resale inventories increased, with a 14 percent increase since January 2015. Distressed properties such as foreclosures and short sales remained the same as a percentage of the total market in February. The median listing price in Malibu went down from January to February. There were a total of 3 price increases and 18 price decreases.’
“‘I predict we’ll see more of a re-grouping than a bust,” says Angela Jennings, a senior associate at the firm, ‘there will be some slowdown, some builders will have to adjust their investment time-horizons, but we’re not seeing panic. No one’s pulling out, the phones are still ringing.’”
Realtor Rule #1- Never tell the truth so as to screw as many people possible in the future.
What are you talking about? It’s always a great time to buy or sell a house.
http://ochousingnews.com/wp-content/uploads/2013/07/z_nar_propaganda_2006.png
Update: Oil Falls Through $50 Floor Again; Dead Cat Bounce Over
http://www.marketwatch.com/investing/future/crude%20oil%20-%20electronic
“Chevron: Don’t Be Fooled By Dead Cat Bounce”
http://seekingalpha.com/article/2900266-chevron-dont-be-fooled-by-dead-cat-bounce
Ventura, CA List Prices Sink 5% in 2014; Plunge 15% MoM As Demand Evaporates Statewide
http://www.zillow.com/ventura-ca-93001/home-values/
What is happening up the 101 from Ventura Co. in Santa Barbara, Santa Maria and Santa Ynez as far as prices are concerned. This is the county in Cali that when I was in school out there we called the land of the nearly wed and the nearly dead.
Thanks.
‘San Diego County home sales dropped significantly in January, according to the latest housing statistics from the Greater San Diego Association of Realtors (SDAR). January sales of single-family homes fell 36 percent compared to December, and were down about 10 percent compared to January 2014.’
‘Similarly, sales of condominiums and townhouses dropped by 38 percent from December and by 26 percent from the prior year.’
‘SDAR said the silver lining is that prices remain stable. The median price of single-family homes in San Diego County ticked up 5 percent to $500,000, and condos and townhomes were virtually unchanged from December at $332,000.’
“Locally, job growth is strong, and that will certainly help the housing market this year, but the banks are going to need to cooperate, too,” said SDAR’s 2015 Board President Chris Anderson. “As it stands, it’s very difficult for some buyers to qualify for a home loan.”
I would think twice about loaning someone $500,000 for one house Chris. That’s a lot of money.
I have colleagues in Silly Valley that paid (with mostly borrowed money) over 1 million for what is essentially a 40 year old tract home. The property tax alone is $1000 a month. These are dual income (300k+) households.
I still don’t get what’s so great about living there. Unless you like round the clock traffic jams and paying through the nose for everything. The weather isn’t that great.
They don’t sound too bright.
I still don’t get what’s so great about living there. Unless you like round the clock traffic jams and paying through the nose for everything. The weather isn’t that great.’
Reminds all the Chinese of home
The weather is better than Tech-city-Seattle, and it’s where the job is. And better than being in Cowtown, USA any day of the week, job or not. Plus the restaurant choices are second-to-none.
It’s not for me, but I travel there for work a lot and I have grown to appreciate the upsides. In previous jobs, I’ve also traveled to a lot of cowtowns as well, where you can probably get a better steak dinner in most cases.
There’s a more ethnic and continental food choices in flyover these days. I’m sure there are more Michelin ranked eateries in the Bay Area, but how often to mere mortals eat at places like those. And if you have a million dollar mortgage on an old tract house in a cul de sac, can you even afford to eat out?
That’s great but with the way housing prices are falling in Raintown Seattle, you’re gonna need that job.
Seattle, WA Sale Prices Plunge 18% In 2014
http://www.zillow.com/seattle-wa-98122/home-values/
“‘You have economies from Europe, Japan, China that are either in or very close to recession or some form of growth that is significantly degraded,’ Snider says.”
A very prolific former poster somehow never could manage to connect the dots between collapsing demand and falling oil prices.
Zillow predicts 63135 home values will rise 3.5% next year, compared to a 3.5% rise for Ferguson,mo
place to be- Zillow is a little slow on the uptake
Cedar Mill, OR Sale Prices Plunge 6% YoY; Crater 12% QoQ As Prices Move Lower Statewide
http://www.zillow.com/cedar-mill-or/home-values/
FREE !
Free Event in Washington DC, February 10 - 14!
Join us for a free Rich Dad Education financial workshop in Washington DC. All attendees are entered to win a Kindle Fire. Save your spot now!
Falls Church County(DC Metro) List Prices Nosedive 17% YoY
http://www.zillow.com/falls-church-city-county-va/home-values/
why no forecast
weird ,even for Zillow
We already know what’s on the horizon. Just look in the rearview mirror.
http://shelbytaylorsup.com/wp-content/uploads/2014/09/sandstorm.png
“slower growth and weaker demand from China is likely to lead to lower global commodity prices by around 11% in 2015 and 5% in 2016, broadly in line with the latest IMF commodity price forecasts.”
Global debt increased $50 Tr over the past few years. “Growth” has been a masquerade. The money has been mostly wasted on unproductive things and financial skimming. Key commodities already having fallen 50% and there is no sign of support anywhere.
I can just picture the pinheads at the IMF throwing numbers and predictions around across the board room table. “We should say 11%, that doesn’t sound too drastic.”
“The Big Lie: 5.6% Unemployment”
http://www.gallup.com/opinion/chairman/181469/big-lie-unemployment.aspx
‘Two researchers from the University of North Dakota, Bill Caraher and Bret Webber, said this housing boom-bust cycle is just part of a long history of settlement on the northern Great Plains. As part of their ongoing North Dakota Man Camp Project, they visit dozens of RV parks across the Bakken multiple times a year, interviewing residents and taking note of changes.’
‘Webber’s second realization was that building lots of permanent housing can be too much of a gamble for oil patch communities. When one town, Watford City, started investing in a lot of housing and apartments a few years into the oil boom — something he initially thought all towns should do — Webber worried.’
“My first reaction was, ‘I hope they’re doing the right thing here because this is a risky investment.’”
‘Towns that over-build when times are good can get stuck with the bill in a downturn. It’s called the “too much mistake,” a term coined by North Dakota historian Elwyn Robinson way back in the 1950s. That cycle of fluctuating population and housing needs, the researchers say, is not unique to this oil boom. It’s also a part of agriculture, the area’s original industry.’
‘Like many Great Plains states, North Dakota’s economy has always been one that exports raw materials, from wheat to cattle to oil. All three are dependent on outside markets, markets that, as Webber said, “are constantly experiencing price fluctuations over which the local farmers or oil workers have absolutely no control.”
‘Early homesteaders left during drought, or when commodity prices dropped. The northern prairie is littered with empty, weathered farmhouses, abandoned by owners who left for better opportunities. Oil workers do the same, especially as prices drop.’
The article had this link:
http://www.ghostsofnorthdakota.com/
Housing Demand Plummets YoY In 55 Of 58 California Counties
http://files.zillowstatic.com/research/public/County/County_Turnover_AllHomes.csv
Only 3 counties posted a gain in housing demand. The average of the median sale prices in those three counties was 60% less than the statewide median sale price.This explains why inventory is massive and growing and sellers are slashing list prices across the state.
There’s a whole lot more slashing to come.
http://finance.yahoo.com/news/americans-nice-fat-pay-raise-130000624.html
All indicators suggest that not only is the labor market tightening fast and increasing opportunities for out-of-work Americans, but it’s setting the stage for a powerful surge of wage increases later this year.”
Anyone seeing this?
Haven’t the pundits been saying this for the past five years?
My company is transferring all our production overseas so I don’t see any increased wages in my future