October 18, 2015

A Hall Of Mirrors

The second weekend topic, looking forward, is Peak to Peak: Where In Today’s Boom/Bust Cycle Does the U.S. Find Itself? By Danielle DiMartino Booth. The bursting of the housing bubble, which to this day remains a thorn in the lumber industry’s side, and today’s commodities bubble, currently plaguing the global economy, are two bubbles bound by a troubling ‘flation’ paradox. The reaction to the PEAKing in home price inflation led to the PEAKing in commodities inflation. Meanwhile, boom/bust cycles, which stretch back in history as far as black tulip mania and characterize the current era of policymaking will inevitably usher in deflation scares that emanate from bursting bubbles.”

“The debt Band-Aids applied provide an easier path than the restructuring of economies that would make them more productive over the long haul. The absence of such structural reforms leaves countries reliant on re-igniting their sputtering export engines. The only catch is, not everyone can play the same game at once.”

“Where in today’s boom/bust cycle does the U.S. find itself? According to the latest WSJ headlines, ‘Worry Over Low Inflation Kept Fed at Bay.’ And yet, eight days earlier, another headline, this one from the Dallas Morning News angsted over, ‘Area Apartment Rents Rising at a Record Rate.’ Well, which is it? According to two of the brightest minds in investing, Van Hoisington and Jim Grant, the answer is BOTH.”

“At a recent conference, fixed income investing legend Van Hoisington explained why the Fed cannot technically ‘print’ money, at least when gauged by true M2, which is cash, checking and savings deposits and money market mutual funds. Recall that at its simplest, inflation is too much money chasing too few goods. Buying up all manner of debt with the hopes of inducing inflation only works if what the Fed spends circulates back into the economy in the form of M2 chasing goods. But that hasn’t happened. Rather, Fed purchases have been deposited right back at the Fed where they now sit fallow generating a pittance of income that sadly beats the negative rates they’d get otherwise.”

“When money growth stagnates, the economy won’t slip into gear, which is just what we’ve seen for over six years now. (True money printing involves depositing money directly into checking accounts and happens to be illegal for those of you wondering.)”

“Jim Grant of Interest Rate Observer fame concedes that while we have seen little in the way of inflation of goods in recent years, we remain real time witnesses to the effect of the extraordinary amount of credit chasing asset prices from stocks, bonds and commercial real estate to the mountain PEAKs and beyond. Rising asset prices have no place in traditional inflation metrics as they are viewed as misleading economic growth signals. Or, as Grant said ‘The distortion of prices puts us in a Hall of Mirrors.’ It is thus an illusion of prosperity via the prism of asset bubbles that deludes us into believing anything of economic value has been produced.”

“But back to those paradoxical inflation/deflation headlines. The two gentlemen above, along with some acknowledged defects within the Fed’s preferred inflation measure, help solve the riddle. The creation of debt in debt-laden economies accomplishes a whole lot of economic nothing, hence incomes grow at no faster pace than the rest of the economy. That’s what happens when debt levels cross a line in the sand of the whole of a given country’s economic output. (Look no further than Japan’s debt to GDP of 670 percent to understand why that country is flirting with recession yet again.)”

“At the same time, credit has been chasing high-end apartment construction and prices to what is hoped are PEAK levels. At a national level, apartment data miners find that rents are rising at something more along the lines of a five-plus percent pace. The core consumer price index (CPI), which excludes food and energy, meanwhile, reports a more subdued 3.6-percent pace in rental inflation.”

“But that still isn’t the number that poisons the ‘flation’ worry well. The Fed’s ‘preferred measure,’ the core personal consumption expenditures (PCE) gauge, most recently crawled in at a worryingly low 1.3-percent rate, a level sufficiently shy of the Fed’s formal 2 percent target. When numbers are this low, four-tenths of a percent is material. That’s exactly the size of the difference between core PCE and CPI, the latter of which last clocked in at 1.7 percent. The main difference between the two comes down to their shelter weightings.”

“Tellingly, the core PCE also came under scrutiny during the PEAK years of the housing boom because it failed then, as it fails today, to capture the immense drag housing puts on household budgets. Harvard’s Joint Center for Housing Studies most recent data find that almost half of all renters spend more than 30 percent of their income on rent; they call this cohort ‘burdened’ and I’d have to agree. More than a quarter of all renters are ‘severely cost burdened,’ and spend more than half their income, half, on rent. The Harvard data reveal that lower income individuals are even more disproportionately burdened, which distressingly stands to reason.”

“In a recent report titled, ‘The Burden of Shelter,’ Michelle Meyer, Bank of America economist and renowned housing expert, nodded to policymaker’s dilemma: ‘If renters have to allocate more of their disposable income on shelter, there is less money to spend elsewhere, contributing to the disinflationary pressure for consumer goods.’ And that’s just what we’ve seen.”

“As for the prospects for truly normalizing interest rates one day, demographic trends only promise to increase the ranks of severely cost burdened renters in the coming years. Harvard’s data project that due to the rise in minorities and elderly as Baby Boomers age, those who spend more than half on rent will increase by 11 percent over the next decade and that’s IF rental inflation slows to that of income growth.”

“Of course, the opposite scenario unfolding would be ideal – that income growth begins to outpace that of rent inflation. Such an economic miracle, though, will only be possible with a radical change of thinking among policymakers. Policymakers are either blind, or worse, willfully blind to the financial asset price inflation that flashes red today, just as it did during the dotcom and housing bubble eras. If that is the case, the bust to come will be followed by yet another boom in asset prices, one that will require firehoses to douse the flames of impending deflation.”

“At the core of policymakers’ Catch 22 is the fact that there is no easy way out. To borrow from Hoisington’s philosophy – developed countries such as the U.S. are simply too large to devalue their way out of debt by using a depreciating currency to reduce debt loads. That leaves belt tightening which generations of central bankers have been trying to avoid at all costs.”

“Can the same brands of debilitating debt loads that leveled the global economy during the Great Depression be sustained indefinitely? That’s surely the hope as the frequent application of additional debt-creation bandages over the open wounds of high debt levels seem to be the only solution politicians find palatable.”

“Perhaps the privileged skiers atop the world’s financial markets will be nimble enough to avoid sliding on the ice as one season of asset bubble glides into the next creating the illusion of a powdery permanent winter wonderland for a chosen few. Perhaps they can be magically transported from PEAK to PEAK with little in the way of collateral damage.”

“But what of the hard landing on the fully-thawed bare earth at the bottom of the mountain that must be endured by the millions of workers who cannot choose a more accommodating trail to escape their budgetary shackles? Will central bankers always be seemingly divinely endowed with soothing words to calm and assure the masses? After all, inflation in the wise words of central bankers, is only an illusion and does not exist. Except it does exist in a very real way for the masses far below the rarefied air of the lofty PEAKS.”




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66 Comments »

Comment by Professor Bear
2015-10-17 03:40:23

“Peak to Peak: Where In Today’s Boom/Bust Cycle Does the U.S. Find Itself?”

Exactly. Is this a Jeopardy-style topic?

 
Comment by Professor Bear
2015-10-17 03:46:02

“When money growth stagnates, the economy won’t slip into gear, which is just what we’ve seen for over six years now. (True money printing involves depositing money directly into checking accounts and happens to be illegal for those of you wondering.)”

It’s been repeatedly done recently in the form of various tax breaks.

Comment by AmazingRuss
2015-10-17 05:15:16

Don’t forget bush II’s stimulus checks.

Comment by Professor Bear
2015-10-17 08:29:31

Also not forgetting Cash for Clunkers, tax forgiveness on defaulted mortgages, Social Security tax rollback, or the big one: Quantitative Easing to pump up asset prices in order to generate wealth effects. All had the effect of increasing cash on hand for consumers to spend.

Comment by Skroodle
2015-10-17 21:19:08

Cash for clunkers turned paid off cars into car payments. Decreasing cash and increasing debt for those consumers.

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Comment by BetterRenter
2015-10-18 07:13:43

Consumers sought DEBT at a much faster rate than any scheme to get actual CASH into their hands. The middle class are experts at turning marginal income gains into larger or more payment schemes.

The net effect is ultimately deflationary.

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Comment by inchbyinch
2015-10-18 10:53:51

When my clunker didn’t pass Ca smog, I sold it to the state for 15Xs what the junkyard offered me. (Mar 2015)

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Comment by Prime_Is_Contained
2015-10-18 11:24:45

Sold it to the state??!? What does that mean??

Last time I heard your story about your old car (volvo, was it?), I seem to recall that you said you drove it down to the junkyard and got rid of it. Or is this state program something that is run through junkyards?

 
Comment by inchbyinch
2015-10-18 18:08:32

Prime
It had to be in driving condition ,dropped off at a junkyard/state approved dismantler, with the state certificate. If you have the certificate, the state pays you what for me was 15Xs the amt offered by a Volvo dismantler/wrecking yard. The program runs out of $ all the time, repeatedly refunded.

 
Comment by Prime_Is_Contained
2015-10-19 08:46:10

Interesting; thanks for the info, inch.

Although it does make me wonder: why does the state have an interest in removing affordable-but-operating vehicles from the road? It sounds a lot like cash-for-clunkers!

 
 
 
 
 
Comment by Professor Bear
2015-10-17 03:51:47

“At the same time, credit has been chasing high-end apartment construction and prices to what is hoped are PEAK levels. At a national level, apartment data miners find that rents are rising at something more along the lines of a five-plus percent pace. The core consumer price index (CPI), which excludes food and energy, meanwhile, reports a more subdued 3.6-percent pace in rental inflation.”

The construction of high-end apartments nobody lives in as a haven for international money launderers to park their plunder is fully consistent with rising rents for the proles, as the former supply does nothing to meet the rental demand of the latter.

Comment by Prime_Is_Contained
2015-10-17 09:42:52

Great point.

 
Comment by Ed
2015-10-17 12:54:49

I keep thinking, who is living in all these luxury rentals that are going up? The Seaport area of Boston, the Fenway area of Boston, all lousy with big buildings with fancy names like ‘the Regency’, all renting for $3,000+, how are all these buildings not vacant, how long can they stay vacant? Surely everyone can’t live in ‘luxury’.

Comment by Professor Bear
2015-10-17 19:43:49

This is really part of the same story that explains all those empty investor-owned high rise non-luxury apartment buildings in empty Chinese cities. Empty residential buildings is a symptom of printing press money wasted on producing real world white elephants.

Real Estate
Pied-à-Neighborhood
Pieds-à-Terre Owners Dominate Some New York Buildings
OCT. 24, 2014
Almost half the apartments on a stretch of Park Avenue are empty most of the year. Credit Joshua Bright for The New York Times
Big Deal
By JULIE SATOW

The question of who, if anyone, lives in the multimillion-dollar condominiums being built across Manhattan grows more intriguing with every new tower crane that hoists glass slabs and concrete blocks hundreds of feet into the sky.

New Yorkers want to know: Who are these people who hide behind limited liability companies while shelling out a fortune for a condominium — who see the apartment as an investment or even just a vanity play, and who are too busy sunning in St. Bart’s or skiing in Gstaad to actually show up and shop at the local market or pay for tickets to a Broadway show?

Many well-heeled New Yorkers are frustrated that while a large share of their income goes to taxes of all kinds, their non-New Yorker neighbors down the street pay a comparatively minuscule amount in property taxes. And an evening stroll through Midtown is starting to feel like the Wild West after the gold rush, with buildings like the Plaza — officially the Plaza Pied a Terre Hotel Condominiums — sitting mostly dark. It wouldn’t surprise some of us to see tumbleweed blow by the Apple cube on Fifth Avenue.

Comment by Professor Bear
2015-10-17 20:22:07

“Smart home, enjoy life,”

That’s just dumb. Anyone who decides to buy real estate in response to a slogan like that is a complete moron.

World Asia China News
China’s Middle-Class Dreams in Peril
Smaller cities on the cusp of China’s transformation toward consumer-driven growth struggle to overcome ill effects of previous economic model
By Mark Magnier and Laurie Burkitt
Oct. 4, 2015 8:03 p.m. ET

XINXIANG, China—In this city of almost 6 million people, a successful English-language school illustrates the aspirations of an emerging middle class.

Deng Yi’ou, its 38-year-old owner, owns a house and car, and her school is flourishing as more parents pay 650 yuan (around $100) a month for afternoon English classes for their children.

“Parents all over China have the same dream, even in smaller cities like Xinxiang. They want their children to have a good education, a better future, see them become richer than they are,” said Ms. Deng, who is saving to buy a second, larger house.

Xinxiang, originally a small market town that traces its roots back more than 1,000 years, is one of 1,600 smaller cities on the cusp of the economic transformation China is attempting. If it is to succeed, the ability of people like Ms. Deng to spend is crucial.

On the one hand, Xinxiang embodies the promise and potential for growth that still propels the Chinese economy, even in slowdown, with the spending power of millions waiting to be unlocked.

But the perils of previous excesses are also more evident here: There is too much debt, too many factories and too many vacant apartments.

Like many Chinese cities, Xinxiang built industrial parks, ornate bridges and six-lane roads during China’s boom years. Another mark of its furious pace of growth: In the May, Xinxiang was ranked as the city with the most polluted air in Henan province.

The idea, widely embraced, was that its growth would turn its residents into stronger consumers.

“Smart home, enjoy life,” says one of the hundreds of billboards trying to sell real estate by evoking the good life with images of designer bags, gold coins and wine bottles.

At the Wan Hui development, real-estate agents sold 200 apartments in a single day when it opened in 2009, said sales representative Wang Shuai. This year it has taken four months to sell 40 homes starting at 486,000 yuan [$76,400] for two bedrooms, he said.

He said spending cuts and a drive to go after lavish official outlays and corruption have paralyzed buying.

“Some people are still buying, but not like before,” Mr. Wang said. The biggest buyers in previous years were people who fell into money, turning into millionaires overnight as the government offered them money for their land, and then there were the bureaucrats themselves, he said. “But that is over.”

Wan Hui originally planned to build 33 towers each containing up to 300 homes, but has only built 13 towers, many of those remain empty, he added.

Similar scenarios are playing out across China’s heartland and could ultimately endanger the county’s shift to an economy driven by consumption.

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Comment by BetterRenter
2015-10-18 07:19:19

Gee, who could have imagined that you couldn’t sell expensive things like bottles of fine wine and gold coins to nearly 1 billion poor people?

Extending them credit only goes so far, since that credit must be based on reasonable expectations of repayment, which hinges on income. And high incomes are needed to afford an urban, wine-and-gold-buying lifestyle.

 
Comment by Prime_Is_Contained
2015-10-18 11:39:48

Empty residential buildings is a symptom of printing press money wasted on producing real world white elephants.

+1, PB.

This mal-investment is due to the underlying funds invested not expecting any real return in a ZIRP environment—so a bubble-return looks particularly enticing to many, and infrastructure at least looks semi-durable.

In an environment where real-world returns were reasonable, no one would _think_ of letting their funds (that could be invested to advantage somewhere) languish in a real-world piece of infrastructure that produces nothing.

All that investment that is currently parked in concrete, steel, and glass should be yearning for a return—but isn’t, because there aren’t any returns out there to be found.

 
Comment by Oxide
2015-10-18 12:57:14

6 million is considered to be one of 1600 smaller cities? That’s more than the entire DC area, including Baltimore.

 
 
 
 
 
Comment by Professor Bear
2015-10-17 03:55:48

“Rather, Fed purchases have been deposited right back at the Fed where they now sit fallow generating a pittance of income that sadly beats the negative rates they’d get otherwise.”

They’ve been pushing on a string now for what, seven years already? And crowing nonstop about the false recovery every step of the way.

 
Comment by Professor Bear
2015-10-17 04:16:57

“The creation of debt in debt-laden economies accomplishes a whole lot of economic nothing, hence incomes grow at no faster pace than the rest of the economy. That’s what happens when debt levels cross a line in the sand of the whole of a given country’s economic output.”

I’ve Got Plenty of Nothing

Comment by RioAmericanInBrasil
2015-10-17 07:52:40

hence incomes grow at no faster pace than the rest of the economy.

The income only for the rich grew faster than the rest of the economy.

Comment by SUGuy
2015-10-17 08:05:54

“The income only for the rich grew faster than the rest of the economy”

The assets and stocks grew faster for the rich under Obama and the income stagnated for the rest.

Comment by RioAmericanInBrasil
2015-10-17 08:16:41

The assets and stocks grew faster for the rich under Obama and the income stagnated for the rest.

And:
America’s wealthiest 1% received 58% of new income 2009-2014. AP

And:
from 2000–2014, the median income for non-elderly households fell from $68,941 to $60,462, a decline of $8,479, or 12.3 percent.

Since 1973, the median man working full-time, full-year has seen no sustained growth, dropping from $53,291 in 1973 to $51,902 in 2002 and falling further over the 2002-07 recovery and the recession to $50,383 in 2014.

Income Stagnation in 2014 Shows the Economy Is Not Working for Most Families

http://www.epi.org/blog/income-stagnation-in-2014-shows-the-economy-is-not-working-for-most-families/

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Comment by Mafia Blocks
2015-10-17 09:42:38

Then update your skillset Lola. Nobody is going to pay u an inflated wage.

 
Comment by redmondjp
2015-10-17 20:17:28

Wrong answer, HA - more education is not the solution. We are importing hundreds of thousands of highly-educated people into this country every single year, and they are willing to work for low wages. Tech sector wages have been stagnant for the past 15 years, when adjusted for inflation.

 
Comment by Mafia Blocks
2015-10-17 20:31:14

Nobody Lola

 
Comment by BetterRenter
2015-10-18 07:24:16

Mafia Blocks said: “Then update your skillset Lola.

I got a better idea: Reduce your standard of living. Face the truth of the future’s limitations in income for you, and still live pretty well with fewer needs and expectations. I did that and benefited greatly; I paid cash for my house and I live comfortably while the people around me whine and cry about bills, bills, bills. Of course, I don’t run up bills. I don’t rent movies; I get them from the library that my property taxes have already paid for. I don’t eat out any more often than about 2-3 times a month. Why have a kitchen if you don’t use it? Etc.

 
Comment by inchbyinch
2015-10-18 10:20:43

redmondjp
My EE Husband was a Engineering Manager for Intel, and H1-Bs hit the American Engineering jobs hard when he held the position. An education doesn’t do much good between exporting jobs and importing tax break applicants to fill positions.

He likes R&D more than Management, so he is working with a start up PT. His eyeballs rule his life, unfortunately.

You’re 100% right. It sucks out there in tech land for the last 15 years. All his positions in R&D came from CEOs of start ups, and his last start up adventure ended when Intel bought the company and ended a great Engineering team. It was a pressure cooker to say the least. He said never again and he meant it. Life is too short. (He liked traveling for Intel, but hated the declining opportunities for American tech professionals.)

 
Comment by Mafia Blocks
2015-10-18 10:28:32

lying.through.her.teeth.the.whole.time.

 
Comment by redmondjp
2015-10-18 16:08:48

I’ve ben an EE now for 25 years. I’ve been around the block a few times. I’ve been laid off twice and missed being laid off several other times. Most of the companies I used to work for have been absorbed into multinational corporations with HQs outside of the US. Skills help, but being middle-aged and white in this job market is tough unless you have very in-demand skills, or know somebody (or both).

I thought that I would work for one corporation and work my way up and be in some senior technical or management role by now. It didn’t work out that way! Those days are gone. I can do the technical skills just fine, but am lacking in the brown-nosing dept. which turns out to be the #1 most important thing one needs to be good at in order to advance in one’s career. They didn’t have any classes in college on that subject.

I’m working at a secure job, but making, by tech standards, entry-level wages, even with 25 years of experience.

I don’t recommend engineering to people seeking career advice, honestly, unless they really have a passion for it.

 
Comment by inchbyinch
2015-10-18 18:58:57

redmondjp
Trust me engineering management sucked the life out of my husband. He was making great $, but he had deadlines hallucinations are made of, by people who had no idea what it took to reach product completion. Life was hell.

You’re right about compensation for engineers. Offshoring HQs has made it worse for sure, and no way have they put their capital into American workers.

Hubby worked for Litton Guidance & Control right out of college, and could have transitioned into a govt job, and to this day, he regrets chasing the tech R&D dream, and not taking less wages for a great retirement package. His co-workers who did govt related engineering did better.

btw, I built my first Heath Kit just after we met, and it worked!

 
Comment by inchbyinch
2015-10-18 21:33:36

redmondjp
Your white middle-aged comment has been said numerous time by hubby. Try being older (in EE terminology, dinosaur) and have product ideas, but only want PT work.
(eyeballs -can’t take FT stress) There ought to be affirmative action for white middle-aged and white older males. Talk about discrimination.

 
 
 
 
 
Comment by Professor Bear
2015-10-17 04:22:31

“But what of the hard landing on the fully-thawed bare earth at the bottom of the mountain that must be endured by the millions of workers who cannot choose a more accommodating trail to escape their budgetary shackles?”

SAVE OUR HOMES bailouts for everyone under President Hillary!

Comment by taxpayers
2015-10-17 05:38:40

And even free ‘re hc
Embrace deflation 1921= following growth

 
 
Comment by Professor Bear
2015-10-17 04:26:09

Kudos to Ms.Booth for an outstanding summary of the economic status quo.

Comment by Blue Skye
2015-10-17 06:40:29

It is very difficult to analyze inflation when you talk about price increases as “inflation”. That leaves one with a very fractured picture of what is happening, like the blind men describing an elephant. If you look at the increase of the money supply as inflation, then you can visualize the rivers of money flowing from the Fed to the banks and then outward. Only by looking at the whole flow of money can you appreciate the gross distortions in some areas and the dangers of a breach here or there.

Just my opinion, but focusing on the price of certain things is a distraction from the massive parasite that sits on the back of our largely debt based collective economy.

Comment by Ben Jones
2015-10-17 07:17:47

There’s a story to Ms Danielle DiMartino before she was Ms Booth. When I started this blog she was writing an economic column for the Dallas Morning News. And she was all over the housing bubble when most didn’t have a clue. She also obviously had contacts and would write about what they were saying. For instance, once she wrote about Federal Reserve murmurs of raising interest rates so they would have “ammunition” to cut if housing crashed the economy. That’s how it played out. Then, suddenly she got hired by the Fed and no longer wrote for the DMN!

So all these years later and she’s in the regular world again. I posted another piece she wrote recently. But note this one; she writes of privileged policy makers, skiers, above the masses. Read it carefully. They are not suffering the worst of their actions, but many are.

Yes, inflation is an esoteric concept. And as she says “inflation in the wise words of central bankers, is only an illusion and does not exist. Except it does exist in a very real way for the masses far below the rarefied air of the lofty PEAKS.” She is talking in the language of central bankers and making points that can’t be mistaken.

Comment by Blue Skye
2015-10-17 07:52:19

The money does not appear to be moving around much at the base of the mountain.

https://research.stlouisfed.org/fred2/series/M2V

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Comment by RioAmericanInBrasil
2015-10-17 08:02:53

The money does not appear to be moving around much at the base of the mountain.

Money does not move around much when wealth and income gains only flows to the rich. Middle-class and poor spend most all their money. For the rich, it mainly pools.

Wealth/Income inequality are not good for capitalistic economies nor good for democracy. Many respected studies prove this while none prove the opposite.

 
Comment by Mafia Blocks
2015-10-17 08:09:22

They have it and u dont. The wealthy owe u nothing Lola.

 
Comment by Professor Bear
2015-10-17 09:19:28

“The money does not appear to be moving around much at the base of the mountain.”

Frozen liquidity moves glacially.

 
Comment by Blue Skye
2015-10-17 09:30:35

It would be interesting to see a global overview.

 
 
Comment by scdave
2015-10-17 09:32:43

Read it carefully ??

I did…Need to read it again to digest all that it has to offer…

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Comment by Senior Housing Analyst
2015-10-17 05:32:47

Charlotte, NC Housing Prices Dive 4% YoY

http://www.zillow.com/charlotte-nc/home-values/

 
Comment by Neuromance
2015-10-17 09:12:48

The economic policy makers (i.e. central bankers) don’t fully understand what is going on. They are able to keep the indicators they are interested in within the range they want to a large degree. But they really still are still like children poking a turtle.

Comment by Professor Bear
2015-10-17 09:20:44

Great point!

 
Comment by Professor Bear
2015-10-17 09:26:01

It is a logical fallacy to assume a centrally planned economy manipulated to hit prescribed levels of various indicators will perform on par with a decentralized economy registering the same indicator readings.

However, given the need for politically attractive optics, the motivation is clear.

Comment by Neuromance
2015-10-18 12:51:49

One problem of central planning is that people are ingenious in seeking value, and may not respond to your policy in the ways you want.

Low interest rates to accomodate borrowing and investment in the company? But wait, what happens if that’s not the most lucrative course, especially if there’s no business case to be made for the actions the Fed wants business to take? What happens if the most lucrative course of action is to engage in stock buybacks and for private equity funds to load raided companies with massive amounts of debt, taking payment now and leaving the mess for someone else to deal with?

That’s just one example. Giving banks money so they’ll loan it out? How about a more lucrative action involving speculating in all manner of markets?

And those failures to some would indicate that the central planner should pull back. To others, it means there’s not enough central control.

 
 
 
Comment by aNYCdj
2015-10-17 10:15:04

So i was right all along….. pay off everyone’s credit card by $3000 at 20% interest that an extra $50 a month for everyone to spend.

Or give people zero percent for 5 years…and no increase in limits, again the monthly payment will all go to the principal, and some extra cash each month to spend.

———-
True money printing involves depositing money directly into checking accounts and happens to be illegal for those of you wondering

Comment by Prime_Is_Contained
2015-10-17 11:09:28

True money printing involves depositing money directly into checking accounts and happens to be illegal for those of you wondering

It wasn’t illegal when Bush II send out stimulus checks; why would direct-deposit be illegal again?

Comment by AmazingRuss
2015-10-17 14:24:31

Becuz socialisms?

 
 
Comment by Blue Skye
2015-10-17 14:33:20

Do you still have that $3,000 balance on your credit card after all these years?

Comment by Goon
2015-10-17 18:27:20

Yeah, wtf?

 
Comment by aNYCdj
2015-10-17 18:45:57

no blue it just seemed like a reasonable amount $3000 x 100 million equals $300 billion, and the fed was spending $45 billion each month buying up bonds

Comment by Blue Skye
2015-10-18 16:29:55

dj,

The Fed conjures up money to bail the banks, not you and me. They have no incentive to forgive our debts. They are owned by the lenders.

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Comment by trader jack
2015-10-17 12:59:55

One of my papers in Econ 101 was to depreciate the paper money by 10% a year to force the spending of the money
In effect taxing the money by 10%

Prof didn’t think much of it!

LOL

Comment by Professor Bear
2015-10-17 19:45:45

Did you pursue a career in central banking?

 
 
Comment by Senior Housing Analyst
2015-10-17 15:53:57

Felida, WA Housing Prices Plummet 6% YoY; Foreclosures Backing Up Across Washington State

http://www.zillow.com/felida-wa/home-values/

Comment by redmondjp
2015-10-17 20:21:05

Oh HA, you are fracking hilarious!!! Felida????

Lived in WA for 50 years now and have never heard of it!

You’re really scraping the bottom of the cherry-picking data barrel, that’s for sure.

Comment by Mafia Blocks
2015-10-17 20:29:16

Data my friend….. stick with the data.

Bellingham,WA Housing Prices Fall 8% YoY

http://www.zillow.com/bellingham-wa-98229/home-values/

Comment by Prime_Is_Contained
2015-10-18 11:57:48

You better check your data before posting and looking the fool:

Bellingham, WA

Median Sale Price
Aug 2015: $296K
Aug 2014: $285K

Net gain YoY: 3.9%

http://www.zillow.com/bellingham-wa/home-values/

Stop lying by cherry-picking tiny tiny data-sets.

(Comments wont nest below this level)
Comment by Mafia Blocks
2015-10-18 12:26:17

http://www.zillow.com/bellingham-wa-98229/home-values/

See Bellingham in that link? We do.

DOWN 8%…. and falling.

 
Comment by redmondjp
2015-10-18 16:11:24

HA has a PhD in lying with statistics. It’s all that he knows how to do.

He likes to make up numbers too, like 25M empty houses, in some other universe.

 
Comment by Mafia Blocks
2015-10-18 16:47:59

Data my friend…

Seattle, WA Housing Prices Plummet 19%

http://www.zillow.com/ballard-seattle-wa/home-values/

 
 
 
 
 
Comment by SD_LI
2015-10-18 11:47:40

Thanks for this post Ben.

Ms. Booth is an excellent writer.

 
Comment by Patrick
2015-10-18 15:53:35

The USA is possibly the strongest financially in the world. It started QE first and now the better part of the world is engaged. A lowering of a currency’s value seems to be real around the world - but inflation is still a dream (nightmare).

Consumerism has not been encouraged properly and refinancing has resulted in real estate and stock buybacks. Not much for economic improvement.

But funds have flown into the USA as a bastion of safety and to maintain a rental fee for these funds they have had to be properly lent or invested. That is why the US economy has improved - not the misused QE funds.

There are bubbles and the system will deal with them. But round two, the equalization of use of money supply vs velocity is badly out of whack. I have no idea how they can ever begin to manage this problem. Merely taking back the QE dollars forgets that a lot of them went for real expenses the gov had.

 
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