Mar182016
Forget austerity, housing and the economy need more stimulus
Proponents of austerity predicted a number of dire consequences for fiscal stimulus, but so far, none of them have come to pass.
Have you ever been completely certain about something only later to find out you were completely wrong? Most people won’t admit it, and many people fail to acknowledge the truth even to themselves. I like to believe I have been more right than wrong over the last nine years of writing about these issues, but I have made some significant blunders.
So far pretty much every prediction I’ve made about interest rates has been wrong. I was nearly right last year when I said interest rates would not rise in 2015, but in the late December meeting Janet Yellen proved me wrong again. I was right about the housing bust, but I was wrong about the housing bottom. I was six months late in accepting the March 2012 bottom was the real deal.
Over the last several years, I’ve sided with those who favor less central bank tampering the economy and our money. Since I am personally fiscally conservative, I extrapolate my believes on how governments and central banks should act. The idea of a central bank printing money and stealing the stored wealth in my savings is repugnant, and although I was never a gold bug, I believe in the idea of sound currency. These personal biases caused me to oppose those who wanted to stimulate our way back to economic health.
After what transpired over the last several years, I’ve come to believe I was wrong. Quantitative easing did not make the US dollar into toilet paper. In fact, the relative strength of the US dollar is one of the problems hindering growth right now. Quantitative easing did not lead to rampant inflation. Deflation is still a huge problem globally, and price inflation has been far less than 2% for many years now.
The problems of asset mispricing and the poor allocation of capital have come to pass. Despite our poor economic growth over the last decade, we’ve managed to inflated several asset bubbles that will like deflate with high volatility over the next several years. I don’t believe this will have the negative impact on the economy that most fear, but I could be wrong about that too.
Icarus and endless quantitative easing
Icarus is a character from Greek mythology. He wanted to escape the island of Crete, so his father fashioned him wings made of wax and feathers and instructed him not to fly too close to the sun or the wax would melt and he would crash. Icarus did not heed his father’s warning, and when he flew too high, the wax melted, the feathers fell off, and he crashed back down to earth.
Quantitative easing is much like the flight of Icarus. When the economy got really bad, it was arguably the only way out of our predicament. If they print just the right amount, we can fly to safety. However, if they print too much, if they fly too close to the sun, the melting rays of inflation will cause investors to stop buying bonds, the federal reserve would lose control of long-term rates, and we could have a complete meltdown of the mortgage and housing markets.
Martin Armstrong Exclaims “Central Bankers Are Crazy & The Public Is Out Of Its Mind”
Submitted by Tyler Durden on 03/13/2016
The central bankers are simply crazy, not evil. …
If the central bankers have gone crazy with this whole negative interest rate theory, then the public is simply out of their minds. The euro rallied because Draghi cut rates further, extended the stimulus another year, increased the amount by another 33%, and then declared rates would stay there for years to come. And these insane traders cheer. Unbelievable! They are celebrating the public admission of Draghi that all his efforts to date have failed, so let’s do even more of the same. And they love this nonsense?
While the hyperbole is certainly entertaining, let’s think about this for a moment rationally. Most Central Banks around the world have lowered interest rates and printed money with little results to show for the policy. So the question is “were these policies completely misguided, or did they fail to go far enough?”
Generally, the sign of a failed government policy is that its proponents claim it didn’t go far enough. All wars since world war two have been limited engagements. In all these conflicts that were not decisive (and even some that were), proponents claimed we didn’t go far enough to win and ensure future peace, and opponents claimed the whole idea was a failure. Which side is right?
Negative interest rates have become simply a tax on saving money and the stupid traders and media writers love it. The Fed tries to raise rates and they say – NO! This is a stunning combination of admission and stupidity …
All they see is that lower interest rates “should” stimulate but ignore the fact that they never do. They are too stupid to grasp the fact that raising taxes cannot be offset by lower interest rates. People judge everything by the bottom-line and not some crazy theory that’s just stupid. A simple correlation study by a high school student in math class would prove this theory does not correlate to the expected outcome. And we cheer this insanity confirming our own overall stupidity and one is left wondering who is crazier?
I suppose it is just that central bankers are crazy and the public, as well as the media, are just out of their minds.
Did the theory correlate to the expected outcome? I don’t think either side of the debate can claim victory by that criteria.
Proponents of stimulus and quantitative easing claim that their policies would lead to economic growth and prosperity. While the economy hasn’t been as strong as previous expansions, we have experienced economic growth.
Opponents of stimulus and quantitative easing claimed those policies would lead to currency debasement, runaway inflation, and a plethora of associated economic problems. While the ZIRP policy inflated asset bubbles and likely misallocated capital, it had none of the other more serious deleterious effects its opponents were certain would occur.
On balance, I have to go with the proponents of stimulus and quantitative easing. In retrospect, I don’t think we went far enough to boost the economy.
Future Economists Will Probably Call This Decade the ‘Longest Depression’
01/08/2016, Brad DeLong
Economist Joe Stiglitz warned back in 2010 that the world risked sliding into a “Great Malaise.” This week, he followed up on that grim prediction, saying, “We didn’t do what was needed, and we have ended up precisely where I feared we would.”
The problems we face now, Stiglitz points out, include “a deficiency of aggregate demand, brought on by a combination of growing inequality and a mindless wave of fiscal austerity.“
I was a proponent of austerity. I didn’t believe printing money and artificially stimulating demand would do much of anything. Further, I believed inflation was always right around the corner and the reckless policies of the federal reserve were sure to trash the dollar and rob the stored wealth of everyone holding cash. In retrospect, it was clear that I was completely wrong.
None of the problems I feared ever materialized. It’s apparent to me now that we could have printed a lot more money, papered over many more problems with none of the ill effects I envisioned.
He says the only cure is an increase in aggregate demand, far-reaching redistribution of income and deep reform of our financial system. The obstacles to this cure, he writes, “are not rooted in economics, but in politics and ideology.”
Indeed. Joe Stiglitz is right.
Politicians from the right and conservative economists all incorrectly predicted rampant inflation and a collapsing dollar. Investors loaded up on gold for an inflationary spiral that never occurred, and many gold bugs lost a significant portion of their wealth in the bear market since 2011. If anything, it looks today like we didn’t go far enough with stimulus.
Back before 2008, I used to teach my students that during a disturbance in the business cycle, we’d be 40 percent of the way back to normal in a year. The long-run trend of economic growth, I would say, was barely affected by short-run business cycle disturbances. There would always be short-run bubbles and panics and inflations and recessions. They would press production and employment away from its long-run trend — perhaps by as much as 5 percent. But they would be transitory.After the shock hit, the economy would rapidly head back to normal. The equilibrium-restoring logic and magic of supply and demand would push the economy to close two-fifths of the gap to normal each year. After four years, only a seventh of the peak disturbance would remain.
In the aftermath of 2008, Stiglitz was indeed one of those warning that I and economists like me were wrong. Without extraordinary, sustained and aggressive policies to rebalance the economy, he said, we would never get back to what before 2008 we had thought was normal.
I was wrong. He was right. …
(See: When should pundits admit their mistakes?)
What we need now is 1) debt relief to unwind the overhang and 2) much tighter financial regulation to prevent the growth of new fragilities. And if those prove inconsistent with full recovery, then we need massive government spending on infrastructure and other investments financed by money printing until full employment is reattained.
Worries about inflation prompted the federal reserve to raise interest rates in December of 2015. So far the fears of inflation appear unfounded, and the economy shows signs of weakness due to the soaring dollar caused by rising interest rates. If we do have a recession this year or next, don’t be surprised if we have renewed calls for more stimulus, and this time, the opponents won’t have much credibility in their arguments against it.
Like Brad DeLong, I’ve come to believe I was wrong for many years about the problem of inflation and printing too much money. I was a proponent of needless austerity. Based on everything we witnessed over the last decade, it’s hard to continue to embrace a policy of austerity that’s failed to produce meaningful economic growth. Until we see a problem with inflation, I’m in favor of bringing on more stimulus. We aren’t there yet.
[listing mls=”CV16052552″]
The worries about inflation were not completely unfounded it’s just the banks have so much bad debt on their books the level of deflation was underestimated. The banks are still holding worthless debt at full market value and so our debt based money system appears larger than it functionally is.
I agree. The question them becomes what to do about it. The banks can’t absorb the losses for a complete write down, so they keep kicking the can. Eventually, the old bad debt will probably be replaced with new, more stable debt, but that is a slow process. The federal reserves ZIRP helps facilitate that turnover, but it creates other problems as well.
What to do about it??
Same as it ever was…
Devalue the dollar further and tell bigger lies than before.
IR, I respect the mea culpa. But it’s pretty hard for people like me who took the opposite view to say “I knew it all along”; there was a lot of uncertainty in that trade.
True, we could have printed more money, but it probably wouldn’t have done much good. The real economy has only responded to ZIRP via a wealth effect off of inflated asset prices, but that response diminished to virtually nil some time ago. The only way from here is “counter-austerity”- spending a shot load of money on infrastructure which will both make the us more competitive and create millions of real jobs. But the Kochs of the world *like* high unemployment, so this won’t happen. Finally, let’s note that it is damn difficult to find a serious economist whose salary isn’t paid by an anti-labor “think tank” who thinks that our current deficit level represents any real problem. In fact, most believe that a balanced budget is anti-growth.
I don’t feel foolish for anything of the things I said or believed. Those of us in the austerity side could have been right. It was an unknown, and we took our best guess based on the available data. It was wrong only in retrospect.
As someone who makes daily public statements, I feel the need to acknowledge it when I am wrong. Fortunately, I am not one of those economists whose salary depends on pretending I wasn’t wrong.
Is this a good time for a reality check?
Ah heck… of course it is.
“Understand you cannot have your house rise in value yet ‘money’ still retain some mythical tangible wealth. Perhaps in the land of OZ, but there is no such historical period that anyone can point to”. –M.Armstrong
So borrow the money and repay the devalued dollars?
Metaphorical and esoteric my messages are, no?
“PATIENCE YOU MUST HAVE my young padawan”
– Yoda
The real Yoda was a muppet, not a CGI abomination.
Arizona pair accused of posing as Realtors, lenders, defrauding Hispanic families
Families thought they were buying a home, but were actually leasing it
The owners of a Phoenix-based real estate consulting company stand accused of posing as both Realtors and mortgage lenders, and defrauding a number of Hispanic families by convincing them that they were buying a house, when, in reality, they were only leasing the house.
According to the office of the attorney general for the state of Arizona, Mark Brnovich, Ruben Diaz and Rodrigo Diaz, the owners of ProSolutions, LLC, preyed on Spanish-speaking families who wanted to buy a home.
Brnovich’s office filed an Arizona Consumer Fraud and Civil Racketeering Lawsuit against ProSolutions and its owners, accusing them of acting as a home loan financing officer, thereby taking thousands of dollars in down payments from families who thought they purchased a home but later discovered they never owned the home.
According to Brnovich’s office, the Consumer Fraud Lawsuit alleges ProSolutions misrepresented the nature and terms of various home financing transactions for the company’s own financial gain.
“In several instances, ProSolutions allegedly mischaracterized lease agreements as purchase agreements and accepted hundreds of thousands of dollars’ worth of home payments from consumers before consumers learned that they did not hold the title to their homes,” Brnovich’s office said.
Here’s how much the big bank CEOs made in 2015
The chief executive officers of the largest four banks benefited from a strong year last year, with all but one bank CEO benefitting from a pay hike in 2015, an article in Reuters by Ueslei Marcelino said.
Here are each CEOs pay ranked from smallest to largest, according to the article:
4. Bank of America’s CEO Brian Moynihan’s made the lowest amount, with his total compensation rising to $16 million for 2015, up from $13 million for 2014.
3. Next, Citigroup CEO Michael Corbat received a sizeable pay raise in 2015, increasing by about 27% in 2015, earning about $16.5 million last year, compared with $13 million in 2014, the article stated.
2. While ranked second, Wells Fargo Chairman and CEO John Stumpf’s pay was unchanged from last year at $19.3 million in 2015.
1. Coming in first, JPMorgan Chase CEO Jamie Dimon, chief executive of the largest U.S. bank by assets, had his 2015 pay surge 35% to $27 million.
-Peanuts
The 7 Highest-Paid Athletes in 2015
http://www.cheatsheet.com/sports/the-7-highest-paid-athletes-in-2015.html/?a=viewall
You are well aware that pro athletes make a ridiculous amount of money, but did you know that the 100 highest-paid athletes made $3.2 billion in total over the last 12 months? We didn’t either. And we’ve never wanted to be professional athletes more.
But that is exactly what Forbes does. It crunches the numbers, organizes the information, and makes you realize that some folks simply have it better than you — financially speaking, of course. This time around, Forbes compiled its list of the world’s highest paid athletes, and the we have a feeling you’ll recognize most of the names. Yet, we’re sure you’re dying to know where their bank comes from. Leave it to Forbes to fill in the blank there too:
“Our earnings figures include all salaries, prize money and bonuses paid out between June 1, 2014, and June 1, 2015. Endorsement incomes are an estimate of sponsorship deals, appearance fees and licensing fees for the 12 months through June 1 based on conversations with dozens of industry insiders. We do not deduct for taxes or agents’ fees and we do not include investment income.”
Now that the groundwork has been laid out, the only thing left to do is get on with the list itself. With that in mind, here are the seven highest-paid athletes in 2015.
7. Kevin Durant
Kevin Durant shoots in the 2014 Western Conference Finals
Ronald Martinez/Getty Images
•Sport: Basketball
•Total Earnings: $54.1 million
•Salary/Winnings: $19.1 million
•Endorsements: $35 million
Despite a disappointing 2014-15 season, that saw him only play in only 27 games due to a foot injury, Kevin Durant’s bank account never felt the brunt of the punishment. KD earned roughly $19 million from the Oklahoma City Thunder this past year, but we all know it’s his endorsement money that makes the biggest splash. He signed a monster 10-year, $300 million deal with Nike back in 2014, and this arrangement will also pay him royalties. Along with that partnership, Forbes notes that Durant has sponsorship deals with companies such as BBVA, Sprint, Sonic, Panini, 2K Sports, Skullcandy. It’s no wonder that KD’s total earnings in 2015 hit $54.1 million.
6. LeBron James
LeBron James smiles during Game 4 against Boston
Jim Rogash/Getty Images
•Sport: Basketball
•Total Earnings: $64.8 million
•Salary/Winnings: $20.8 million
•Endorsements: $44 million
LeBron James may not be No.1 on this list, but his $64.8 million haul in 2015 still makes him the King of the National Basketball Association. James made $20.8 million from his salary with the Cleveland Cavaliers — and he’s earned every last penny. In just his first season back with his original team, the King has taken this inexperienced bunch all the way to the NBA Finals. The task at hand isn’t over, but he’s still been making history along the way. Off the court, he took home $44 million in endorsements. James is affiliated with companies such as Nike, Kia, McDonald’s, Coca-Cola, Samsung, and Beats by Dre. The list could go on, but we’re sure you get the gist of it. Suffice to say, it pays to be the King.
5. Roger Federer
Roger Federer returns a shot during the 2015 French Open
PASCAL GUYOT/AFP/Getty Images
•Sport: Tennis
•Total Earnings: $67 million
•Salary/Winnings: $9 million
•Endorsements: $58 million
Roger Federer is currently the No. 2 ranked tennis player in the world. Yet, he is unquestionably, the highest-paid player on the tour. He may not be winning as much on the court ($9 million last year) as he used to — being 33 years old will do that do a pro — but he doesn’t need a racket to keep raking it in. The winner of 17 career Grand Slams is making a killing in endorsement money. His portfolio includes deals with Nike, Rolex, Credit Suisse, and Mercedes-Benz. With friends like this paying him $58 million combined last year, Federer was able to reach $67 million in total earnings last year. Game. Set. Match.
4. Lionel Messi
Lionel Messi celebrates after scoring a goal at the Copa del Rey
David Ramos/Getty Images
•Sport: Soccer
•Total Earnings: $73.8 million
•Salary/Winnings: $51.8 million
•Endorsements: $22 million
Barcelona’s magician Lionel Messi used his quick feet to bring in a total of $73.8 million last year. He’s so vital to the club’s success that they pretty much throw the bank at him. Messi was paid $51.8 million last year to simply make others look foolish on the pitch. He makes it seem so easy when you watch him play the beautiful game. But its not. He’s just that good. Of course, if you’re the kind of guy who puts up 43 goals in league play alone — like he did in 2014-15 — big companies are always going to want your face associated with their brands. Which is while Adidas and Samsung are part of the Lionel Messi fan club. What he does with the money, of course, is anybody’s guess.
3. Cristiano Ronaldo
Cristiano Ronaldo celebrates after scoring against Villarreal
DANI POZO/AFP/Getty Images
•Sport: Soccer
•Total Earnings: $79.6 million
•Salary/Winnings: $52.6 million
•Endorsements: $27 million
Not to be outdone by the only player on the planet who rivals him, Real Madrid’s Cristiano Ronaldo came away as the highest-paid soccer player last year, with a cool $79.6 million in total earnings. He punishes opponents on the field and scores goals at a ridiculous rate. As a result, his club had no issue with paying him $52.6 million this past season. But when you’re the most popular athlete in the world –102 million Facebook and 36.1 million Twitter followers — and conventionally handsome, the endorsement deals will always be available. Just ask Nike.
2. Manny Pacquiao
Manny Pacquiao at press conference prior to the Mayweather fight
Ethan Miller/Getty Images
•Sport: Boxing
•Total Earnings: $160 million
•Salary/Winnings: $148 million
•Endorsements: $12 million
According to Forbes, Manny Pacquiao made a solid $12 million last year from his endorsement deals with Nike, Foot Locker, Wonderful Pistachios, Nestle’s Butterfinger, and others in the Philippines. He also brought in $23 million from his fight against Chris Algieri back in November. But let’s get serious, it’s the $125 million payday from his megafight against Floyd Mayweather Jr. on May 2, that made Pacman extra rich this past year. Sure, he fought with a bum shoulder. Sure, there could be ramifications from not disclosing this injury. Sure, he misled the public. But we have a hard time picturing those problems keeping him up at night. After all, he is sleeping on a bed of $160 million.
1. Floyd Mayweather Jr.
Floyd Mayweather Jr. celebrates his victory over Manny Pacquiao
Al Bello/Getty Images
•Sport: Boxing
•Total Earnings: $300 million
•Salary/Winnings: $285 million
•Endorsements: $15 million
Floyd Mayweather Jr. may not be the most popular guy out there, but he is 2015’s highest-paid athlete. Did you see the $100 million check he received right after his bout with Pacquiao? Yeah, that was real. But as Forbes notes, he’ll really cash out when all the revenue figures are totaled.
If you taking into consideration that Mayweather’s 60% cut from this record-breaking fight, and you throw in the money he made from his bout with Marcus Maidana from September 2014, then you’re looking at man who just pulled in $285 million from his time in the ring last year.
Some people are so money and they don’t even know it. Floyd Mayweather Jr. is most certainly not one of them.
Those are astonishing numbers. I can’t say I’m bothered by star athletes making that kind of money. We all like them because they entertain us. The bankers making millions are assholes.
Bank CEO salaries are only a fraction of their total compensation. Let’s compare peanuts to peanuts.
The salary amount typically represents a smaller portion of the compensation package as you head north of $100K. This makes it difficult to answer, “How much do you make?”
I believe that is total compensation:
Dimon’s Pay Jumps 35% to $27 Million
http://www.bloomberg.com/news/articles/2016-01-21/dimon-s-pay-jumps-to-27-million-with-most-tied-to-performance
JPMorgan Chase & Co. boosted Jamie Dimon’s pay 35 percent, tying most of the package to future performance after a record share of investors rejected the bank’s compensation practices last year.
The bank awarded Dimon, its chief executive officer and chairman, $27 million for 2015, up from $20 million a year earlier, according to a regulatory filing Thursday. The package includes $20.5 million in performance share units, a new pay element tied to future targets. Proxy advisers had complained last year that the company lacked concrete goals for its executives. Dimon also got a $5 million cash bonus and a $1.5 million salary.
Bank execs make it easy to hate them.
Athletes get a pass like a lot of other famous entertainers. No one gets upset that an actor makes $20M a film, or a producer makes many times that. But a CEO makes $5M, and he’s excoriated. BTW, many of the .01% are the very same people that are getting the pass. Double standard or just human nature?
Dimon’s net worth is estimated at $1.1Bn – he didn’t get that by earning $27M at a clip.
And then there’s this:
http://money.cnn.com/2016/02/12/investing/jamie-dimon-jpmorgan-chase-stock/
Yes, they get sweetheart deals on stock which they generally manage to execute at the right time. I would happily run a bank for nothing on were I able to buy discounted stock based on my insider knowledge of the firm’s prospects, especially if they were going to lend me the money to do it (as is often the case).
Personally, I don’t think that this is any more grossly out of proportion than the packages of most other large company CEOs. Then again, most ball players, actors, and corporate CEOs are not running a quasi-criminal enterprise. Since the risk JPMC takes in order to make Jamie’s stock bets pay is backstopped by the US taxpayer, Jamie should earn more like the CEOs of Fannie or Freddie: $600K.
…and before anyone utters any claptrap about pay for performance, there is not only almost no correlation between medium term performance and pay, there is heaps of evidence that higher pay actually diminishes performance for some job roles, among them managerial.
https://hbr.org/2016/02/stop-paying-executives-for-performance
As the thinking at Harvard business school is propegated througout the world as the pinnacle of understanding, thanks in advance for not telling me that you know better. You might, but companies are not paying $100K to send their executives to your seminars.
Fannie Mae: Expect Fed rate hikes in June and December
Wishful thinking on display
Despite the Federal Open Market Committee announcing earlier this week that it felt that current economic conditions did not warrant another increase of the federal funds rate, Fannie Mae’s Economic & Strategic Research Group still expects that the FOMC will increase rates at least twice in 2016.
According to Fannie Mae’s March 2016 Economic and Housing Outlook, economists at the government-sponsored enterprise expect the FOMC to raise rates in June and December, despite “flat” economic growth in 2016.
“Financial market conditions appear to be improving as 2016 progresses, but economic growth is expected to remain flat at 2% this year,” Fannie Mae’s report states. “Weakness in net exports and oil-related nonresidential investment, as well as the ongoing inventory correction process after unsustainable accumulations during the first half of 2015, should combine to drag on growth.”
Despite those headwinds, the economy isn’t without its positive indicators, the report shows.
According to Fannie Mae’s report, “strengthening domestic consumer and business spending and a healthy labor market” should help to outweigh the negative factors.
“We see lingering effects of the strong dollar, low oil prices, and soft overseas demand creating a drag on economic growth,” said Fannie Mae Chief Economist Doug Duncan.
“However, the economy appears to have regained some footing after a slowdown in the fourth quarter of 2015, as stocks bounced back and oil prices have risen amid a strengthening labor market,” Duncan continued.
Duncan added that the current labor market and inflation conditions continue to support Fannie Mae’s expectation of a federal funds rate hike of 25 basis points in both June and December.
“A less optimistic outlook for future wage gains, especially among small business employees, coupled with continued strong home price appreciation boosted by lean inventory, is adding to the housing affordability challenge,” Duncan said.
“Our latest Home Purchase Sentiment Index shows that high home prices are a top reason for consumers’ perception that it’s a bad time to buy a home,” Duncan continued. “However, low mortgage rates should help support moderate housing expansion as we move through the year.”
GOP chairman: Banks are facing ‘regulatory waterboarding’
feel-good story of the day
A top House Republican on Tuesday accused the Obama administration of engaging in “regulatory waterboarding” when it comes to monitoring banks.
House Financial Services Committee Chairman Jeb Hensarling (R-Texas) vowed that he would soon unveil a proposal to replace the Dodd-Frank financial reform law. He portrayed the 2010 regulatory overhaul as a boondoggle that has put smaller bankers out of business.
“Washington’s regulatory waterboarding is drowning community banks and small businesses,” he told bankers gathered in Washington. “On behalf of every hardworking, struggling American — I will not rest until Dodd-Frank is ripped out by its roots and tossed on the trash heap of history.”
Speaking before members of the American Bankers Association, Hensarling said the long-awaited GOP alternative to Dodd-Frank would be simpler but no less effective.
Calling Dodd-Frank a “modern day Tower of Babel,” Hensarling argued the complex new rules mandated by the law are making it impossible for small banks to meet all their legal requirements.
“You’ll see us offer a bold alternative to the sclerotic status quo of our financial markets,” he said. “I can report to you today that we are deep into our planning, and you will soon see our bill.”
Tapping into the populist anger that is a force on both the right and the left, Hensarling vowed that his bill would be even tougher on Wall Street’s bad actors than the current law. But it would also subject regulators to stricter oversight in their efforts to craft new financial rules, requiring them to go through rigorous analysis of every new initiative.
Hensarling’s plan would also allow banks to obtain “vast regulatory relief” if they are willing to hold higher amounts of capital to guard against risks.
“If a bank chooses to have a fortress balance sheet that protects taxpayers and minimizes systemic risk, then bankers ought to be allowed to be bankers,” he said.
And Hensarling vowed that the Federal Reserve’s operations would be overhauled as part of any regulatory push from him. Long a critic of the central bank’s policies, the Texan has repeatedly pushed bills that would limit the institution’s powers and subject it to extra outside oversight.
And the conservative lawmaker heaped plenty of scorn on one of Dodd-Frank’s biggest pieces: the Consumer Financial Protection Bureau. He reiterated longstanding GOP gripes with the regulator, calling it far too powerful and severely lacking in outside checks on its abilities.
“The Bureau operates with such secrecy, unaccountability and bureaucratic tyranny it would make a Soviet commissar blush,” Hensarling said.
Despite Hensarling’s vow to act, any GOP effort to revisit Dodd-Frank will face Democratic opposition. Rep. Maxine Waters (D-Calif.), the top Democrat on Hensarling’s panel, dismissed his plan later Tuesday.
“This is just another attempt by the majority to gut administration policies that have helped millions of Americans,” she said in a statement. “Any plan that repeals the heart of Dodd Frank is a futile exercise that could jumpstart another financial crisis.”
Not only is Hensarling completely wrong, and an obvious shill for the banking industry, but he’s so despicable as to use biblical references to signal to believers that his proposal is righteous, and Dodd-Frank is evil.
He’s so ridiculous, I find him an almost amusing caricature.
He reminds me of the big bad wolf. The CFPB is housed in brick, so he huffs and puffs to please his masters, but his pompous posturing comes to nothing.
+1
You’re sounding more and more like Trump everyday 😉
Housing starts growing, but 21% below a 50-year average
New housing starts continue to grow strongly. The 12-month rolling total of starts which is a more statistically robust measure of trends in housing start data grew 11.9% year-over-year in February to 1,131,400 starts. This represents the most starts in a 12-month period since June 2008. Though the upward trend is good news for the housing sector, the 12-month rolling total is still 21% below a 50-year average of 1,444,619 starts. However, this is up from 23% below the 50-year average in January.
http://dwtd9qkskt5ds.cloudfront.net/blog/wp-content/uploads/2016/03/Housing-starts-2-feb-16.png
Donald Trump just threatened more violence. Only this time, it’s directed at the GOP.
Donald Trump romped to victory last night in Florida (effortlessly swatting Marco Rubio out of the race), North Carolina, and Illinois, and the resulting delegate count now means that Trump has a very plausible route to winning an outright majority of the delegates, securing the nomination. However, this is far from assured, and Trump’s latest vault forward has only intensified conversations among Republicans about how to stop him at a contested convention.
But no sooner had this chatter started, then Trump dropped another bomb, by suggesting this morning on CNN that if he finishes with the most delegates, and the nomination goes to someone else, that violence could result:
Trump said Wednesday that a contested GOP convention could be a disaster if he goes to Cleveland a few delegates shy of 1,237 — and doesn’t leave as the party’s nominee.
“I think you’d have riots,” Trump said on CNN.
Noting that he’s “representing many millions of people,” he told Chris Cuomo: “If you disenfranchise those people, and you say, ‘I’m sorry, you’re 100 votes short’…I think you’d have problems like you’ve never seen before. I think bad things would happen.”
It’s hard to say whether this is intended as a threat or a prediction. But the unsettling fact of the matter is that there is no particular reason to rule out the former — that it was indeed intended as a tacit threat, as least of a certain kind. Trump has been playing a clever little game where he hints at the possibility of violence while stopping short of explicitly threatening it — yet he also doesn’t denounce such an outcome as unacceptable, so his hints effectively function as a threat.
The media is still trying to punish him for not using PC language, but that’s exactly what people want and why they are supporting him.
They’re shaming him for using shameful language.
Maybe, but voters are tired of having their free speech regulated by the PC police. The pendulum is swinging in the other direction now.
As a consequence we see all the hateful, bigoted, negative thinking that was for so long hidden from view. I wonder if in retrospect the PC movement will concede defeat or if they will say the years of PC oppression were worth it because it changed a few minds?
California home prices decline 4.7% from January
http://cdnassets.hw.net/dims4/GG/2fdda4b/2147483647/resize/876x%3E/quality/90/?url=http%3A%2F%2Fcdnassets.hw.net%2Fbb%2Fd5%2F68ec84f74e2099d43f5f4823ccd8%2Fscreen-shot-2016-03-16-at-4.01.40%20PM.png
After accelerating for five straight months, the median price of an existing, single-family detached California home fell 4.7 percent in February to $446,460 from $468,330 in January. February’s median price was 3.8 percent higher than the revised $429,930 recorded in February 2015.
“February’s home price increase was the slowest rate of growth in six months, reflecting a shift in sales toward lower-priced, inland areas as buyers feeling the affordability crunch and tight supplies move away from urban cores to find affordable housing,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Home buyers in the Bay Area are seeking to buy in Contra Costa, Solano, or Sonoma counties, rather than San Francisco, and Southern California home buyers are moving inland to Riverside, San Bernardino, or Central Valley areas, where housing inventory is more abundant and affordable.”
http://cdnassets.hw.net/dims4/GG/52c7173/2147483647/resize/876×876%3E/quality/90/?url=http%3A%2F%2Fcdnassets.hw.net%2Fba%2F97%2F4f5bc26546f196d84f0151bddbd1%2Fscreen-shot-2016-03-16-at-3.48.43%20PM.png
Economic Index Creeps Up After Two Months of Decline
The Conference Board reported Thursday that its Leading Economic Index® (LEI) for the U.S. increased 0.1 percent in February to 123.2 (2010 = 100), following a 0.2 percent decline in January, and a 0.3 percent decline in December.
“The U.S. LEI increased slightly in February, after back-to-back monthly declines, but housing permits, stock prices, consumer expectations, and new orders remain sources of weakness,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “Although the LEI’s six-month growth rate has moderated considerably in recent months, the outlook remains positive with little chance of a downturn in the near-term.”
The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.1 percent in February to 113.3 (2010 = 100), following a 0.3 percent increase in January, and a 0.2 percent increase in December.
The Conference Board Lagging Economic Index® (LAG) for the U.S. increased 0.4 percent in February to 120.4 (2010 = 100), following a 0.1 percent increase in October, and no change in December.
The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The leading, coincident, and lagging economic indexes are essentially composite averages of several individual leading, coincident, or lagging indicators. They are constructed to summarize and reveal common turning point patterns in economic data in a clearer and more convincing manner than any individual component – primarily because they smooth out some of the volatility of individual components.
Bay Area home sales: Second-slowest February in eight years
A shortage of Bay Area homes for sale … kept sales low in what was the second-slowest February in eight years, according to a report released Thursday.
Sales of single-family homes were flat from a year ago across the region, the real estate research firm CoreLogic said, but it was a mixed market.
First-time buyers were moving eastward, keeping sales robust there, said Andrew LePage, a research analyst with CoreLogic.
“There’s more activity in some of the inland markets because of affordability,” he said. But overall, sales “are off to only a slightly stronger start than in 2015,” LePage said.
“A lot of people are dropping out of market,” said Lynne French of Windermere Real Estate in Clayton in Contra Costa County. “For first-time buyers, $739,000 for a house is tough.”
“Affordability is the issue,” said Jennifer Branchini, a real estate agent in Pleasanton. “First-time buyers are being pushed really far out.”
“It’s a difficult market,” Lisa Johnson said. “It’s just highly competitive. You’re fighting off 10 to 15 other people who want the exact same house. And then there are the people purchasing houses to flip them. It’s crazy.”
The right hand giveth and the left hand taketh away. Monetary stimulus is only half of the equation. Ignoring fiscal austerity imposed by higher taxes during the last decade only leads to erroneous conclusions.
Monetary stimulus put a floor under housing prices. It prevented prices from falling back in line with incomes. At the same time, federal, state, and local taxes rose. This effectively reduced discretionary income. More monetary stimulus only prevents prices from falling back in line with income. In order for discretionary income to rise, either wages need to go up or expenses need to go down.
Wage growth is a slow process, and has little ability to economic activity. Since prices aren’t falling, as a result of monetary stimulus, that won’t stimulate economic growth either. Healthcare costs have risen dramatically over the last few years from the Affordable [sic] Care Act. Federal tax rates were raised during the recession and never lowered. State tax rates were increased during the recession and were never lowered. Sales taxes rose during the recession and were never lowered. Property taxes rose for existing homeowners as a direct result of lower mortgage rates.
It’s pretty simple: if we want to stimulate the economy, allow prices to fall and reduce taxes. That’s it. Instead, through monetary policy, we keep prices artificially high which decreases demand, and then, with fiscal policy, we raise taxes which further impacts demand. You can’t add two negative numbers together and expect a positive outcome. It’s amazing that the global economy is doing as well as it is, considering.
I would continue to raise short-term rates (50bps/yr) and dramatically cut the tax burden (10% across the board). This will lower prices while increasing demand. Excess capacity will be utilized and incomes and corporate profits will rise.
Irrespective of any changes in rates, tax revenue didn’t go up during the recession. I don’t buy the argument that this was a drain on spending.
Further, tax revenues still end up in circulation because government spends that money on goods and services, pays salaries of government workers, and so on. That’s why many argue that government spending is an antidote to recessions.
At this point, I don’t see what benefit further tax cuts would create.
“Irrespective of any changes in rates, tax revenue didn’t go up during the recession. I don’t buy the argument that this was a drain on spending.”
Of course tax revenue didn’t go up during the recession; incomes fell, and unemployment rose, AND tax rates rose. The only fiscal stimulus we had was the payroll tax holiday, and that only lasted a year. After which federal, state, and local taxes were hiked to cover bloated government budgets.
Paradoxically, tax revenues rise when tax rates fall. This is because economic activity increases when people have more money to spend. An expanding economy has higher monetary velocity. Since the government taxes anything that moves, higher transaction volume results in higher tax revenue, despite lower tax rates.
Raising taxes takes money out of household budgets. This is money that can’t be spent. Since most households don’t save, a 10% increase in tax rates results in 50% less discretionary money to spend (since this comes out after taxes and fixed expenses). A 10% drop in tax rates will double discretionary income.
“Further, tax revenues still end up in circulation because government spends that money on goods and services, pays salaries of government workers, and so on. That’s why many argue that government spending is an antidote to recessions.”
I don’t disagree with that. What I am saying is that we should do that plus reduce tax rates. You are arguing against austerity and so am I. If we are going to deficit spend to correct the economy, then we should make sure it’s effective. Increasing the deficit, THEN raising taxes, and THEN cutting government spending ensures that any fiscal stimulus is ineffective. Might as well just balance the budget and take our lumps.
“At this point, I don’t see what benefit further tax cuts would create.”
It would put money in people’s pockets. Money they can spend. Cutting tax rates now would be more effective than during the peak of the recession because we are at full employment. More discretionary spending right now would increase demand for goods and services. This would increase economic activity and competition for employees. When unemployment was high, increasing demand wouldn’t result in increasing wages only in more hiring.
If debt is the problem, then the best way to get rid of it is through GDP growth, i.e. inflation.
On that point we both agree, and since the banks can’t endure the write-downs, growth is our only way out.
How you cut the tax burden 10% across the board matters, when half of households have no federal income tax burden and would receive no benefit from a 10% federal income tax cut.
Increase their tax credits….
I’m no fan of tax credits, but I understand what you’re saying. Although the 50% that don’t pay taxes would see no direct benefit by cutting taxes 10%, they would indirectly benefit from the higher wages that such a tax cut would generate.
Now, if the goal of a deficit funded tax cut is to generate spending, there would be no more effective way to do it than to cut checks to the 50% that don’t pay taxes. Since they didn’t earn that money, they would have no qualms about spending it.
I would have no problem increasing the tax credits today, on a temporary basis, provided all tax credits, along with tax cuts, were phased out as the economy recovers. We can’t run the tax system like we’re in a permanent recession, redistributing income regardless of merit.
You had me ’til “redistributing income regardless of merit.” Does the free market distribute income based upon merit, or is it much more complicated than this?
It distributes income based on optimal use of capital.
Yeah, I figured that might draw a response. The free market is complicated, to be sure. And not always fair. But when a government takes $1000 out of one person’s pocket and puts it into another’s, there’s no due process consideration of the parties right to that money. Is there?
The right to tax and spend to promote the general welfare must have some rational limit. If not, all the other provisions in the Constitution are meaningless.
When a struggling “high-income” (1X) family of four living on the coast, has to pay $1000 to a “low-income” (0.5X) family of four living in the heartland, who aren’t struggling because their cost of living is one-fifth that of the high-income family, then I believe I’m justified in saying that not only is this without merit, it’s also without justice.
The US tax code makes no provision for differences in cost of living, but redistributes income based on AGI.
We had huge tax cuts in the 2000s without any inflation-adjusted trickle down to middle-class wages… so what’s that indirect benefit again?
Not having to pay increased healthcare premiums and underfunded pension plans. Employers put the extra money into covering pension benefits from prior generations, and increasing healthcare costs.
After the tax cut in 2003, Supplements to wages and salaries grew by an average of 6.2% between 2000 and 2006, while wages only grew by 3.1%. Traditional pension plans were still in place and healthcare costs to employees rose with inflation.
Between 2010 and 2014 benefits grew by only 2.9%, while wages grew by 4.2%. Healthcare premiums, deductibles, copays, and out-of-pocket maximums rose substantially. Pensions transitioned from defined benefit to defined contribution.
I’m not sure which one better.
Back in 1960 President Kennedy cut taxes 10% across the board and stimulated the economy. It’s the textbook example that demonstrates it can work.
In 2000 George Bush also cut taxes, and it did nothing for the economy. It’s the textbook example that demonstrates it doesn’t always work.
One of the differences between the Kennedy tax cuts and the Bush tax cuts was a dramatic increase in federal nondefense spending at the time (Apollo). Maybe the combination of tax cuts and rising federal consumption expenditures explains why the Bush tax cuts weren’t as successful. Or maybe, the infrastructure investment was the difference.
YOY increase in Federal nondefense government consumption expenditures and gross investment / Real GDP
YOY exp YOY GDP
1959 33.0 6.9
1960 -6.0 2.6
1961 4.1 2.6
1962 20.5 6.1
1963 11.0 4.4
1964 10.4 5.8
1965 7.9 6.5
1966 3.6 6.6
YOY exp YOY GDP
1999 2.7 4.7
2000 2.3 4.1
2001 4.7 1.0
2002 7.4 1.8
2003 4.1 2.8
2004 2.0 3.8
2005 1.3 3.3
2006 3.5 2.7
These Are the Cities Where Rich Millennials Live
Millennials are giving up on getting rich and more likely to identify as working class than other generations, according to recent research.
Just not all millennials. Lots of young bankers and lawyers and software developers are making big bucks, and they’re especially likely to be your neighbors if you live in Arlington, Va. Aaron Terrazas, an economist at Zillow, compiled a list of the cities in which the most rich millennials live 1, defining millennials as 22 to 34 years old and “rich” as households earning at least $350,000 a year. His research offers one finding you’d expect and another that’s a little more surprising.
http://assets.bwbx.io/images/iWv3OmVTSpxg/v2/-1x-1.png
Tech hubs dominate the list, which makes sense, since San Francisco, Sunnyvale, Calif., Seattle, and Denver are full of software companies that pay high salaries to young workers. Arlington, Va., is slightly less obvious: It’s a well-off inner suburb of Washington, where the median income is $109,000 and 19 percent of households earned at least $200,000 in 2014. Perhaps more importantly, the median home value is a bit more than $600,000, according to Zillow, making it a likely stopping point for Beltway professionals on their way to bigger homes in other suburbs.
Huntington Beach, Calif., which once waged a gnarly trademark dispute with Santa Cruz, Calif., over who had the right to the moniker “Surf City,” seems like another outlier. The median income is $85,000, and 12 percent of households earn $200,000 or more. Terrazas points out, though, that Huntington Beach is next door to Newport Beach, home to Pimco and a host of other high-paying financial companies.
http://assets.bwbx.io/images/i4iwbLsNtKjw/v1/-1x-1.png
Terrazas also created a breakdown of cities in which millennials are more likely to be wealthy than members of their parents’ generation. Of the 73 cities in the Zillow survey, in only 13 was the share of millennials earning at least $350,000 higher than the share of boomer households at the same income threshold. Millennials are most often wealthier than their parents in tech towns and close suburbs of major cities, such as Yonkers, N.Y., or Jersey City, N.J., where well-paid bankers and lawyers and other professionals are likely to live before outgrowing their abodes when they start a family.
A bit off topic but how do young lawyers command such high salaries when there is all kinds of reporting claiming that an oversupply of lawyers exists and hordes of recent law school grads can’t find any work?
Salary distribution for lawyers is unique. It’s bimodal:
http://www.nalp.org/class_of_2013_bimodal_salary_curve
The median isn’t a valuable reference point in this context.
So it sounds like salaries have come down based on the comparison to 2009 where 25% were in the $160k mode, whereas 4 years later in 2013 only 17% were there. And of course that graph does not include the number of grads that are part-time, unemployed, or working in non-related fields, which anecdotally seems to have gone up.
Prospective law students have received the message. The number of law students in every ABA law school has continued to decline for may years. Not only is law school not a guaranteed path to a high salary, for a large percentage it’s a ticket to an average salary and monumental debt servitude.
Forget Trump: Here’s Who’s Really Destroying the Republican Party
By David Dayen5 hours ago
http://finance.yahoo.com/news/forget-trump-heres-whos-really-101500374.html
The seminal event in the crackup of the Republican Party is not the rise of Donald Trump as their presidential nominee, contrary to popular opinion. It was the overthrow of John Boehner as Speaker of the House. That showed the power of the forty-odd members of the House Freedom Caucus, and their incompatibility with the GOP establishment and the compromises required by divided government (or for that matter, math).
The change in leadership at the top has not bridged this divide. Despite months of happy talk, the Freedom Caucus rejectedPaul Ryan’s budget resolution, likely leaving the Republicans with no budget this year, after they made returning to regular order a campaign promise in 2014. The lack of a budget is just a sidelight to the continuing irreconcilable differences between conservative factions. Trump will not be able to fix this either; only a purge of one side of the party or the other would.
The Freedom Caucus essentially wants to control government from a base of 40 members of the House, with only a few allies in the Senate and no president willing to agree to their demands. They want to defund Planned Parenthood, balance the budget through massive spending cuts, dismantle government healthcare programs, and overturn every executive order of the past eight years, regardless of not having the two-thirds support in Congress that would be required currently to override Obama vetoes and make that happen.
Conservatives had to beg Ryan to take the Speaker’s job. His prescient leeriness stemmed from seeing Boehner put in the impossible spot of rounding up votes for routine government functions. And absolutely nothing changed when he received the gavel.
For months, Ryan has attempted to broker a deal on a budget resolution, which sets topline numbers for the appropriations committees to use to fund government operations. A bipartisan deal at the end of last year set those numbers in stone, at $1.07 trillion for the next fiscal year. But the Freedom Caucus wants to cut that by $30 billion, back to the level mandated by sequestration, the automatic spending cuts implemented in 2011.
Ryan and his colleagues tried to offer the Freedom Caucus incentives to come aboard. He promised $100 billion in future cuts over the next 10 years, if they’d just sign onto the topline $1.07 trillion number. He offered votes on cuts to the Children’s Health Insurance Program and taking away tax credits for undocumented immigrants with U.S. citizens as children. And he threatened to cancel the appropriations process without a budget resolution, meaning no opportunity for the kinds of ideological policy riders the Freedom Caucus cherishes as a way to get their priorities into law.
Nevertheless, the caucus formally announced its opposition, unable to stomach the nominal $30 billion spending increase (all of which was offset by cuts elsewhere). Members dismissed the additional votes as meaningless, because the Senate was unlikely to take them up.
Consider that Ryan is the architect of perhaps the most sweeping conservative budget in history, one that would balance the budget in a decade, mostly by pulling the safety net out from low-income Americans. In the past, he hasproposed ending Medicare as we know it, cutting Social Security benefits and simultaneously cutting taxes on the wealthy, necessitating even more budget trims. And now this guy is a big-spending liberal!
Because Democrats don’t typically agree to budget resolutions from the other side, losing a 40-member bloc is enough to ensure that the Republican budget won’t have enough votes. That means it’s likely the government will be funded with a continuing resolution at current levels for the near future. And Democrats will have to supply most of the votes for it.
Democrats, indeed, have largely been in charge of budgeting for the past year because of this dysfunction. Freedom Caucus members have tried to claim that they are listening to the public will as expressed by Trump’s primary successes — “the establishment has been rejected in every one of our states,” Rep. Raul Labrador said recently — but this has been going on since before Trump ever announced his candidacy.
Indeed, this implacability is more reminiscent of how Ted Cruz has operated in the Senate, with his demands to shut down the government over Obamacare in 2013. Cruz actually sees that event as his defining moment, even though it accomplished nothing. And his acolytes in the House are following this script. We’re seeing the Cruz-ification of the Republican Party, not the Trump-ification.
It’s worth noting that senators despise Cruz for what they consider doomed, self-serving gambits. But the institutional structure of the modern GOP values such tactics over conciliation. That’s a recipe for disaster, and heralds this split within the party more than anything else.
The kicker to all this came this Tuesday, in deposed Speaker John Boehner’s backyard. His replacement in that congressional seat will be Warren Davidson, a businessman who was actively supported by the Freedom Caucus. It’s part of a strategy of theirs to win open-seat races in conservative districts across the country, slowly building their membership. “We’re doing everything we can to win,” said Freedom Caucus chair Jim Jordan. And they did.
It’s hard to see how this will stop. If Paul Ryan cannot mediate this intra-party dispute, who can? If they can’t agree on something as simple as a topline budget number, what can they agree on? And if Freedom Caucus-aligned candidates have a leg up in head-to-head races, what stops a much more deeply conservative Republican Party from growing, and a backlash — even a fissure — from its establishment wing?
Trump’s cult of personality may come and go. But the Freedom Caucus phenomenon seems much more consequential. And it’s hard to figure out how Republicans will manage the fallout.
Great article. Thanks for sharing.
I also read recently that the Tea Party support has been diminishing for the last few years, so the days of these 40 Representatives trying to hold the government hostage may be coming to an end.
Varieties of inequality
The great divergence
America’s most successful cities, states and firms are leaving the rest behind
Mar 12th 2016 | DURHAM, NORTH CAROLINA | From the print edition
http://www.economist.com/node/21694356/print
IN THE Nuvotronics factory in Durham, North Carolina, small is beautiful. The firm, founded in 2008, uses a process resembling 3D printing to make miniaturised radio chips for jets and satellites. Typically, such chips are the size of a chocolate bar; Nuvotronics’s widgets are smaller than a breath-mint. Such innovation is lucrative; every kilogram saved makes a satellite $15,000 cheaper to launch. Nuvotronics is part of a cluster of high-tech firms that have increased Durham’s GDP per person by 28% since 2001. By the same measure, North Carolina as a whole grew by just 3% over the same period. Durham’s success reflects an emerging trend: high-flying cities, and the successful firms they contain, are detaching from the rest of the economy.
Cities have long been the most productive places to do business, because they bring firms, customers and workers closer together. A banker in New York is only a taxi ride away from her clients; a new restaurant there immediately has 8.4m potential customers on its doorstep. Where clever people congregate, innovation results.
For the most successful cities, these advantages seem to be getting bigger. In 2001 the richest 50 cities and their surroundings produced 27% more per head than America as a whole. Today’s richest cities make 34% more. Measured by total GDP, the decoupling is greater still, because prosperous cities are sucking in disproportionate numbers of urbanising Americans. Between 2010 and 2014 America’s population grew by 3.1%; its cities, by 3.7%. But the 50 richest cities swelled by 9.2%.
Durham, whose population grew by about 7% in that period, provides some hints as to what makes a place flourish. The city thrives on its proximity to three leading universities—Duke, North Carolina State and the University of North Carolina. Far-sighted planning in 1959 led Durham and its close neighbours, Raleigh and Chapel Hill, to establish a research park between the three cities. The idea was to coax the universities’ boffins into business ventures. It worked; today 50,000 people work there.
Unlike much of America, the area has not shied away from infrastructure investment. Raleigh-Durham airport has been renovated with a helping hand from local businesses. The roads are well maintained, if a little crowded. Bill Bell, the city’s mayor, hopes to develop a light-rail system for the city; in 2011 voters approved a sales-tax increase to help pay for it.
Investment has also revitalised a deprived downtown area. For most of its history, Durham made tobacco and textiles. When those industries went into decline in the latter half of the 20th century, they left a vacuum in the city. But over the past decade the gap has been plugged. The tower of the old American Tobacco factory, emblazoned with the “Lucky Strike” logo, still stands—but the factory is now a “campus” featuring bars, restaurants and the kind of tech firms where staff ride around on scooters. The city’s performing-arts centre, across the road, is one of the four best-attended theatres in the country. Mr Bell says public-private partnerships account for much of the investment.
Durham is unusual for its failure to drag up state-wide incomes. The state’s labour-force participation rate, at 61%, is grim even by American standards. Elsewhere, the presence—or absence—of rich cities determines economic fortunes. States with one of today’s richest 50 cities have grown 13% in per-person terms since 2001. The 18 (mostly southern and south-western) states without such a city saw growth of just 7%. As a result, inequality between states has risen for most of the past decade-and-a-half (see chart).
Rich cities typically attract successful, growing firms. Nuvotronics is young, employing fewer than 100 people, and did not move to Durham until 2013. But the city also plays host to well-established firms like Cree, which makes LED lighting, and giants like Quintiles, a consultancy which works on pharmaceutical trials. Attracting the right companies matters because America’s firms, too, are diverging. In the past two decades returns to investment at the most profitable 10% have more than doubled by one measure. Returns for middling performers have increased only a little (see chart). A recent paper by Jason Furman of the White House and Peter Orszag, a former budget chief, says this could be because the best firms are gaining market power (think of Apple’s dominance of the smartphone market). A report by McKinsey attributes the divergence to the varying pace of digitisation across industries. Highly digitised industries such as technology, media and professional services—all common in successful cities—have benefited from the juiciest increases in margins. Digital laggards, such as health care and offline retailing, are doing less well.
This bears directly on the inequality which matters most: that in wages. Two recent studies suggest that most of the increase in inequality over the past four decades is explained by wage gaps between firms rather than within them. A secretary will probably earn more working for Goldman Sachs than working for the local plumber; it is more lucrative to be a programmer at Facebook than in a corporate back-office. This means that bringing highly skilled workers to an area is not enough to guarantee high wages; the right firms must come to town, too.
The end of mediocrity
In 2013 Tyler Cowen, an economist at George Mason University, predicted in his book “Average is Over” that the fortunes of both people and places would become more polarised. Ambitious and talented workers, he argued, would want to work in a relatively small number of cities and regions. These vibrant clusters would then benefit from increasing returns to scale, cementing their advantages. Mr Cowen’s predictions are already coming true. While successful cities grow, almost 60% of rural counties are losing population. With America’s shale and manufacturing industries suffering, the pull of successful cities is becoming greater still.
Delaware Chancery Court voids ‘unconscionable’ payday loan, awards borrower damages
http://www.abajournal.com/news/article/delaware_chancery_court_voids_unconscionable_payday_loan_awards_borrower_da/?utm_source=maestro&utm_medium=email&utm_campaign=weekly_email
Calling the terms of a $200 payday loan “unconscionable,” Delaware’s influential Court of Chancery voided it Monday and awarded the borrower $3,240 in damages, plus attorney fees.
Since plaintiff Gloria James still owes $3 of the original $200 to National Financial LLC, that amount was offset against the damages she is owed for a total award of $3,237, the court notes in its written opinion (PDF).
The damages represent double the $1,620 interest on the $200 loan, a statutory remedy provided by the federal Truth in Lending Act.
Attorney Rick Cross, who represented James, anticipated that the ruling could lead to additional lawsuits and encourage lawmakers to restrict the activities of payday lenders, the Associated Press reports. The lenders typically target “folks that are financially unsophisticated and usually in a financial hardship,” he said.
However, the court declined in the opinion to issue a blanket injunction sought by James that would have barred National Financial from collecting on similar loans made to other customers. The court’s 73-page opinion focuses on the facts and circumstances of James’ case.
In addition to finding that the company’s loan document was confusing and a contract of adhesion, Vice Chancellor J. Travis Laster emphasized that James, who worked as a hotel housekeeper before a hand injury made it impossible for her to repay the loan, was unsophisticated and did not understand its terms.
$1,620 interest on the $200 loan
Wow!
Perhaps calling these payday lenders “scummy” wasn’t bad enough to do them justice.
That’s outrageous… how is a payday lender supposed to make a living if they can no longer victimize the financially unsophisticated? Anyone that understands basic math would never take out one of these loans. Payday lenders are left with a customer base consisting of financially literate crazy people, i.e. wall street types.
Thankfully Debbie Wasserman Shulz is standing up for the little guy, which of course is the payday lender in this case, from such overreaching and punitive regulation. She is a champion of the people!
The fact that her and Hillary are BFF’s has only cemented my vote for 8 more years of the Clinton husband/wife super team. Only they have the experience necessary to milk these lenders for every campaign donation possible, while talking tough to voters, and rolling back 70 year old regulations to allow financial super conglomerates to exist and participate in this “underserved” portion of the lending market.
The 2016 election is coming down to a status quo Conservative versus a Progressive populist reformer. What’s really strange is the role reversals of the parties. The Progressive Populist is the Republican, and the status quo Conservative is the Democrat.
It’s official, climate change has gone too far. When the sheeple are forced to start drinking recycled (toilet) water, will they start to question the science?
Expanding use of recycled water would benefit the environment, human health
https://www.sciencedaily.com/releases/2016/03/160318091012.htm
Expanding the use of recycled water would reduce water and energy use, cut greenhouse gas emissions and benefit public health in California — which is in the midst of a severe drought — and around the world.
A new study by the UCLA Fielding School of Public Health, published online March 17 in the American Journal of Public Health, found that recycled water has great potential for more efficient use in urban settings and to improve the overall resiliency of the water supply.
More than 1 in 9 people around the world, about 750 million, do not have access to safe, clean drinking water, and the problem is expected to worsen in step with rising greenhouse gas concentrations, population increases and climate change.
The study expands on a 2014 assessment in which the researchers offered recommendations for saving water while also protecting and promoting public health.
In the new report, the UCLA researchers compare California’s current water conservation efforts with two other options: banning landscape irrigation and expanding the use of alternative water sources, such as recycled water. The authors found that increasing the use of recycled water would have the greatest potential to reduce water and energy use and lower greenhouse gas emissions.
The study also identified several potential public health benefits of using more recycled water, including improving municipalities’ ability to maintain green spaces and decreasing air pollution, which in turn would reduce the occurrence of respiratory disease.
“Expansion of recycled water use has a tremendous potential to positively impact health,” said Hilary Godwin, a co-author of the study and a UCLA professor of environmental health sciences. “Recycled water is often perceived to be dirty or unhealthful, or associated with the moniker ‘toilet to tap.’ Our research helps change this conversation.”
In most of California, water has to be pumped in to meet demand, which places an extraordinary burden on the state’s other resources: About 20 percent of the energy California uses goes toward treating, transporting and heating water. The process of transporting water alone produces about 4 million tons of greenhouse gas emissions per year.
Scientists also project that continuing climate change — on top of the current drought, now in its fifth year — will only exacerbate water scarcity in the state. That could result in lower agricultural production, reduced water quality as a result of saltwater intrusion, and respiratory and cardiovascular disease caused by airborne particulate matter.
Currently, roughly 52 percent of the state’s water is used for irrigation. In some parts of the state, recycled water is used to irrigate golf courses and green spaces, but most urban areas don’t have the infrastructure to recycle water for large-scale irrigation projects. And although municipal bans on landscape irrigation have helped conserve water and energy, they can also have harmful effects, such as depleting urban green spaces where people can be active, which in turn can lead to increases in obesity and cardiovascular disease.
In addition, when the researchers analyzed water desalination — a process that removes salt and minerals from water — they found that the technique uses 50 percent more energy than importing water, and is 120 times more energy-intensive than getting water from the Los Angeles Aqueduct, which is gravity-powered.
“Of the conservation strategies we evaluated, the expanded use of recycled water had the greatest potential to reduce water and energy use and reduce greenhouse gas emissions,” said Sharona Sokolow, a doctoral candidate in the Fielding School’s department of environmental health sciences and the study’s lead author. “One health benefit of recycled water is its ability to maintain green spaces, which can lead to cleaner air, thus reducing risks for respiratory disease.”
Brian Cole, adjunct assistant professor of environmental health sciences at the Fielding School, said the strategy could be applied to water systems worldwide.
“The hope is that this research might inspire communities to consider increasing recycled water use because of the potential to have a positive impact on public health,” said Cole, a senior author of the study.
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