Tuesday, July 30, 2013

Today's links

1---Obama to Urge Business Tax Rewrite to Help Spur New Jobs, Bloomberg

The economy grew at a 1.8 percent rate during the first three months of the year, more slowly than its 2.5 percent average pace during the last two decades. The unemployment rate, at 7.6 percent in June, remains above its 6 percent average over the past 20 years.

While the benchmark Standard & Poor’s 500 stock index is up more than 18 percent this year and has almost doubled since Obama took office in 2009, the median household income of $51,500 in May is 5 percent lower than in June 2009, the official end of the recession, according to estimates by Sentier Research

2---Rent-backed securities? What could go wrong?, WSJ

3---American Dream erased as homeownership hits 18-year-low, Financial Post

The U.S. homeownership rate, which soared to a record high 69% in 2004, is back where it was two decades ago, before the housing bubble inflated, busted and ripped more than 7 million Americans from their homes.

With ownership at 65% and home values rising, housing industry and consumer groups are pressing lawmakers to make the American Dream more inclusive by ensuring new mortgage standards designed to prevent another crash are flexible enough that more families can benefit from the recovery. Regulators are close to proposing a softened version of a rule requiring banks to keep a stake in risky mortgages they securitize, according to five people familiar with the discussions

4---James Galbraith on Social Breakdown and Financial Stress in Europe and Why the Word “Stimulus” Needs to be Banned, naked capitalism

5---Vital Signs Chart: Home Sales Remain Near Postcrash Highs, WSJ

6--The US turns Japanese, WSJ

Is the U.S. Turning Japanese?

In the 1970s, many Americans feared Japan would set the tone for growth in the 21st century economy. One research group says that may be the case — but not in the way feared decades ago.
The Economic Cycle Research Institute, a private research firm that has been bearish on the U.S. economy, says the U.S.’s performance in this recovery is looking ominously similar to that of Japan’s “lost decades,” the period from 2Q 1992 until 1Q 2013, when Japan suffered through little economic growth and steep deflation.
The business cycle group looked at average yearly GDP growth for major developed nations as well as China for the periods of 1Q 1980 to 1Q 2001 (green bars on chart), 1Q 2001 to 1Q 2013 (yellow) and the last five years 1Q 2008 to 1Q 2013 (blue). For Japan, ECRI divided the periods to 2Q 1992, the lost decades (red), and the last five years.
The research showed that over the last five years, the U.S. grew just 0.7%, a notch below the 0.8% pace recorded during Japan’s lost decades.
“Basically the U.S. is already becoming like Japan during the lost decades,” says ECRI director, Lakshman Achuthan.

The downshift in growth is not a U.S. phenomenon. Major European economies also have seen growth slow across the three periods. And that is a major point of ECRI’s research

7--Consumer confidence dips, WSJ

8----The Logical (and Coming) End to the US Empire, counterpunch

Regarding the scarcity of resources issue, none other than the World Bank produced a detailed study of demand and supply projections for the immediate future. The study projects that, on the basis of current consumption and immediately precedent rises in it, the demand for food will rise by 50% by 2030, for meat by 85%, for oil by 20 million barrels a day, and for water by 32%, all by the same year. This is met by alarming statistics and predictions from the supply side. In their report, they state that global food growth rates fell by 1.1% over the past decade, and are continuing to fall, while global food consumption outstripped production in seven of the eight years between 2000 and 2008. Further, the Food and Agricultural Organization and the UN Environment Program estimate that 16% of the arable land used now is degraded. Intensifying competition between different land uses is likely to emerge in future, including food crops, livestock, etc., and the world’s expanding cities. Current rates of water extraction from rivers, groundwater and other sources are already unsustainable in many parts of the world. Over one billion people live in water basins in which the physical scarcity of water is absolute; by 2025, the figure is projected to rise two billion, with up to two thirds of the world’s population living in water-stressed conditions (mainly in non-OECD countries). On oil, the International Energy Agency has warned consistently that there is a significant risk of a new “supply crunch” as the global economy “recovers.” Additionally, the IEA’s chief economist argues that peak production could take place by 2020 (from the “World Development Report 2011, Background Paper: Resource Scarcity, Climate Change and the Risk of Violent Conflict,” www.worldbank.org ).

The conclusion from all of these points is nearly obvious: if resources are even relatively scarce, and the habits of and desires for consumption continue to rise among nations, and especially among the citizens of Empire (as has been documented in part above), and if control over those resources is the goal of Empire, but if the Empire consumes more resources than it can logistically or economically control due to natural limitations of those resources themselves, and/or to the consumption of more resources than is either available to it or that it needs to survive, then the power of the Empire will naturally-logically end in a sharp decline, and soon (For applicable details on this, see Richard Heinberg, “The Brief, Tragic Reign of Consumerism—and the Birth of a Happy Alternative,” www.postcarbon.org ).

9---Comment on House Prices: Real Prices, Price-to-Rent Ratio, Cities, calculated risk

First a comment from Zillow Economist Dr. Svenja Gudell:
“Three straight months of national home value appreciation above 10 percent is not normal, not sustainable and, frankly, not very believable. As the overall housing market continues to improve, the impact of foreclosure re-sales on the Case-Shiller indices continues to be pronounced, as homes previously sold under duress trade again under more normal circumstances, leading to inflated and misleading markups in price,” said Zillow Senior Economist Svenja Gudell. “It’s increasingly critical that the average American homeowner not read numbers like today’s Case-Shiller results and assume their homes must also have appreciated at these levels over the past year, or will continue to appreciate at these levels going forward. In reality, typical home values have appreciated at roughly half this pace for the past several months, which is still very robust. Looking ahead, a combination of rising mortgage interest rates, flagging investor demand and more inventory entering the market will all help to moderate the pace of home value appreciation and stabilize the market.”
emphasis added
I agree with Gudell on these two key points: 1) I also think right now the Case-Shiller index is overstating price increases for most homeowners (both because of the handling of distressed sales and weighting of some coastal areas), and 2) I also think price appreciation will slow going forward.

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