Housing Supply: What do all the numbers mean? (6 charts) We are constantly bombarded with housing supply numbers: 3.86 million existing homes for sale, 10.5 month-of-supply, 2.1 million "pending sales", 7 million mortgages delinquent. NY Fed president William Dudley said "We estimate that there are roughly 3 million vacant housing units more than usual", and other sources have mentioned there are close to 19 million vacant housing units in the U.S.! What does it all mean? The number to start with is the "visible supply" reported monthly from the National Association of Realtors (NAR). At the end of October, the NAR reported there were 3.86 million homes for sale. CoreLogic reports the number of distress sales in their monthly US Housing and Mortgage Trends. . So both the level of visible inventory and the percentage of distressed sales is elevated – and that puts downward pressure on house prices. The next number is the "pending sales" of 2.1 million units. This was reported by CoreLogic this week. Some analyst have called the number of REOs and total delinquent loans as the "shadow inventory". This is incorrect The key numbers to follow for the housing market are 1) existing home inventory, 2) number of delinquent loans, and 3) the excess vacant inventory.
Reagan Advisor Bruce Bartlett Rips ‘Starve The Beast’ Republican Ideology – Bruce Bartlett, domestic advisor to President Ronald Reagan, Treasury official under the first President Bush and Ron Paul (R- Texas) staffer on the House Banking Committee, is not a liberal. But he’s becoming increasingly critical of his party’s ideology. In a Fiscal Times article entitled ‘Starve the Beast: Just Bull, not good Economics,’ Bartlett does a good job dismantling and exposing this slogan’s emptiness. “It ought to be obvious from the experience of the George W. Bush administration that cutting taxes has no effect whatsoever even on restraining spending, let alone actually bringing it down. Just to remind people, Bush inherited a budget surplus of 1.3 percent of the gross domestic product from Bill Clinton in fiscal year 2001. The previous year, revenues had been 20.6 percent of GDP, spending had been 18.2 percent, and there had been a budget surplus of 2.4 percent. When Bush took office in January 2001, we were already well into fiscal year 2001, which began on Oct. 1, 2000. He immediately pushed for a huge tax cut, which Congress enacted. In 2002 and 2003, Bush demanded still more tax cuts, even as the economy showed no signs of having been stimulated by his previous tax cuts. The tax cuts and the slow economy caused revenues to evaporate.
Starve the Beast: Just Bull, not Good Economics, by Bruce Bartlett – A prime reason why we have a budget deficit problem in this country is because Republicans almost universally believe in a nonsensical idea called starve the beast (STB). By this theory, the one and only thing they need to do to be fiscally responsible is to cut taxes. They need not lift a finger to cut spending because it will magically come down, just as a child will reduce her spending if her allowance is cut — the precise analogy used by Ronald Reagan to defend this doctrine in a Feb. 5, 1981, address to the nation. It ought to be obvious from the experience of the George W. Bush administration that cutting taxes has no effect whatsoever even on restraining spending, let alone actually bringing it down. Just to remind people, Bush inherited a budget surplus of 1.3 percent of the gross domestic product from Bill Clinton in fiscal year 2001. When Bush took office in January 2001,… He immediately pushed for a huge tax cut, which Congress enacted. In 2002 and 2003, Bush demanded still more tax cuts. Spending did not fall in response to the STB decimation of federal revenues; in fact, spending rose from 18.2 percent of GDP in 2001 to 19.6 percent in 2004, and would continue to rise to 20.7 percent of GDP in 2008.
Quantitative Easing and the Renminbi, by Martin Feldstein, Commentary, Project Syndicate: The United States Federal Reserve’s policy of “quantitative easing” is reducing the value of the dollar relative to other currencies that have floating exchange rates. The Fed’s goal may be to stimulate domestic activity in the US and to reduce the risk of deflation. But, intended or not, the increased supply of dollars also affects the international value of the dollar. But the market forces that cause currencies to appreciate do not work on the renminbi, because China has only very limited capital-account convertibility. The People’s Bank of China determines the renminbi’s exchange rate.So the relevant question is how the Chinese government will choose to respond to the Fed’s quantitative easing and the impact of the Fed’s policy on other currencies. Between 2008 and June of this year, the Chinese held the renminbi at a fixed rate of 6.8 to the dollar. In June of this year, the Chinese authorities decided to allow the renminbi to appreciate at a moderate pace, as it had done between 2006 and 2008. Indeed, in the five months since that announcement, the Chinese government has allowed the renminbi to appreciate by 3.1% – not much less than the average rate of appreciation that it allowed between 2006 and 2008.
Neither apocalypse nor paradise – I know that industrial economies have already overshot their supply of resources, from oil to water to fish in the seas. I also know that we’re quickly filling up all the places to put our pollution, particularly greenhouse gas emissions. And I know that the Earth cannot long sustain a population of seven billion humans and growing. I know that our societies cannot make peak oil or climate change go away with technology. I know that clean energy won’t replace all the fossil fuels we use now. But I also know that unless we want to shiver in the dark, we’ll need some source of power.I don’t know exactly what the post-peak future will look like, and I am suspicious of people who claim that they do. I’m sure that both Nicole Foss and Jeff Rubin are aware of the moral responsibility that comes with giving financial advice. But since Foss says that families should prepare now for deflation and Rubin says they should prepare now for inflation, one of them will be wrong. Even as some people benefit from their advice, others will suffer.
Another extreme drought hits the Amazon, raising climate change concerns – "We know from simple on-the-ground knowledge that the 2010 drought was extreme, leading to record lows on some major rivers in the Amazon region and an upsurge in the number of forest fires. Preliminary analyses suggest that the 2010 drought was more widespread and severe than the 2005 event. The 2005 drought was identified as a 1-in-100 year type event." That’s from an email to CP by forest scientist Simon Lewis, a leading expert on the Amazon (see Scientists: “There are multiple, consistent lines of evidence from ground-based studies published in the peer-reviewed literature that Amazon forests are, indeed, very susceptible to drought stress”). The figure above is from the University College London Global Drought Monitor via a post by WWF’s Nick Sundt, that I am reposting below. The world’s largest rain forest has long been a bulwark of hope for a planet troubled by climate change. Covering an area the size of the continental United States, the Amazon holds 20 percent of Earth’s fresh water and generates a fifth of its oxygen. With the planet’s climate increasingly threatened by surging carbon emissions, the Amazon has been one of the few forces keeping them in check. But the latest scientific evidence suggests the forest may be unable to shield us from a hotter world.
EU rescue costs start to threaten Germany itself – The escalating debt crisis on the eurozone periphery is starting to contaminate the creditworthiness of Germany and the core states of monetary union. Credit default swaps (CDS) measuring risk on German, French and Dutch bonds have surged over recent days, rising significantly above the levels of non-EMU states in Scandinavia. "Germany cannot keep paying for bail-outs without going bankrupt itself," said Professor Wilhelm Hankel, of Frankfurt University. "This is frightening people. You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver. It is like an underground Switzerland within our borders. People have terrible memories of 1948 and 1923 when they lost their savings." The refrain was picked up this week by German finance minister Wolfgang Schäuble. "We’re not swimming in money, we’re drowning in debts," he told the Bundestag.