Steve Bull's Blog, page 1342
August 8, 2017
What slowdown? Vancouver and Toronto real estate markets still hot and unaffordable for many
Housing prices are once again climbing in Vancouver and Toronto may soon follow
Emelia Symington Fedy with her partner, Christie Watson, and two children in Vancouver — the city the family is leaving because they can’t afford to live there. (Emelia Symington Fedy)
With recent price declines in Canada’s hot real estate markets, there’s been talk of a slowdown. But, so far, it’s hardly something for prospective buyers to get excited about.
While prices did drop after the introduction of a foreign homebuyers tax in Vancouver last year, they’re once again surging to new highs.
In Toronto, both prices and sales have taken a dive since the same type of tax came into effect in April.
Some had hoped a combination of recent government rule changes making it harder to get a mortgage, higher mortgage rates and the foreign buyers tax might have a lasting effect in cooling the market.
However, Toronto home prices are still up compared to last year and some industry experts predict that, as in Vancouver, the city’s recent dip will simply be a blip.
And as long as Toronto and Vancouver’s real estate markets continue to sizzle, many people will continue to find home ownership out of reach in these cities.
‘I just don’t get to live here,” says Emelia Symington Fedy, who’s moving her family from Vancouver to Halifax because she can’t afford the high cost of housing in her beloved city. “It feels like my lover has jilted me. I’m heartbroken.”
Vancouver downturn dashed
In August 2016, the B.C. government implemented a 15 per cent tax on foreign nationals buying property in Metro Vancouver to help cool skyrocketing house prices. For a time, the tax appeared to be working.
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Now, a Trade War — Is a Shooting War Next?
Now, a Trade War — Is a Shooting War Next?
A popular thesis since the 1930s is that a natural progression exists from currency wars to trade wars to shooting wars. Both history and analysis support this thesis.
Currency wars do not exist all the time; they arise under certain conditions and persist until there is either systemic reform or systemic collapse. The conditions that give rise to currency wars are too much debt and too little growth.
In those circumstances, countries try to steal growth from trading partners by cheapening their currencies to promote exports and create export-related jobs.
The problem with currency wars is that they are zero-sum or negative-sum games. It is true that countries can obtain short-term relief by cheapening their currencies, but sooner than later, their trading partners also cheapen their currencies to regain the export advantage.
This process of tit-for-tat devaluations feeds on itself with the pendulum of short-term trade advantage swinging back and forth and no one getting any further ahead.
After a few years, the futility of currency wars becomes apparent, and countries resort to trade wars. This consists of punitive tariffs, export subsidies and nontariff barriers to trade.
The dynamic is the same as in a currency war. The first country to impose tariffs gets a short-term advantage, but retaliation is not long in coming and the initial advantage is eliminated as trading partners impose tariffs in response.
Trade wars produce the same result as currency wars. Despite the illusion of short-term advantage, in the long-run everyone is worse off. The original condition of too much debt and too little growth never goes away.
Finally, tensions rise, rival blocs are formed and a shooting war begins. The shooting wars often have a not-so-hidden economic grievance or rationale behind them.
…click on the above link to read the rest of the article…
Productivity and Debt
William Blake Europe Supported by Africa and America 1796
Earlier this week I was struck by the similarities and differences between two graphs I saw float by. And the thought occurred that they are as scary as they are interesting. The graphs show eerily similar trends. And complement each other. The first graph, which Tyler Durden posted, shows productivity, defined as more or less the same as GDP per capita. It goes all the way back to 1790 and contends that 2017 productivity is about back to the level it was at in 1790. In the article, Tyler suggests a link with the amount of time people spend on Instagram et al, but perhaps there is something more going on.
That is, America and Western Europe exported almost their entire manufacturing capacity to China etc. And how can you be productive if you don’t manufacture anything? Yeah, I know, ‘knowledge economy’ and ‘service economy’ and all that, but does anyone still really believe those terms? Sure, that may have worked for a while as others were still actually making stuff (and nobody really understood the idea anyway), but it’s a sliding scale. As productivity plunged, so did GDP per capita. We can all wrap our heads around that.
America’s Productivity Plunge Explained
For the first time since the financial crisis, US multifactor productivity growth turned negative last year, mystifying economists who have struggled to find something to blame for the fact that worker productivity is declining despite a technology boom that should make them more efficient – at least in theory. To be sure, economists have struggled to find explanations for the exasperating trend, with some arguing that the US hasn’t figured out how to properly measure productivity growth correctly now that service-sector jobs proliferate while manufacturing shrinks. But what if there’s a more straightforward explanation? What if the decline in US productivity measured since the 1970s isn’t happening in spite of technology, but because of it?
…click on the above link to read the rest of the article…
August 5, 2017
Trump Will Now Become the War President
President Trump has been defeated by the military/security complex and forced into continuing the orchestrated and dangerous tensions with Russia. Trump’s defeat has taught the Russians the lesson I have been trying to teach them for years, and that is that Russia is much more valuable to Washington as an enemy than as a friend.
Do we now conclude with Russia’s Prime Minister Dmitry Medvedev that Trump is washed up and “utterly powerless?” I think not. Trump is by nature a leader. He wants to be out front, and that is where his personality will compel him to be. Having been prevented by the military/security complex, both US political parties, the presstitute media, the liberal-progressive-left, and Washington’s European vassals from being out front as a leader for peace, Trump will now be the leader for war. This is the only permissible role that the CIA and armaments industry will permit him to have.
Losing the chance for peace might cost all of us our lives. Now that Russia and China see that Washington is unwilling to share the world stage with them, Russia and China will have to become more confrontational with Washington in order to prevent Washington from marginalizing them. Preparations for war will become central in order to protect the interests of the two countries. The situation is far more dangerous than at any time of the Cold War.
The foolish American liberal-progressive-left, wrapped up as they are in Identity Politics and hatred of “the Trump deplorables,” joined the military/security complex’s attack on Trump. So did the whores, who pretend to be a Western media, and Washington’s European vassals, not one of whom had enough intelligence to see that the outcome of the attack on Trump would be an escalation of conflict with Russia, conflict that is not in Europe’s business and security interests.
…click on the above link to read the rest of the article…
McMaster: U.S. Preparing For “Preventive War” With North Korea
The United States is preparing for all options to counter the growing threat from North Korea, including launching a “preventive war,” national security adviser H.R. McMaster said in an interview that aired Saturday on MSNBC. The comments come after North Korea carried out two tests of intercontinental ballistic missiles in the past month and after the president said he has been clear he will not tolerate North Korea’s threats to attack the U.S. with nuclear weapons.
The key excerpts (full transcript):
H.H.: Let me switch if I can to North Korea, which is really pressing. And– and remind our audience, at the Aspen Institute ten days ago, Chairman of the Joint Chiefs, Joe Dunford, said, “There’s always a military– option. It would be horrific.” Lindsey Graham on Today Show earlier this week said– “We need to destroy the regime and their deterrent.” Secretary of State Rex Tillerson said on Tuesday, I believe, to North Korea, “You are leaving us no choice but to protect ourselves.” And then the Chairman of the Chief of Staff of the Army said, “Just because every choice is a bad choice doesn’t mean you don’t have to choose.” Are we looking at a preemptive strike? Are you trying to prepare us, you being collectively, the administration and people like Lindsey Graham and Tom Cotton for a first strike North Korea?
H.R.M. Well, we really, what you’re asking is– is are we preparing plans for a preventive war, right? A war that would prevent North Korea from threatening the United States with a nuclear weapon. And the president’s been very clear about it. He said, “He’s not gonna tolerate North Korea being able to threaten the United States” if they have nuclear weapons that can threaten the United States; It’s intolerable from the president’s perspective. So of course, we have to provide all options to do that. And that includes a military option.
…click on the above link to read the rest of the article…
August 3, 2017
Trump, the CIA and the Yokeldom
Jackson Pollock The Deep 1943
The western world is mired in a mile-deep political crisis and nary a soul seems to notice, or rather: everyone just sees their own little preferred echochamber tidbits of it. Which is not a good thing, because that crisis is bound to trigger other bigger crises that are much more damaging. And I’m sorry to say it, but Donald Trump is not your main problem. Not even close.
The main problem is the collapse of western political systems. While that is what brought Trump to power in the first place, he didn’t cause the collapse. The collapse is also what ‘gave you’ Brexit, and Trump didn’t cause that either. Moreover, in the next step, on the far end of all this, Trump may well be the only thing standing between you and CIA warfare. I know, who wants to hear that, right?! Who’s ready for that next step?
But it’s not that crazy. Trump was the one who stopped the CIA from arming Syrian ‘rebels’, which are just a bunch of extremists gathered by that same CIA in its attempts to unseat Assad, and who Trump saw laughingly beheading a child. And who was it that had previously, and enthusiastically, decided to support these crazies? The US Republican and Democratic parties, in unison, while Obama was president and Hillary slash Joe Biden was Secretary of State. Remember the Chelsea Manning footage of videogame-like drone killings? What did Obama do about that?
Still, that’s not where the core of the demise of our political systems lies. Though it does gave us a flavor of their priorities. The core can be found in economic issues. In both president Bush II and president Obama bailing out banks while letting people’s incomes and wealth tank, and not sueing any banker for anything at all. Obviously, the same scenario played out in Britain as well. And in many other nations.
…click on the above link to read the rest of the article…
Russian PM: “The U.S. Just Declared Full-Scale Trade War On Russia”
Several hours after President Trump officially signed the new Russian sanctions into law – despite his reservations and his statement that while he favors “tough measures to punish and deter aggressive and destabilizing behavior by Iran, North Korea, and Russia, this legislation is significantly flawed” – Russia responded when moments ago Russian Prime Minister Dmitry Medvedev said on his FaceBook page that any hopes of improving Russian relations with the new US administration are dead, that the Trump administration demonstrated complete impotence by transferring executive power to Congress “in the most humiliating manner”, and most notably, that the US just declared a full-scale trade war on Russia.
From Medvedev’s facebook page:
The signing of new sanctions against Russia into law by the US president leads to several consequences. First, any hope of improving our relations with the new US administration is over. Second, the US just declared a full-scale trade war on Russia. Third, the Trump administration demonstrated it is utterly powerless, and in the most humiliating manner transferred executive powers to Congress. This shifts the alignment of forces in US political circles.
What does this mean for the U.S.? The American establishment completely outplayed Trump. The president is not happy with the new sanctions, but he could not avoid signing the new law. The purpose of the new sanctions was to put Trump in his place. Their ultimate goal is to remove Trump from power. An incompetent player must be eliminated. At the same time, the interests of American businesses were almost ignored. Politics rose above the pragmatic approach. Anti-Russian hysteria has turned into a key part of not only foreign (as has been the case many times), but also domestic US policy (this is recent).
…click on the above link to read the rest of the article…
An Angry Beijing Responds: “We Will Never Dance To Trump’s Tune”
With just one day to go until the Trump administration launches the first salvo in what could develop into a full-scale trade war between the US and China, there is the issue of a diplomatic (hopefully) resolution of escalating situation in North Korea, one which Citi today said is “increasingly likely” to involve military action. On this issue, China is becoming increasingly displeased with Trump’s relentless twitter badgering, and as AFP reports, “Trump-style outbursts are no way to get China to bend to the US’s will.”
The animosity between D.C. and Beijing has been building up for months, as the two capitals have long traded blame over the failure to rein in the North, but last week’s breakthrough in North Korean missile technology has raised the specter of a strike by Pyongyang on American cities, escalating the rhetoric.
“I am very disappointed in China,” President Donald Trump tweeted after the North boasted last week that the entire mainland US was within range of its intercontinental ballistic missiles. “Our foolish past leaders have allowed them to make hundreds of billions of dollars a year in trade, yet they do NOTHING for us with North Korea, just talk.”
While China – North Korea’s main trade partner and ally – has repeatedly countered that it does not hold the key to the crisis and has rejected Trump’s attempts to link the issue to the trade relationship, keeping official responses to Trump’s 140-character outbursts restrained, state media has been less muted.
“Trump is quite a personality,” an opinion piece published Monday by the Xinhua state news agency said. “But emotional venting cannot become a guiding policy for solving the nuclear issue … and even less should (the US) stab China in the back.”
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“The US Is Staring Down A Technical Default” – Here Are The Five Debt Ceiling Scenarios
In a note released on Monday commenting on the looming US debt ceiling showdown and the growing threat of a government shutdown and technical default by the US, Compass Point analyst Isaac Boltansky said he is becoming increasingly concerned that fall deadlines for federal government funding and the debt ceiling will prove tougher than the market currently expects, resulting in “markets roiled heading into 4Q and Fed’s policy normalization trajectory facing complications.” He adds that the increasingly fragmented legislative landscape may be set to “transition from inaction to dysfunction”, citing such factors as:
Lawmakers return in Sept. with no clear strategy
GOP leaders will likely be forced to rely on sizable contingents of Democrats
Current spending caps for FY2018 are “despised” by both Democrats, Republicans, but for wholly different reasons
White House’s position remains unclear as Treasury Sec. Steven Mnuchin has repeatedly called for a clean debt ceiling increase, but over the weekend President Donald Trump and OMB Director Mick Mulvaney suggested putting legislative activity on hold until health care is addressed
As a result, Boltansky sees odds of govt shutdown as materially higher than the likelihood of reaching debt ceiling as core components of spending fight (including border wall funding) are “meaningfully more politically complicated” than raising debt ceiling; his base case is for the federal government to face a brief shutdown in early October.
While that may be a little extreme, the reality is that with Congress critically fragmented, and with increasingly more politicians chosing to ignore anything that comes out of the mouth of the president, a happy ending is by no means assured and, as Boltansky suggests, “market event” may be necessary to spur Congress into action, similar to the passage of the TARP bill.
…click on the above link to read the rest of the article…
How Twisted Minds Function
The economic theories arising out of Australia are both amusing and frightening. In the latest bit of madness, an economist pleads for more inflation, blaming cheap overseas retailers for Australia’s housing bubble.
For mocking purposes only, please consider How Cheap Overseas Retailers are Pushing Up House Prices in Australia.
“DOWN Down! Prices are Down!” It’s a jingle that is practically our national anthem. But ever-cheaper retail — and the waves of foreign retailers competing on price — could seriously unbalance Australia.
“Down, Down” might be the only place our economy has left to go if we can’t solve the imbalance between crazy low retail prices and crazy high house prices.
Australia needs a little bit of inflation. Without it, our economy is stuck with low interest rates and all the issues they create. But inflation is turning out to be very hard to generate.
The world’s discount retailers have discovered Australia. Aldi, Costco and Uniqlo were wave one of the discount invasion. Wave two is coming in 2017 and mostly involves Amazon. Every retailer already here is working hard to be able to compete.
Prices keep falling and the RBA is finding life difficult. Its job is to keep inflation in line. It should be between two and three per cent per year. But for a while now inflation has been below that range.
You can almost imagine RBA governor Philip Lowe stomping round his office, muttering “bloody foreigners! Coming over here! Making our retail goods cheaper!”
Having low inflation is a problem. While of course we love low prices, overall the economy runs best with consistent predictable inflation. That’s what the RBA is supposed do. It is pledged to makes sure inflation is predictable: between two and three per cent.
The Think Engine
That bit of economic nonsense was courtesy of economist Jason Murphy. He publishes the blog Thomas The Thinkengine. You can follow Jason on Twitter @Jasemurphy.
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