thehousingbubble@gmail.com
Blog

The Question Would Have Been Laughable A Few Short Years Ago, But Not Many Are Laughing Now

A report from the Huffington Post on Canada. “Rental rates across Canada have fallen for three straight months and are down 7.8 per cent, on average, from before the pandemic, rental site Rentals.ca reported this week. Larger cities have been hit particularly hard. Rents per square foot have dropped steeply in Toronto since the pandemic and are now 9.5 per cent below their levels from a year ago. Some experts have warned that if this continues long enough, it could lead to forced selling in the housing market, driving up the supply and pushing down prices.”

“‘Tourism is likely to be slow for some time, and the possibility cannot be excluded that lodgings currently marketed to tourists on short-term-rental platforms such as Airbnb will be put up for sale for lack of revenue,’ economists Matthieu Arseneau and Alexandra Ducharme wrote.”

From CBC News in Canada. “The broad strokes of Calgary’s challenges are now well known. The shock of the oil price collapse that first started in 2014 has never really subsided, leaving some downtown towers completely empty, and many more with high vacancy rates. That has caused overall property values in the core to plummet by around $14 billion. Now, with the pandemic and its economic gut punch, the city has to face the prospect of massive tax defaults, less revenue from service fees and a transit system that’s bleeding money.”

“The question of whether Calgary is shrinking, or whether it could, would have been laughable a few short years ago. Luxury cars parked in front of high-end restaurants were the norm. While those working outside the downtown towers scraped by, as costs continued to rise, there were big bonuses and big paycheques in the energy industry. But not many are laughing now.”

The Wirral Globe in the UK. “If you’ve got an eye for a bargain, no matter what league you’re shopping in, then feast your eyes on this grand Edwardian property in Caldy. Originally on the market for £2,000,000 it is now subject to a whopping 25% price reduction, making it available for offers over £1,500,000 today.”

From CNBC TV 18 in India. “Mumbai’s luxury apartments, the abode of the rich and famous in the business world, have seen a sharp drop in the rentals. A survey of the top 10 luxury buildings shows that the rent expectations of the owners have come down by 10-15 percent with room to negotiate. In most cases, the final cut is as sharp as 20-25 percent. Most landlords want the tenants to stay even at a lower cost to get constant rental cash as once vacated it might be difficult to get an occupant with the ability to pay rent for a luxury apartment.”

“A lot of it is defined by the demand and supply dynamics and cash conservation, by and large, owners choose to rent than sell at a distressed value. The drop in rentals also shows that overall property rates have dropped and distress sale cannot be ruled out.”

From Stuff New Zealand. “Rents at some Queenstown rental properties have been slashed by half as landlords try to pay bills and entice tenants. Accommodation in the popular resort town had been among the most expensive in the country pre-Covid-19. Landlord Bob Tovey said five of his properties had sat empty since just before the country went into lockdown. Tovey had dropped rents 50 per cent for his two three-bedroom homes in Fernhill, a one-bedroom apartment in Fernhill, a five-bedroom house on Queenstown Hill and a three-ensuite bedroom waterfront property in the town centre used for Airbnb.”

“‘I have decreased rent to $410 per three-bedroom house from $800, so it’s a bargain at the moment. It’s cheaper than Cromwell rent,’ he said. ‘I have dropped Airbnb property prices by 50 per cent, so I am getting some bookings coming in there. It’s a year of no profit, but the mortgages are covered.’ He was offering six-month contracts and then would reassess to see what the rental market was doing, he said. ‘This is not a sustainable business model obviously.'”

The Sydney Morning Herald in Australia. “Owners in Sydney’s Opal Tower say they are struggling to pay for ongoing costs arising from cracks in the 36-storey building, after spending about $1 million over the past 18 months. The owners’ corporation is considering a special levy to pay for fees for lawyers, engineers and other consultants, as well as $1.28 million in insurance premiums for the new financial year.”

“Owners corporation chairman Shady Eskander said owners were lumbered through no fault of their own with the continued costs from the defects, which forced residents to evacuate the tower at Olympic Park on Christmas Eve 2018, and the high insurance premium. ‘The owners corporation has no money to pay,’ he said.”

“Mr Eskander said some owners had lost their jobs due to the pandemic-induced recession, while others were struggling to pay mortgages after the loss of tenants. Owners will consider a special levy of up to $5000 on average per apartment at an extraordinary general meeting on July 1. Owner Andrew Neverly, 60, shut his tour and car rental business several months ago because it was reliant on foreign tourists. Mr Neverly said owners were livid at the prospect of having to fork out for a special levy at a time when they were struggling financially.”

“‘As far as we are concerned, it’s throwing good money after bad. We can’t sell it. Banks won’t lend on the building,’ he said. ‘It is a hideous situation. Everyone is under loads of financial stress.'”

“Mr Neverly bought his two-bedroom apartment off the plan for $840,000 in 2014 and rented it out. To help offset the loss of income from his tour business, he has refinanced his home at Greenacre in Sydney’s west. ‘My business has gone down the drain. It is very difficult circumstances and my wife is not working either. We are under the hammer,’ he said.”

Related Posts
This Post Has 108 Comments

  1. ‘As far as we are concerned, it’s throwing good money after bad. We can’t sell it. Banks won’t lend on the building…It is a hideous situation. Everyone is under loads of financial stress’

    I know just how you feel Andy.

    Actually I lied, you are fooked!

  2. ‘The question of whether Calgary is shrinking, or whether it could, would have been laughable a few short years ago. Luxury cars parked in front of high-end restaurants were the norm. While those working outside the downtown towers scraped by, as costs continued to rise, there were big bonuses and big paycheques in the energy industry. But not many are laughing now’

    Before Vancouver, before Toronto, Calgary was the golden star in Canada’s real estate bubble. Booms turn to busts, and it can happen quick, I’ve seen it. Something that seemed invincible, usually finds it’s quite the opposite. I’m thinking about you bay aryans.

    1. ‘But not many are laughing now’

      From CBC News in Canada. “The broad strokes of Calgary’s challenges are now well known. The shock of the oil price collapse that first started in 2014 has never really subsided, leaving some downtown towers completely empty, and many more with high vacancy rates. That has caused overall property values in the core to plummet by around $14 billion. Now, with the pandemic and its economic gut punch, the city has to face the prospect of massive tax defaults, less revenue from service fees and a transit system that’s bleeding money.”

      – Property values plummeting by $14 billion seems like a lot. I’ll bet there wasn’t anyone complaining when it went up by $14 billion. Cue that tiny violin.

      “Price is what you pay. Value is what you get.” – Warren Buffett

      “The popularity of inflation and credit expansion, the ultimate source of the repeated attempts to render people prosperous by credit expansion, and thus the cause of the cyclical fluctuations of business, manifests itself clearly in the customary terminology. The boom is called good business, prosperity, and upswing. Its unavoidable aftermath, the readjustment of conditions to the real data of the market, is called crisis, slump, bad business, depression. People rebel against the insight that the disturbing element is to be seen in the malinvestment and the overconsumption of the boom period and that such an artificially induced boom is doomed. They are looking for the philosophers’ stone to make it last.” — Ludwig von Mises (1940)

      1. They are looking for the philosophers’ stone to make it last.

        The Fed is apparently trying to be that philosopher’s stone.

    2. Oil-dependent economies tend to quickly morph from boom to bust. On the eve of the COVID-19 pandemic, Calgary’s oil-based economy was already toast.

      Calgary’s Once-Booming Economy Hit by Oil Industry’s Woes
      As prices of Canadian crude plummet, city’s unemployment rate and vacancies rise
      Energy job cuts have hollowed out Calgary’s downtown, which is dominated by more than 80 glass towers.
      By Photos by Jason Franson for The Wall Street Journal
      Updated Feb. 25, 2020 9:36 am ET

      CALGARY, Alberta—The massif of steel and glass skyscrapers at the core of this city’s downtown once stood as a testament to the rise of Canada’s oil-and-gas industry.

      Now, more than a quarter of the space in these buildings is empty. In December, the unemployment rate, at 7.5%, was the highest among Canada’s largest cities, 2 percentage points above Toronto’s and nearly 3 points higher than Vancouver’s.
      …

  3. ‘Tourism is likely to be slow for some time, and the possibility cannot be excluded that lodgings currently marketed to tourists on short-term-rental platforms such as Airbnb will be put up for sale for lack of revenue’

    These idiots were losing money in good times, it’s speculating. They will bail because prices are falling.

  5. It occurs to me that with current technology and low energy prices and plenty of housing, we have all the ingredients needed for most of the world to have a great, productive life. The biggest barrier to that is the people who paid too much for the existing buildings and land in hopes of extorting money from everyone else and will buy every politician in sight to avoid taking a loss. And the bankers who enabled them all along and will continue to do so for as long as possible so they can avoid booking the loss too.

    1. If the world ever again decides to start creating wealth by actually creating wealth by adding value, and not deluding themselves into thinking they are with all of the various manifestations of rent seeking.

      1. Just read that Zoom, which had sales of $2B and is marginally profitable, has market cap of $67B

        I suppose their video conferencing has some value. But a P/E of over 400 seems ludicrous, especially considering how fickle users are. Remember when everyone used Skype?

  6. Tucker Carlson just gave one sobering 15 minute opening monologue on BLM being a political party that no one dare criticize without being called a racist or fired from their job (example below). How no one dare go after the Looters and rioters although they know who they are, they’re all over YouTube he said. How 3 weeks ago defunding police departments was unthinkable, but today NYC eliminated 600 anti-crime unit and plainclothes officers because BLM demanded it.

    He went on but he’s right, It is out of control. Groups of thugs tearing down statues that they deem racist, shouldn’t there be some kind of public debate before that happens and shouldn’t people who do that be lined up and marched into a paddy wagon? Thugs beating people for daring to defend their place of business? And anyone who has a problem with any of it is beat down with the racist hammer like this young lady below. If what she wrote is going to remain as the gold standard by which a racist is judged than the country is all ready gone.

    Windsor principal on leave after Black Lives Matter comments stir controversy

    By Katy Savage
    Jun 14 2020

    The board voted unanimously at an emergency meeting Friday afternoon to place Principal Tiffany Riley on leave until negotiations for her permanent departure have concluded.

    “We do not intend to hire her back,” board Chair Elizabeth Burrows said. “We wanted to make sure we acted as quickly as we possibly could.”

    Riley was placed on leave the day after she posted a statement on her personal Facebook page. She said she wanted to support Black Lives Matter but doesn’t think “people should be made to feel they have to choose black race over human race.”

    “While I understand the urgency to feel compelled to advocate for black lives, what about our fellow law enforcement? What about all others who advocate for and demand equity for all?” Riley wrote. “Just because
    I don’t walk around with a BLM sign should not mean I am a racist.”

    The post was quickly reposted and widely circulated within the school and wider community.

    https://vtdigger.org/2020/06/14/windsor-principal-on-leave-after-black-lives-matter-comments-stir-controversy/

    Board ousting Windsor principal after ‘insanely tone-deaf’ posts on Black Lives Matter

    By TIM CAMERATO
    Valley News Staff Writer
    Published: 6/12/2020 9:35:21 PM
    Modified: 6/12/2020 9:35:06 PM

    https://www.vnews.com/Windsor-High-School-Story-34741525

    3. I don’t always agree with him. Nor do I always disagree.

      But I will defend his, and everyone else’s right to not be silenced.

    4. “Black Lives Matter is looking to remake the country and then control it.”

      Tucker Carlson

      1. There’s a video made a few days ago of a CTA bus driver body slamming some BLM punk trying to cause trouble. It was on twitter so it probably wouldn’t post here. People cheered for the bus driver and blessed him and thanked him.

        #BlackLivesSplatter would have been appropriate.

    5. You can’t disagree with Black Lives Matter of course they do. But saying all lives matter is a no no.

      “Affirming the fundamental equality of all Americans is now hate speech”

      Tucker Carlson

    6. ‘insanely tone-deaf’

      It’s a harbinger of what’s to come when the Democrats take power again. Brace yourselves.

      1. I don’t think I believe the polls. If this Country has desended Into BLM and Joe Biden being the voice of America now, than the radical left has prevailed and it’s all over.

        They obviously don’t believe in voting but rather taking things by force and extortion. It’s very much like the Brown Shirts of Nazi Germany. And people wonder how a nut like Hilter rose to power.

        1. They obviously don’t believe in voting but rather taking things by force and extortion.

          I think that’s because they can’t sell their radical message to the middle and win at the polls. To win they have to pretend to be moderate. But when you have poster children like AOC braying for communism, it becomes hard to hide the true intentions.

    7. Jeff, I no longer recognize the country I was born in and grew up in. When my dad was in a rehab hospital last July prior to moving into assisted living and dying in September, I told him that he and his (all now deceased) siblings were the last generation of real Americans.

      Secession / Balkanization seems the only way out now…

      1. I. feel your pain 401 cause I feel the same pain that this isn’t the America I grew up in.
        When I think back about the hippies of the sixties they were rejecting War, they were against pollution, they wanted Civil Rights for all races. In addition there was a rejection of Corporate America until they realized they couldn’t live on Commie like communes and they needed jobs. Than they became yuppies.

      2. The great country that you grew up in also had thugs, bullies, criminals, looters, commies, killers and the cowards who knelt to them.

        They will fold when honest people stand up to them, they always do.

      3. “prior to moving into assisted living and dying in September”

        401

        I am very sorry for your loss.

        After years of reading your posts and our lunch at the Brass Ring, I feel like I know the kind of person you are. Knowing that the apple does not fall far from the tree, I figure your Dad must have been one hell of a guy.

      4. It really is looking rather grim these days. Socially, politically, and economically.

        2. Your country was founded by the likes of Thomas Jefferson, who’s been getting his statue torn down by idiots. You don’t even know what America is.

          1. People may be about to get an education on why people like Jefferson and Jackson were great despite their flaws. Trump has been handed the historical opportunity to do great things but so far doesn’t seem able to break free of his own limitations. But he hasn’t totally folded either so there’s still hope.

        3. On further reflection, you are not trying to take your country back, either. You’re trying to create a new country, the kind that Mao and Lenin, etc. went for. That’ll end up getting millions killed, just like it always does. That’s not American of you. Have you thought of moving to one of those countries like you probably promised to do if Trump were elected and found out they didn’t want you?

  9. A report from the Huffington Post on Canada. “Some experts have warned that if this continues long enough, it could lead to forced selling in the housing market, driving up the supply and pushing down prices.”

    – Oh, sure. Where were the experts when the bubble was inflating?

    From CNBC TV 18 in India. “Most landlords want the tenants to stay even at a lower cost to get constant rental cash as once vacated it might be difficult to get an occupant with the ability to pay rent for a luxury apartment.”

    “The drop in rentals also shows that overall property rates have dropped and distress sale cannot be ruled out.”

    – It looks like luxury/Class A didn’t “pencil out” in India either.

    From Stuff New Zealand. ” ‘This is not a sustainable business model obviously.’ ”

    – Asset bubbles as a sustainable business model. Right out of Econ. 101. Oh wait. Make that the central bank playbook. Then it all makes sense.

    The Sydney Morning Herald in Australia. ‘The owners corporation has no money to pay,’ he said.”

    “‘As far as we are concerned, it’s throwing good money after bad. We can’t sell it. Banks won’t lend on the building,’ he said. ‘It is a hideous situation. Everyone is under loads of financial stress.’”

    ‘My business has gone down the drain. It is very difficult circumstances and my wife is not working either. We are under the hammer,’ he said.”

    – The swan song of the housing horny. It always ends the same. In tears.

  11. Republican congressman who just announced he has the coronavirus refused to wear a face mask on the House floor 2 weeks ago
    “Rep. Tom Rice, a South Carolina Republican, announced on Monday that he, his wife, and his son had been infected with the coronavirus.”

    2. This is just disheartening.
      In financial news, we’re in for a depression. It will wait until after the election, but it’s coming.
      In political news, we have riots and looting. Any opinion is enough to lose your job. Even no opinion is enough to lose your job.
      In medical news, the most effective tools against the epidemic and masks and hydroxychloroquine. Conservatives think that masks violate their Constitutional rights, and the FDA just revoked the use of HCQ (of course they looked mostly at the hospital studies).

      It’s as if we are choosing to destroy our society.

        1. ‘As Black Lives Matter protests continue to gain strength across the United States, former senior advisor to President Barack Obama Valerie Jarrett says the country might have reached “a turning point.”

          ‘The top Obama official says that the protests and demonstrations have been “incredibly positive,” with people of all races, backgrounds, and ages participating.’

          https://finance.yahoo.com/news/former-obama-advisor-valerie-jarrett-talks-protests-defunding-police-and-criminal-justice-reform-122130901.html

          1. “incredibly positive,”

            Yeah, right. These people have shat in their own backyards. The costs will linger for decades.

            Race in America
            Economic Damage From Civil Unrest May Persist for Decades
            By Rob Garver
            June 02, 2020 03:13 PM
            People exit damaged stores after the glass was knocked out in the Chelsea neighborhood of New York, Monday, June 1, 2020. (AP Photo/Craig Ruttle)

            WASHINGTON – Already reeling from the coronavirus pandemic and unemployment levels not seen since the Great Depression, cities across the United States smoldered on Tuesday after a seventh consecutive night of protests and civil unrest related to the death of African American George Floyd while in the custody of Minneapolis police last week.

            As business owners and residents yet again clean up the debris, there is growing concern that the economic damage to many of the communities where violence is taking place will persist long after the last window pane is replaced and the last burned out car is towed away.

            Businesses and neighborhoods where protests have turned violent will have to contend not just with the aftermath of the protests, but with multiple aggravating factors that will make recovery even more difficult.
            …

          2. “make recovery even more difficult”

            Welcome to the recoveryless recovery.

            I travel around the country alot and spend money in everywhere I visit. But I will be making a conscious choice to not spend money in any city that defunds its police and won’t enforce laws against looters and other antifa trash.

            Which is fine, I’ve seen enough of cities in my lifetime. There’s nothing there I need or want.

          3. These people have shat in their own backyards.

            There’s an article on the CNN website that basically says there are no grocery stores in these areas because of racism.

            But 60-plus years of corporate strategies, white flight and stereotypes about black Americans have made it significantly harder for many black people to access a supermarket than it is for most white people, according to leaders of big cities across the country as well as food policy advocates, historians and urban studies experts.

            It couldn’t possibly have anything to do with
            -rampant shoplifting
            -armed robberies
            -looting
            -burning the stores to the ground

          4. the economic damage to many of the communities where violence is taking place will persist long after the last window pane is replaced and the last burned out car is towed away.

            Yes, though it appears many of the rowdiest people were outsiders. Who will or have already disappeared back to wherever they came from. Leaving the poor folks in the ‘hood even worse off. Again. Is there some sort of diabolical plan here?

          5. “… demonstrations have been “incredibly positive,”

            Totally agree. It just like the founding fathers who had to assert themselves to get King George’s attention.

          6. Totally agree. It just like the founding fathers who had to assert themselves to get King George’s attention.

            I have a hard time envisioning the founding fathers looting a Walmart, then setting it on fire.

          7. I have a hard time envisioning the founding fathers looting a Walmart, then setting it on fire.

            Not impossible if it was King George’s favorite store :-).

          9. It just like the founding fathers

            Actually, it’s not like that at all. Are you being taxed without representation? I don’t think so. Do you want liberty, no you already have it. Do you want to be left alone so that you can pursue your happiness? That’s easy, but it’s not what you’re demanding.

            You want something else.

          10. In Colorado wrote:
            There’s an article on the CNN website that basically says there are no grocery stores in these areas because of racism.
            […]
            It couldn’t possibly have anything to do with
            -rampant shoplifting
            -armed robberies
            -looting
            -burning the stores to the ground

            “Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.” – John Adams

            There’s a level of trust required for certain systems to exist. I’ve seen how small, typically immigrant-owned businesses can eke out profit in the heart of a crime-ridden ghetto. But those are small, tightly-controlled businesses. A store in which large numbers of people can walk around, picking things up from a broad selection of items and be reliably expected to pay for them – I don’t think it would work. If it could work, it would – there would be grocery stores there. Money is green and scale brings more profit. SNAP cards transfer cash as well as credit or debit cards. But the inner city business environment is a tundra, suitable to smaller, tenacious scrub plants which can withstand the harsh environment.

        2. I’ve seen how small, typically immigrant-owned businesses can eke out profit in the heart of a crime-ridden ghetto.

          I hadn’t ever thought about it before, but those immigrants frequently come from low trust cultures. So they understand how to make it work in a way that others don’t.

          1. “So they understand how to make it work in a way that others don’t.”

            +1 Starting with two sets of books.

    3. Did Republican Congresscritters miss the memo that COVID-19 is highly contagious and airborne?

      1. Bullshit. PCR is a research tool that amplifies genetic material. It was never intended to be a diagnostic tool. It’s false positive is 100% because no virus has ever been isolated to Koch’s postulates. Using sequence alignment to patch together a “genome” is not science. Figure out what I’m saying.

  13. ‘Since coronavirus, everything has become possible because the central bank has made it so. The government wants to keep borrowing costs low? The Bank will create money and use it to purchase as much debt as the state issues. Companies need cash? The Bank will create more money and dole it out cheaply for short-term bonds. Traders fear there will be no buyers? The Bank will be their “market maker of last resort”. Companies and households need zero rates? The Bank will cut them. Zero rates threaten lenders’ profitability? The Bank will create even more money and give it to the lenders for nothing.’

    ‘Is it not odd that since the 2008 crisis, the financial market, which sits right at the heart of capitalism, has been subject to the kind of state intervention that would not look out of place in a communist system? I emphasise the word “intervention”, as opposed to regulation. John Maynard Keynes believed that capitalist economies needed constant management to stop them imploding. Financial markets are much the same. They need their sails trimmed by well-made rules to set a stable course.’

    ‘Intervention is different. Friedrich Hayek argued in The Road to Serfdom that polluting free markets with state planning creates arbitrary winners and losers. The losers then seek rectification and the state ends up having to buy off one marginalised group after another. Something similar is happening today, only the government’s fingerprints are nowhere to be seen because the intervention is being done by the central bank.’

    ‘In a blog last week, Michael Every, a senior analyst at Rabobank, wrote: “Could we please have the intellectual honesty to admit the system today functions to give more money to ultra-rich people? This is no longer a free-market system. Water does not find its own level. It is channelled through canals cut by an establishment, and some fields are watered very well and others left arid.”

    https://www.thetimes.co.uk/article/central-banks-are-right-to-act-but-they-must-not-ignore-the-losers-xtj8d25hf

    1. Ahem…

      $2,000 for a Watermelon? That’s a Bargain as Deflation Returns in Japan

      Half-price suits and cheap brews also highlight central bank’s challenge

      ‘A prized Densuke watermelon grown in northern Japan sold at auction on Monday for about $2,000. That’s a lot for a piece of fruit, but down more than 70% from last year’s season-opening auction.’

      ‘It was another sign that Japan, the first modern advanced economy to tackle deflation more than two decades ago, is facing the return of its stubborn foe.’

      “There was quite a big impact from the coronavirus. Tourism hasn’t recovered yet, so demand for gifts and souvenirs is expected to decline,” said Tomofumi Suematsu, who works at the market that held the melon auction.’

      ‘On Tuesday, the Bank of Japan said overall prices are likely to go down for now, adding that the nation’s economy “has been in an extremely severe situation due to the impact of the novel coronavirus.” Consumer prices excluding volatile fresh food prices fell in April from a year earlier, the first year-over-year drop in more than three years.’

      ‘Deflation, an overall decline in prices, used to be just a Japanese disease, but it is spreading world-wide. Consumer inflation in China fell to a 14-month low in May, and producer prices fell at their fastest pace in more than four years. U.S. inflation is slowing too, prompting a reconsideration of extreme measures that might be needed in the event of deflation.’

      ‘The nation has mostly shrugged and reverted to its frugal ways. Businesses are responding with the reflex learned over a quarter-century: cut prices. Suit maker Aoki Holdings Inc. has seen sales plummet because office workers have been staying home. It is selling its latest suit designs at half price.’

      “Consumers will start to get used to buying at low prices once they experience it,” said Mizuho Securities economist Toru Suehiro. “They would think, ‘I should probably wait until a sale because the shop had one before.’”

      https://www.wsj.com/articles/2-000-for-a-watermelon-thats-a-bargain-as-deflation-returns-in-japan-11592308373

      1. ‘The boss of Belfast International Airport has said the quarantine measures are “a stake through the heart” of its summer trade. More passenger flights are returning to Northern Ireland, as the easing of coronavirus restrictions continue. Easyjet restarted its services to seven UK destinations as well as Portugal. Graham Keddie, managing director of the airport, told Good Morning Ulster that the airport has yet to return to capacity.’

        “Today we should have 22,000 plus going through the terminal and we should be lucky to have 700 or 800,” he said.’

        https://www.bbc.com/news/uk-northern-ireland-53036386

      2. ‘U.S. inflation is slowing too, prompting a reconsideration of extreme measures that might be needed in the event of deflation.’

        Wasn’t deflation prevention one of the intended purposes of Ben Bernanke’s Quantitative Easing, whose Fed balance sheet impacts were never fully unwound after their enactment in 2009, and which was ramped up to unprecedented levels since March 2020? And then there are the similar anti-deflation measures enacted by the Bank of Japan in the 1990s and still failing to prevent deflation today.

        2. People. There’s no deflation in the U.S. Other than big screen TVs and some apparel items, the cost of everything else has been and continues to go UP. Take real estate, the subject of this blog, for example, which, along with stocks are explicitly targeted for higher prices by the Fed to stimulate “the wealth effect.” The purchasing power of the $ since the inception of the Fed in 1913 has declined by 97%. Paraphrased: “Well punk, do you feel wealthy?”

          – Deflation equals falling prices. The last time that happened was during the Great Depression, when the U.S. was still on a gold standard, which abruptly ended in 1971. Now there are absolutely no spending constraints on Congress or the Fed. None whatsoever. I’m so old I remember the debt ceiling. No more. Anything goes. This is massively inflationary. MMT has been tried. See Weimar Republic, Germany, Zimbabwe, Venezuela, etc. Since it was so successful there, we’re now giving it a spin. Got gold?

          – The base definition of inflation is an increase in the money supply. Check out the Fed’s “balance” sheet. “To the moon!” It’s never going to normalize. We’re talking trillions of $ here. Trillions. The last time around a little over 10 years ago during the GFC, it was billions.

          “What inflation is not, we believe, is ‘too many dollars chasing too few goods.’ Pure and simple, it is ‘too many dollars.’ What the redundant dollars chase is unpredictable.  In recent months they have chased stocks, commodities, euros, junk bonds, emerging market debt and houses.  On Wall Street, such inflationary episodes take the name ‘bull markets.’ They are always welcome.  When, on the other hand, the surplus dollars chase skirts (or sweaters, or automobiles, or medical care), that phenomenon is called ‘inflation.’ It is usually unwelcome.” – James Grant, Mr. Market Miscalculates – The Bubble Years and Beyond, Axios Press, Mt. Jackson, VA, 2008, p. 107

          1. There is no inflation in wages. So prices of essential items will go up, but not to the point of runaway inflaftion. Simply because people do not have the wages. Unless gobs of heli-money is dropped on the peeps continuously.
            Being the reserve currency of the world also helps.

            Same thing happened in Japan in 1980. The on-going effect is people are earning 3rd world wages and living in a first world country. So basic food is cheap, but all imported items such as cheese, wines etc. are about 10~20% more expensive of comparable items in the US.

            Loss of jobs, high unemployment leads to wage deflation.

          3. I don’t know about UBI. If every man, woman and child gets it then, yes there will be inflation. Obviously, some stealth inflation is taking place in groceries and every day items. One could argue that it is market manipulation too. Remember how much excess cheese was supposedly produced? But prices at the store hardly budged.
            Right now there is a check of sorts, on runaway inflation and that is lowly wages for the general population. If you look at Bay area and NYC, certain professions (IT, lawyers, marketing types) made out like bandits, and still do. The excess wages went into housing. People overpaid – maybe easily manipulated into believing that much more money could be made by speculating in housing. As HBB readers are aware, in any Ponzi, there are those that got in early who will make large sums of money and these people carry water along with the 6 percenters, who profit anyway.

            If the rise of stock market rise during last few months is entirely due to the stimulus check money playing havoc, then you can imagine what UBI will do.

          4. If the rise of stock market rise during last few months is entirely due to the stimulus check money playing havoc, then you can imagine what UBI will do.

            Here’s a question for all: should the Dems take over (Senate + WH) in November, what are the odds that there will be some form of UBI?

          5. “Universal Basic Income?”

            In a sense it’s already here for many, but it’s automatically spent on section 8 vouchers, snap food benefits, health care and other programs.

          6. and other programs

            Which require qualification, hence it’s not universal, not yet. So what happens if the Dems decide to give everyone $2000 a month?

          7. Shendi wrote:
            There is no inflation in wages.

            There is wage inflation though – for the top income earners.

            I was wondering how the government/Fed’s actions would affect the RE market. How does sucking debt out of the system, equate to higher house prices and stock prices? The reason I think is, that debt is being replaced with cash in Wall Street and in government. Workers in those sectors and related sectors (e.g. government contractors) get that money resulting in a trickle-down effect. This group, 10% of wage earners say, are able to bid up prices while the lower tier wage earners have stagnant income.

            I think the “cost of a fast food burger index” is a pretty good way to see if inflation is going on (it has multiple inputs and labor). And yeah, it has jumped post 2008:
            1) https://www.insider.com/fast-food-burgers-cost-every-year-2018-9#in-2018-your-burger-costs-an-average-of-264-25
            2) https://capstoneinvest.com/inflation-cpi-and-the-big-mac-taking-a-bite-of-reality/

            One has to disaggregate wages to understand what’s going on and what’s going to happen.

            Also, households have been getting bigger for a while: https://fredblog.stlouisfed.org/2016/12/the-puzzle-of-real-median-household-income

            Median income (half above, half below) is about 33K: https://fred.stlouisfed.org/series/MEPAINUSA646N

            Household median income is higher, at 63K: https://fred.stlouisfed.org/series/MEHOINUSA672N

            I was looking for a really clean chart of the wage differences but couldnt not find one coming up to 2019.

          8. “So what happens if the Dems decide to give everyone $2000 a month?”

            Betcha immigration would increase.

      3. I must be blind, because I sure don’t see price declines on most things I buy regularly. Perhaps I simply have odd shopping habits.

        Gasoline is down from where it was a year ago, but it is up from its recent lows.

        It’s great that rents and housing prices are starting to fall. But I’m in the midst of a lease so my rent won’t change for awhile. And most likely, it will not go down if I stay put.

        2. Gasoline is down from where it was a year ago, but it is up from its recent lows.

          Per GasBuddy, prices average $2.28 in my neck of the woods, vs. $1.80 just a few weeks ago.

        3. Got a constructive reply to offer, rather than simply an emoji?

          When you know of a certain someone who brings absolutely nothing constructive to a conversation, that’s when you use the Joshua Tree extension to block said individual’s posts from being displayed.

  14. Debt is the real killer of prosperity. Build a society on wealth accumulation and savings if you want to collectively prosper. Base growth on debt accumulation and reckless financial gambling if you prefer economic collapse.

    1. I was reading an article on MMT, and it’s even got Krugman nervous. He was saying that you could obtain X amount of cash without harming the currency if you sold debt, instead of printing up that amount of cash.

      The net result then is that adding that extra layer of obfuscation, hiding deficit spending as debt which is sold on the market (and in the repo market, which was having trouble back in september, well before covid), allows more money printing.

      Yes, the future is infinite but this continuous printing of money beyond the rate of growth of goods, services and financial products (will these constructs be a saving grace of the system? Is my core assertion true?) I think will either lead to inflation or deflation at some point. That point would probably be a fork in the road: keep printing, go the inflation route, maybe break the currency, or simply devalue debt; or stop printing and we have an emperor’s new clothes moment.

      Japan (is the model) has been biased towards deflation, even with bold money printing and debt monetization. I don’t know if the currency bends like a willow branch or bends like glass.

      America I think is in a bout of real inflation: housing, education, medical, clothes (in my anecdotal experience), fast food burgers. Pointing to technology devices as being signs of no inflation is a bit disingenous – technology has been increasing rapidly so it’s not like current devices are competing against very old ones – it’s all state of the art competing against state of the art and a little bit older.

      1. Debt issuance [is] money printing. When someone buys one of Bob Toll’s $80k houses for $800k the money supply just expanded.

      1. gimme gimme my stimUloze check….we bought a queen bed and i needed ball joints and tires. we will bank the next checks, dont really need to upgrade my 2011 mac mini. Im not editing 4k vids with multiple windows open.

    2. Europe Markets
      European stocks rally on central bank action and U.S. data
      Published: June 16, 2020 at 8:43 a.m. ET
      By Steve Goldstein
      People walk with bags after shopping at the Selfridges department store in London on June 15, 2020. After three months of being closed under coronavirus restrictions, shops selling fashion, toys and other nonessential goods are being allowed to reopen across England for the first time since the country went into lockdown in March.

      European stocks rallied on Tuesday, as the previous day’s worries over the spreading coronavirus outbreaks succumbed to optimism over central bank support.
      …

      1. “On Monday, Cooperman pointed to purchases of bankrupt car-rental company Hertz Global Holdings Inc. HTZ, 7.98%, which has drawn feverish buying interest from bargain-hunting investors, even though the company’s bankruptcy means that there is little if any equity value in the enterprise.”

        It’s not about equity value, it’s about price: Price is what establishes value, not equity.

        If the price goes up then then the value goes up. It’s that simple (and that stupid).

        A rising price brings in (sucks in) more buying because a rise in price translates to a rise in value. Nobody “knows” what Hertz is worth, in the fundamental sense of the term so “investors” (choke) rely on price rises (or – the horror! – price declines) to determine what it is worth.

        IMO all of this is extremely stupid but nevertheless there it is.

        1. Benjamin Graham once said that over the short term the stock market is a voting machine while over the long term the stock market is a weighing machine.

          One can “weigh” values and may do alright over the long term but he just may get killed over the short term; The voting, which rules over the short term, can completely overwhelm any other method of determining fair value. This “voting”, this overwhelming voting, is often done by ignorant people who have somehow gotten access to money. It’s similar to what often goes on in real estate.

          1. over the short term the stock market is a voting machine while over the long term the stock market is a weighing machine

            And we’ve been doing an experiment for decades now called “what happens if you make it a voting machine for as long as humanly possible”?

      2. CNBC headline this morning:

        “Regulators never thought investors would be gullible enough to buy Hertz ‘garbage,’ Harvey Pitt says”

        1. The Fed’s selective breeding program of the last couple decades has succeeded in producing a better idiot. What used to be idiot-proof no longer is.

    1. ‘Four days after Las Vegas announced its closure, Darbour saw his sales drop to half of what he needed to stay open. He gave away supplies and perishables to employees, locked the doors and laid off 26 of his 30 workers. Unlike restaurants in metropolitan areas, Dabour said Baker’s businesses cannot rely on the town’s 500 residents. And delivery service? Not a chance.’

      “Who would we deliver to? The cactus or the rocks?” Dabour asked. “It’s going to be a long haul to get back to where we were. There’s no guarantee when I open the doors that we’ll have a customer.”

      https://www.latimes.com/california/story/2020-06-16/on-the-road-to-a-reawakening-las-vegas-a-california-desert-town-starts-to-come-to-life

      1. “Ms House – a high-ranking consultant with multi-level marketing giant Arbonne”

      2. Are you supposed to leave your valuables lying around when renting to strangers?

        In a high trust culture you can just lock them in a closet that’s off limits to tenants and everyone will respect that.

    1. Durango is the county seat of La Plata County.

      Proofread your posts so you don’t sound like a REALTOR.

  19. When FDR created the Federal Jobs programs during the Great Depression, at least people had to work to get the benefit.

    Than fast forward to The War on Proverty , that morphed into the Welfare State. Apparently 1.3 trillion is spent per year on these hand out. Basically a lot of it is supplement to low wages paid by the Oligarchy.
    So about 14 %of Fed budget goes to Social Security and Medicare. About a Trillion goes to the Military.

    So , never a serious discussion about defunding the Welfare State, but Defund the Police and give more to the Welfare State that supplements the greed of the Oligarchy.
    This is why Big Business is in bed with the welfare State.
    The USA would of been calling for their jobs back a long time ago had. welfare not sustained the mass looting of jobs and manufacturing in this Country.
    BLM calling for more welfare, so why wouldn’t the Oligarchy support that.

    Further, the Military complex is another area in which endless wars has to be questioned.

  20. So the Corporate lotters are in bed with BLM and the Commie left to further corrupt the USA , which stopped being a Captalist Country a long time ago.

    Obamacare was nothing more than a Communist program to prop up a price fixing monopoly called Health Care, using the IRS to enforce costs based on income.

    Of course Trump was a threat to the rigged DC Swamp. The resistance keeps showing their true colors.

    1. Of course Trump was a threat to the rigged DC Swamp

      I’m glad he cleaned things up and got the nation back on track!

      /sarc

  21. Poor Uncle Warren is under attack from the pandemic speculator horde.

    Hold off, sheople…it’s way too early to figure out who is swimming naked just yet.

    Key Words
    Warren Buffett backers sound off: He needs ‘to adapt’ to this market to reverse his ‘chronic underperformance’
    Published: June 16, 2020 at 10:35 a.m. ET
    By Shawn Langlois
    ‘If Berkshire is to have the prospects of generating the value it has in the past, it has to adapt by buying these companies that will generate significant value over the next 25 years.’
    …

Comments are closed.