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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

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Posted by WARREN MOSLER on August 14th, 2014

I am now also emailing my posts directly to my PMC donors at the same time they are emailed for posting on this website.

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Posted in Uncategorized | No Comments »

today’s observations

Posted by WARREN MOSLER on September 2nd, 2014

Not much sign of any move towards higher deficits today. Just talk of more bank liquidity, which doesn’t matter, and more to weaken the euro, which doesn’t work either.

Hard to say why the euro has been going down, but it’s not ECB policy per se which, while meant to weaken the euro, instead continues to be ‘strong euro’ biased. So must be portfolios selling euro, maybe in response to Russia’s actions.

“French Prime Minister Manuel Valls called for more action from the ECB to lower the value of the euro.Mr Valls said: “the monetary policy has started to change”. While he called the ECB’s package of measures taken in June a “strong signal,” he also said that “one will have to go even further.”

German Finance Minister Mr Schaeuble said deficit-fueled growth leads to economic decline, signalling discord with Italy and France as euro-area policy makers seek ways to avoid deflation and spur growth. Euro-area countries that pursued austerity policies in return for sovereign bailouts are “doing much better than all the others in Europe,” Schaeuble.

ECB’s Coeure says ready to adjust monetary policy if needed: In an article published in Greek daily Ta Nea, ECB’s Coeure said that ECB’s measures so far, have contributed to stability in the euro zone while its recent decisions have ensured a particularly accommodative direction in monetary policy in the single-currency bloc. “The ECB will provide additional liquidity to banks on the condition that they increase credit directed to the real economy, and it is ready to further adjust the direction of its monetary policy, if needed,” Coeure said (Ta Nea, Reuters) ”

Posted in Banking, Currencies, EU | No Comments »

Charts and data from the last few days

Posted by WARREN MOSLER on August 28th, 2014

Down for the cold winter then back up some, and a very weak first half of the year, and Q3 fading from Q2:


The second estimate for second quarter GDP growth came in a little stronger than expected, rising 4.2 percent annualized versus a 4.0 percent forecast and coming off a 2.1 percent weather related drop in the first quarter. With this second estimate for the second quarter, the general picture of economic growth remains the same; the increase in nonresidential fixed investment was larger than previously estimated, while the increase in private inventory investment was smaller than previously estimated.

Real final sales of domestic product-GDP less change in private inventories-increased 2.8 percent in the second quarter, in contrast to a decrease of 1.0 percent in the first. Real final sales to domestic purchasers gained 3.1 percent versus 0.7 in the first quarter.

Chain-weighted prices gained 2.1 percent annualized, compared to the consensus for 2.0 percent and the first quarter number of 1.3 percent.

Overall, the weather-related rebound in the second quarter was stronger than expected. Personal spending made a comeback and inventories were rebuilt. The economy is gradually regaining momentum-emphasis on gradually.

Corporate Profits

Again, for growth this year to exceed last year, all the components on average have to grow more than they did last year:

NAR: Pending Home Sales Index increased 3.3% in July, down 2.1% year-over-year

By Bill McBride

From the NAR: Pending Home Sales Pick Up in July

The Pending Home Sales Index, a forward-looking indicator based on contract signings, climbed 3.3 percent to 105.9 in July from 102.5 in June, but is still 2.1 percent below July 2013 (108.2). The index is at its highest level since August 2013 (107.1) and is above 100 – considered an average level of contract activity – for the third consecutive month.

With purchase apps down 11% year over year and cash purchases down it’s hard to see how total sales can grow?

MBA Purchase Applications

Demand for purchase applications picked up in the August 22 week, rising 3.0 percent. But the trend remains stubbornly flat, down 11.0 percent year-on-year. The index for refinancing applications also rose 3.0 percent in the week. Mortgage rates were little changed in the week with the average for conforming loans ($417,000 or less) down 1 basis point to 4.28 percent.

Falling home prices are not a good sign:

S&P Case-Shiller HPI

Home price appreciation continues to unwind as S&P Case-Shiller 20-city adjusted data show a 0.2 percent decline in June following a 0.3 percent in May. Year-on-year, the adjusted rate is plus 8.1 percent vs 9.3 percent in May. Monthly declines swept 13 of the 20 cities with Minneapolis, Detroit, Atlanta and Chicago showing special weakness.

Unadjusted data, which are followed in this report, show a monthly gain of 1.0 percent that reflects the relative strength of summer months for sales. But the year-on-year rate, where this effect is offset, tells exactly the same story as the adjusted data, at 8.1 percent vs 9.3 percent in the prior month.

Home prices are weakening, based not only on this report but also on FHFA data, also released this morning, and on yesterday’s new home sales report as well as last week’s existing home sales report. Easing home prices are a plus for sales but a negative of course for homeowner wealth.

Durable Goods Orders

Durables orders soared in July due aircraft orders but otherwise came off a moderately strong core number in June. New factory orders for durables soared a monthly 22.6 percent in July, following a 2.7 percent boost in June. Econoday’s consensus called for a 5.1 percent gain in July. The high end of forecasts was 24.5 percent.

Excluding transportation, durables orders slipped 0.8 percent, following a 3.0 boost in June. Analysts forecast a 0.4 percent rise for July. But June earlier had been estimated to be up “only” 1.9 percent from the full factory orders report.

Transportation spiked a monthly 74.2 percent after rising 2.1 percent in June. Nondefense aircraft (Boeing) surged 318.0 percent (that is not a typo) after gaining 11.1 percent in June. Another but more moderate positive was motor vehicle orders which gained 10.2 percent, following a 1.3 percent dip in June. Defense aircraft fell 28.8 percent in July, following a rise of 9.2 percent the month before.

Outside of transportation, gains were limited with “other” gaining. Other categories slipped but followed upward revisions to June.

Orders for equipment investment edged down in July but followed a strong June. Nondefense capital goods orders excluding aircraft declined 0.5 percent, following a spike of 5.4 percent the month before. Shipments of this series, however, were positive, gaining 1.5 percent in July, following an increase of 0.9 percent in June. The latest shipments numbers suggest a favorable number for business equipment in third quarter GDP.

The Boeing order gets filled over approximately the next 10 years:

Posted in GDP, Government Spending, Housing | No Comments »

Comments on Professor John Cochrane’s – A Few Things the Fed Has Done Right

Posted by WARREN MOSLER on August 28th, 2014

A Few Things the Fed Has Done Right

The Fed’s plan to maintain a large balance sheet and pay interest on bank reserves is good for financial stability.

By John H. Cochrane

Aug 21 (WSJ) — As Federal Reserve officials lay the groundwork for raising interest rates, they are doing a few things right. They need a little cheering, and a bit more courage of their convictions.

The Fed now has a huge balance sheet. It owns about $4 trillion of Treasury bonds and mortgage-backed securities. It owes about $2.7 trillion of reserves (accounts banks have at the Fed), and $1.3 trillion of currency. When it is time to raise interest rates, the Fed will simply raise the interest it pays on reserves. It does not need to soak up those trillions of dollars of reserves by selling trillions of dollars of assets.


The Fed’s plan to maintain a large balance sheet and pay interest on bank reserves, begun under former Chairman Ben Bernanke and continued under current Chair Janet Yellen, is highly desirable for a number of reasons—the most important of which is financial stability. Short version: Banks holding lots of reserves don’t go under.

Not true.
Confusing reserves with capital to some extent.
Banks can fail via losses that wipe out capital even with plenty of liquidity.

This policy is new and controversial. However, many arguments against it are based on fallacies. People forget that when the Fed creates a dollar of reserves, it buys a dollar of Treasurys or government-guaranteed mortgage-backed securities. A bank gives the Fed a $1 Treasury, the Fed flips a switch and increases the bank’s reserve account by $1. From this simple fact, it follows that:

• Reserves that pay market interest are not inflationary. Period. Now that banks have trillions more reserves than they need to satisfy regulations or service their deposits, banks don’t care if they hold another dollar of interest-paying reserves or another dollar of Treasurys. They are perfect substitutes at the margin. Exchanging red M&Ms for green M&Ms does not help your diet. Commenters have seen the astonishing rise in reserves—from $50 billion in 2007 to $2.7 trillion today—and warned of hyperinflation to come. This is simply wrong as long as reserves pay market interest.

Yes and no.

Yes, the mix of Fed liabilities per se isn’t inflationary.

No, even if they didn’t pay interest it wouldn’t be inflationary. In fact, it would mean a reduction in govt interest payments which is a contractionary bias.

And his point is best stated by stating that both reserves and tsy secs are simply dollar denominated ‘bank accounts’ at the Fed, the difference being the duration and rates, directly or indirectly selected by ‘govt’.

• Large reserves also aren’t deflationary. Reserves are not “soaking up money that could be lent.” The Fed is not “paying banks not to lend out the money” and therefore “starving the economy of investment.”


Every dollar invested in reserves is a dollar that used to be invested in a Treasury bill.

Wrong statement of support. He should state that the causation goes from loans to deposits. ‘Loanable funds’ applies to fixed fx, not floating fx.

A large Fed balance sheet has no effect on funds available for investment.

True, they are infinite in any case. Bank lending is constrained only in the short term by capital, as there is always infinite capital available with time at a price that gets reflected in lending charges.

• The Fed is not “subsidizing banks” by paying interest on reserves.

It is to the extent that paying interest is subsidizing the economy in general, as govt is a net payer of interest.

The interest that the Fed will pay on reserves will come from the interest it receives on its Treasury securities.

Sort of. Better said that the interest received on the tsy’s will equal/exceed/etc. the interest paid on reserves. ‘Come from’ is a poor choice of words.

If the Fed sold its government securities to banks, those banks would be getting the same interest directly from the Treasury.


The Fed has started a “reverse repurchase” program that will allow nonbank financial institutions effectively to have interest-paying reserves. This program was instituted to allow higher interest rates to spread more quickly through the economy.


Again, I see a larger benefit in financial stability. The demand for safe, interest-paying money expressed so far in overnight repurchase agreements, short-term commercial paper, auction-rate securities and other vehicles that exploded in the financial crisis can all be met by interest-paying reserves.

Sort of. The term structure of rates constantly adjusts to indifference levels is how I’d say it.

Encouraging this switch is the keystone to avoiding another crisis. The Treasury should also offer fixed-value floating-rate electronically transferable debt.

Why??? Indexed to what? The one’s they are doing indexed to T bills make no logical sense at all.

This Fed reverse-repo program spawns many unfounded fears, even at the Fed. The July minutes of the Federal Open Market Committee revealed participants worried that “in times of financial stress, the facility’s counterparties could shift investments toward the facility and away from financial and nonfinancial corporations.”

This fear forgets basic accounting.


The Fed controls the quantity of reserves. Reserves can only expand if the Fed chooses to buy assets—which is exactly what the Fed does in financial crises.

Furthermore, this fear forgets that investors who want the safety of Treasurys can buy them directly. Or they can put money in banks that in turn can hold reserves. The existence of the Fed’s program has minuscule effects on investors’ options in a crisis. Interest-paying reserves are just a money-market fund 100% invested in Treasurys with a great electronic payment mechanism.

Available to banks.

That’s exactly what we should encourage for financial stability.

The Open Market Committee minutes also said that, “Participants noted that a relatively large [repurchase] facility had the potential to expand the Federal Reserve’s role in financial intermediation and reshape the financial industry.”

Not really.

It always has been about offsetting operating factors one functionally identical way or another.

Yes, and that’s a feature not a bug. The financial industry failed and the Fed is reshaping it under the 2010 Dodd-Frank financial-reform law. Allowing money previously invested in run-prone shadow banking to be invested in 100%-safe reserves is the best thing the Fed could do to reshape the industry.

They can only do that if they reduce the institutional additions to the bank’s cost of funds/lower risk restrictions to make the banks more competitive with non bank lenders.

Temptations remain. For example, with trillions of reserves in excess of regulatory reserve requirements, the Fed loses what was left of its control over bank lending and deposit creation. The Fed will be tempted to use direct regulation and capital ratios to try to micromanage lending.

That’s all it ever had. Lending was never reserve constrained.

It should not. The big balance sheet is a temptation for the Fed to buy all sorts of assets other than short-term Treasurys, and to meddle in many markets, as it is already supporting the mortgage market. It should not.

I see precious little difference apart from option vol considerations.

The Fed is making no promises about the stability of these arrangements—a large balance sheet and market interest on reserves available to non-banks. It should. In particular, it should clarify whether it will allow its balance sheet to shrink as long-term assets run off, or reinvest the proceeds as I would prefer.

It doesn’t matter for what he’s talking about.

Most of the financial stability benefits only occur if these arrangements are permanent and market participants know it. We can debate whether interest rate policy should follow rules or discretion, be predictable or adapt to each day’s Fed desire. But the basic structures and institutions of monetary policy should be firm rules.

The remaining short-term question is when to raise rates. Ms. Yellen has already made an important decision: The Fed will not, for now, use interest-rate policy for “macroprudential” tinkering. This too is wise. We learned in the last crisis that the Fed is only composed of smart human beings. They are not clairvoyant and cannot tell a “bubble” from a boom in real time any better than the banks and hedge funds betting their own money on the difference. Manipulating interest rates to stabilize inflation is hard enough. Stabilizing inflation and unemployment is harder still.

Especially when they have it backwards.

Additionally chasing will-o-wisp “bubbles,” “imbalances” and “crowded trades” will only lead to greater macroeconomic and financial instability.

Here too a firm commitment would help. Otherwise market participants will be constantly looking over their shoulders for the Fed to start meddling in home and asset prices.

Plenty of uncertainties, challenges and temptations remain. Tomorrow, we can go back to investigating, arguing and complaining. Today let’s cheer a few big things done right.

Mr. Cochrane is a professor of finance at the University of Chicago Booth School of Business, a senior fellow at the Hoover Institution, and an adjunct scholar at the Cato Institute.

Doesn’t mention/forgets that the Fed buying secs is functionally identical to the tsy not selling them in the first place, etc.

Posted in Banking, Fed | No Comments »

new home sales bad

Posted by WARREN MOSLER on August 25th, 2014

And it’s no longer about prices, which fell, and inventories, which are now plenty high:

New Home Sales

Upward revisions offset a lower-than-expected 412,000 annual sales rate for new home sales in July with the two prior months revised higher by a total of 28,000. July’s gain is centered entirely in the South which rose 8.1 percent in the month. The South is by far the largest region for new home sales, outdistancing all other regions combined.

Lack of new homes on the market has been constraining sales but perhaps less so now. Supply on the market rose to 205,000 vs 197,000 in June, pulling up the monthly supply to 6.0 months at the current sales rate vs 5.6 in June.

High prices have also been constraining sales but, again here too, perhaps no more. The median price fell 3.7 percent in the month to $269,800. Year-on-year, the median price is up only 2.9 percent which is well below the year-on-year sales gain of 12.3 percent.

The Dow is moving to opening highs following today’s report, a key report that, despite the soft headline and concentrated gain in the South, adds to the building evidence of renewed vigor in the housing sector.

Posted in Housing | No Comments »

ECB relying export driven growth through euro depreciation

Posted by WARREN MOSLER on August 23rd, 2014

Note below that he states it’s the fx channel that the ECB is relying on to support aggregate demand.

Good luck to them, it doesn’t work that way!!!

From the speech by Mario Draghi, President of the ECB, Annual central bank symposium in Jackson Hole, 22 August 2014:

Boosting aggregate demand

On the demand side, monetary policy can and should play a central role, which currently means an accommodative monetary policy for an extended period of time. I am confident that the package of measures we announced in June will indeed provide the intended boost to demand, and we stand ready to adjust our policy stance further.

We have already seen exchange rate movements that should support both aggregate demand and inflation, which we expect to be sustained by the diverging expected paths of policy in the US and the euro area (Figure 7). We will launch our first Targeted Long-Term Refinancing Operation in September, which has so far garnered significant interest from banks. And our preparation for outright purchases in asset-backed security (ABS) markets is fast moving forward and we expect that it should contribute to further credit easing. Indeed, such outright purchases would meaningfully contribute to diversifying the channels for us to generate liquidity.

Posted in Currencies, ECB, trade | No Comments »

Charts on labor force participation rates- not good!

Posted by WARREN MOSLER on August 23rd, 2014

Hard to believe there isn’t a lot of slack indicated here.

Note that it’s always gone up during an expansion, until now:

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And isolating the ‘prime working age’ removes the ‘aging factor’

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In fact, the chart for ‘over 55′ shows the overall drop in participation didn’t come from this group, and, seems, their participation would have gone up in a ‘normal’ recovery:

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And who would have thought a weak demand would hurt these groups first/hardest…
Certainly not in America…

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And, while down dramatically, look how high this has been and still is:

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But maybe the clue to why the subject is getting all the attention this time around lies here?

Just saying…

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For all men the rate’s been falling for a long time, with the recent drop less noticeable.

And it used to be over 85%!

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Add this and you have the appearance that (lower cost?) women have been replacing (higher cost?) men for a long time now?

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Enough to make the point.

Unlike all prior recoveries, this recovery continues to fail to keep up with population and productivity growth

Which is the evidence that the federal budget deficit is far to low for current financial condition.

That is, the output gap remains extreme and, if anything, is growing, as out government continues to fail its electorate.

Posted in Employment | No Comments »

Existing home sales up for July, but down yet again year over year

Posted by WARREN MOSLER on August 22nd, 2014

This was spun as a good number, as it exceeded expectations, but check out the year over year chart below,
where sales have been down vs the same month last year for nearly a year:

The NAR reports: Existing-Home Sales Continue to Climb in July
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 2.4 percent to a seasonally adjusted annual rate of 5.15 million in July from a slight downwardly-revised 5.03 million in June. Sales are at the highest pace of 2014 and have risen four consecutive months, but remain 4.3 percent below the 5.38 million-unit level from last July, which was the peak of 2013. …

Existing Home Sales

Existing home sales in July advanced 2.4 percent to an annualized pace of 5.15 million units, topping expectations for 5.00 million. June rose a revised 2.4 percent to a marginally downwardly revised 5.03 million. July sales were down 4.3 percent on a year-ago basis.

For the latest month, strength was in the single-family component which gained 2.7 percent to 4.55 million annualized. Condos were unchanged at 0.60 million.

Supply on the market actually rose faster than sales-up 3.5 percent in July to 2.37 million units. Months’ supply, however, was steady at 5.5 months.

The median price rose 0.4 percent in July to $222,900 (up 4.9 percent year-ago) while the average price increased 0.2 percent to $268,700 (up 3.7 percent year-ago).

Year over year chart:

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Strange report here, but manufacturing in general doing reasonably well:

Details do not confirm what at the headline level, at 28.0 vs July’s 23.9, is exceptional acceleration this month in the Philly Fed’s manufacturing sector. New orders have slowed very sharply so far this month, to 14.7 vs July’s 34.2, while shipments are at 16.5, likewise well down from another 34.2 in July.

Unfilled orders are contracting and delivery times are improving, again both pointing to slowing activity. Employment growth is down as are price pressures.

Posted in Housing | No Comments »

US jobs rose since ’08 crisis, but pay is 23% less

Posted by WARREN MOSLER on August 21st, 2014

US jobs rose since ’08 crisis, but pay is 23% less: report

Aug 11 (Reuters) — Jobs growth in the U.S. since the 2008 recession has been undermined by lower wages, with workers earning an average 23 percent less than earnings from jobs which were lost, a report by an organization representing U.S. cities said on Monday.

The average annual salary in sectors where jobs were lost – particularly manufacturing and construction – during the 2008-9 financial crisis was $61,637, according to the report by the United States Conference of Mayors (USCM), which represents cities with populations of more than 30,000.

Job gains through the second quarter of 2014 in comparative sectors showed average wages of $47,171, implying $93 billion in lower wage income, the report said.

The report also showed that the majority of metro areas – 73 percent – had households earning salaries of less than $35,000 a year.

The latest monthly employment data from the Labor Department showed that more than 200,000 jobs were created for the sixth straight month in July, but that wages were about flat in the private sector.

American workers, on average, earned $24.45 an hour in July, up only a penny from June. Over the last year, wages have grown just 2 percent, in keeping with where they have been stuck since late 2009.

Posted in Employment | No Comments »

Real Fiscal Responsibility Today Radio and TV Show pilots

Posted by WARREN MOSLER on August 20th, 2014

The Real Fiscal Responsibility Talk Show Pilot Project

This project is for everyone tired of hearing economic commentary from those who got everything wrong. For decades the the doctrine of “Fiscal Responsibility” interpreted as long-term deficit reduction and Government austerity has had a secure place in American politics. The three of us proposing this project believe that this doctrine is the economic equivalent of the medieval notion that patients must be bled to cure them of disease.

The notion that austerity is necessary after running budget deficits caused by economic downturns is false and damaging to economies all over the world. We have opposed targeted deficit reduction and austerity in the blogosphere and in an e-book since 2010. Yet despite our efforts and the efforts of many others who using the Modern Money Theory (MMT) approach to economics, as well as other post-Keynesians, the mythology of austerity still survives, waiting in the wings until the next debt ceiling or budgetary crisis provides an opportunity for austerity partisans to push their nostrums of spending cuts and “Grand Bargains” once again.

We value Real Fiscal Responsibility highly, but that doesn’t lie in targeted deficit reduction, or in spending cuts for their own sake. Instead, it lies in targeting real impacts, real benefits, and real results, and fulfilling the needs of real people. We want to replace the false and damaging austerian accountant’s green eyeshade paradigm of so-called Fiscal Responsibility, evaluated against the arbitrary standards and scare tactics of debt-to-GDP ratios and public debt levels, with the human scale paradigm of Real Fiscal Responsibility, evaluated against the standard of fulfilling public purpose.

We seek funding for a pilot project for a new radio/video series that will present, and advocate for this paradigm change. The project will create six shows that we will then use to get the series picked up by an existing cable network.

Please visit the donation page.

Posted in Deficit, GDP, Government Spending | No Comments »

taking away the punch bowl

Posted by WARREN MOSLER on August 20th, 2014


Posted in Deficit, Government Spending | No Comments »

Architectural index up in July

Posted by WARREN MOSLER on August 20th, 2014

Winter dip then a recovery.

We’ll see if these levels hold.

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Posted in Housing | No Comments »

Mortgage purchase apps

Posted by WARREN MOSLER on August 20th, 2014

Not good- purchase apps now down 11% vs last year.
And cash buyers have been fading as well.
And the size of homes built has leveled off.
And check out what’s happened to the growth of new building permits.

Fortunately, as per the mainstream economists and analysts, bad news is good news, as it means the Fed will be lower for longer to a fault, triggering a credit led expansion…

MBA Purchase Applications

A sizable drop in mortgage rates failed to give a lift to purchase applications which fell 0.4 percent in the August 15 week. The trend remains very weak with the year-on-year rate for the purchase index down 11 percent. Monday’s housing market report cited a rise in serious buyers for new homes, buyers however that are likely to be cash buyers based on mortgage application data.

Applications for conventional mortgages, both for purchases and refinancing, rose in the week but the report notes a 5.9 percent decline in applications for government mortgages that includes an unadjusted 8 percent decline in Department of Veterans Affairs applications. Federal Housing Administration and Rural Housing Service applications also fell.

Total refinancing applications rose 3.0 percent in the week giving a 1.4 percent lift to the composite index. Refinancing applications made up 55 percent of all applications vs 54 percent in the prior week. Rates moved lower with the average for conforming loans ($417,000 or lower) down 6 basis points to 4.29 percent.

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U.S. Home Size Levels Off, for Now at Least

Lawler: Table of Distressed Sales and Cash buyers for Selected Cities in July

By Bill McBride

Economist Tom Lawler sent me the table below of short sales, foreclosures and cash buyers for several selected cities in July.

Comments from CR: Tom Lawler has been sending me this table every month for several years. I think it is very useful for looking at the trend for distressed sales and cash buyers in these areas. I sincerely appreciate Tom sharing this data with us!

On distressed: Total “distressed” share is down in all of these markets, mostly because of a sharp decline in short sales.

Short sales are down in all of these areas.

Foreclosures are down in most of these areas too, although foreclosures are up a little in few areas like Nevada, Sacramento and the Mid-Atlantic.

The All Cash Share (last two columns) is mostly declining year-over-year. As investors pull back, the share of all cash buyers will probably continue to decline.

Posted in Housing | No Comments »

Housing and CPI

Posted by WARREN MOSLER on August 19th, 2014

Reinforces the mainstream narrative of the moment:
The Fed will keep rates low, getting ‘behind the curve’ and causing a run away economy.

My narrative remains that the 0 rate policy is deflationary and also keeps a lid on growth.

The ‘surge’ in total starts, which remain pretty much at the lows of prior recessions (see charts which are not population adjusted), was in multi family, which is ok, but units tend to be smaller and a lot less expensive than single family, and total expense is what counts for GDP/employement/etc. And it all remains a much lower % of GDP than in prior cycles:

Housing Starts

Housing may be making a comeback with the labor market improving and awareness that the Fed is cutting back on mortgage-backed securities-meaning a pending rise in mortgage rates.

Housing starts for July jumped to an annualized pace of 1.093 million units-up from 0.945 million units the prior month. The latest number well topped expectations for 0.963 million units. July was up a sharp 15.7 percent (monthly), after dipping 4.0 percent in June.

Strength was led by the multifamily component which surged 28.9 percent after a 3.1 percent decline in June. But the single-family component showed health with an 8.3 percent rebound after falling 4.4 percent in June.

According to building permits, momentum is building-but largely for the multifamily component. Permits jumped a monthly 8.1 percent to an annualized pace of 1.052 million units. For July, the multifamily component gained 21.5 percent while the single-family component edged up 0.9 percent.

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Consumer Price Index

Posted in Housing, Inflation | No Comments »

Fed policy comment

Posted by WARREN MOSLER on August 18th, 2014

So the theme is ‘the Fed is getting behind the curve’

That is, Yellen keeps rates ‘too low’ causing the economy to overheat.

Complete nonsense, of course, but it drives markets until it doesn’t.

Much like QE.

The 0 rate policy, including QE, remains no way supportive of growth and employment, but instead deflationary and contractionary, as evidenced by the anemic private sector credit expansion, low income growth, and ‘low inflation’. And the gaping output gap…

Posted in Fed, Interest Rates | No Comments »

Housing market index

Posted by WARREN MOSLER on August 18th, 2014

Above expectations on a bounce from ‘cold winter’ lows that still leaves it relatively low, and lower than this time last year.

And note that mortgage finance has flattened out as well.

The regional breakdown is led by the Midwest which surged 13 points to 65 followed by the West which dipped 1 point to 57. Continuing to lag way back is the Northeast, a region already fully developed, with the South, which is by far the largest region for new home sales, down 2 points to a soft 51 which doesn’t point to much strength for the new home sales report. Watch for housing starts tomorrow and the new home sales report next Monday. The Dow is moving to opening highs following today’s report.

Posted in Housing | No Comments »

Bank lending weekly update

Posted by WARREN MOSLER on August 16th, 2014

What was touted as an acceleration of growth seems to have leveled off over the last few weeks, and is looking more like a dip in growth (cold winter?) followed by a recovery that’s leveled off.

More troubling, however, is the late cycle pattern of a slowdown in the growth of lending followed by borrowing to fund cash shortfalls that turns into negative growth, but in this case seems the recent growth is coming from the smaller banks:

At the same time, net interest margins for banks continues to fall:

(August 7 release)

Posted in Banking, Credit | No Comments »

Last tweet of Aaron Swartz before he died

Posted by WARREN MOSLER on August 15th, 2014

Tweet attached
Reads like he’s been promoting ideas from the MMT websites

Aaron Swartz documentary here

Posted in MMT | No Comments »

NY Fed: Household Debt decreased

Posted by WARREN MOSLER on August 14th, 2014

So much for a consumer led ‘borrowing to spend’ credit expansion? 6 years of 0 rates from the Fed hasn’t done the trick. Same in Europe. Nor over 20 years of same in Japan.

But these are all exceptions…

NY Fed: Household Debt decreased Slightly in Q2 2014, Delinquency Rates Lowest Since Q3 2007

Posted in Credit | No Comments »

credit chart upgrade

Posted by WARREN MOSLER on August 13th, 2014

Still anemic.

Looks to me there was a ‘dip’ and then ‘recovery’ and a recent return to the prior growth rate?

Doesn’t look like acceleration from this angle?
Just a dip and recovery, leveling off at a lower rate of growth?

And looking at both of these I’m not impressed, sorry!

Posted in Credit | No Comments »