Relevant and even prescient commentary on news, politics and the economy.

The Birth of a Bomb and the Rebirth of a City

1945 and 2018

On August 6, 1945; The US dropped an atomic bomb (Little Boy) on Hiroshima destroying much of the city and instantly killing 80,000 of its citizens. 60,000 more would die later

On August 6, 1945; The Enola Gay dropped the first atomic bomb ever used in military combat on Hiroshima. A second atomic bomb was dropped on Nagasaki August 9, 1945.

On August 6, 2018; On the 73rd anniversary of dropping of the first atomic bomb, the residents of Hiroshima will pause to remember the 80,000 residents and the destruction which changed the course of history. Church bells will ring at 8:15 AM, the moment the bomb was dropped from the Enola Gay.

Later on August 6, 2018 and in the evening, Toro Nagashi Lanterns will be floated down the Motoyasu river and past The Atomic Dome (Prefuctural Industrial Promotion Hall). First held in 1946, the Toro Nagashi (literally, “flowing lanterns”) ceremony was first held in Tokyo. Participants Float glowing paper lanterns down a river to commemorate the souls of the dead.

Today, Hiroshima is a prosperous manufacturing city.

Hiroshima Today, Laura McCamy, “Business Insider,” August 6, 2018

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Mortgage rates probably have to top 5% to tip housing into a recession-leading downturn

Mortgage rates probably have to top 5% to tip housing into a recession-leading downturn

I’ve pointed out many times that, generally speaking, mortgage rates lead home sales. It’s not the only thing — demographics certainly plays an important role — but over the long term interest rates have been very important.

I have run the graph comparing mortgage rates to housing permits many times. In the graph below, I’m using a slightly different housing metric — private residential fixed investment as a share of GDP, both nominal (blue) and real (green), current through last Friday’s report on Q2 GDP. Here’s the long term view:

We can see the leading relationship over the large majority of time frames in the last 50 years, with a few notable exceptions: the late 1960s and 1970s *huge* demographic tailwind of Baby Boomers reaching home-buying age, the 2000s housing bubble and bust, and 2014 (mainly due to the Millennial generation tailwind).

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Weekly Indicators

(Dan here….another one from NDd)

My Weekly Indicators post is up at Seeking Alpha. The old vaudeville sketch comes to mind: “Niagara Falls.  Slowly I turn. Step by step ….”

Not only are these weekly posts intellectually edifying, but since clicking over and reading it puts a penny in my pocket, it is the epitome of polite etiquette.

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Mush versus Mush on Climate Change

Mush versus Mush on Climate Change

The very long New York Times piece on climate change politics in the 1980s by Nathaniel Rich has attracted a lot of critical commentary—justifiably.  To say that the failure to achieve a political response was due to human nature, a genetic defect that prevents our species from planning ahead, is just lazy and wrong.  Were the scientists, environmentalists and other activists that did want to take action a bunch of mutants?  Haven’t humans acted with foresight (and also failed to act) since time immemorial?  “Human nature” explains everything and nothing; it’s what you invoke when you don’t want to do the digging a real explanation would require.

I wish the left had a solid response to this immobilizing mushiness, but instead it mostly offers its own version of counter-mush.  A case in point is Naomi Klein.  I’ve already written at length about her book This Changes Everything: Capitalism and the Climate, but I don’t want to let her latest piece at The Intercept pass without notice.

Klein rightly excoriates Rich, but then goes on to make this argument:

Capitalism, not human nature, is responsible for climate inaction.
Capitalism is an ideology that worships profit and “endless growth”.
Its purest form is neoliberalism.
The late 1980s was the high water mark of neoliberalism, so climate activism was suppressed.
We must reject capitalism by adopting the earth-centered philosophy of indigenous peoples.
Politically, this means embracing a caring economy of green jobs, meeting human needs and rejecting “extractivism”.

If this were just Klein’s own idiosyncratic viewpoint we could shrug and move on, but since it reflects what may be the main current in left thinking about the climate crisis, it matters that it turns what ought to be well focused and clear into a thick, gummy soup.

No, capitalism is not an ideology.  What makes Jeff Bezos a capitalist is not his belief system but his ownership and deployment of capital.  Capitalism is a system of institutions that give economic and political primacy to the possession and control of capital.  There is no single metric that captures the effect that a capitalist context has on an issue like climate change, but the starting point is surely anticipated capital gains or losses from a given policy.  (One way we can tell that existing policies are largely toothless is that their enactment had imperceptible effects on asset prices.)

Yes, the 1980s was the zenith of the modern neoliberal project, but there are currents within neoliberalism that support climate action.  One doesn’t have to be a fan of this school of thought to recognize that it’s not monolithic on environmental matters—or on racism, criminal justice, public health and other questions.

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Saturday Night News Clips

Rude Tipping

How to torment the wait staff for their tip. A fun game to play on a night out with your wife or friends. The diner shared the experience on Facebook claiming his methods resulted in “the best service experienced.”

Explaining at the beginning of the meal, he would place five single dollar bills on the table for the server to see and not say anything to them. If they messed up, he would take a dollar away and so on. At the end of the dinner, whatever was left was their tip.”

Wait staff would keep looking at the money with a puzzled look on their face. Once he took away a dollar because of forgotten table bread. He replaced the dollar when the waiter brought extra bread later. “Ha ha all in all a great evening of fun with my love and a good dinner experiment we both wanted to see play out. Try it, you will be surprised!” he wrote.

One waiter’s comment: “I served for years putting myself through college – i would have ignored you most of the night for the satisfaction of letting you know your condescending $5 means absolutely nothing to me while i racked up $10-$20 tips from people that can actually afford to go out to eat.”

NRA alleges financial difficulties

The National Rifle Association (NRA) is alleging it is facing financial danger after the state of New York pressured financial institutions to cut ties with the gun group.

Obtained and first reported by Rolling Stone, the NRA claims in a lawsuit, the state of New York sought to hurt the organization by urging financial institutions and insurers not to work with the gun group.

The organization is suing New York Gov. Andrew Cuomo (D), the state’s Department of Financial Services (DFS), and Maria Vullo, New York’s superintendent of financial services. An amended version of the complaint was filed in U.S. District Court in New York last month.

The lawsuit stems from a May decision by New York financial regulators over “Carry Guard,” a-NRA marketed insurance policy for members who face legal costs after firing a gun legally. The DFS determined that the policy was illegal under New York state law, and the insurers who provided it must stop selling the policies and paid a $7 million fine.

Trump commission did not find widespread voter fraud
Republican President Donald Trump convened a commission to investigate the 2016 presidential election after he made unsubstantiated claims of 3 million to 5 million ballots were illegally cast. Maine Secretary of State Matthew Dunlap and other critics rejected Trump’s claims of widespread voter fraud.

The Trump administration last month complied with a court order to turn over documents from the voting integrity commission to Matthew Dunlap. The commission met just twice and had not issued a report.

Dunlap’s findings received immediate pushback Friday from Kansas Secretary of State Kris Kobach, who acted as the vice chair of the commission with VP Mike Pence serving as the chair.

“For some people, no matter how many cases of voter fraud you show them, there will never be enough for them to admit that there’s a problem,” said Kobach, who is running for Kansas governor and has a good chance of unseating the incumbent, Jeff Colyer, in the Republican primary Tuesday.

“It appears that Secretary Dunlap is willfully blind to the voter fraud in front of his nose,” Kobach said in a statement released by his spokesman.

Kobach said there have been more than 1,000 convictions for voter fraud since 2000, and that the commission presented 8,400 instances of double voting in the 2016 election in 20 states.

“Had the commission done the same analysis of all 50 states, the number would have been exponentially higher,” Kobach said.

In response, Dunlap said those figures were never brought before the commission, and Kobach has not presented any evidence for his claims of double voting. He said the commission was presented with a report claiming over 1,000 convictions for various forms of voter misconduct since 1948.

“The plural of anecdote is not data,” Dunlap said in his Friday letter to the shuttered commission’s leaders.

Federal judge says Trump must fully restore DACA

A federal judge ruled Friday that the Trump administration must fully restore the Deferred Action for Childhood Arrivals (DACA) program.

In his 25-page opinion, Judge John Bates said the Trump White House had “again” failed to provide justification for its proposal to end the Obama-era program, under which nearly 800,000 people brought to the country illegally as children, known as “Dreamers,” have received work permits and deferral from deportation.
The judge also said in his opinion that he has agreed to delay his ruling to give the Trump administration 20 days “to determine whether it intends to appeal the Court’s decision and, if so, to seek a stay pending appeal.”

There Are Still a Lot of Men Without Jobs

The prime-age employment-population ratio which is the most straightforward of job market measures hit a new post-recession high of 79.5 percent in the U.S. in July, according to today’s jobs report from the Bureau of Labor Statistics. However when looking at a separate analysis for men and women, the measurement for men still falls short for men.

For prime-age women, the employment-population ratio is back to its peak from the previous business cycle, and within 2 percentage points of its all-time high in March 2000.

For U.S. prime-age men, meanwhile, the employment-population ratio is still almost 2 percentage points below its peak from the last business cycle, and nearly 10 points below its all-time high (the data series goes back to 1948) in March 1953. Countless studies have addressed the possible causes of this disappearance of prime-age men from the workforce, and I’m not going to go into them here. It just seems worth noting that, even with the unemployment rate dipping to levels last seen on a sustained basis in the 1960s, there are still a lot of prime-age men out there without jobs (8.6 million in total, according to the BLS) who could conceivably be put to work.

Colbert “Daddy’s Little Contradictor” Perhaps, feckless is too weak a term to describe the lady?

To Close Saturday Night . . . Dan Rather on Trump’s attack on Lebron

“This is apparently what the President of the United States feels the need to share with the world at what should be long past his bedtime?

It’s a disgrace. It’s racist.

And it’s the product of petty but dangerous hatreds. I repeat this is the PRESIDENT??!?”

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Charity begins in actually giving

Via Truthout:

In every community, there are nonprofit charities that serve real needs: local food pantries, programs addressing the opioid crisis, the Red Cross chapters that come to our aid after a storm. Charities provide vital services to the people and places they serve.

These organizations lean heavily on volunteers, fundraisers, and donors. And most ordinary donors give without consideration of a tax break — people give their time, treasure, and talent without keeping score.

For many ultra-wealthy donors, however, charity can be motivated not just by generosity, but also by tax avoidance.

A case in point is the surge of donor-advised funds, or DAFs, created in recent years by wealthy donors. We studied these accounts in“Warehousing Wealth,” a new report for the Institute for Policy Studies.

A DAF is like a mini-foundation, a holding account for giving — but with substantially greater benefits and conveniences for the donors.

When donors contribute to a DAF, they take a tax deduction — often a big one. But those funds can then sit in the DAF for years, even generations, before they’re granted out to charities working to meet real social needs.

Originally created by community foundations, DAFs have been recently adopted by for-profit Wall Street firms like Fidelity Investments, Goldman Sachs, and Charles Schwab.

These firms created charitable DAFs to serve their wealthy clients’ philanthropic goals, while happily charging fees to keep funds under management. They have no legal incentive to see funds move in a timely way to active charities, so corporate-affiliated DAFs have been growing exponentially in recent years.

A decade ago, the biggest donation recipients in the United States were the United Way, the Red Cross, and the American Cancer Society. Today, it’s the Fidelity Charitable Gift Fund. In fact, six of the ten largest charity recipients are DAFs.

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June real trade balance

When the second quarter real GDP report was published I saw that trade made a major contribution to growth — exports contributed 1.12 percentage points of the 4.1% real GDP growth.  But that seemed like some sort of fluke produced by unusual conditions rather that what trend growth would generate.  Moreover, the BEA estimate was based on only two months actual data and the other month was a BEA “guesstimates”.  So new data was quite likely to generate large changes in reported real  GDP. June data was released this morning at the same time as the unemployment report, so it did not get much attention. Real exports increased and real imports imports declined. Both moved back toward their intermediate growth trend.

The trade balance is the difference between two very large numbers so that small changes in either series can generate very large changes in the trade balance.  The June real trade deficit was $ 7.9 ( B 2012 $ ) as compared to $7.7 ( B 2012$)  in April and  $7.5 ( B 2012 $) in May. The June trade balance is about where is was at the end of the first quarter.  So when the 2nd quarter real GDP is revised the major contribution from trade is likely to be revised down significantly.

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