Tag: Housing

Some incomplete comments on the current US economic environment

Some incomplete comments on the current US economic environment

This is going to be a quick hit post to get some thoughts down on paper because a few threads are coalescing for me that I want to give some coherence to. The essence of the threads revolves around the tension at the Fed between normalizing policy and the ability of the economy to withstand it. My view has been upbeat about the US economy – and that’s been without a trace of recession worry for the last several months. But there are some negative factors coming together that give me pause. And it begins with housing.

Property, inequality and financial crises

Property, inequality and financial crises

So where did they get the money?

It’s an all too familiar story. Inflows of foreign capital, mainly from Scandinavian banks, attracted by low interest rates and a population hungry for credit – credit advanced, of course, against property. Latvian house prices soared and there was a construction boom. Easy credit, wealth effects and incomes from construction and real estate activities also fuelled a consumption boom: suddenly Latvia, one of the poorest countries in Europe, was flooded with Porsches and Bentleys.

Borrowing to spend in America and the credit accelerator

Borrowing to spend in America and the credit accelerator

The US economy’s upswing over the last six years has been predicated on credit like the cycle before it because wage growth has been lacklustre. I want to describe where credit activity has created a lift in consumer spending and in capital investment that would otherwise have been absent. Afterwards, I want to describe where I think the weaknesses in this economic model lie and why I am inclined to believe we are closer to the end of cycle than near a mid-cycle slowdown a la 1994.

Home prices since 1870: No price like home

Home prices since 1870: No price like home

House price fluctuations take centre stage in recent macroeconomic debates, but little is known about their long-run evolution. This column presents new house price indices for 14 advanced economies since 1870. Real house prices display a pronounced hockey-stick pattern over the past 140 years. They stayed constant from the 19th to the mid-20th century, but rose strongly in the second half of the 20th century. Sharply increasing land prices, not construction costs, were the key driver of this trend.

Economic and market themes: 2014-10-24 Technology earnings, Chinese housing and European hopelessness

Economic and market themes: 2014-10-24 Technology earnings, Chinese housing and European hopelessness

I have three areas I want to explore today: earnings reports, China and Europe. The earnings reports are mixed but generally good enough to support continued job growth and economic momentum through this fourth quarter. I also want to deep dive on tech companies. On China, the slowdown is all about housing. And in Europe, there is zero sign that political differences can be smoothed over without crisis.