The Mess That Greenspan Made - Part 2

What to Do About Secular Stagnation?

Not that it really needed it, but the debate over “secular stagnation” has been rekindled in recent days by a new paper(.pdf) by economists Gauti Eggertsson and Neil Mehrotra of Brown University that, basically, says we’ve got to save less and spend more if we’re going to achieve higher growth during a period when population growth is slowing and inequality is rising. Higher rates of inflation and more government debt is also encouraged.

Here’s Eggertson talking to the folks at CNBC a few days ago.

After he looked at the paper, Mohamed El-Erian penned this Bloomberg commentary that concluded today’s economists are, basically, lost at sea with no real idea or consensus about what caused the recent poor economic performance or what to do about it.

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No Spring Rebound for Existing Home Sales

The National Association of Realtors reported that sales of existing homes fell 0.2 percent in March to a seasonally adjusted annual rate of 4.59 million units as there appears to have been no spring rebound in home sales after the severe winter weather that saw home sales slow sharply last December. Unfortunately for buyers, home prices continue to rise.

This marks the seventh time in the last eight months that sales have moved lower, a change in direction that came just after the Federal Reserve began talking about tapering their bond purchases, talk that led to sharply higher mortgage rates last year. Of course, that’s about the same time that Wall Street investors began to lose interest in the housing market, a sector that is now clearly facing headwinds.

On a year-over-year basis, sales are now down 7.5 percent, the biggest decline since the housing bubble burst, save for the periods in 2010 and 2011 when the expiration of government subsidies spurred buying surges and subsequent slowdowns.

In contrast to falling sales volume, the median sales price continued to rise, jumping from $189,000 in February to $198,500 in March. This puts home prices up 7.9 percent from a  year ago, consistent with the 6.9 percent annual price gain reported by the FHFA earlier today. Low supply was blamed for both lower sales and higher prices, though rising inventory pushed the months of supply metric higher, from 5.0 in February to 5.2 in March.

So far, at least, it is clear that weather wasn’t to blame for the recent housing market swoon.

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Someday, We’ll Miss Joe Biden

It may well be that caricatures and impersonations of Vice President Joe Biden in such places as Saturday Night Live have unalterably shaped opinions of the man to his detriment. Nevertheless, you can’t help but chuckle a little bit when you seen headlines and photos like the combination below from this story at Bloomberg.

In Biden’s defense, he’s only got about a quarter-smile going on there (which, for most of the general population, would be a pretty wide, full smile) and this may or may not have anything to do with anything that is going on in Ukraine.

It would seem that his biggest obstacles to securing the Oval Office in 2016 (well, aside from Hillary) is that he’s so gaffe-prone and has a history of smiling at all the wrong times.

Tuesday Morning Links

MUST READS
Gunmen detain 3 journalists in eastern Ukraine – AP
Ukraine Accord Nears Collapse, Biden Visits Kiev – Bloomberg
Russia is already feeling the pain of Western sanctions – CNBC
Putin’s career roadmap goes back to emperors Peter and Catherine – Quartz
Nevada Standoff a Symptom of Increasing Authoritarianism – Ron Paul Institute
On Tour With Rock-Star Economist Thomas Piketty – New York Magazine
The Systematic Errors In Thomas Piketty’s New Book – Real Clear Markets
How Income Inequality Can Hurt the Economy – Fiscal Times
Why a Global Tax on Wealth Won’t End Inequality – Foreign Affairs
Young Adults Cite College Costs as Their Top Money Problem – Gallup
The Myth of Working Your Way Through College – The Atlantic
The saddest way to default on your student loan – Vox

To find out what Tim thinks of today’s news, subscribe to Iacono Research

MARKETS/INVESTING
Asian stocks edge mostly higher on US earnings – AP
Bull vs. Bear debate: Is pullback over? – USA Today
Is This What a Credit Bubble Looks Like? – Cyniconomics
China Stock Index Rises for First Time in Four Days – Bloomberg
Hedge Fund Assets Hit a Record, For the 7th Straight Quarter – Barron’s
Treasury Two-Year Auction Near Highest Yield Since 2011 – Bloomberg
Gold steadies off 2-1/2 week low as dollar retreats – Reuters
Why China is a positive gold prices going forward – Arabian Money
China Banks And 100,000 ‘Outlets’ Sell Gold – GoldCore
Chinese gangs implicated in India gold smuggling – Mineweb
Lack of upside catalysts weigh on gold – MarketWatch

ECONOMY/WORLD/HOUSING/BANKING
Death of Ceteris Paribus – Alhambra Partners
What Recovery? How the NBER Determines When Recessions End – WSJ
Sorry, Fed Inflationistas: Technology Is Deflationary – of two minds
Chinese Bad-Loan Ratio Rises ‘Significantly,’ Huarong Says – Bloomberg
Stephen Roach: China, U.S. Headed in Opposite Directions – Caixin Online
Wage cuts make Spain’s recovery a long, painful path – Reuters
Fannie, Freddie cut housing-market forecasts for 2014 – MarketWatch
Americans think owning a home is better for them than it is – Washington Post
U.S. Housing Market Looking for Good Old Days – S&P Housing Views
Guess Who Makes More Than Bankers: Their Regulators – WSJ
Report Card on Fed Policy During the Great Recession – Fiscal Times
A Chance to Remake the Fed – American Prospect

 
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