Dirk Bezemer is a professor of economics at the University of Groningen, the Netherlands. Michael Hudson is a distinguished research professor of economics at the University of Missouri, Kansas City, and a professor at Peking University. The authors thank the editor and two anonymous referees for helpful suggestions that greatly improved this article. Bezemer wishes to thank the Equilibrio Foundation and the Institute for New Economic Thinking for financial support. Any remaining errors are the authors’ own.
Abstract: Conflation of real capital with finance capital is at the heart of current misunderstandings of economic crisis and recession. We ground this distinction in the classical analysis of rent and the difference between productive and unproductive credit. We then apply it to current conditions, in which household credit — especially mortgage credit — is the premier form of unproductive credit. This is supported by an institutional analysis of postwar U.S. development and a review of quantitative empirical research across many countries. Finally, we discuss contemporary consequences of the financial sector’s malformation and overdevelopment.
Why have economies polarized so sharply since the 1980s, and especially since the 2008 crisis? How did we get so indebted without real wage and living standards rising, while cities, states, and entire nations are falling into default? Only when we answer these questions can we formulate policies to extract ourselves from the current debt crises. There is widespread sentiment that this crisis is fundamental, and that we cannot simply “go back to normal.” But deep confusion remains over the theoretical framework that should guide analysis of the post-bubble economy.
The last quarter century’s macro-monetary management, and the theory and ideology that underpinned it, was lauded by leading macroeconomists asserting that “The State of Macro[economics] is Good” (Blanchard 2008, 1). Oliver Blanchard, Ben Bernanke, Gordon Brown, and others credited their own monetary policies for the remarkably low inflation and stable growth of what they called the “Great Moderation” (Bernanke 2004), and proclaimed the “end of boom and bust,” as Gordon Brown did in 2007. But it was precisely this period…
Light detection and ranging, or lidar, is a sensing technology based on laser light. It’s similar to radar, but can have a higher resolution, since the wavelength of light is about 100,000 times smaller than radio wavelengths. For robots, this is very important: Since radar cannot accurately image small features, a robot equipped with only a radar module would have a hard time grasping a complex object. At the moment, primary applications of lidar are autonomous vehicles and robotics, but also include terrain and ocean mapping and UAVs. Lidar systems are integral to almost all autonomous vehicles and many other robots that operate autonomously in commercial or industrial environments.
Lidar systems measure how far away each pixel in a 3D space is from the emitting device, as well as the direction to that pixel, which allows for the creation of a full 3D model of the world around the sensor. The basic method of operation of a lidar system is to transmit a beam of light, and then measure the returning signal when the light reflects off of an object. The time that the reflected signal takes to come back to the lidar module provides a direct measurement of the distance to the object. Additional information about the object, like its velocity or material composition, can also be determined by measuring certain properties of the reflected signal, such as the induced Doppler shift. Finally, by steering this transmitted light, many different points of an environment can be measured to create a full 3D model.
Most lidar systems—like the ones commonly seen on autonomous vehicles—use discrete free-space optical components like lasers, lenses, and external receivers. In order to have a useful field of view, this laser/receiver module is mechanically spun around, often while being oscillated up and down. This mechanical apparatus limits the scan rate of the lidar system while increasing both size and complexity, leading to concerns about long-term reliability, especially in harsh environments. Today, commercially available high-end lidar systems can range from $1,000 to upwards
Today’s labour market in the US has much in common with that of the late 19th and early 20th centuries. Then, as now, there were few government protections for workers, fears over cheap immigrant labour, rapid technological change, and increasing market concentration. This column explores the lessons that can be drawn from the earlier ‘Gilded Age’. The findings suggests that even as markets play a greater role in allocating labour, legal and political institutions will continue to shape bargaining power between firms and workers.
Phenomenal increases in income and wealth inequality in the US and other rich economies have been observed over the last four decades, driven by skill-biased technological change (Autor et al. 2008), increased trade (Autor et al. 2013), and institutional and policy changes that have allowed the rich to earn/extract a greater share of the economic pie (Alvaredo et al. 2013, Piketty 2014). An associated rise of populist politicians suggests a link between economic inequality and political polarisation (McCarty et al. 2006, Autor et al. 2016), and potential for costly conflict (Esteban and Ray 2011, Bowles and Jayadev 2006).
Moreover, there is every reason to believe that past trends will continue –technological change seems to continually enhance the return to capital and the earnings of the most skilled (while displacing the less skilled); it is increasingly easy to hire workers across borders in online labour markets; and greater numbers of workers are now part of the ‘gig economy’, with employment relationships replaced by contractor relationships offering workers limited collective bargaining rights and fewer legal protections (Horton 2010, Brynjolfsson and McAfee 2014).
Remarkably, looking ahead towards the labour market of the future feels a lot like looking back at the labour market of the past, particularly that of the late 19th and early 20th century ‘Gilded Age’ in American history. Then, as now, few government protections for workers existed, save those they could secure for themselves; then, too, native-born low-skill workers felt threatened by cheap immigrant labour from abroad while being buffeted by rapid technological change and increasing market concentration. Labour market outcomes in the…
On Monday, Andrea Tantaros, a Fox News host, became the latest in a growing drumbeat of voices charging Fox News with tolerating and condoning a hostile work environment for women that “operates like a sex-fueled, Playboy Mansion-like cult, steeped in intimidation, indecency, and misogyny,” according to the lawsuit Tantaros filed in New York State Supreme Court.
Tantaros charges in the lawsuit that she was sexually harassed by Roger Ailes, who recently stepped down as Fox News CEO, while he ran an intimidation campaign against her through his public relations department. This is the second lawsuit to be filed against Ailes by Fox News women in as many months. In July, Gretchen Carlson went public with similar charges against Ailes in a high-profile lawsuit. According to the Washington Post, Carlson’s lawyers have received reports from more than 20 women that “they were harassed by Ailes during his long career in television, dating as far back as the mid-1960s.”
One of those women, Laurie Luhn, went on the record with Gabriel Sherman of New York Magazine. Luhn told Sherman that “she had been harassed by Ailes for more than 20 years, that executives at Fox News had known about it and helped cover it up, and that it had ruined her life.” Sherman reported that he was able to independently corroborate key details in Luhn’s account as well as viewing a $3.15 million severance agreement that was paid to Luhn in exchange for “iron-clad nondisclosure provisions.”
“Iron-clad nondisclosure provisions” is the stock and trade of Wall Street powerhouse law firm, Paul, Weiss, Rifkind, Wharton & Garrison, which has been handling fraud charges against the serially charged Wall Street bank, Citigroup, for decades. (See our previous report on Paul Weiss here.) Paul Weiss was brought into the Ailes matter to conduct an internal investigation by Fox News parent, 21st Century Fox.
Paul Weiss also has a history of being charged with corporate bias in the way it conducts those internal investigations of sexual assault and/or sexual harassment claims. Two such charges have already emerged against Paul Weiss in the Ailes/Fox News matter. On August 2, Lloyd Grove of The Daily Beastreported that an attorney for former Fox News anchor Laurie Dhue had released a…
Existing home sales fell a greater than expected 3.2% in July, to a seasonally adjusted annualized rate of 5.39 million. Sales were well below the Econoday consensus estimate of 5.52 million, and lower than the lowest guess in a range of 5.420 to 5.650 million. The median sale price declined as well. As is typically the case, the Econoday writer manages to spin the news as positive.
Prices are coming down but sales aren’t going up, at least not in July. Sales of existing homes slowed to a 5.39 million annualized rate which is under low-end expectations and down 3.2 percent on the month. The year-on-year rate has been slowing and is suddenly under water at minus 1.6 percent.
The median price fell 1.4 percent to $244,100 with the year-on-year rate a little less respectable at plus 5.3 percent, a rate roughly consistent with this morning’s FHFA house price report where slowing is also the theme.
Single-family sales are not a plus in today’s report but they are compared to condo sales. Single-family home sales fell 2.0 percent to a 4.82 million rate with condo sales down a very sharp 12.3 percent to a 570,000 rate. Year-on-year, single-family home sales are in the negative column but not by much, at minus 0.8 percent vs an 8.1 percent decline for condos.
Weakness in sales is a plus at least for supply which is still very thin and a key factor holding down sales. Supply on the market rose to 2.13 million from 2.11 million in June with supply relative to sales at 4.7 months vs June’s 4.5 months.
Pending home sales have been weak which limits the surprise of today’s report. Yet today’s report does take some shine off yesterday’s sales surge for new homes. Still, lower prices together with higher supply are pluses for existing home sales ahead.
Allegedly, weaker sales is a plus for supply, and a plus in supply will lead to strength in sales.
Despite the fact that pending home sales have been very weak, no economist expected this decline.
I’m making my way through the Sanford C. Bernstein research piece that everyone is talking about today, in which the sell-side brokerage compares passive investing to a combination of Nihilism and Marxism. To be clear, the author does not make the case that passive is bad or active is better – he’s just saying that there are policy considerations that should be thought about before regulators and government officials proclaim the shift to low-cost passive as universally beneficial for society.
So far, it’s very thought-provoking. I’m not sure how much of it I agree or disagree with yet, I like to stew on these things a bit before reacting.
Here’s one part I whole-heartedly agree with, however – there is a bubble in indexes. Bernstein plots the rise of man-made indexes in the chart below, and talks about how factors have become the new active management. I think this is true.
A lot of what used to be looked at as the alpha of a stock-picking manager can now be reduced to the beta factors that have paid off. Even Buffett’s portfolio has been given the beta distillation treatment (he likes wide moats and consistent cash flow and looks more like a growth-at-a-reasonable-price afficianado than a Ben Graham-esque deep value hawk).
If we’re systematizing stock-picking via factor investing (and we are, to a large degree), then it follows that we will all take it too far. The way things work now is that index companies (Solactive, MSCI, Russell, SPDJ etc) are being asked to create more indexes by ETF sponsors, who then pay a licensing fee and create new products based on them. This is how a formerly active strategy – “I want all high quality companies that have raised dividends in the last 10 years and have CEOs of Hawaiian ancestry” – becomes an “index” strategy. We’re playing games with words here. It’s led to a proliferation in new indexes that has gotten very carried away.
Here’s Inigo Fraser-Jenkins:
Before we start our discussion proper we should say what we mean by active and passive. It is becoming increasingly hard to tell the difference
Two days ago we reported that as Congressional anger mounts in this year's episode of "pin runaway healthcare spending on the evil pharmaceutical company", politicians like Chuck Grassley, Bernie Sanders, and countless more, slammed Mylan's Epipen price increases, which as shown in the chart below while not as dramatically "sharp" as Shkreli's infamous 5000% price hike for Daraprim pills to $750 a pill in the summer of 2015, have been quite aggressive nonetheless.
So far, this year's melodrama has culminated with Grassley sending an angry letter to Mylan CEO Heather Bresch, in which he said that "the substantial price increase could limit access to a much-needed medication."
There was more political outrage this week: “I am deeply concerned by this significant price increase for a product that has been on the market for more than three decades, and by Mylan’s failure to publicly explain the recent cost increase, which places a significant burden on parents, schools and other purchasers of the EpiPen,” Senator Mark Warner, a Virginia Democrat, said Tuesday in a statement, noting that he is a parent of a child with severe allergies.
Senator Richard Blumenthal, a Connecticut Democrat who has asked the company to lower its prices, is holding an event on Wednesday where he will call for investigations by the Senate Judiciary Committee and the Federal Trade Commission into potential antitrust violations and deceptive and illegal trade practices.
Bresch has been criticized for increasing the price of the devices to prevent fatal allergy reactions from less than $100 for a pair in 2007 to more than $500 today. Bresch, who was president in 2007 and has since become chief executive of the global pharma giant, went from making $2,453,456 nine years ago to $18,931,068 last year, according to filings from the company. The pay increase, first reported by NBC News, came as Mylan repeatedly raised the price of the live-saving epinephrine device by increments of 5, 10 and 15%.
As a result, it is likely that Bresh will soon be invited to Congress to explain her price increases in this year's episode of kangaroo court, meant to deflect attention from the real culprit behind out
James Grant, Wall Street expert and editor of the investment newsletter Grant’s Interest Rate Observer, warns of a crash in sovereign debt, is puzzled over the actions of the Swiss National Bank and bets on gold.
Mr. Grant warns of today’s reckless hunt for yield and spots one of the biggest risks in government debt. He’s also scratching his head over the massive investments which the Swiss National Bank undertakes in the US stock market.
Question: For more than three decades Grant’s has been observing interest rates. Is there anything left to be observed with rates this low?
Grant: Interest rates may be almost invisible but there is still plenty to observe. I observe that they are shrinking and that the shrinkage is causing a lot of turmoil because people in need of income are in full hot pursuit of what little of yields remains.
Question: What are the consequences of that?
Grant: It reminds me of the great Victorian English journalist Walter Bagehot. He once said that John Law can stand anything but he can’t stand 2%, meaning that very low interest rates induced speculation and reckless investing and misallocation of capital. So I think Bagehot’s epigraph is very timely today.
This is the best time in history to invest in real estate
reminds me of the times when extreme headlines like this have marked major turning points in markets. Perhaps the most famous was Business Week’s cover story, “The Death of Equities,” in 1979. That was near the best time to buy stocks in my lifetime.
More recently and at a lesser scale, we have the example of the widely publicized piece by Jason Zweig of the Wall Street Journal proclaiming “Let’s Be Honest About Gold: It’s a Pet Rock.” That was in July of 2015 when gold was near its bottom in the $1100 range. It has been among the best performing asset classes since then.
The headline on the Marketwatch piece has a similar feel. It may well mark a major turning point in the multifamily rental investment market.
But I’m not here to argue that. I simply want to show that the headline and the arguments that Reeves puts forth in support of it, are just wrong. Far from being the best time ever to invest in rental property, the fundamentals are atrocious. It’s a market that has been rigged by the world’s central banks.Ever cheaper financing has pushed multifamily housing prices into the stratosphere, and pushed capitalization rates into the sub-basement of history. This is where the real estate bogeymen live and thrive. If you go there, they will eat you alive.
The uptrend in multifamily housing prices isn’t about improving fundamentals. It’s about central banks constantly making real estate financing cheaper and cheaper, not to mention easier. The chart above shows that as money has gotten cheaper, virtually all of the gains in real estate prices can be attributed to the value of the financing. The market is completely at the mercy of a rise in mortgage rates. Certainly there’s an argument to be made that the Fed would never allow that, but would the assumption that mortgage rates would never rise be a prudent basis for investing today?
Following the recent revelation that the Obama administration paid Iran $400 million in ransom money to release 4 US hostages, perhaps Tehran was looking for a tip, because moments ago a US defense official said that four Iranian ships carried out a "high speed intercept" of a US destroyer in the strait of hormuz, an incident that the official dubbed "unsafe and unprofessional", cited by Reuters.
FOUR IRANIAN MILITARY VESSELS CARRIED OUT "HIGH SPEED INTERCEPT" OF U.S. DESTROYER IN VICINITY OF STRAIT OF HORMUZ ON AUG 23 - U.S DEFENSE
By The Foundation for Economic Education. Originally published at ValueWalk.
Netflix’s Little Prince Champions The Freedom Of Children
The Little Prince, which Netflix released this month, is a charming story about retaining our child-like curiosity throughout our lives. The film recounts two different stories; one follows the story of Antoine de Sain...
Dirk Bezemer is a professor of economics at the University of Groningen, the Netherlands. Michael Hudson is a distinguished research professor of economics at the University of Missouri, Kansas City, and a professor at Peking University. The authors thank the editor and two anonymous referees for helpful suggestions that gr...
This morning's release of the July Existing-Home Sales decreased from the previous month to a seasonally adjusted annual rate of 5.39 million units from 5.57 million in June. The Investing.com consensus was for 5.51 million. The latest number represents a 3.2% decrease from the previous month and a 1.6% decrease year-over-year.
Here is an excerpt from today's report from the National Association of Realtors.
Lawrence Yun, NAR chief economist, says existing sales fell off track in July after steadily climbing the last four months. "Severely restrained inventory and the tightening grip it's putting on affordability i...
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Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer. One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."
Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.
Genetic components are the DNA sequences that are 'inherited.' Some of these genes are stronger than others in their expression (e.g., eye color). Yet, some genes turn on or off due to external factors (environmental), and it is und...
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