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Economy

Market Talk – December 4, 2019

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ASIA:

US President Donald Trump sounded a little more optimistic over the trade deal with China today, having stated that current talks are going very well. Yesterday, President Trump sent the market into a slight frenzy suggesting that perhaps it would be better to wait until after the elections in November next year to conclude any deal. Still, there remains pressing issues between the two countries mainly the issue with Hong Kong and the Xinjiang region. Regarding the Xinjiang region, the US passed a bill that can enable sanctions on ministers who are involved with the Chinese treatment of Uighurs.

Japan and the US have now concluded a trade deal that passed through the Japanese upper house today. The initial deal was drawn out at the start of the year when Japanese Prime Minister Shinzo Abe and US President Donald Trump met. Some critics are pointing to a US victory in the deal as a 2.5% tariff remains on any Japanese cars exported to the US.

India has passed a Citizenship Act Amendment Bill which will allow many Sikhs, Hindus, and other religious minorities who have fled Pakistan, Bangladesh, and Afghanistan to take refuge in India. There was some criticism of the bill as it omitted those of the Muslim faith, however, President Modi’s camp said that those of the Muslim faith would not be required to use the bill as they can take refuge in Islamic nations across the globe.

The major Asian stock markets had a mixed day today:

  • Shanghai decreased 6.58 points or -0.23% to 2,878.12
  • Kospi decreased -15.18 points or -0.73% to 2,068.89
  • ASX 200 decreased 105.80 points or -1.58% to 6,606.50
  • NIKKEI 225 decreased 244.58 points or -1.05% to 23,135.23
  • Hang Seng decreased 328.74 points or -1.25% to 26,062.56
  • SENSEX increased 174.84 points or 0.43% to 40,850.29

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.0003 or -0.05% to 0.68459
  • NZDUSD increased 0.0012 or 0.18% to 0.6528
  • USDJPY increased 0.1910 or 0.18% to 108.8240
  • USDCNY decreased 0.0182 or 0.26% to 7.0502

Precious Metals:

  • Gold decreased 3.40 USD/t oz. or -0.23% to 1,475.32
  • Silver decreased 0.26 USD/t. oz or -1.50%% to 16.9318

Some economic news from last night:

China:

Caixin Services PMI (Nov) increased from 51.1 to 53.5

Chinese Composite PMI (Nov) increased from 52.0 to 53.2

Japan:

Services PMI (Nov) increased from 49.7to 50.3

South Korea:

FX Reserves – USD (Nov) increased from 406.32B to 407.46B

Hong Kong:

Manufacturing PMI (Nov) decreased from 39.3 to 38.5

Australia:

AIG Services Index (Nov) decreased from 54.2 to 53.7

Services PMI decreased from 50.1 to 49.7

GDP (YoY) (Q3) increased from 1.4% to 1.7%

GDP (QoQ) (Q3) dccreased from 0.5% to 0.4%

GDP Capital Expenditure (Q3) increased from -1.7% to -0.2%

GDP Chain Price Index (Q3) decreased from 1.2% to 0.7%

GDP Final Consumption (Q3) decreased from 1.0% to 0.3%

New Zealand:

ANZ Commodity Price Index (MoM) increased from 1.2% to 4.3%

Some economic news from today:

India:

Nikkei Services PMI (Nov) increased from 49.2 to 52.7

EUROPE/EMEA:

Latest in the UK Brexit case is that UK PM Boris Johnson is seemly failing to rule out leaving the EU on WTO terms. The UK Foreign Secretary Dominic Raab backed the PM by saying he is absolutely right to be leaving a “no-deal” outcome on the table during negotiations. During questioning, the PM failed to criticise Raab but said, “We have a great deal. It’s going to allow us to come out smoothly and efficiently on 31 January.” A leaked document by the Conservatives shows that they are considering that the Brexit negotiations could lead on for years even with the withdrawal agreement passed. Labour and Lib Dem members were quick to comment on the leaked document, stating that PM Boris Johnson could not be trusted and that a realistic trade deal cannot be passed as quickly as they promise.

The situation in Iran is apparently getting worse as there was a major crackdown on protesters yesterday. A human rights organization believes that at least 208 people have now died since the protests began. Still, the country has an internet blackout after the government raised prices and placed quotas on petroleum. Meanwhile, Iran has announced a joint naval exercise with Russia and China in the Indian Ocean, which is expected to commence at the end of the year.

Turkey has lowered their opposition to the NATO Baltic plan, as they have now agreed to support the deal which will bolster the defences of the Baltic states and Poland against Russia. Initially, Turkey was against such a deal as they received a hard time with regards to their battle with the YPG in Syria.

France is battling internally with transportation strikes as they brace for potentially the worst strike in decades. The strikes are expected to commence tomorrow on the 5th of December with the country expected to be forced to a standstill.

The major Europe stock markets had a green day today:

  • CAC 40 increased 72.47 points or 1.27% to 5,799.68
  • FTSE 100 increased 29.74 points, or 0.42% to 7,188.50
  • DAX 30 increased 151.28 points or 1.16% to 13,140.57

The major Europe currency markets had a green day today:

  • EURUSD increased 0.00089 or 0.08% to 1.10899
  • GBPUSD increased 0.01107 or 0.85% to 1.31077
  • USDCHF increased 0.0014 or 0.14% to 0.9885

Some economic news from Europe today:

Norway:

Current Account (Q3) decreased from 26.5B to 23.9B

House Price Index (YoY) (Nov) increased from 2.4% to 3.1%

Spain:

Spanish Services PMI (Nov) increased from 52.7 to 53.2

Italy:

Italian Composite PMI (Nov) decreased from 50.8 to 49.6

Italian Services PMI (Nov) decreased from 52.2 to 50.4

France:

French Markit Composite PMI (Nov) decreased from 52.6 to 52.1

French Services PMI (Nov) decreased from 52.9 to 52.2

Germany:

German Composite PMI (Nov) increased from 48.9 to 49.4

German Services PMI (Nov) increased from 51.6 to 51.7

Euro Zone:

Markit Composite PMI (Nov) remain the same at 50.6

Services PMI (Nov) decreased from 52.2 to 51.9

UK:

Composite PMI (Nov) decreased from 50.0 to 49.3

Services PMI (Nov) decreased from 50.0 to 49.3

US/AMERICAS:

The NATO summit in London wrapped up today, and it appears progress has been made between NATO members. Members have agreed to increase their annual spending by a combined $130 billion and that figure is expected to increase to $400 billion by 2024. Currently, only nine members are meeting their 2% of GDP spending requirement. Britain, Poland, Estonia, Latvia, Lithuania, Greece, Bulgaria, Romania, and the US are all expected to meet their spending requirements this year.

Expected controversies occurred during the event. French, Canadian, and UK leaders were secretly recorded on a hot mic mocking US President Trump. During a press conference with Germany’s Merkel, Trump responded to the incident by calling Canadian PM Trudeau “two-faced” and upset that Canada failed to meet the 2% spending requirement. The incident likely worsened relations between Macron and Trump after their spat on Tuesday. However, the White House called France “a partner of the United States in many key ventures.”

President Trump came out in favor of the Iranian protesters, much to the dismay of the Iranian authorities. Yesterday, Iran declared that the US owes them $130 billion to compensate for losses due to sanctions.

The Bank of Canada (BoC) announced this Wednesday that they will hold the current benchmark rate at 1.75%. Unlike the majority of central banks who have opted to lower rates, the BoC has continued to stick to the course. Canada’s central bank sees an uptick in the overall global economy as well as future growth in the upcoming years. “Financial markets have been supported by central bank actions and waning recession concerns, while being buffeted by news on the trade front. Indeed, ongoing trade conflicts and related uncertainty are still weighing on global economic activity, and remain the biggest source of risk to the outlook. In this context, commodity prices and the Canadian dollar have remained relatively stable,” the bank said in their official statement.

Third quarter growth in Canada met analysts’ expectations at 1.3%. Unlike its neighbor to the north, Canada has successfully maintained its core inflation target of around 2%. The BoC foresees inflation remaining close to target for the next two years. In addition to monitoring volatile global trade, the bank is honing in on consumer spending and housing activity in advance of the next policy decision.

US Market Closings:

  • Dow advanced 146.97 points or 0.53% to 27,649.78
  • S&P 500 advanced 19.56 points or 0.63% to 3,112.76
  • Nasdaq advanced 46.03 points or 0.54% to 8,566.67
  • Russell 2000 advanced 11.27 points or 0.70% to 1,613.90

Canada Market Closings:

  • TSX Composite advanced 5.16 or 0.03% to 16,897.34
  • TSX 60 advanced 0.04 of a point or 0% to 1,009.00

Brazil Market Closing:

  • Bovespa advanced 1,344.91 points or 1.23% to 110,300.93

ENERGY:

The EIA reported a crude oil inventory draw of 4.9 million barrels for the week to November 29th, which caused crude to move up by nearly 4%. Analyst had expected there to be a slight build in Crude. The OPEC+ meeting is due to happen this week in Vienna where Iraq’s oil minister told reporters that a deep cut to production is “preferred by a number of key members.”

The oil markets had a mixed day today:

  • Crude Oil increased 2.0708 USD/BBL or 3.67% to 58.5672
  • Brent increased 2.154 USD/BBL or 3.52% to 63.3932
  • Natural gas decreased 0.059 USD/MMBtu or -2.41% to 2.3899
  • Gasoline increased 0.0477USD/GAL or 3.04% to 1.6151
  • Heating oil increased 0.0496 USD/GAL or 2.63% to 1.9386
  • Top commodity gainers: Ethanol (4.79%),Crude Oil(3.67%),Brent(3.52%), and Gasoline(3.04%)
  • Top commodity losers: Cheese (-5.67%), Milk (-5.05%), Steel (-4.18%), and Natural Gas (-2.41%)

The above data was collected around 11:25 am EST on Wednesday.

BONDS:

Japan -0.02%(+3bp), US 2’s 1.56% (+2bps), US 10’s 1.74%(+3bps), US 30’s 2.20%(+5bps), Bunds -0.35% (-7bp), France -0.04% (-7bp), Italy 1.37% (-4bp), Turkey 12.00% (+11bp), Greece 1.58% (-50bp), Portugal 0.37% (-1bp), Spain 0.43% (-0bp) and UK Gilts 0.71% (+4bp).

  • German 10-Year Bund Auction decreased from -0.290% to -0.330%

 



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Economy

Bonus Quotation of the Day…

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… is from page 426 of the late Jan Tumlir’s January 1984 speech at the Cato Institute – a speech titled “Economic Policy for a Stable World Order” – as this speech is reprinted in Dollars, Deficits, & Trade (James A. Dorn and William A. Niskanen, eds., 1989):

Indeed the difficulty for the economist may now lie in explaining why the world economy still functions at all, however dissatisfied we may be with its functioning. The answer is, of course, that there is a lot of ruin in any economy with a modicum of freedom. I am sometimes unsure whether it is actually an advantage of the capitalist system that it can take such an enormous amount of beating. If it were in the habit of collapsing more frequently, we would perhaps govern ourselves more prudently (and more cheaply to boot).

DBx: Indeed.

I’ve long argued that the economist’s standard assertion that government intervenes into the economy first and foremost to correct market failures fails spectacularly as a positive theory of government intervention into the economy. It’s far closer to the truth to say that government intervention into the economy is fueled not by market failures (as understood by economists) but, rather by the market’s astonishing success and robustness.

The market’s success at raising people’s standards of living creates the expectation that wealth creation is easy and normal while poverty is out of the ordinary. But of course historically poverty is the norm – and poverty so deep, unrelenting, and overwhelming that few Americans today can begin to imagine a condition so crushing. Because the market makes wealth so abundant and its production appear to be normal and easy to the point of being practically automatic – and because nearly all of the massive number of details of the intricate processes at work at every moment to create wealth are hidden from view – the market’s ‘failure’ to create heaven on earth is believed by many to be an unanswerable indictment of the market.

On top of this ‘problem’ is the market’s mighty robustness: tax it, saddle it with diktats, poison it with easy money, accuse it of being run by and for demons and devils, and the market keeps motoring along, improving the lives even of those who most hate it and who do the most to harass it. The market works less well than it would absent these intrusions, of course, but it still works surprisingly well. As long as, and insofar as, prices and wages are allowed to adjust according to the forces of supply and demand, the market’s robustness is Herculean. (The market is not, however, indestructible. Harass it too much and it will quit working.)

If the market truly collapsed completely more often, giving people a taste of what life is like without it, the world would have in it not only far fewer communists and socialists, but also far fewer “Progressives” and “conservative nationalists.”

The market’s true failure, in short, lies is its incredible capacity to succeed and to keep on keeping on. The market fails to prevent people from taking it for granted.

The post Bonus Quotation of the Day… appeared first on Cafe Hayek.



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Economy

Market Talk – December 12, 2019

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ASIA:

According to reports from Reuters, China is trying to propose a plan to promote Macau to be its next “Hong Kong” by building it into a world-leading financial center. China unveiled plans of creating a yuan-denominated stock exchange, as well as allocating extra land to Macau for it to grow. The region was a former Portuguese colony and will target companies from Portuguese speaking countries such as Brazil in order to avoid direct competition with China and the mainland.

Indian Parliament passed Citizenship Amendment Bill on 11-Dec-2019, which proposes to accord citizenship to illegal Hindu, Sikh, Buddhist, Jains, Parsis and Christian migrants from Pakistan, Bangladesh and Afghanistan. It, naturally, implies that migrants, who identify themselves with any group or community other than those mentioned above, from these countries won’t be eligible for citizenship. The bill also relaxes the provisions for “Citizenship by naturalization.” The proposed law reduces the duration of residency from the existing 11 years to just five years for people belonging to the same six religions and three countries. The bill covers six communities namely Hindu, Sikh, Buddhists, Jains, Parsis and Christian migrants from Pakistan, Bangladesh and Afghanistan.

The Indian government has prohibited gift imports through e-commerce portals except life-saving drugs and rakhi. The import of goods was earlier free and not subject to customs duties. The move will impact Chinese e-commerce web sites like Club Factory, Ali Express and Shein who are the largest users of this route.

The US reprimanded Pakistan Air Force chief for misusing F-16 fighter jets by undermining their shared security platforms and infrastructures months after the Indian Air Force shot down an F-16 jet of Pakistan Air Force during an aerial combat over Kashmir. Andrea Thompson, the then-undersecretary of State for Arms Control and International Security Affairs, wrote a letter to Pakistani Air Force Chief Air Chief Marshal Mujahid Anwar Khan in August over the matter.

The major Asian stock markets had a mixed day today:

  • Shanghai decreased 8.72 points or -0.30% to 2,915.70
  • Kospi increased 31.73 points or 1.51% to 2,137.35
  • ASX 200 decreased 43.80 points or -0.65% to 6,708.80
  • NIKKEI 225 increased 32.95 points or 0.14% to 23,424.81
  • Hang Seng increased 348.71 points or 1.31% to 26,994.14
  • SENSEX increased 169.14 points or 0.42% to 40,581.71

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.00241 or 0.35% to 0.68931
  • NZDUSD increased 0.00003 or 0.00% to 0.65823
  • USDJPY increased 0.5860 or 0.54% to 109.1310
  • USDCNY decreased 0.04597 or -0.65% to 6.98293

Precious Metals:

  • Gold decreased 5.54 USD/t oz. or -0.38% to 1,470.81
  • Silver increased 0.013 USD/t. oz or 0.08%% to 16.9207

Some economic news from last night:

Singapore:

Unemployment Rate (Q3) remain the same at 2.3%

Japan:

Core Machinery Orders (MoM) (Oct) decreased from -2.9% to -6.0%

Core Machinery Orders (YoY) (Oct) decreased from 5.1% to -6.1%

Foreign Bonds Buying increased from -511.1B to 235.8B

Foreign Investments in Japanese Stocks decreased from 394.0B to -200.4B

Australia:

MI Inflation Expectations remain the same at 4.0%

New Zealand:

External Migration & Visitors (Oct) decreased from 1.40% to 0.10%

FPI (MoM) (Nov) decreased from -0.3% to -0.7%

Permanent/Long-Term Migration (Oct) decreased from 4,290 to 4,120

Visitor Arrivals (MoM) increased from -0.1% to 0.0%

Some economic news from today:

Singapore:

Retail Sales (MoM) (Oct) decreased from 2.0% to -2.2%

Retail Sales (YoY) (Oct) decreased from -2.1% to -4.3%

India:

CPI (YoY) (Nov) increased from 4.62% to 5.54%

Cumulative Industrial Production (Oct) decreased from 1.30% to 0.50%

Industrial Production (YoY) (Oct) increased from -4.3% to -3.8%

Manufacturing Output (MoM) (Oct) increased from -4.0% to -2.1%

EUROPE/EMEA:

UK elections went underway today, with still the outcome being unpredictable. The election results will be counted out in the morning. Yesterday, both Labour and Conservatives gave their final pitches with PM Boris Johnson saying his side was the only side who can bring Brexit forward.

France is gearing up for another round of strikes tomorrow over the proposed reforms of the pension plan and age of retirement.

According to the WSJ, Saudi Arabia is seeking to defuse the situation with Iran, with the Pakistani FM acting as a mediator between the two.

The US senate comittee has now officially signed off a bill which places sanctions on Turkey over thier recent purchase of the S-400 missile defense system.

The major Europe stock markets had a green day today:

  • CAC 40 increased 23.39 points or 0.40% to 5,884.26
  • FTSE 100 increased 57.22 points, or 0.79% to 7,273.47
  • DAX 30 increased 74.90 points or 0.57% to 13,221.64

The major Europe currency markets had a mixed day today:

  • EURUSD decreased 0.00204 or -0.18% to 1.11126
  • GBPUSD decreased 0.00821 or -0.62% to 1.31169
  • USDCHF increased 0.00346 or 0.35% to 0.98606

Some economic news from Europe today:

UK:

Thomson Reuters IPSOS PCSI (Dec) increased from 47.8 to 48.5

RICS House Price Balance (Nov) decreased from -6% to -12%

Germany:

Germany Thomson Reuters IPSOS PCSI (Dec) decreased from 53.55 to 53.43

German CPI (YoY) (Nov) remain the same at 1.1%

German CPI (MoM) (Nov) decreased from 0.1% to -0.8%

German HICP (YoY) (Nov) increased from 0.9% to 1.2%

German HICP (MoM) (Nov) decreased from 0.1% to -0.8%

Swiss:

SNB Interest Rate Decision remain the same at -0.75%

PPI (YoY) (Nov) decreased from -2.4% to -2.5%

PPI (MoM) (Nov) decreased from -0.2% to -0.4%

France:

France Thomson Reuters IPSOS PCSI (Dec) decreased from 43.69 to 42.49

French CPI (YoY) increased from 0.8% to 1.0%

French CPI (MoM) (Nov) decreased from 0.0% to -0.1%

French HICP (YoY) (Nov) increased from 0.9% to 1.2%

French HICP (MoM) (Nov) increased from -0.1% to 0.1%

Italy:

Italian Quarterly Unemployment Rate decreased from 9.9% to 9.8%

Italy Thomson Reuters IPSOS PCSI (Dec) increased from 38.88 to 40.11

Euro Zone:

Industrial Production (YoY) (Oct) decreased from -1.8% to -2.2%

Industrial Production (MoM) (Oct) decreased from -0.1% to -0.5%

Deposit Facility Rate (Dec) remain the same at -0.50%

ECB Marginal Lending Facility remain the same at 0.25%

ECB Interest Rate Decision (Dec) remain the same at 0.00%

US/AMERICAS:

The US-China trade deal is close to completion, according to President Trump. “Getting VERY close to a BIG DEAL with China. They want it, and so do we!” he posted this Thursday. CNBC reported that US negotiators are ready to cancel the new tariffs and cut existing tariffs by 50% ($360 billion). With only three days left before the US imposes an additional $156 billion on Chinese goods, time is of the essence.

Bank of Canada Governor Stephen Poloz sees Canada’s economy expanding in the new year at a steady. Last week, the central bank voted to maintain the target rate at 1.75% where it has remained for over a year. Growing government debt, not just in Canada, is one of Poloz’s main concerns. “Experience shows that high debt levels can amplify the impact of a shock on the economy,” the governor stated. Poloz expressed concerns over global trade as well, stating that companies are dismantling supply chains in favor of cheaper, less effective, options.

Canada’s Conservative Party Leader Andrew Scheer resigned this Thursday. Scheer’s resignation comes after it was revealed that he used Conservative Party funds to pay for his children to attend private school. Dustin van Vugt, executive director of the party, may be forced to resign as well for similar reasons.

Brazil’s central bank voted in favor of dropping the target rate to 4.5%. “Essential conditions for sustained growth were laid down in 2019. Brazil is ready for a new development cycle,” stated Waldery Rodrigues, special secretary to Brazil’s Economy Ministry. Brazil certainly amped up efforts to build business, attract foreign and domestic capital, lower the debt ceiling, and solve the ongoing pension crisis. However, the pension dilemma is ongoing as are domestic conflicts such as the Amazon wildfires. Unemployment remains high at 11.6%, but is expected to decline in the new year. The government cited optimism about continued economic growth and predicts GDP to rise to 2.3% in 2020.

US Market Closings:

  • Dow advanced 220.75 points or 0.79% to 28,132.75
  • S&P 500 advanced 26.94 points or 0.86% to 3,168.57
  • Nasdaq advanced 63.27 points or 0.73% to 8,717.32
  • Russell 2000 advanced 12.89 points or 0.79% to 1,644.81

Canada Market Closings:

  • TSX Composite advanced 7.29 points or 0.04% to 16,946.90
  • TSX 60 advanced 1.56 points or 0.15% to 1,012.93

Brazil Market Closing:

  • Bovespa advanced 1,235.87 points or 1.11% to 112,199.74

ENERGY:

The IEA report was released this week which was contrary to the OPEC optimism for demand.

The oil markets had a green day today:

  • Crude Oil increased 0.4992 USD/BBL or 0.85% to 59.3943
  • Brent increased 0.4959 USD/BBL or 0.78% to 64.3858
  • Natural gas increased 0.0381 USD/MMBtu or 1.68% to 2.3095
  • Gasoline increased 0.0032USD/GAL or 0.20% to 1.6422
  • Heating oil increased 0.0141 USD/GAL or 0.73% to 1.9477
  • Top commodity gainers: Wheat(2.16%),Steel(13.28%),Ethanol(1.90%), and Natural Gas(1.68%)
  • Top commodity losers: Cocoa(-9.37%), Oat(-5.03%), Baltic Dry (-4.93%), and Orange Juice(-0.97%)

The above data was collected around 12:40 EST on Thursday.

BONDS:

Japan -0.02%(-2bp), US 2’s 1.63% (+2bps), US 10’s 1.88%(+9bps);US 30’s 2.24%(+2bps), Bunds -0.32% (-0bp), France 0.03% (-1bp), Italy 1.34% (+2bp), Turkey 12.10% (-8bp), Greece 1.39% (-61bp), Portugal 0.41% (+5bp), Spain 0.47% (+4bp) and UK Gilts 0.82% (+5bp).

  • US 30-Year Bond Auction decreased from 2.430% to 2.307%
  • US 4-Week Bill Auction increased from 1.500% to 1.540%
  • US 8-Week Bill Auction increased from 1.520% to 1.540%

 



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Economy

Was There a Housing Bubble?, by David Henderson

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In his recent book Shut Out, Kevin Erdmann, a finance expert and visiting fellow at the Mercatus Center at George Mason University, has two main messages. The first, which is not controversial among economists, is that restrictions on residential construction in coastal California and the urban Northeast have constrained supply so much that housing in those areas is virtually unaffordable for people in the lower- and middle-income classes. His other message is more controversial, that the financial crisis last decade was not due to a housing bubble but, rather, to bad policy decisions based on the idea that there had been a bubble. Whereas I was already convinced of his first point, I, like the majority of economists, was skeptical of his second. But because of all the data and reasoning he brings to the issue, I now find myself at least 90% convinced.

Probably because his second point is the more controversial, Erdmann spends about the first half of the book making that case. At times his narrative gets bogged down and his language is often sloppy. For example, he uses the word “shortage” to refer to a situation where demand increases but supply doesn’t. Economists, however, tend to reserve that word for situations where the price fails to clear the market such that quantity demanded exceeds the quantity supplied. The good news is that he often saves the day with pithy, clever quotes that sum up his message. Also, the more than 100 graphs he uses in the book seem like overkill, but that is better than underkill.

 

Types of cities / Erdmann makes his case by looking at the diverse characteristics of U.S. cities rather than lumping them all together, and by studying changes in housing prices and rents over time. He focuses on the 20 largest U.S. metropolitan areas and divides them into four categories: Closed Access cities, Contagion cities, Open Access cities, and Uncategorized cities. The five Closed Access cities are New York City, Los Angeles, Boston, San Francisco (including San Jose), and San Diego. In those cities, local and state governments have imposed strong restrictions on construction.

Erdmann seems a little vague about when those restrictions got really tight. His narrative suggests that it was in the 1990s, but there’s no index to help one look for a clear answer; he did confirm in an email to me that he dates it to 1995. In those cities, housing starts, even in economic expansions, have been low, incomes have been high, rents have been high (and rising) even relative to incomes, and there were large rates of out-migration of households with low incomes.

The above are the opening 4 paragraphs of David R. Henderson, “Was There a Housing Bubble Last Decade?Regulation, Winter 2019/2020, pp. 63-65. Read the whole thing. [Scroll down about 60 percent of the way.]

Thanks to Jeff Hummel for improving a previous draft and to Kevin Erdmann for promptly answering the questions I emailed him.

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