Power & Market

Single-Family Housing Starts Drop by Most Since 1990

01/18/2018Ryan McMaken

Housing starts usually fall from November to December. It's something that happens seasonally. This year, from November to December, housing starts for single-family houses dropped by 21.6 percent. That's the largest drop for the period since starts dropped 21.4 percent in 1990 — so it's a 27-year low.

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The drop is larger in single-family homes than in all housing units over all. For all units, the November-December drop is only at a five-year low. Back in 1990, the drop for the period was 29 percent:

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Does this indicate new weakness in housing markets? 

Using the seasonally adjusted data — I'm not using adjusted data above — NBC reports that "US housing starts down sharply on drop in single-family units" and notes December numbers "fell more than expected":

Home building increased 2.4 percent to 1.202 million units in 2017, the highest level since 2007. December's moderation in homebuilding is likely to be temporary amid strong demand for housing that is being driven by a robust labor market.

Builders, however, continue to struggle with labor and land shortages as well as more expensive lumber. A survey on Wednesday showed confidence among homebuilders slipping from an 18-year high in January. Builders expected a dip in buyer traffic and sales over the next six months.

The article mentions "more expensive lumber" but politely doesn't mention that lumber is more expensive partly due to new tariffs slapped on Canadian lumber by the Trump administration. 

There are any number of factors that go into housing starts, but if the supply of lumber is being artificially constrained, that means producers will have to build with more expensive materials, so houses will likely be more expensive. When homes are more expensive, fewer of them sell, and housing starts start to decline. 

On top of this, builders are facing slowly-increasing interest rates, which will also put downward pressure on home production. 

The NBC writer is clearly optimistic, although it's worth noting that during four of the last six months, the year-over-year change in housing starts has been negative (including all housing units). There's clearly a downward trend in growth since 2012. 

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Silent Cal on "America First"

01/17/2018Jeff Deist

The rise of Trump has dredged up old and bitter debates surrounding the concept of "America First," a position Trump frequently advocates almost unconsciously and using his own peculiar terms. Consider this tweet, from 2013, as an example of Trump expressing a populist, America First sentiment regarding both domestic and foreign policy in a few short words:

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Most progressives, neo-conservatives, and neo-liberals view this development with alarm and disdain, equating America-centric sentiment as inherently xenophobic, isolationist, and utterly incompatible with America's role as the unquestioned arbiter of world affairs. In their minds Trump harkens back to the bad old days of the America First Committee and Charles Lindbergh, days of suspicious small-mindedness and nationalism. In their eyes, America First is the cry of the Babbitts, the John Birchers, and the Deplorables. Only a provincial fool, one who fails to grasp the complexity of the modern world, could support Trump's retreat into a mythical world where America worries mostly about her own.

Some conservatives, libertarians, anti-war doves, and pro-Trump populists disagree, arguing that Trump's inward turn is exactly what is needed in a country with $20 trillion in debt and a war in Afghanistan running longer than any other in US history. Globalism, at least the political sort, has eroded American sovereignty and diminished our sense of any shared American experience. But even with Trump's revolution lurching about this is a distinctly minority viewpoint. The American media, universities, and corporate boardrooms are aligned against it, not to mention the Deep State and leaders of both political parties. 

But it remains worthwhile to consider the case for humility, rather than nativism and nationalism, as the foundation for a less ambitious and kinder set of policies—one that considers America First from the perspective of a restrained nation offering goodwill rather than direction to the world. Leave it to Silent Cal, speaking before an American Legion convention in 1925, to state the case plainly yet eloquently*:

The generally expressed desire of "America first" can not be criticized. It is a perfectly correct aspiration for our people to cherish. But the problem which we have to solve is how to make America first. It can not be done by the cultivation of national bigotry, arrogance, or selfishness. Hatreds, jealousies, and suspicions will not be productive of any benefits in this direction. Here again we must apply the rule of toleration. Because there are other peoples whose ways are not our ways, and whose thoughts are not our thoughts, we are not warranted in drawing the conclusion that they are adding nothing to the sum of civilization. We can make little contribution to the welfare of humanity on the theory that we are a superior people and all others are an inferior people. We do not need to be too loud in the assertion of our own righteousness. It is true that we live under most favorable circumstances. But before we come to the final and irrevocable decision that we are better than everybody else we need to consider what we might do if we had their provocations and their difficulties. We are not likely to improve our own condition or help humanity very much until we come to the sympathetic understanding that human nature is about the same everywhere, that it is rather evenly distributed over the surface of the earth, and that we are all united in a common brotherhood. We can only make America first in the true sense which that means by cultivating a spirit of friendship and good will, by the exercise of the virtues of patience and forbearance, by being "plenteous in mercy," and through progress at home and helpfulness abroad standing as an example of real service to humanity.

This is the point Ron Paul worked valiantly to make in 2008 and 2012, with his audacious references to the Golden Rule and calls for American to lead by example rather than force. It's at the core of what Murray Rothbard called the "key to the whole libertarian business," the foundational question of war and peace. We believe in liberty not because we know what's best for the world, but precisely because we don't know— and neither do politicians and elites. Washington, DC cannot competently address the needs and hopes of 320 million Americans, much less 7.5 billion people around the world. Humility, rather than hubris, compels us to advocate market cooperation, voluntary civil society, and peace rather than top-down political control. But hubris is at the core of everything the state does, and it's at the core of the worldview of those who hate Ron Paul precisely because he challenged the federal state's omniscience in his campaign. Given the state of affairs here at home, and our simmering domestic Cold Civil War, perhaps 2018 should be the year America takes a break from lecturing down to, bribing, cajoling, threatening, and warring with the rest of the world.

*h/t to The Federalist for unearthing this great speech.

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Switzerland Bans Welfare Recipients From Obtaining Citizenship

01/11/2018Ryan McMaken

Swiss news site The Local reports that new laws taking effect this month will make it even more difficult for immigrants to obtain citizenship. 

It has apparently been established law for some time that immigrants collecting social benefits are barred from naturalization. The new law, however, now also prohibits naturalization if an applicant has accepted social benefits at any time during the previous three years. 

An exception is made if the benefits "are paid back in full." 

On the other hand, applicants for citizenship now must only have resided in Switzerland for ten years instead of 12, as was the case before the new law took effect. 

It's important to make a distinction here. The change in law is not saying the recipients on social welfare will be deported. It is merely closing them off from citizenship until they can demonstrate they do not require social assistance. 

There is a difference here between residency and naturalization, and the two ought not to be confused. The state is quite flexible with legal residency. The rules for extending citizenship, though, are far more rigorous. 

Indeed, Switzerland has a large number of foreign born residents, and its economy includes many immigrant workers. 

Unlike many other nations, though, the Swiss recognize that the political system is distinct from the economic system, and admitting a migrant to the Swiss economic sphere does not necessarily mean the state must also grant access to the political sphere. 

Moreover, in nearly all cases, immigrants residing in Switzerland have citizenship. They're simply citizens somewhere else. (Swiss law specifically protects immigrant residents from deportation in case of statelessness.)

This is true everywhere, of course. Non-resident immigrants residing in the US, for example, are already citizens. They're simply citizens somewhere else. This fact is confused by the usage of phrases like "illegal alien" or "undocumented worker" which ignore the actual citizenship status of these workers. In most cases, the term "foreign national" — which highlights the fact these people are not stateless — is really more useful than "illegal immigrant." 

After all, the "illegality" of an immigrant is a totally arbitrary status made up by government bureaucrats, and is no more morally legitimate than the term "illegal drugs." In both cases, the only difference between legal and illegal is some government paperwork. 

On the other hand, there is no clear reason why foreign nationals residing anywhere ought to be given an easy path to citizenship, especially in cases where those residents rely on taxpayer funded services. 

This position, by the way, need not violate the property rights of immigrant residents. After all, property rights exist everywhere, regardless of location, and a respect for property rights suggests that persons ought to be allowed to freely contract with others for employment, housing, and other goods — regardless of an arbitrary government decree of illegality. 

In a 2017 column titled "Don't Confuse Immigration with Naturalization," I explore this topic further.

Preferably, access to the economic system is open to anyone with whom persons are willing to contract, whether they be employers, landlords, shopkeepers, and potential customers for new immigrant-owned businesses. Given that people tend to be quite open to economic ties with others, accessing the economic sphere has long been quite easy for immigrants to the United States. This is precisely because the economic sphere is relatively free and open in the US. 

Granting access to the political sphere, however, opens up a variety of other problems, such as extending access to the ballot box, and encouraging the use of political power to enrich one's self or one's own group. This problem is hardly unique to immigrants, as I've explained here, but as the Swiss understand, restricting access to the political system in this case is often quite prudent. Thus, is makes sense to be open to migration, while being less open with the extension of citizenship privileges. 

The ideal, of course, is to shrink the political sphere in such a way that citizenship ceases to be important. In a laissez faire economy where the state has only a tiny role in the regulation and ownership of property, then it would not be terribly important if one enjoys citizenship or not. The free exercise of one's property rights would be assured regardless. 

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Sessions to Renew War on Cannabis

01/04/2018Mark Thornton

According to multiple sources, Attorney General Jeff Sessions is going to revoke the Obama-era Cole Memo, which directed federal law enforcement to respect states' marijuana legalization laws. Once revoked, federal prosecutors in states where marijuana has been legalized will independently decide how to enforce federal marijuana policy in their states. This could create chaos in the fast-growing cannabis business which has been creating large numbers of jobs and burgeoning tax revenues for state and local governments.

It is unclear how Mr. Sessions thinks that such a move would benefit Sessions or help him carry out his job, other than repealing an Obama-era rule might get him back into the graces of President Trump.

The only other option is that Session is supposed to help address the Opioid Crisis. He thinks that cannabis has somehow contributed to the crisis ala the Gateway Theory of drugs, which assumes that cannabis smokers will turn into heroin addicts. The Gateway Theory has long been debunked for many reasons. In fact, cannabis and cannabis legalization has actually reduced the crisis somewhat. Cannabis is now being successfully used to treat opioid addiction. In states that have legalized cannabis, the number of opioid overdose deaths have actually decreased.

In any case, it will be interesting to see how people react to a new crackdown on cannabis in states that have successfully repealed federal law and enjoy very positive results.

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Stringham: Don't Bet on a Strong Dollar

Dr. Edward Stringham was quoted today in US News in an article on investing in a strong dollar next year.

His advice? Friends don't let friends bet on a strong dollar.

[B]etting on the dollar can be risky, as it tends to lose value over the long term rather than gain, says Edward P. Stringham, president of the American Institute for Economic Research.

"While it remains to be seen what will happen to the specific value of the dollar over the next year, the [U.S. Federal Reserve] has a fairly established record of increasing the money supply and decreasing the value of the dollar over the long run," Stringham says. "A dollar was defined as 1/20th of an ounce of gold up until 1934 and now a dollar buys 1/1,200th of an ounce. People with assets or pensions tied up in dollars see their savings or retirement whittled away."

The gradual fall of the dollar means it's hazardous to keep too much in assets like bank savings for the long term. 

Read the full article here.

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Sources Claim Janet Yellen Will Not Be Re-Appointed

10/26/2017Ryan McMaken

According to Politico:

On Wednesday, one top [Morning Money] source who talks regularly to President Trump said the only finalists are Jay Powell and John Taylor and the question is just which one gets it. This person said Janet Yellen is out as is Kevin Warsh. Gary Cohn, as we’ve reported, has been out of it for weeks now. But…

We've discussed Jay Powell here before as "a full endorsement of the status quo in terms of monetary policy." John Taylor, of course, is founder of the Taylor Rule, which is highly overrated and has been dissected here and here

Other candidates, remain of course, but as Ron Paul noted earlier this week, everything we're looking at is just more of the same.

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