The return of irrational exuberance to Las Vegas: The growing worries of another Las Vegas housing bubble.
It is rather clear that large institutional investors are diving into investment real estate once again. This time these investors are supplanting individuals but are targeting very familiar markets in Arizona, Nevada, and Florida. One of those markets is Las Vegas. Las Vegas had one of the most spectacular real estate bubbles that we have seen in this generation. The housing bubble was not evenly distributed. You had places across the nation that barely saw the signs of a housing bubble and then you had places like Las Vegas. The glamour and lights in the Southwest Desert.   You had home values rising close to 140 percent from 2000 to their peak in 2007 like some sort of real estate Icarus. The bust was equally spectacular. Today you are seeing the same kind of fervor in the market but this time it is being driven by hungry institutional investors. There are clear signs that Las Vegas real estate is in some form of bubble albeit different from the last one.
Bread, butter, and food stamp economy: Is the US developing a permanent under-class of citizens economically?
The American economy has developed a deep disconnect between its financial markets and the working and middle class. The stock market has soared by 138 percent from the low reached in 2009. Yet very little of this has trickled down to the majority of Americans. In fact, most Americans actually saw little to negative growth in their net worth over this period. Even more problematic is the emergence of a permanent working poor in spite of a booming stock market. Over 47 million Americans are still receiving food stamps on a monthly basis. Not only has this number remained high, there is now an economy that is building up around servicing the needs of this large constituency. Why wouldn’t there be a new booming market here? Nearly one out of every six Americans is on food assistance in the most prosperous country in the world. Doesn’t exactly go hand and hand with the perception of a record breaking stock market. Is the US and the current economy developing a permanent under-class of citizens?
Rationalizing and pushing the debt limit: The academic battle to open the gates on unlimited digital debt monetization.
One of the recent cases for the never ending expansion of debt purchases via central banks is the case of the Bank of Japan. The BoJ has essentially gone into hyper-drive with their version of quantitative easing by going straight into the Nikkei. The case seemed simple: the European Union mired in austerity measures has failed whereas the US and now Japan in full QE mode were the models for ever expanding bank balances sheets. While the case for the working and middle class is still to be made in these nations, it is the case that GDP has expanded but how much of this has come because of financial speculation and additional risky behavior caused by easy debt. Well Japan is experiencing a quick correction in a few short weeks. The Nikkei is now down over 16 percent from the peak reached in May. This quick reversal is suddenly getting rationalized as some sort of market adjustment. Yet if you saw an individual that was in financial trouble because of debt the last thing you would offer them is more debt. That seems to be the recipe for success according to central banks.
Why inflation matters: How the Fed is creating real estate inflation and hiding behind inflation data to continue their expansionary ways. OER and Case Shiller divergence.
Inflation matters. It matters a lot. Contrary to what you may hear in the mainstream press the Federal Reserve has done everything to stoke the fires of inflation. The reasons for this include creating asset inflation that is understated in CPI data and also setting up a system where consumption is almost forced upon consumers. How so? With negative interest rates consumers are losing money by simply having their money in a savings account. Even a modest rate of inflation will erode purchasing power when banks are paying zero percent on your hard earned deposits. Yet this is all part of the design. Inflation matters because it does encourage spending. You want to spend today given that your current dollars will lose value tomorrow. The Fed likes inflation so much that it has reignited the housing market once again while it has expanded its balance sheet to over $3.3 trillion. Inflation absolutely matters.