by William Skink
After writing yesterday’s post about the lack of affordable housing in Missoula and the economic mess in Greece, I ran across at least a half-dozen other articles I could have added.
An article at Counterpunch about The Rent Crunch unpacks what seems like the obvious solution to a lack of affordable housing: building more affordable housing. Too bad it doesn’t work that way. From the link:
Policy experts explain that the rent explosion is caused by a rental housing supply shortage and failure to keep up with demand. But if this is true, wouldn’t the solution be to simply build more housing? There is no shortage of building materials or construction workers. So why isn’t more housing built? The owners of housing respond to changes in supply and demand in a different way. They raise rents. If new housing units are built for the long term, then its to get in on the currently high and rising rents.
The change in market conditions is the lever for the owners of land and housing to extract more money from anyone who needs a roof over their head. This basic need is a means of enrichment. Many people have no land, some have a little, and a few own a lot.
When people can’t afford to live inside, they become homeless. If you happen to be one of the tens of thousands of homeless people in LA, it’s not just surviving you need to worry about. This Pando article about Google moving into town and hiring private security to harass the homeless is a good example of what municipalities probably wish they could do, but can’t (remember, just a few years ago Missoula’s City Council attempted to ban sitting on sidewalks to keep unsightly homeless people from scaring away tourist dollars).
In Hong Kong, many McDonalds become de facto homeless shelters at night because the food is cheap, employees aren’t allowed to throw people out, and 20% of people in Hong Kong live below the poverty line.
While the situation in Greece will get a lot of attention this week, Zerohedge takes a look at the worsening situation in China:
While Greece has understandably been the focal news event over the weekend – after all it has been 5 years in the making – let’s not forget that in another massive move, one geared squarely to prevent a market collapse and to avoid even further panic, the Chinese central bank cut both its policy rate and the reserve rate in a dramatic push to calm down markets after a 10% crash in just two trading days.
Which, incidentally, shows that after the Fed, the BOE, the SNB, the BOJ and the ECB, the PBOC is the latest bank to have cornered itself in a world where it must inflate the bubble at all costs or face the dire consequences. What consequences? Nomura explains:
The policy easing should be viewed as a measure to contain the risk of a hard landing or systemic crisis rather than one to achieve faster growth. In this case, the stronger-than-expected monetary easing may help stem the decline in the equity market following a 10.6% drop over the past two trading days. The positive wealth effect of the equity market on consumption or aggregate demand is limited in China, but an equity market collapse would hurt millions of mid-class households and pose great danger to the economy and social stability.
In Ukraine, a default on its debt could happen at the end of July. At least that is what Goldman Sachs is expecting:
“Ukraine will not make the July 24 coupon payment and, as a result, will enter into default at that point,” Bloomberg quotes Goldman Sachs analyst Andrew Matheny as writing in his research note on Ukraine.
The analyst also warned that Kiev will likely issue a moratorium on its foreign debt repayment plan, as it will fail to settle the disagreement with its creditors.
“We do not expect the ad hoc committee to accept Ukraine’s latest restructuring proposal.”
While Ukraine sinks deeper into civil war and fiscal insolvency, a recent deal between Russia and Germany has dealt a major blow to America’s wedge policy of preventing further Russian economic integration with Europe. Michael Whitney writes about that reality:
Here’s the scoop: Two days before the swaggering Sec-Def touched down in Germany, Gazprom announced that it was putting the finishing touches on a massive deal that would double the amount of Russian gas flowing to Germany via a second Nord Stream pipeline. The shocking announcement made it look like the clueless Carter had no idea what was going on and that his efforts to isolate Russia were a complete flop. And, make no mistake; the deal is huge, big enough to change the geopolitical calculus of the entire region.
Closer to home, Puerto Rico just announced it can’t repay its debt. The implications are significant, especially for cities and states across the US that utilize bonds to improve their communities (like Missoula did with it’s 42 million dollar parks and trails bond last year). Puerto Rico is on the hook for 70 billions dollars. From the link:
The governor of Puerto Rico has decided that the island cannot pay back more than $70 billion in debt, setting up an unprecedented financial crisis that could rock the municipal bond market and lead to higher borrowing costs for governments across the United States.
Puerto Rico’s move could roil financial markets already dealing with the turmoil of the renewed debt crisis in Greece. It also raises questions about the once-staid municipal bond market, which states and cities count on to pay upfront costs for public improvements such as roads, parks and hospitals.
For many years, those bonds were considered safe investments — but those assumptions have been shifting in recent years as a small but steady string of U.S. municipalities, including Detroit, as well as Stockton and Vallejo in California, have tumbled into bankruptcy.
The wheels are coming off the bus. Do the passengers realize a crash is imminent? When they do, it will be a mad scramble for the exits.