Random Economic Posts

[LFC]

Hundreds of PPP loans went to fake farms.

The shoreline communities of Ocean County, New Jersey, are a summertime getaway for throngs of urbanites, lined with vacation homes and ice cream parlors. Not exactly pastoral — which is odd, considering dozens of Paycheck Protection Program loans to supposed farms that flowed into the beach towns last year.

As the first round of the federal government’s relief program for small businesses wound down last summer, “Ritter Wheat Club” and “Deely Nuts,” ostensibly a wheat farm and a tree nut farm, each got $20,833, the maximum amount available for sole proprietorships. “Tomato Cramber,” up the coast in Brielle, got $12,739, while “Seaweed Bleiman” in Manahawkin got $19,957.

None of these entities exist in New Jersey’s business records, and the owners of the homes at which they are purportedly located expressed surprise when contacted by ProPublica. One entity categorized as a cattle ranch, “Beefy King,” was registered in PPP records to the home address of Joe Mancini, the mayor of Long Beach Township.

“There’s no farming here: We’re a sandbar, for Christ’s sake,” said Mancini, reached by telephone. Mancini said that he had no cows at his home, just three dogs.

All of these loans to nonexistent businesses came through Kabbage, an online lending platform that processed nearly 300,000 PPP loans before the first round of funds ran out in August 2020, second only to Bank of America. In total, ProPublica found 378 small loans totaling $7 million to fake business entities, all of which were structured as single-person operations and received close to the largest loan for which such micro-businesses were eligible. The overwhelming majority of them are categorized as farms, even in the unlikeliest of locales, from potato fields in Palm Beach to orange groves in Minnesota.

The Kabbage pattern is only one slice of a sprawling fraud problem that has suffused the Paycheck Protection Program from its creation in March 2020 as an attempt to keep small businesses on life support while they were forced to shut down. With speed as its strongest imperative, the effort run by the federal Small Business Administration initially lacked even the most basic safeguards to prevent opportunists from submitting fabricated documentation, government watchdogs have said.

While that may have allowed millions of businesses to keep their doors open, it has also required a massive cleanup operation on the backend. The SBA’s inspector general estimated in January that the agency approved loans for 55,000 potentially ineligible businesses, and that 43,000 obtained more money than their reported payrolls would justify. The Department of Justice, relying on special agents from across the government to investigate, has brought charges against hundreds of individuals accused of gaming pandemic response programs.

Drawn by generous fees for each loan processed, Kabbage was among a band of online lenders that joined enthusiastically in originating loans through their automated platforms. That helped millions of borrowers who’d been turned down by traditional banks, but it also created more opportunities for cheating. ProPublica examined SBA loans processed by several of the most prolific online lenders and found that Kabbage appears to have originated the most loans to businesses that don’t appear to exist and the only concentration of loans to phantom farms.

In some cases, these problems would’ve been easy to spot with just a little more upfront diligence — which the program’s structure did not encourage.

[goldenvalley]

That's amazing. This Kabbage thing seems to have spun up quickly. It takes some time to access deed records to create applications for completely fictitious businesses, doesn't it? Is there an app or algorithm for that?

[LFC]

The global container shipping industry is in a clusterfunk.

Whidbey Islanders are getting a front row seat to the growing U.S. trade deficit, which is hitting record highs. It's fueled by a surge in demand for imports, mostly from East Asia. There's so much cargo being shipped to the U.S. from Asia right now that the ports of Seattle and Tacoma are chock-full of container ships.

"We are seeing a historic surge of cargo volume coming into our ports," says Tom Bellerud, the chief operations officer of The Northwest Seaport Alliance, which manages all cargo processing at the ports of Seattle and Tacoma. "The terminals are having a difficult time keeping up with processing all the cargo off these vessels fast enough."

On both land and at sea, the entire supply chain is struggling to keep up. In the Pacific Northwest, it's become such a clusterfest that the U.S. Coast Guard has been redirecting boats to anchor off the coast of Whidbey Island and other places they typically don't park. Ship crews are having to wait days, even weeks, for the chance to dock at the ports and offload their precious goods.

It's the same story up and down the West Coast. In San Francisco Bay, the traffic jam of container ships has gotten so bad that the U.S. Coast Guard has been asking ships not to enter the bay at all. Robert Blomerth, director of the USCG's San Francisco Vessel Traffic Service, said last week that there were 16 container ships waiting in the open ocean outside the Golden Gate to get in and unload their cargo. He says it's "completely abnormal."

When we spoke to Gene Seroka, the head of the Port of Los Angeles, he said his port had 19 ships waiting to dock and they're now waiting, on average, about five days to get in. In normal times, they don't have to wait at all.

Lars Jensen, CEO of Vespucci Maritime, has spent 20 years studying the industry and he says what's going on is unprecedented. "The container shipping industry is in a state of chaos that I don't think it has ever been since it was invented," he says.

[andydp]

Jun 16, 2021 17:58:42 GMT LFC said:

The global container shipping industry is in a clusterfunk.

Whidbey Islanders are getting a front row seat to the growing U.S. trade deficit, which is hitting record highs. It's fueled by a surge in demand for imports, mostly from East Asia. There's so much cargo being shipped to the U.S. from Asia right now that the ports of Seattle and Tacoma are chock-full of container ships.

"We are seeing a historic surge of cargo volume coming into our ports," says Tom Bellerud, the chief operations officer of The Northwest Seaport Alliance, which manages all cargo processing at the ports of Seattle and Tacoma. "The terminals are having a difficult time keeping up with processing all the cargo off these vessels fast enough."

On both land and at sea, the entire supply chain is struggling to keep up. In the Pacific Northwest, it's become such a clusterfest that the U.S. Coast Guard has been redirecting boats to anchor off the coast of Whidbey Island and other places they typically don't park. Ship crews are having to wait days, even weeks, for the chance to dock at the ports and offload their precious goods.

It's the same story up and down the West Coast. In San Francisco Bay, the traffic jam of container ships has gotten so bad that the U.S. Coast Guard has been asking ships not to enter the bay at all. Robert Blomerth, director of the USCG's San Francisco Vessel Traffic Service, said last week that there were 16 container ships waiting in the open ocean outside the Golden Gate to get in and unload their cargo. He says it's "completely abnormal."

When we spoke to Gene Seroka, the head of the Port of Los Angeles, he said his port had 19 ships waiting to dock and they're now waiting, on average, about five days to get in. In normal times, they don't have to wait at all.

Lars Jensen, CEO of Vespucci Maritime, has spent 20 years studying the industry and he says what's going on is unprecedented. "The container shipping industry is in a state of chaos that I don't think it has ever been since it was invented," he says.

I have friends who live on the Island.

Why the surge and backlog ? Tariffs being removed ?  Were these ships diverted from the Suez ?  There must be an underlying cause.  The container handlers don't mind making upwards of $250K/year so labor isn't the problem.  Trucks ?  

[LFC]

More housing is needed in the U.S.

The Treasury Department is waving a warning flag to Congress and other policymakers about the housing market. Its message? The country is quickly running out of homes, and you need to do something about it.

Traditionally, the federal government’s housing policies have been demand-side interventions. Things like the mortgage interest deduction, which reduces homeowner’s taxes (stimulating demand) or the Fed buying up over a trillion dollars in mortgage bonds to help bring down mortgage rates (also stimulating demand). These types of policies are broadly popular since they help people afford something expensive. But they don’t do anything to reduce the cost of housing.

Now, in a memo authored by Deputy Secretary of the Treasury Wally Adeyemo, he makes the case for an increased focus on supply-side interventions. Simply put: We need to build more homes.

“Ultimately, the biggest driver of the lack of affordable housing today is a supply constraint that has existed before the COVID pandemic but has been exacerbated by the pandemic,” Adeyemo tells Vox.

In the memo, he writes: “Critically, the Biden-Harris Administration is undertaking an historic shift in U.S. housing policy by focusing on supply constraints and the availability of affordable housing units, including multifamily rental units.”

Adeyemo is right: The supply problem is the biggest problem in the housing market. Not only is it the fundamental cause of skyrocketing prices over the last year, it was responsible for the burdensome cost of rent and homes before Covid-19 ever hit the United States and it opens the door to increased discrimination.

[goldenvalley]

Jun 17, 2021 18:10:49 GMT LFC said:

More housing is needed in the U.S.

The Treasury Department is waving a warning flag to Congress and other policymakers about the housing market. Its message? The country is quickly running out of homes, and you need to do something about it.

Traditionally, the federal government’s housing policies have been demand-side interventions. Things like the mortgage interest deduction, which reduces homeowner’s taxes (stimulating demand) or the Fed buying up over a trillion dollars in mortgage bonds to help bring down mortgage rates (also stimulating demand). These types of policies are broadly popular since they help people afford something expensive. But they don’t do anything to reduce the cost of housing.

Now, in a memo authored by Deputy Secretary of the Treasury Wally Adeyemo, he makes the case for an increased focus on supply-side interventions. Simply put: We need to build more homes.

“Ultimately, the biggest driver of the lack of affordable housing today is a supply constraint that has existed before the COVID pandemic but has been exacerbated by the pandemic,” Adeyemo tells Vox.

In the memo, he writes: “Critically, the Biden-Harris Administration is undertaking an historic shift in U.S. housing policy by focusing on supply constraints and the availability of affordable housing units, including multifamily rental units.”

Adeyemo is right: The supply problem is the biggest problem in the housing market. Not only is it the fundamental cause of skyrocketing prices over the last year, it was responsible for the burdensome cost of rent and homes before Covid-19 ever hit the United States and it opens the door to increased discrimination.

That's been the conclusion in California.  There is too little affordable housing...affordable for middle class white collar income folks, affordable housing for working class.  Cities around here are developing far flung exurbs that make owning a reliable car a prerequisite for buying a house in them. 

[LFC]

Still lovin' me some Jen Psaki, this time for bitch-slapping Gym Jordan into next Tuesday.

Rep. Jim Jordan (R-OH) on Monday complained about gas prices being higher now than they were a year ago -- and got promptly shut down by White House Press Secretary Jen Psaki.

Writing on Twitter, Jordan complained that the average price of gas now is just over $3 a gallon, while it was only $2.21 per gallon a year ago.

What Jordan failed to mention, of course, is that gas was so cheap because the COVID-19 pandemic had left tens of millions of Americans unemployed and stuck at home.

"You forgot to mention that gas prices are the same now as they were in June 2018," Psaki informed him. "Or that this time last year unemployment was 11.1% -- today it's 5.8%."

[pnwguy]

Jun 21, 2021 21:57:34 GMT LFC said:

Still lovin' me some Jen Psaki, this time for bitch-slapping Gym Jordan into next Tuesday.

Rep. Jim Jordan (R-OH) on Monday complained about gas prices being higher now than they were a year ago -- and got promptly shut down by White House Press Secretary Jen Psaki.

Writing on Twitter, Jordan complained that the average price of gas now is just over $3 a gallon, while it was only $2.21 per gallon a year ago.

What Jordan failed to mention, of course, is that gas was so cheap because the COVID-19 pandemic had left tens of millions of Americans unemployed and stuck at home.

"You forgot to mention that gas prices are the same now as they were in June 2018," Psaki informed him. "Or that this time last year unemployment was 11.1% -- today it's 5.8%."

Can't we just refer to him as Jock Strap Jim?

[goldenvalley]

Jun 21, 2021 23:25:58 GMT pnwguy said:

Jun 21, 2021 21:57:34 GMT LFC said:

Still lovin' me some Jen Psaki, this time for bitch-slapping Gym Jordan into next Tuesday.

Can't we just refer to him as Jock Strap Jim?

The people at Lawyers, Guns, & Money call him Gym Jordan.

[AnBr]

[LFC]

Here's an interesting use for abandoned strip mines, something we here in PA know quite a bit about.

Jocelyn Sheppard hasn’t always been a lavender and honey farmer. For more than a decade, she was the founding partner of a consulting firm that did market research, business planning and grant writing for tech startups and nonprofits. But something came up at work that pulled her into a completely different world.

“I was hired to write a grant to explore the feasibility of growing lavender on reclaimed coal mine land,” Sheppard recalls, “When the grant was winding down, I had the idea that this would be great as a commercial opportunity.”

This year, Sheppard’s notion became a reality in Boone County, W.Va. Her new company, Appalachian Botanical, is now a 35-acre lavender farm and apiary located in the bowl of an old strip mine.

It’s a venture of second chances in more than one way.

The Boone County area was once a busy hub for strip mines. But as the world pivoted to natural gas, those coal mines were no longer financially feasible to operate, so the mining companies walked away. The pH balance of the soil they left behind doesn't have the nutrients to support most vegetation, leaving acres of pitted hillsides and valleys. Fortunately, there is one beautiful purple plant that is even tougher than the rocky terrain.

Sheppard acquired a 15-year agricultural lease from the Penn Virginia Operating Company, the landowner of an old strip mine. Without any competition, she pays just a nominal annual rent as well as royalties based on gross sales. It's a godsend for the mining company, which is only able to reclaim the bond they have on the site when the West Virginia Department of Environmental Protection decides the land has been restored and is productive. So instead of having to plant trees, which take many years to be deemed productive, Penn Virginia Operating Co. is letting Appalachian Botanical do the reclamation work faster and cheaper.

But the second lease on life isn't for the land alone.

“One of the reasons that this business has been so important to me is there are people out there who need second chances,” Sheppard says. “While maybe they’ve made some bad decisions in life, it’s not entirely their fault they were born into poverty or born into an area where the jobs are few and far between. So helping them come back from the problems they’ve experienced so they can be productive members of society, that's an extremely attractive proposition to me.”

Adam, a crew lead at the company, is a formerly incarcerated resident of Boone County who is especially grateful for the opportunity he’s been given at Appalachian Botanical.

[LFC]

RobinHood was just hit with a $70M fine.

A Wall Street regulator has ordered the retail trading platform Robinhood to pay more than $70m in penalties for causing what it described as “widespread and significant” harm to its customers.

The Financial Industry Regulatory Authority (Finra) announced on Wednesday that it was fining Robinhood $57m and ordering it to pay $12.6m plus interest in restitution to its customers—the largest penalty ever ordered by the regulator.

Among a litany of failures alleged by Finra, widespread technical problems on the platform during periods of high volatility cost some traders tens of thousands of dollars, it said.

Robinhood also allowed thousands of customers to trade risky derivative products when it was “not appropriate” for them, according to the regulator, and gave customers false or misleading information about how much cash was in their accounts, their ability to trade on margin, and the risk of losses on derivatives trades.

Finra cited the death by suicide of a young Robinhood customer last year, who mistakenly believed he had incurred $730,165 in losses on a margin trade. In fact, his account had a balance of $16,000. In a note found after his death, he indicated he did not believe that he had “turned on” margin trading on his account.

For more than five years, Robinhood had “failed to establish and maintain” a system for complying with securities regulations, Finra said.

“Compliance with these rules is not optional and cannot be sacrificed for the sake of innovation or a willingness to ‘break things’ and fix them later,” said Jessica Hopper, head of Finra’s enforcement department.

In response to Finra’s action, the company said: “Robinhood has invested heavily in improving platform stability, enhancing educational resources, and building out our customer support and legal and compliance teams. We are glad to put this matter behind us and look forward to continuing to focus on our customers and democratising finance for all.” (Later in the day, the company also published a blog post outlining how it is trying to better "meet our responsibility to our customers.")

[LFC]

Remote working was promoted as an expected boon to struggling areas particularly in the Midwest. Without being tightly tethered to a physical location people could go wherever they wished. Nice thought but that's not what's really happening. Also the number of people working remotely is dropping.

Rani Molla
So people are leaving some of the biggest metros. Where are they moving to?

Mark Muro
Interestingly, they’re mostly moving to the suburbs. They’re not moving, for the most part, to Wichita to save the heartland. They’re moving either farther out within the metro or into nearby counties. So nearby counties around the New York area or in the Bay Area, moving to Alameda County, and so on. And they’re mostly shorter moves.

In the end, the volume of moves in most places isn’t really that much more than a usual year with the exception of New York City, the New York region, and the Bay Area. It’s a movement out to the suburbs or even the exurbs, but it’s still tethered to the big metros.

Rani Molla
So people from these big cities are moving outward, creating this sort of doughnut effect from the center of big cities, but they’re not necessarily moving to the Midwest or to some beleaguered area of the country in a meaningful way.

Mark Muro
A smattering of them are. We looked at it closely in the Bay Area: 700,000 moved out of the Bay Area, only 12,000 into 19 classic heartland states. It’s not the main thing happening, let’s put it that way.

Rani Molla
As for the smaller moves outside of cities, is that just a matter of uncertainty surrounding the future of work? Like, “My boss might change her mind next year and make me come back to the office, I can’t go too far away”?

Mark Muro
I think that’s a big factor — or hybrid work, meaning you’ve got to come in two days a week. That’s gonna limit where you can move. The other thing that’s happening is that remote work is declining. It was about 57 percent of professional workers working remotely a year ago in May. This May it was 30 percent. I think it will go down further. It won’t go all the way down. But even remote work may not be as massive a trend as expected.

I guess it turns out that the Midwest just isn't a very attractive area for most people.

[goldenvalley]

Jul 6, 2021 19:54:19 GMT LFC said:

Remote working was promoted as an expected boon to struggling areas particularly in the Midwest. Without being tightly tethered to a physical location people could go wherever they wished. Nice thought but that's not what's really happening. Also the number of people working remotely is dropping.

Rani Molla
So people are leaving some of the biggest metros. Where are they moving to?

Mark Muro
Interestingly, they’re mostly moving to the suburbs. They’re not moving, for the most part, to Wichita to save the heartland. They’re moving either farther out within the metro or into nearby counties. So nearby counties around the New York area or in the Bay Area, moving to Alameda County, and so on. And they’re mostly shorter moves.

In the end, the volume of moves in most places isn’t really that much more than a usual year with the exception of New York City, the New York region, and the Bay Area. It’s a movement out to the suburbs or even the exurbs, but it’s still tethered to the big metros.

Rani Molla
So people from these big cities are moving outward, creating this sort of doughnut effect from the center of big cities, but they’re not necessarily moving to the Midwest or to some beleaguered area of the country in a meaningful way.

Mark Muro
A smattering of them are. We looked at it closely in the Bay Area: 700,000 moved out of the Bay Area, only 12,000 into 19 classic heartland states. It’s not the main thing happening, let’s put it that way.

Rani Molla
As for the smaller moves outside of cities, is that just a matter of uncertainty surrounding the future of work? Like, “My boss might change her mind next year and make me come back to the office, I can’t go too far away”?

Mark Muro
I think that’s a big factor — or hybrid work, meaning you’ve got to come in two days a week. That’s gonna limit where you can move. The other thing that’s happening is that remote work is declining. It was about 57 percent of professional workers working remotely a year ago in May. This May it was 30 percent. I think it will go down further. It won’t go all the way down. But even remote work may not be as massive a trend as expected.

I guess it turns out that the Midwest just isn't a very attractive area for most people.

Well shoot I know where those Bay Area folks are going...to points up along I 80 and US 50 Eastbound...especially Sacramento and less populated counties directly east and a bit north of Sacramento (El Dorado and Placer Counties).   A friend sold his house for $100,000 over asking price after a bidding war between 2 bidders relocating from the Bay Area...this wasn't a McMansion, just a nice, well maintained 2800 sq. ft. suburban house near good schools.

[LFC]

Here's an interesting take. It's generally an indictment of Republican economics of never paying for today what you can push off until tomorrow, preferably onto other people, and how it relates to the Florida condo collapse.

Prior to the 1980s, Americans understood the need to keep a healthy cash-flow going or set aside reserves to cover the future cost of maintaining things. We had a top personal federal income tax bracket on the morbidly rich of around 74% and an almost-50% top corporate income tax bracket for those corporations that were essentially money machines.

As a result, infrastructure dating all the way back to the transcontinental railroad system built during the administration of Abraham Lincoln were well-maintained and reliable. Roads, schools and hospitals were shiny-new and state-of-the-art; even the older buildings constructed during and before FDR‘s New Deal were well-maintained. And, although we hadn’t yet heard of the need to concern ourselves with climate change, our government was able to fund itself to deal with crises.

When Ronald Reagan took office in 1981, for example, the US national debt stood at a mere $908 billion; we funded things with taxes and mostly maintained a necessary national debt so savers and federal and state agencies would have a safe place to park cash in treasuries (which would cease to exist if we paid off the national debt).

And we understood that investing in America produced great returns on that investment. When World War II ended and our national debt was 119% of GDP (about where it is now), President Dwight Eisenhower borrowed even more money to build the interstate highway system, which produced such an explosion of economic activity that the added tax revenues paid down the national debt to 60% of GDP by the end of his presidency.

Similarly, the GI Bill that gave 7.8 million mostly young men free college and low-interest home loans proved a fabulous investment.

Since college graduates make so much more than people who only have a high-school education, and higher-income people pay higher tax rates, every $1 invested in the educational part of the GI Bill during its life from 1944 to 1956 produced an additional $7 dollars in tax revenue to our government over the lifetime of those now-well-educated and well-paid veterans.

Condos have a slightly more checkered history, but it parallels the mentality of the “greed is good” Reagan Revolution. While the idea of condominiums goes back to the 19th century, the first modern condo built in America was Graystone Manor in Utah in 1960 and they really started to become a “big thing” in the Reagan 1980s.

When a developer builds and then sells condo units, there are two parts to the selling price that buyers take into consideration: the sale price and the HOA (Home-Owners Association) fee. That fee covers maintenance and operation of the condo, from painting and landscaping to replacing carpeting to fixing leaky pipes, and is typically a few hundred dollars a month.

From a buyer’s point of view, the monthly HOA fee is mentally added to the monthly mortgage payment to determine how much they can afford to borrow to buy the condo. Thus, the lower the HOA fee, the higher the mortgage the buyer can afford and the higher the initial price the developer can charge — money that the developer walks away with.

Therefore, for most of the 60 years developers have been selling condos, they’ve ignored long-term maintenance costs when calculating HOA fees to keep them low, making the sale of the condos more profitable to the developer. And, for similar reasons, HOA boards are often reluctant to raise monthly fees to build a reserve for future major maintenance projects because it lowers their own resale values.

The problem comes 20, 30 or 40 years down the road when the condo needs a new roof or major repairs and there’s nothing in the reserves to pay for it. Which is why the residents of Champlain Towers South were, just in the past few months, hit with an $80,000-per-unit one-time assessment to pay for the structural deterioration the 2018 survey found.

The developer walks away with the initial cash, previous homeowners got a free ride, and people who bought-in during later years get hit with the costs of major repairs, particularly when HOA boards choose to run the condo with no consideration of the future like Republican’s have run the country since 1981.

Which is pretty much the same thing that Reaganomics brought us with the entire nation. The billionaires who owned Reagan didn’t want to continue paying a 74% top tax rate, so they got him and Congress to drop that top rate all the way down to 25%.

To deal with the loss of revenue, we essentially stopped maintaining the country while Reagan and the first President Bush subsidized the wealthy by more than tripling the national debt to $2.6 trillion in their 12 years.

[AnBr]

Looks like you do not have the link you intended for this post.

[goldenvalley]

From LFC's quote

When a developer builds and then sells condo units, there are two parts to the selling price that buyers take into consideration: the sale price and the HOA (Home-Owners Association) fee. That fee covers maintenance and operation of the condo, from painting and landscaping to replacing carpeting to fixing leaky pipes, and is typically a few hundred dollars a month.

From a buyer’s point of view, the monthly HOA fee is mentally added to the monthly mortgage payment to determine how much they can afford to borrow to buy the condo. Thus, the lower the HOA fee, the higher the mortgage the buyer can afford and the higher the initial price the developer can charge — money that the developer walks away with.

I own a condo...in a small building, nothing like what fell down in Florida. In a microcosm we illustrate the struggles of an HOA. A few of us in the HOA argue for building more reserves by raising the monthly fee and setting a regular maintenance schedule; one of the group complains about the monthly fee we already pay.  Yet that complainer is the one that prompted our tenting of the structure for termite extermination and re-doing the drainage system around the building. Oh and painting the whole building too...in an ocean atmosphere (not beach front) even stucco covered buildings like ours need regular repainting.

We paid special assessments for all those projects and this one guy is happy after penny pinching with that. I'd rather have a healthy reserve to minimize the assessments.  Somehow structural things related to the building appear to him to be "extras" aside from the routine landscape, insurance, water provision costs. This concept of property ownership needs some serious rethinking. 

[Bact PhD]

Jul 6, 2021 21:28:46 GMT LFC said:

Here's an interesting take. It's generally an indictment of Republican economics of never paying for today what you can push off until tomorrow, preferably onto other people, and how it relates to the Florida condo collapse.

Prior to the 1980s, Americans understood the need to keep a healthy cash-flow going or set aside reserves to cover the future cost of maintaining things. We had a top personal federal income tax bracket on the morbidly rich of around 74% and an almost-50% top corporate income tax bracket for those corporations that were essentially money machines.

As a result, infrastructure dating all the way back to the transcontinental railroad system built during the administration of Abraham Lincoln were well-maintained and reliable. Roads, schools and hospitals were shiny-new and state-of-the-art; even the older buildings constructed during and before FDR‘s New Deal were well-maintained. And, although we hadn’t yet heard of the need to concern ourselves with climate change, our government was able to fund itself to deal with crises.

When Ronald Reagan took office in 1981, for example, the US national debt stood at a mere $908 billion; we funded things with taxes and mostly maintained a necessary national debt so savers and federal and state agencies would have a safe place to park cash in treasuries (which would cease to exist if we paid off the national debt).

And we understood that investing in America produced great returns on that investment. When World War II ended and our national debt was 119% of GDP (about where it is now), President Dwight Eisenhower borrowed even more money to build the interstate highway system, which produced such an explosion of economic activity that the added tax revenues paid down the national debt to 60% of GDP by the end of his presidency.

Similarly, the GI Bill that gave 7.8 million mostly young men free college and low-interest home loans proved a fabulous investment.

Since college graduates make so much more than people who only have a high-school education, and higher-income people pay higher tax rates, every $1 invested in the educational part of the GI Bill during its life from 1944 to 1956 produced an additional $7 dollars in tax revenue to our government over the lifetime of those now-well-educated and well-paid veterans.

Condos have a slightly more checkered history, but it parallels the mentality of the “greed is good” Reagan Revolution. While the idea of condominiums goes back to the 19th century, the first modern condo built in America was Graystone Manor in Utah in 1960 and they really started to become a “big thing” in the Reagan 1980s.

When a developer builds and then sells condo units, there are two parts to the selling price that buyers take into consideration: the sale price and the HOA (Home-Owners Association) fee. That fee covers maintenance and operation of the condo, from painting and landscaping to replacing carpeting to fixing leaky pipes, and is typically a few hundred dollars a month.

From a buyer’s point of view, the monthly HOA fee is mentally added to the monthly mortgage payment to determine how much they can afford to borrow to buy the condo. Thus, the lower the HOA fee, the higher the mortgage the buyer can afford and the higher the initial price the developer can charge — money that the developer walks away with.

Therefore, for most of the 60 years developers have been selling condos, they’ve ignored long-term maintenance costs when calculating HOA fees to keep them low, making the sale of the condos more profitable to the developer. And, for similar reasons, HOA boards are often reluctant to raise monthly fees to build a reserve for future major maintenance projects because it lowers their own resale values.

The problem comes 20, 30 or 40 years down the road when the condo needs a new roof or major repairs and there’s nothing in the reserves to pay for it. Which is why the residents of Champlain Towers South were, just in the past few months, hit with an $80,000-per-unit one-time assessment to pay for the structural deterioration the 2018 survey found.

The developer walks away with the initial cash, previous homeowners got a free ride, and people who bought-in during later years get hit with the costs of major repairs, particularly when HOA boards choose to run the condo with no consideration of the future like Republican’s have run the country since 1981.

Which is pretty much the same thing that Reaganomics brought us with the entire nation. The billionaires who owned Reagan didn’t want to continue paying a 74% top tax rate, so they got him and Congress to drop that top rate all the way down to 25%.

To deal with the loss of revenue, we essentially stopped maintaining the country while Reagan and the first President Bush subsidized the wealthy by more than tripling the national debt to $2.6 trillion in their 12 years.

The other thing that's been occurring in Flori-DUH for the last four decades or so is conversion of rental apartments to condos. This nicely shifts the future maintenance liabilities to the new HOA.

Interestingly, this happened to my former apartment complex at about the 40-year mark, a time where major maintenance expenses (roof, electrical, plumbing) would be kicking in BIG TIME. I don't know all of the particulars concerning the maintenance over time; sadly, my old building succumbed to a fire a couple of years ago -- I haven't seen any reports about what may have caused the blaze. Hmmm.

[LFC]

Jul 6, 2021 22:14:16 GMT AnBr said:

Looks like you do not have the link you intended for this post.

Fixed. Sorry about that.

[AnBr]

Jul 7, 2021 13:36:43 GMT LFC said:

Jul 6, 2021 22:14:16 GMT AnBr said:

Looks like you do not have the link you intended for this post.

Fixed. Sorry about that.

Thanks.

[LFC]

The question is, of course, how badly are they going to f*** things up in Greenland?

Mineral exploration company KoBold Metals, backed by billionaires including Jeff Bezos and Bill Gates, has signed an agreement with London-listed Bluejay Mining (JAY.L) to search in Greenland for critical materials used in electric vehicles.

KoBold, which uses artificial intelligence and machine learning to hunt for raw materials, will pay $15 million in exploration funding for the Disko-Nuussuaq project on Greenland's west coast in exchange for a 51% stake in the project, Bluejay said in a statement.

Shares in BlueJay traded 26% higher on the news.

The license holds metals such as nickel, copper, cobalt and platinum and the funding will cover evaluation and initial drilling.

[RichTBikkies]

Jun 16, 2021 17:58:42 GMT LFC said:

The global container shipping industry is in a clusterfunk.

If this isn't sorted pretty damn quick the sellers may take their merchandise elsewhere.

[Deleted]

On a personal level ..... we can't get dog milk bone biscuits on the island. The dawg has warned us she will pack her bags and leave home although we have tried to explain Economics 101 to her. She just mutters 'want cookies' and stares down squirrels . Squirrels aren't as tasty as milk bones but she's desperate

[LFC]

I stumbled onto this when doing some research on potential tax changes with the reconciliation bill. It sounds like most nations have woken up to being played as suckers by corporations who promise "yuuuuge!" investments in return for ultra-low taxes. (No link. This was the entire text concerning this matter on a fairly long page.)

Although not directly related to the international tax provisions described above in the House Bill, recent tax developments in the international community could further impact the direction of U.S. tax legislation. The Organization for Economic Cooperation Development (OECD) recently announced that 136 counties have agreed to a long-negotiated deal pursuant to which such countries will impose a global minimum corporate tax rate of 15%. The imposition of the global minimum tax could result in some international income that would otherwise be subject to U.S. tax (including, under the subpart F income and GILTI rules described above) being subject to local country tax instead. However, the Biden administration and U.S. Treasury Secretary Janet Yellen ultimately believe that this agreement is a good step towards the goal of ending the so-called global “race to the bottom” pursuant to which countries compete to attract companies with ever-lowering tax rates.

[goldenvalley]

Here's a little corner of the fertilizer industry that I had no idea existed and that has world wide impact. 

This is a story, naturally, about urea.

Prices for the humble chemical — yes, the stuff in urine — are soaring to levels not seen in over a decade. In this time of everything shortages and inflation worries, that alone might not sound too surprising. But urea links up several disparate-looking strands of global economic disruption, showing how easily extreme weather and shipping turmoil can cause supply shortfalls to radiate.

People and industries of all kinds are feeling the shocks. In India, a lack of urea has made farmers fear for their livelihoods. In South Korea, it meant truck drivers couldn’t start their engines.

How do we get urea?

One big reason for surging fertilizer prices is surging prices of coal and natural gas. The urea in your urine is produced in the liver. The industrial kind is made through a century-old process that turns natural gas or gas derived from coal into ammonia, which is then used to synthesize urea.

But a freakish confluence of other factors is pushing up prices as well.

China and Russia, two of the biggest producers, have restricted exports to ensure supplies for their own farmers. In China’s case, an energy crunch led some areas to ration electricity, which forced fertilizer factories to slash production.

Hurricane Ida drove several large chemical plants to suspend operations when it tore through the U.S. Gulf Coast in August. Western sanctions on Belarus have hit that nation’s production of potash, the key ingredient in another fertilizer. Port delays and high freight fees — plant food is bulky stuff — have added to costs.

All of this is rippling around the world in unexpected and sometimes painful ways.

China is also involved in other fertilizer production:

China is a linchpin of the global fertilizer trade. The country accounts for about a tenth of the world’s urea-based fertilizer exports and a third of exports of diammonium phosphate, another type of crop nutrient, according to the World Bank.

As prices of fuel and fertilizer began rising this year, China’s cabinet in June authorized billions of dollars in subsidies and other support for farmers. The next month, the country’s major fertilizer producers met with the state planning agency and agreed to halt exports.

In the fall, soaring electricity demand led the southwestern province of Yunnan, a key phosphate producer, to order drastic production cuts by energy-hungry industries, including fertilizer. And in October, China’s customs authority imposed extra inspection requirements on exports of 29 fertilizers and related products.