Florida Gov. Ron DeSantis issued a statewide stay-at-home order on April 1 last year locking down the Sunshine State for 30 days amid a global panic about the CCP (Chinese Communist Party) virus outbreak. Sitting in his office exactly a year later, he told The Epoch Times that the lockdowns were a “huge mistake,” including in his own state.
“We wanted to mitigate the damage. Now, in hindsight, the 15 days to slow the spread and the 30—it didn’t work,” DeSantis said.
“We shouldn’t have gone down that road.”
Florida’s lockdown order was notably less strict than some of the stay-at-home measures imposed in other states. Recreational activities like walking, biking, golf, and beachgoing were exempted while essential businesses were broadly defined.
“Our economy kept going,” DeSantis said. “It was much different than what you saw in some of those lockdown states.”
The governor nonetheless now regrets issuing the order at all and is convinced that states that have carried on with lockdowns are perpetuating a destructive blunder.
After the 30 days of the initial lockdown in Florida lapsed, DeSantis commenced a phased reopening. He faced fierce criticism at each stage from establishment media and his own constituents beholden to the lockdown narrative.
The governor fully reopened Florida on Sept. 25 last year. When cases began to rise as part of the winter surge he did not reimpose any restrictions. Lockdown proponents forecast doom and gloom. DeSantis stood his ground.
The governor’s persistence wasn’t a leap of faith. Less than two weeks after Florida’s full reopening in late September, scientists from Stanford, Harvard, and Oxford went public with the Great Barrington Declaration, which disavowed lockdowns as a destructive and futile mitigation measure. The declaration, which has since been signed by 13,985 medical and public health scientists, calls on public officials to adopt the focused protection approach—the exact strategy employed by DeSantis.
Despite dire predictions about the pandemic in Florida, DeSantis has been vindicated. On April 1, 2021, Florida ranked 27th among all states in deaths per capita from the CCP virus, commonly known as the coronavirus.
The ranking’s significance is amplified because the Sunshine State’s population is the sixth oldest in the United States by median age. California—the lockdown state often compared to Florida due to its lower per-capita death rate—is the sixth youngest. The risk of dying from the CCP virus is highest for people over 55, with the group accounting for 93 percent of the deaths nationwide.
While Florida is doing either better or relatively the same as the strict lockdown states in terms of CCP virus mortalities, the state’s economy is booming compared to the crippled economies in California and New York. Though less quantifiable, the human suffering from the lockdown-related rise in suicides, mental health issues, postponed medical treatments, and opioid deaths is undeniably immense.
“It’s been a huge, huge mistake in terms of policy,” DeSantis said.
“All I had to do was follow the data and just be willing to go forward into the teeth of the narrative and fight the media,” he added.
“As people were beating up on me, what I said was I’d rather them beat up on me than have someone lose their job. I’d rather have them beat up on me than have kids locked out of school. I’m totally willing to take whatever heat comes our way because we’re doing the right thing.”
Florida Gov. Ron DeSantis gives a thumbs up as he leaves a press conference where he spoke about the cruise industry at Port Miami on April 08, 2021 in Miami, Florida. (Joe Raedle/Getty Images)
‘Don’t Let Them Roll Over Us’
The Epoch Times spent a day embedded with DeSantis as he crisscrossed the state on April 1, jetting southeast from the seat of state government in Tallahassee to a press conference in Titusville and then back north to the Clay County Fair on the outskirts of Jacksonville.
Across dozens of encounters with Floridians from all walks of life, one trend persisted. People thanked DeSantis for his work and his policies. Business owners praised him for not shutting them down.
Chris Allen, the owner of Java Jitters, opened a coffee shop in Orange Park Mall during the pandemic.
“We could not have done that if it wasn’t for Ron DeSantis,” Allen told The Epoch Times after personally thanking the governor during an encounter at the Clay County Fair.
A staff member for Gov. Ron DeSantis holds a “DeSantis 2024, Make America Florida” hat at the Clay County fair on April 1, 2021. The staff member said the hat was handed to the governor by a fair attendee. (Ivan Pentchoukov/Epoch Times)
At the time of the interview, Florida’s unemployment rate was 4.7 percent compared to 6.2 percent nationally. Lockdown states like New York, New Jersey, Pennsylvania, and California had some of the highest rates in the country—8.9 percent, 7.8 percent, 7.3 percent, and 8.5 percent respectively.
“I have a tough time paying for a meal in Florida just because I saved a lot of these restaurants from oblivion,” DeSantis said. Hours after this claim, a curly fries stand at the fair declined to charge the governor.
DeSantis said some people get emotional when they meet him. Several of the interactions with the governor at the Clay County Fair resembled that description. An visibly moved elderly veteran urged the governor to not “let them roll over us.”
“If we hadn’t stood up, these people may not have jobs, the businesses may have gone under, the kids wouldn’t be in school, there’d be all these things,” DeSantis said.
“This really, really impacts people in a very personal way. And I don’t think anything prior to COVID that I’ve seen in politics can quite do it on this level. And it’s really unfortunate that there were governors that had power [who did] the opposite. It really shouldn’t depend on the governor.”
Reopening the state wasn’t as easy as lifting his own stay-at-home measures. When DeSantis issued the final reopening order in late September last year, he signed a companion order prohibiting local Florida governments from restricting people from working or operating a business. The order had far-reaching consequences across the state, especially in densely-populated, liberal-leaning locales where the local authorities imposed their own strict measures.
DeSantis adopted a hands-off approach to local regulations at first, thinking that voters would ultimately hold local authorities responsible. It became obvious eventually that some places would remain locked down despite the data showing that doing so would have no positive impact on the spread of the virus.
“They weren’t going to open this stuff up unless I pried it open,” DeSantis said.
“We had the data. We talked to some of the best scientists in the country,” DeSantis said, referring to Martin Kulldorff from Harvard, Jayanta Bhattacharya from Stanford, and Sunetra Gupta from Oxford.
“Every Floridian has a right to work. Every business has a right to operate.”
In areas that were forced to reopen as a result, the economies are now booming with new hotels and restaurants opening, DeSantis said.
DeSantis received a law degree from Harvard and is a textualist when interpreting the Constitution. He believes barring the local authorities from placing restrictions on the people and businesses was squarely within his authority.
“You can’t have 67 different minimum wages, or 67 different regulations on hotels. We are one state economy, and we need to have certain rules of the road,” DeSantis said.
Gov. Ron DeSantis delivers remarks at a press conference in Titusville, Florida, on April 1, 2021. (Screenshot via Epoch Times)
‘They Are Never Going to Admit They Were Wrong’
Standing behind the desk in his office in Tallahassee, DeSantis leafed through a folder of praise he’s received from around the nation and across the globe. Hanging on the walls around the relatively small space was a portrait of Abraham Lincoln, the Constitution, and the Bill of Rights as well as the uniform the governor wore as the captain of the Yale baseball team.
When asked why he chose Lincoln, DeSantis said the president is the best example of a leader who had to make difficult decisions in a time of crisis. When asked why some of the leaders today have continued with lockdowns even with ample evidence of their ineffectiveness, the governor theorized that the people involved have committed too much to the narrative and have made it impossible to change course.
“You have a situation where if you’re in this field, the pandemic, that’s something that you kind of prepare for and you’re ready for. And a lot of these people muffed it,” he said.
“When push came to shove, they advocated policies that have not worked against the virus but have been very, very destructive. They are never going to admit they were wrong about anything, unfortunately.”
Elected leaders aren’t the only ones to blame, according to the governor. The media and big tech companies played a major role in perpetuating fears about the virus while selectively censoring one side of the mitigation debate. DeSantis said the media and tech giants stood to benefit from the lockdown as people stayed home and consumed their products.
“It was all just to generate the most clicks that they could. And so that was always trying to do the stuff that would inspire the most fear,” DeSantis said.
Two weeks after the interview, an undercover video recorded by Project Veritas showed a technical director at CNN talking about the boost the network received due to its pandemic coverage.
“It’s fear. Fear really drives numbers,” CNN Technical Director Charlie Chester said. “Fear is the thing that keeps you tuned in.”
The fear-mongering worked, DeSantis said, pointing to CDC statistics showing that 4 out of 10 American adults delayed or avoided getting urgent or routine medical treatment in June 2020. The agency’s report said that the pattern may have contributed to the excess deaths reported during that period, due to preventable illnesses and injuries going untreated.
Emergency room doctors had reported that fewer people were coming in with cardiac-related chest pains while more were coming in with late-stage appendicitis, something that is usually caught much earlier. The pandemic has also led to a sharp decrease in cancer screenings and detections.
“When you have people too scared to go to the emergency room when they’re literally having a heart attack, that didn’t happen in a vacuum,” DeSantis said.
“Corporate media played a role in that, by really whipping up people into a frenzy.”
The profit motive wasn’t the only factor potentially driving the media’s slanted coverage, according to the governor. The pandemic hit the United States in an election year, presenting an opportunity to heap the blame on President Donald Trump.
“They viewed it as an opportunity to damage Trump. Obviously, they hated Trump more than anything,” DeSantis said.
Florida Gov. Ron DeSantis in his office in Tallahassee, Florida, on April 1, 2021. (Screenshot via Epoch Times)
‘Council of Censors’
In the April 1 interview, DeSantis criticized big tech companies for censoring critics of lockdowns. Less than a week after the interview, the governor himself became the victim of censorship. YouTube, without warning, scrubbed videos of a roundtable discussion between DeSantis and prominent scientists from Harvard, Oxford, and Stanford who assessed that lockdowns are ineffective.
The American Institute for Economic Research (AIER) was the first to flag the video’s disappearance. The original clip is now hosted on a different platform and appears along with a full transcript on the AIER website.
“Google and YouTube have not been, throughout this pandemic, repositories of truth and scientific inquiry, but instead have acted as enforcers of a narrative, a big tech council of censors in service of the ruling elite” DeSantis said in response to YouTube’s censorship during an April 12 video conference call with three of the scientists from the banned video.
“When they took down the video … they were really continuing what they’ve been doing for the past year: stifle debate, short-circuit scientific inquiry, make sure that the narrative is not questioned. And I think that we’ve seen already that that has had catastrophic consequences for our society.”
The takedown of the video suggests that Big Tech intends to keep exercising the awesome power it directed against Trump in the closing days of the previous administration. Twitter and Facebook banned the president, cutting off a direct line of communication between the commander-in-chief and tens of millions of Americans.
DeSantis thinks that the power monopolies have now is far more extensive than what the United States had witnessed at the turn of the century.
“What we’ve seen with the big tech and the censorship, they are exercising more power than the monopolies at the beginning of the 20th century ever could have exercised,” the governor said. “The type of power that they’re exercising now in some respects is even more profound than the type of power that government typically exercises.”
No End In Sight
Desantis believes the lockdown states may never fully reopen because the leaders there have invested so heavily in the narrative while the voters have grown fearful.
While restrictions are easing across the nation, only six states, including Florida, have fully reopened, according to a tracker maintained by USA Today. Eight states never issued a stay-at-home order.
“I think if your goal is no cases, then there may never be an end to it, because you’re never gonna have zero COVID,” DeSantis said, adding that a more pragmatic goal would be to aim towards a hospitalization rate indicative of a respiratory virus endemic.
“But I don’t know that they’re willing to accept that reality. I think they’re going to try to have no cases at all, which would basically mean there would never be a full end to these policies, which is scary.”
Why You Shouldn’t Worry About Costco Stock
The warehouse club’s shares have been falling, but investors have nothing to worry about.
The warehouse club's shares have been falling, but investors have nothing to worry about.
The market crash has driven stocks into a bear market panicking many investors as strong companies with solid results see their shares tank. It's a market that seems to have no safe havens as the vague specter of inflation has cast a dark shadow over the entire market, but pandemic stocks, technology companies, and the entire retail sector.
Costco (COST) - Get Costco Wholesale Corporation Report has not been immune to the drop. Despite the warehouse club operating pretty much as it always has, steadily adding members while retaining existing members, the chain has seen its share price fall 22.83% in the past six months.
That's a big drop for a chain which has been a very steady stock, usually moving upward while also paying a dividend. Costco's share price drop, however, has nothing to actually do with the company's performance. Instead, the company has fallen victim to broad concerns about retail in general.
Target (TGT) - Get Target Corporation Report, for example, saw its shares lose over 25% in value after it reported first quarter results. The chain grew its same-store sales, which was impressive given that it had seen that metric rise by 22.9% in previous-year quarter. The retailer faltered when it came to profits as earnings were cut in half year-over-year due to rising costs and supply chain issue.
Never mind that Wall Street has taken Target's strength for weakness (making money and gaining customers under these conditions is impressive), Costco shareholders have even less to be worried about.
Why Is Costco So Strong?
Retail stocks, including Target and Costco, have suffered due to rising prices (inflation), supply chain issues, and fears over consumer spending drops. These are real concerns, but Costco has a lot of protection from those issues. The warehouse club operates on a membership model. Its profits come largely from selling memberships, not on the goods its sells its members.
Costco offers members the promise of low prices in exchange for a membership fee. The company offers a limited selection to keep prices down and it has enormous bargaining power with suppliers.
It's possible that inflation will drive prices higher on some key Costco items, but they company can simply pass those increase on without adding a markup. That makes the chain a value proposition for shoppers as these factors impact all retailers.
Costco has been able to hold its own on gross margin, according to CFO Richard Galanti speaking during the company's second-quarter earnings call.
"Moving down to the gross margin line. Our reported gross margin in the second quarter was lower year over year by 32 basis points but up 5 basis points, excluding gas inflation," he said.
Basically, aside from gas -- which is generally cheaper at Costco than anywhere else -- the company maintained its margin. It also grew its same-store sales by 11.1% excluding gas while its income rose as well.
"Net income for the quarter came in at $1.299 billion or $2.92 per diluted share. Last year's second quarter net income came in at $951 million or $2.14 per diluted share," Galanti shared.
Membership Is Costco's Key Metric
Unlike a traditional retailer, sales aren't the key metric for Target. Membership tells investors more about the health of the company than anything else. The warehouse club needs both retain members and add new ones.
It has done that, according to Galanti.
"In terms of renewal rates, they continue to increase. At second quarter end, our U.S. and Canada renewal rate stood at 92%, up 0.4 percentage point from the 12-week earlier at Q1 end. And worldwide rate, it came in at 89.6%, up 0.6% from where it stood 12 weeks earlier at Q1 end," the CFO shared.
Costco has seen its renewal rates go up as more members auto-renew. The warehouse club has also seen more of its members opt for the higher-priced Executive Membership, " who, on average, renew at a higher rate than non-Executive members," Galanti shared.
Membership has been growing (as it steadily has) as well, according to the CFO.
In terms of the number of members at second quarter end, member households and total cardholders, total households was 63.4 million, up 900,000 from the 62.5 million just 12 weeks earlier; and total cardholders at Q2 end, 114.8 million, up 1.7 million from the 113.1 million figure 12 weeks ago. At second quarter end, paid Executive Memberships stood at $27.1 million, an increase of $644,000 during the 12-week period since Q1 end. Executive Members, by the way, represent now 42.7% of our total membership base and 70.9% of our total sales.
So, while Costco's share price has suffered due to broader concerns and general market panic, the chain's business has not suffered. In a terrifying environment for investors, you could argue that Costco's one of the safer bets as long as you're willing to be patient.
In the short-term, stock prices may not reflect actual business results. Over time, however, the warehouse club will go back to posting steady share gains while also paying a dividend (and perhaps offering a bonus special dividend).stocks pandemic consumer spending canada
Labor Looks Set To Win In Hotly-Contested Australian Federal Election
Labor Looks Set To Win In Hotly-Contested Australian Federal Election
Update (0950ET): With almost 60% of the vote counted, it appears Anthony…
Update (0950ET): With almost 60% of the vote counted, it appears Anthony Albanese will return Labor from the political wilderness to government, seizing power from the Coalition after it has been almost a decade in office.
While it remains unclear if Labor can form a majority, the ALP is on track to finish ahead of the Coalition and more likely to reach a minority government, the ABC has projected.
This win means Mr Albanese will replace Scott Morrison as Prime Minister, making him the 31st person to hold the nation's top job.
* * *
As The Epoch Times' Aldgra Fredly detailed earlier, Australian voters cast ballots on Saturday to decide the next prime minister, as well as senators and members of Parliament, after a six-week election campaign that often centred on the economy and national security.
Electoral Commissioner Tom Rogers said Friday that 7,000 polling stations have opened as planned, despite a 15 percent turnover of its 105,000 workforces across Australia in the past week.
“While this is extraordinary, it is a pandemic election,” Rogers said in a statement, thanking those who stepped up to fill positions at polling places identified as not opening due to staff shortages.
The first polling stations will close on the country’s east coast at 6 p.m. local time (08:00 GMT). The west coast is two hours behind.
Nearly half of Australia’s 17 million electors have voted early or applied for postal votes despite loosened coronavirus restrictions. Those who tested positive for the COVID-19 will be able to access telephone voting.
Voting is compulsory for adult citizens in Australia, and failing to provide a valid reason for not voting results in a fine, which can progress to court. The fine for first-time offenders is $20, and it climbs to $50 for subsequent offences, according to the electoral commission.
Incumbent Prime Minister Scott Morrison’s centre-right Liberal-National coalition is vying for a fourth three-year term, having held 76 of the 151 seats in the outgoing parliament. Opposition leader Anthony Albanese’s centre-left Labor Party is considered by most trusted polls as the favourite to win.
(L-R) Australian Prime Minister Scott Morrison, federal opposition leader Anthony Albanese. (Martin Ollman/Getty Images, AAP Image/Lukas Coch)
One possible outcome of the upcoming federal election on May 21 is a hung Parliament where no political party can achieve a majority to govern outright (a party must win 76 seats). Instead, party leaders will be forced to negotiate a coalition with another minor party or independent to cross the benchmark to win government.
A hung Parliament has only occurred once in Australia since World War II. In 2010, both the Liberal-National coalition and Labor landed 72 seats, four votes short of a majority government. It took another 17 days before Labor leader Julia Gillard won enough support from four crossbenchers (minor party or independent MPs) after striking deals with them.
Morrison’s election campaign has focused on his party’s economic management, urging voters to support a government that delivered “a strong economy” over “a weaker one that only makes your life harder.”
He promised to lower taxes and put downward pressure on interest rates and costs of living if his government was re-elected.
Albanese pushed for Labor policies that would make child care more affordable for low-and middle-income families and improve nursing home care for the elderly, pledging to “always look after the vulnerable and the disadvantaged.”
Labor also criticized the Morrison government’s foreign policy credentials following the Solomon Islands-China bilateral security pact, calling the deal Australia’s worst foreign policy failure in the Pacific since World War II.
At the same time, the Coalition at times aggressively called into question Labor’s record with the Chinese communist regime, pointing to Chinese state-run media reports in alleging that the Labor leader was Beijing’s preferred prime minister.
In the lead up to the election, Australia’s domestic spy agency also revealed they had disrupted a plot by Beijing to install candidates in the election who they deemed as friendly and pliable.
“It’s odd the Labor Party wouldn’t say China is interfering—somehow they’re saying it’s Australia’s fault,” Morrison was quoted as saying by Sky News Australia on April 20.
“What I don’t understand is when something of this significance takes place, why would you take China’s side?”
Albanese then accused Morrison of making an “outrageous slur.”
According to a leaked draft of the Solomons-China agreement, Beijing would be able to send police, troops, and naval ships to “protect the safety of Chinese personnel and major projects in the Solomon Islands.”
Many feared that China would use the accord to establish a military base 1,700 kilometres off the Australian coast and destabilise the Indo-Pacific, although Solomon Islands Prime Minister Manasseh Sogavare had said that this would not be the case.
The Fed’s Latest Housing Bubble
Is the current housing market in a bubble that is ready to pop? If so, what is the source and magnitude of the market distortion. The topic of a possible…
Is the current housing market in a bubble that is ready to pop? If so, what is the source and magnitude of the market distortion. The topic of a possible housing bubble has been a topic of discussion lately, especially before Fed officials went on the warpath against Consumer Price Index (CPI) inflation. I have been asked about this issue and below is a truncated response to all those inquires.
I was asked in 2005 to write a chapter about housing bubbles for a proposed book on housing economics and government intervention. Much of the book would be about matters like government planning, zoning, eminent domain, and various government subsidies. My chapter would be a “macro” topic in contrast to the many “micro” housing topics.
I had been following and writing about the then current housing bubble (HB1) since 2003, having just left a stint in the Alabama Banking Department as the Assistant Superintendent of Banking in Alabama to take a professorship of macroeconomics at Columbus State University in Georgia.
I wrote for LewRockwell.com and Mises.org about the housing bubble and in 2005 I published my article “Skyscrapers and Business Cycles” in the Quarterly Journal of Austrian Economics which made the general theoretical connection between Fed policy and real estate investments and in this case, the connection between Fed policy, record setting skyscrapers, and economic chaos.
While my chapter was submitted in 2006 it was not published in the intended book until 2009 during the aftermath of the bubble.1 Not only did the editors invite me to include material in the final published version that they had originally deleted as too controversial. They also drew attention to my chapter at the beginning of their introduction to the book:
To the extent that the media was aware of my work, especially on the skyscraper curse, the response and level of appreciation was mixed. On the one hand, CNN was positive, if not surprised, that my work was so accurate and specific:
One person who wasn't surprised by the economic woes greeting the dedication of the Burj Khalifa (renamed Monday from Burj Dubai in honor of the sheikh of Abu Dhabi, which recently threw Dubai a $10 billion lifeline) was Auburn University economist Mark Thornton.
He predicted tough times for the emirate two years ago in a blog post entitled "New Record Skyscraper (and Depression?) in the Making." He noted that economic depression or stock market collapse usually occurs prior to completion of such skyscrapers.
On the other hand, The Economist took my “skyscraper curse” model to task because it did not stand up to somebody else’s poor understanding of the data involved. The magazine did not actually use my name in their article, although my academic article is listed in their reference list although my name was missing there too. My letter to their editor was not published and after many months I was extremely surprised to receive an email from them saying that my letter to the editor had been misplaced. Despite its discovery, they did not publish it. Extremely odd?
Review of the Charts
Here I will review the charts that I used in my 2006/2009 chapter and update the charts for the current housing bubble. As you will see, the Fed clearly did not learn its lesson and stuck its fingers back into the cookie jar. Of course, much more could be said about this housing bubble, but I will mention here that the bubble in real estate is cloaked in what my friend Keven Duffy correctly calls the “everything bubble.”2
The first chart is based on the Federal Funds Rate, which is the Fed’s main policy interest rate. They can control it directly and because it is the interest rate that banks charge other banks for very short-term loans, it sets the foundation for most other interest rates in the economy.
My chapter was completed in early 2006, but I had been studying and writing about the first housing bubble since early 2004. The paper was not published until 2009, long after the bubble burst and policy makers at the Fed and elsewhere were busily trying to cover up their mistakes.
What followed was seven years near the zero target rate and multiple rounds of bailouts and quantitative easy. This changed in 2016 as the Fed tried to engineer a return to normalcy and a soft landing. It did not work and under the cloak of the covid-19 crisis, the Fed went into double panic mode with a return to zero rates and quantitative easing combined with the Federal government’s unprecedented fiscal stimulus.
At the far left of the graph, you can see the Fed has once again embarked on a normalcy/tightening phase that has only just begun. The Fed has yet to raise its target rate above 1 percent. Balanced sheet reductions will be small until after the November election. Their response is particularly anemic so far given that CPI inflation is above 8 percent.
The thirty-year fixed-rate mortgage is a primary driver of housing bubbles. The 6 percent rate that caused the previous housing bubble seems high compared to recent years, but 6 percent is lower than at any time since we went off the gold standard in 1971.
The truly remarkable rates occurred only in the last few years when a combination of the Fed driving its policy rate to zero, massive quantitative easing, including massive purchases of mortgage-backed securities (MBS) and a tame CPI inflation led to the lowest rates ever, often less than 3 percent!
The Fed’s verbal war on CPI inflation by its top policy makers threatening large and sustained rate hikes and enormous balance sheet reductions, combined with out-of-control CPI inflation has moved market mortgage rates up sharply, now above 5 percent. The shift in recent years to fixed rate mortgages and away from variable rate mortgages should insulate current holders but could also crush potential home buyers and eventually hurt mortgage investors, banks, the Federal Deposit Insurance Corporation (FDIC) and even the Fed itself, which is the largest investor in mortgages.
If CPI does not soon collapse, the Fed will have to move rates much higher and that would trigger a downturn in housing statistics including prices and new permits—the new housing bubble would go bust. Recently on Bloomberg, a top Fed official was asked if its policy could reduce home prices and make it more affordable for first time buyers. The official quickly coughed and said the Fed would never reduce home prices, only the rate of increase. I’m glad that isn’t my job!
In the twenty years prior to completing my paper the total amount of real estate loans at commercial banks increased from $1 trillion to $3 trillion, a massive $2 trillion increase. That same number increased from $3 to $5 trillion, another $2 trillion increase over the last fifteen years despite a soft or negative overall market from 2009 to 2015.
The personal saving rate was above 10 percent on the gold standard and few people were on the public dole. Since going off gold in 1971 the saving rate has been declining and registered near zero when I completed my chapter in 2006. It has since risen to a higher level but remained below the gold standard percent-of-income level, until the covid-19 crisis hit, and the Fed went into its inflationary panic response in March 2020. The Federal government also ran massive deficits combined with multiple rounds of “stimulus” vote buying sprees. With vast amounts of free money and historic economic uncertainty, the personal saving rate spiked to over 25 percent and has since returned to the prior rate between five and 10 percent.
The money supply as measured by the MZM statistics increased by 50 percent during the first housing bubble and has increased another 50 percent since then, increasing in the last few years from roughly $6 trillion to $9 trillion. Obviously, the Fed is trying to do the impossible, which is to engineer and print the economy to prosperity, or whatever goal they are pursuing.
During the previous housing bubble, the amount of Real Private Residential Fixed Investment increased substantially, nearly doubling in the fifteen years leading up to the bubble’s end. During the second housing bubble, it has nearly doubled again. During the previous housing bubble, I marked the beginning of that bubble by noting that housing investment even increased during the prior recession. Investment also spiked again in the recent short recession during 2020 which might suggest that the current bubble has yet to reach its final stages.
Another good measure of housing is the number of single unit housings starts, measured here with New Privately Owned Housing Units data. That number increased substantially in the fifteen years of the previous bubble, before dropping precipitously to a record low. Housing starts have been on a similar trajectory since the previous bubble-bust ended. Although it has so far not reached the same height of the previous bubble its absolute increase is about the same and the number of multi-unit dwelling has noticeably surpassed the previous bubble. Also, the number of employees in the construction industry has reached back to the previous record levels that occurred during the previous housing bubble.
The amount of household debt increased enormously during the previous housing bubble and continued to increase for two years after my paper was completed, before hitting the crash/recession and tapering off for several years before being reignited and reaching its new highs. Since mid-2013 household debt has increased by over 30 percent despite the covid-19 crisis bout of higher household savings.
There are a number of alternative explanations for the red-hot housing and construction sectors, but I have viewed this market as a bubble in the making for many years. My anticipation is that while it could continue for some time, ultimately, we will see that mistakes were made caused by the Fed.
Prior to the last crash in housing prices Fed officials told us there was no housing bubble, that the Fed had near-omniscience and power, and that they would intervene quickly to prevent a bubble or a bust in housing. They claim that was their own transparency, but it turns out it was really their deception of us.
Then on top of that, the Fed acquired new powers and authority, Congress enacted sweeping regulatory and reporting requirements, while everyone else became much more skeptical about house flipping, multiple home ownership, and the charms of “housing prices never go down,” and “no one ever lost money in real estate” maxims.
Now we hear that people are still desperate to buy a house despite outrageous prices. That prices are bid up higher than asking prices. That homes-for-sale inventories are non-existent in some markets and that available homes are snatched up instantly in other markets. That buyers are in a catch-22 of rising prices and rising mortgage rates. That recent buyers can flip for a profit. To me, these are all echoes from a housing bubble being blow up to its inevitable breaking point.
- 1. Mark Thornton, “The Economics of Housing Bubbles” in America’s Housing Crisis: A Case of Government Failure Edited by Benjamin Powell and Randall Holcombe. Independent Institute, 2009.
- 2. Bubbles usually get named after the sector most impacted by the Fed’s monetary inflation and low interest rate policy, but most asset classes have reached bubble proportions in this cycle. NOT SURE IF HE ACTUALLY COINED THE PHRASE.
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