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Trussonomics

I am confused by the calm coverage of the recent radical shift in economic policy – described by the BBC as “bid to boost growth”.  This type of…

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I am confused by the calm coverage of the recent radical shift in economic policy – described by the BBC as “bid to boost growth”.  This type of reporting does not make clear whether we are talking short-term growth or long-term potential, and how these policies impact each of them in very different ways.  From conversations with friends, much of the analysis does not investigate this and ultimately reveal just how dangerous and radical this new set of policies is. 


Potential Output – what is it?

Truss has justified her policy changes economically citing improvements in the UK’s long-term growth potential i.e. increasing potential output

Potential output is the starting point for thinking about how much the country can produce ie it is the maximum sustainable level of output. 

If we are below, then this is called a negative output gap and we see things like unemployment rates being high and inflation likely falling. 

The OBR does a great job on this and their website is very clear

Potential Output – how can we improve it?

Everyone wants to improve potential output and there is a clear left vs right divide on how best to achieve it.

Truss is firmly in the right-wing supply-side movement of “trickle-down” i.e. give tax breaks to rich people and everyone will be better off because somehow this leads to greater potential output.  Reagan was the most prominent exponent of this view but we are still waiting for any evidence that it works.

Potential Output – will it work?

I think best to simply summarise that there is no evidence that cutting taxes has any positive effect on potential output.

OK – so if Trussonomics does not improve potential output, what does it do?

It does a LOT

The most obvious and direct impact is of course on inequality.  She is delivering a massive cash handout to rich people.  The richer you are the more you get. 

The part that is getting less attention is the impact on

  1. Fiscal vs interest rate policy mix
  2. Debt sustainability
  1. Fiscal vs interest rate policy mix

This policy choice has been perhaps at the heart of the political battle of the past decades and is commonly misunderstood.  This is a shame as a simple quadrant model does a good job of providing a framework to compare the options clearly. (Fiscal policy is the mix of tax and spending with high spending/low tax being loose fiscal policy)

Tight fiscal -tight monetary         When you are committed to fighting inflation above other policy goals.  For example, the 1980s or commonly after an economic crisis when trying to rebuild confidence in the currency and debt.  If used inappropriately looking at the 1930s Great Depression.

Tight fiscal – loose monetary     This is the Cameron years.  There is of course a debate over how tight fiscal policy should have been and on how the mix of tax and spending was managed.  But it is a consistent policy mix

Loose fiscal – loose monetary    This was at its maximum during the pandemic i.e. for a short term huge negative shock.  If used long term it just leads to economic catastrophe.

Where are we now?

We are currently in the loose/loose box.  Taking the unemployment rate as a simple measure of the output gap, you can see from the chart below we are at record lows.  This is also clear to anyone trying to hire at the moment and all the reports of staff shortages.  Which makes it odd that Truss talks about “boosting growth” as there is no prospect of lower unemployment from here.

UK Unemployment at record lows

The other factor that makes going for growth an odd policy goal is that inflation is high and rising.  This does not have an easy solution and economic pain is unavoidable.  Trying to avoid it, leads to even greater pain later.

UK Inflation at 30-year highs

What happens next?

The Bank of England will be forced to raise interest rates by huge amounts.  At the start of this year the market expected interest rates to stay at around 1% though 2022 and 2023.  Now the market expects rates to be 4% by the end of this year and 5.5% by the end of next year- with rate expectations for next year shifting 3% since the start of August. 

What does this mean for people?

Well rich people have had a large tax cut and will be fine – I know you are all relieved to hear this.

Anyone on a regular income has had a small tax cut but this will be dwarfed by the rise in the mortgage payments coming soon.


What does it mean for the economy?

I predict a very bumpy path and hard landing for the economy but difficult to say when.  The policy mix of vast fiscal expansion at a time of low unemployment and high inflation to be offset by rapid interest rate rises is a chaotic mix.  I think the economy will stay strong and then crash hard. 

  1. Debt sustainability

This is getting some attention but is being dismissed by Truss.  The fact that they did not let the OBR produce a forecast tells us a lot about how they have contempt for this constraint on policy.  An Office of Budget Responsibility is not what the Chancellor wants to hear from!

But the bond market still exists, and long-term government borrowing is getting hammered.  30-year Gilt yields have risen from under 1% at the start of the year to 4% as I write this.

The tax cuts and extra spending increases the budget deficit.  The rise in interest rates increased the cost of servicing the debt, further increasing the budget deficit.  This can become an exponentially explosive mix with the major accelerator being a currency crisis as the value of sterling falls.

Conclusion

The Trussonomics experiment is radical and dangerous.  I expect high inflation, high interest rates and a weak currency leading to economic crisis.  Politically I expect her to start to blame the Bank of England as though the rise in interest rates was not a direct result of her policies.  The Bank of England may be independent of the government, but they are not independent of economic reality.

Truss has spoken of her disdain for “abacus economics” and she does not believe things need to add up.  I think economic reality exists and her magical money tree fantasy will fail. 

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Economics

Cities With Good Neighbors Have Lower-Than-Average Home Values

New York’s Rochester was identified took the top spot as the most neighborly city in the country.

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New York's Rochester was identified took the top spot as the most neighborly city in the country.

Many want the kind of neighbor who will stop by with fresh-baked cookies, offer gardening tips and take out the mail while they're away — a thing that, if you live in an urban mecca like New York, is just as likely as finding a spacious apartment that's available and within budget.

In honor of National Neighbor Day on Sept. 28, self-storage company Neighbor.com identified Rochester in the Finger Lakes region of New York state as the most neighborly city in the country.

The study analyzed both big and small cities through factors such as resident happiness levels and number of people volunteering their time to the community.

"It's not a surprise that Rochester is the most neighborly city this year, it's made this list each year," Joseph Woodbury, CEO and co-founder of Neighbor.com, said of the findings. "Oftentimes, we connect hospitality with small cities, but you’ll find that people in large cities are just as likely to go out of their way to help one another."

Correlation Between Neighborliness and Home Values

While Federal Reserve economic data pegs the median price of homes sold in 2022 at $428,000, the median list price identified by Realtor.com for Rochester is $150,000. 

Madison, Wis., and Provo, Utah followed Rochester as the most "neighborly" cities in the U.S. and have respective median list prices of $360,000 and $495,000.

Along with Provo, California's Oxnard breaks the list's mold with its high real estate prices — amid proximity to the beach (the city is about 60 miles from Los Angeles) and quaint Victoria architecture, the city has a median list price of $794,500.

Getty Images

Other cities on the list generally fall below the national average for a standard single-family home. Grand Rapids in Michigan has a median list price of $307,500 while that number is only $175,000 in Milwaukee, Wis.

Harrisburg, Pa., and Des Moines, Iowa are two other neighborly cities with respective list prices of $215,000 and $227,500. 

Good neighbors have long been a hallmark of smaller cities with a quieter way of life — metropolises like New York and Los Angeles have very high property values, they are not exactly known for being "friendly" or "welcoming."

With a median list price of $495,000, North Carolina's Raleigh is the largest city to make the list.

Those who think New Yorkers are unfriendly need only to look outside the five boroughs — with a median list price of $334,000, Poughkeepsie also made the list for its neighborliness.

Search For the Next Big Real Estate City

As sleepy towns that paint a TV image of "neighborliness" tend to have lower demand, they may not offer the kind of real estate growth potential that many investors are specifically looking for. 

But exceptions do exist — many small cities are currently in the midst of a real estate boon and, subsequently, an explosion in real estate values.

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According to the study's authors, many homebuyers looking to move have specifically started looking for "friendlier" cities after the pandemic and are driving up demand for formerly quiet places.

Realtor.com identified Utah's Salt Lake City, Idaho's Boise and Washington state's Spokane as 2022's fastest-growing real estate markets.

"Being neighborly goes beyond a friendly wave while driving down the street or offering to water plants while on vacation," Woodbury said. "To be neighborly is opening yourself up to building relationships and ultimately a community that is rooted in compassion, trust, and care."

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Economics

Here’s Why Your Boss May Reject Your Business Travel Request

People are taking vacations again, but a once dominant travel sector is struggling to recover.

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People are taking vacations again, but a once dominant travel sector is struggling to recover.

Now that vaccines are readily available and President Joe Biden has declared that the pandemic is officially over, people are flying again. But they’re really not happy about it.

The research firm J.D. Power found that last year, when the airline industry first started to cautiously rebound, consumer satisfaction with airports reached an all-time high. But this was very likely both because of a relatively smaller sample size and that so many people were happy to fly again that they were willing to overlook a lot of what has become headache-inducing about modern airfare travel.

J.D. Power  (JD) - Get JD.com Inc. Report has found that this year, global passenger levels are nearly back up to 91% of pre-pandemic levels. 

Customer satisfaction has dropped sharply, 25 points on a 1,000-point scale, to 777, as more people have returned to airports, for reasons ranging from an increase in flight cancellations and delays to inflation-driven increases in the cost of airport food.

But while airlines are aware that customers aren’t happy, and that the Biden Administration might try to right the ship with proposals that airlines likely won’t care for, at least people are flying again.

But an additional survey by J.D. Power has revealed that while people are flying again, traveling for business (be it for in-person meetings or industry conferences), has been lagging behind and recovering at nearly the rate of traveling for pleasure. 

Is Traveling for Business on the Way Out?

J.D. Power’s research has found that many travelers doubt that travel levels will increase dramatically from where they are now, and that “a strong majority of executives believe their companies will spend less in the next six months compared to the same period in 2019, for instance, due to things like fewer trips overall or fewer employees sent when there is a trip scheduled,” according to their data.

Overall, business travel has returned to “about 81% of 2019 levels,” notes Managing Director Michael Taylor. “83% was our prediction for this quarter, we’ll see how well we did in a few weeks and add a predication for Q4.”

J.D. Power

Fears of recession and the rising costs of air tickets from inflation play a factor in the decline of business travel. But overall, the main reason is that many of us have gotten so used to working at home that two-thirds of employees would rather find a new job than go back to the pre-pandemic status quo. If employees feel they can get work done from home and don’t feel like braving traffic to return to the office, why would they feel they need to get on a plane?

So have services like Zoom (ZM) - Get Zoom Video Communications Inc. Report and Slack made the business trip redundant? Taylor has his doubts.

“But will people be meeting exclusively in the 'Metaverse' rather than in person? I do not think that will happen,” he says. “There is too much information to be gathered in face-to-face meetings, spoken and unspoken, to be replaced completely by virtual ‘reality.’”

Getty Images

So is This It for Business Travel?

Back in the heady pre-pandemic days three years ago, airlines could rely on the extra income from people whose jobs entailed a great deal of travel, and who had come to the realization that if they were going to spend a chunk of their lives on the road, they could splurge to make it a more comfortable experience. 

But if airlines want this sector to return, Taylor thinks it’s their duty to make it a more appealing option, because frequent delays and other headaches are enough to make anyone stick to Zoom.

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Airlines, Taylor says, must “create more of a “living room” experience for travelers, one that “makes travelers feel valued as patrons of the airlines, and makes people feel like individuals rather than cattle.”

Because while it’s hard to argue with the convenience, Taylor insists there is still something to be said for the occasional in-person meeting. 

“Millenia of evolution in mankind has created an awareness that can’t be described with words on a page or pixels on a screen,” he says. “People will still find advantages in meeting in-person rather than online.”

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Economics

BOEHRINGER INGELHEIM DONATES NEARLY 100,000 PET VACCINE DOSES TO HELP ELIMINATE RABIES AROUND THE WORLD WITH RELAUNCH OF SHOTS FOR GOOD(SM) INITIATIVE

BOEHRINGER INGELHEIM DONATES NEARLY 100,000 PET VACCINE DOSES TO HELP ELIMINATE RABIES AROUND THE WORLD WITH RELAUNCH OF SHOTS FOR GOOD(SM) INITIATIVE
PR Newswire
DULUTH, Ga., Sept. 28, 2022

In recognition of World Rabies Day on September 28, the d…

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BOEHRINGER INGELHEIM DONATES NEARLY 100,000 PET VACCINE DOSES TO HELP ELIMINATE RABIES AROUND THE WORLD WITH RELAUNCH OF SHOTS FOR GOOD(SM) INITIATIVE

PR Newswire

In recognition of World Rabies Day on September 28, the donation is for use on tribal lands and underserved communities in collaboration with Greater Good Charities

DULUTH, Ga., Sept. 28, 2022 /PRNewswire/ -- Boehringer Ingelheim, a global leader in veterinary rabies vaccines, has expanded its commitment to help prevent rabies in dogs by donating nearly 100,000 doses of rabies vaccine. The donation is part of the relaunched SHOTS FOR GOOD℠ program and will be used on tribal lands and in underserved communities across the United States.

Rabies is a zoonotic, viral disease, which can be transmitted through wild animals and pets. Once clinical symptoms appear, rabies is virtually 100% fatali. Even though it is vaccine-preventable, around 59,000 people still die from rabies every year globallyii. Rabies is present on all continents, except Antarctica, with over 95% of human deaths occurring in the Asia and Africa regionsiii. It can pose a significant risk anywhere if dogs are not vaccinated. Dogs are the main source of human rabies deaths, contributing up to 99% of all rabies transmissions to humansiv.

"Boehringer Ingelheim fervently believes no animal should suffer from a preventable disease," said Dr. Julie Ryan-Johnson, head veterinarian for shelters at Boehringer Ingelheim and board vice chair for Greater Good Charities. "Together with Greater Good Charities we can fight the presence of rabies on tribal lands and in underserved communities to keep pets healthier and happier for longer."

Boehringer Ingelheim Animal Health established the SHOTS FOR GOOD initiative in 2019 in Puerto Rico and underserved communities in California, Nevada, Oklahoma, Texas, North Carolina, Louisiana, Mississippi, and Florida. However, in 2020, the initiative was suspended due to global pandemic restrictions.

Since relaunching the program earlier this year, and in collaboration with the global nonprofit, Greater Good Charities, the program has enabled vaccination clinics throughout tribal lands in Alaska, Arizona, Colorado, Montana, and Utah. Additional vaccines have been utilized in Hawaii as part of Greater Good Charities' Good Fix program which offers high-quality, high-volume spay/neuter to help control pet overpopulation in underserved communities.

"In observance of World Rabies Day, we recognize the positive impact of vaccination events to raise awareness about rabies and how to prevent this deadly disease," said Denise Bash, vice president at Greater Good Charities. "The generous vaccine donations from Boehringer Ingelheim Animal Health and the Shots for Good initiative helps to protect pets while making this important effort possible."

About World Rabies Day

World Rabies Day, held every year on September 28, is observed by the United Nations as an International Day. Coordinated by the Global Alliance for Rabies Control, it is a day to raise awareness about rabies and how to prevent this deadly disease. Hundreds of events are held by organizations and individuals around the world in recognition of this day.

About Boehringer Ingelheim

Boehringer Ingelheim Animal Health is working on first-in-class innovation for the prediction, prevention, and treatment of diseases in animals. For veterinarians, pet owners, farmers, and governments in more than 150 countries, we offer a large and innovative portfolio of products and services to improve the health and well-being of companion animals and livestock. As a global leader in the animal health industry and as part of family-owned Boehringer Ingelheim, we take a long-term perspective. The lives of animals and humans are interconnected in deep and complex ways. We know that when animals are healthy, humans are healthier too. By using the synergies between our Animal Health and Human Pharma businesses and by delivering value through innovation, we enhance the health and well-being of both.

Learn more about Boehringer Ingelheim Animal Health USA Inc. at bi-animalhealth.com  

About Greater Good Charities

Greater Good Charities is a 501(c)(3) global nonprofit organization that works to help people, pets, and the planet by mobilizing in response to need and amplifying the good. Greater Good Charities, with a 100/100 rating on Charity Navigator, has provided more than $475 million in impact, including cash grants, in-kind supplies, and programmatic support, to charitable partners in 121 countries since 2007. To learn more about how Greater Good Charities amplifies the good across the globe, please visit greatergood.org.

Media Contact:
Chrissy Jones
Boehringer Ingelheim Animal Health
U.S. Communications
(516) 527-5456
christine.jones@boehringer-ingelheim.com 

REFERENCES

i World Health Organization: Rabies (who.int) (downloaded: April 1, 2022)
ii World Health Organization: Oral rabies vaccine: a new strategy in the fight against rabies deaths (who.int) (downloaded: April 1, 2022)
iii World Health Organization: Rabies (who.int) (downloaded: April 1, 2022)
iv World Health Organization: Rabies (who.int) (downloaded: April 1, 2022)

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SOURCE Boehringer Ingelheim

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