Links: 2013-10-14

Canadian housing market expected to stay on hot streak – The Globe and Mail

“Canada’s housing market is back on a roll, a finding that should be evident in the September sales data that the Canadian Real Estate Association will release on Tuesday.

The slump that began in the summer of 2012 came to an end this past summer, with sales topping economists’ forecasts, and the market showing a surprising amount of momentum.”

Furloughed Workers Pinching Pennies, Volunteering | TIME.com

“Here are the stories of just a few of the government workers directly affected by the shutdown.”

As Washington Dithers on Debt Deal in U.S., China’s News Agency in Commentary Calls for a ‘De-Americanized’ World – China Real Time Report – WSJ 

Weak Exports Show Limits of China’s Growth Model – Real Time Economics – WSJ

“An unexpected fall in China’s exports in September, after a string of modest monthly gains, signals renewed weakness in the emerging markets that have become important trading partners for China, and indicates the limits of relying on further export growth to power the economy.”

BBC News – China inflation rate rises on higher food prices

“Consumer prices in China rose more than forecast in September, fuelled mainly by a surge in food prices.

Prices rose 3.1% during the month, from a year earlier, up from 2.6% in August, the National Bureau of Statistics said.

The bureau said that food prices rose 6.1% from a year ago due to the impact of national holidays, as well as droughts and floods in some regions.

Some analysts said that rising prices had reduced the chance of any major monetary policy moves by Beijing.”

BBC News – India’s inflation rate hits seven-month high

“India’s inflation rate rose to a seven-month high in September, limiting the room for authorities to ease monetary policy as they look to spur growth.

The Wholesale Price Index, India’s main gauge of inflation, rose 6.46% from a year earlier, up from 6.1% in August.

Rising consumer prices have been a concern for policymakers, preventing them from taking aggressive measures to boost India’s slowing economy. “

U.S. May Join Germany of 1933 in Pantheon of Defaults – Bloomberg

“Reneging on its debt obligations would make the U.S. the first major Western government to default since Nazi Germany 80 years ago.

Germany unilaterally ceased payments on long-term borrowings on May 6, 1933, three months after Adolf Hitler was installed as Chancellor. The default helped cement Hitler’s power base following years of political instability as the Weimar Republic struggled with its crushing debts.

“These are generally catastrophic economic events,” said Professor Eugene N. White, an economics historian at Rutgers University in New Brunswick, New Jersey. “There is no happy ending.” “

Shutdown Likely to Prolong Fed’s Stimulus – WSJ.com

“The government shutdown and debt-ceiling fight are clouding the outlook for the global economy and markets, but they are bringing clarity to one area: The Federal Reserve is now likely to keep its foot on the monetary gas pedal even longer to offset damage from the standoff.”

With Standoff Unresolved, Banks Shed Short-Term Treasury Bills – WSJ.com

Default by Nov.1st at the latest if the debt ceiling standoff is not resolved.

“Bigger tests come later this month. The government is scheduled to make a $12 billion Social Security benefit payment on Oct. 23, according to the Bipartisan Policy Center. About $58 billion in government benefits is scheduled to be paid on Nov. 1”

Decaying Roads Slow U.S. Recovery – WSJ.com

“America’s road to recovery may face a costly detour due to a fraying transportation network.

One in nine of the country’s 607,380 bridges is structurally deficient and 42% of the country’s major urban highways are congested, according to an American Society of Civil Engineers estimate, the result of years of inadequate funding and deferred maintenance.”

The Kurtz Republicans – NYTimes.com

““THEY told me,” Martin Sheen’s Willard says to Marlon Brando’s Kurtz in “Apocalypse Now,” at the end of a long journey up the river, “that you had gone totally insane, and that your methods were unsound.”

His baldness bathed in gold, his body pooled in shadow, Kurtz murmurs: “Are my methods unsound?”

And Willard — filthy, hollow-eyed, stunned by what he’s seen — replies: “I don’t see any method at all, sir.”

This is basically how reasonable people should feel about the recent conduct of the House Republicans. “

The Bursting of the Fear Bubble Crossing Wall Street

“So what does that gold selloff mean? That’s hard to say exactly but it’s interesting that it comes at a time of strong cyclical performance. My hunch is that this is the unwinding of the risk trade that was so popular during 2011. Less than watching a new equity bubble, we’re really seeing the Fear Bubble pop. “

Commonsense ideas behind Taleb’s rhetorical flourishes – FT.com

I like Taleb but I see some of his ideas as fatally flawed.

Time to take bets on Frexit and the French franc? – Telegraph Blogs

“We have a minor earthquake in France. A party committed to withdrawal from the euro, the restoration of French franc, and the complete destruction of monetary union has just defeated the establishment in the Brignoles run-off election.

It is threatening Frexit as well, which rather alters the political chemistry of Britain’s EU referendum.”

Arnold Kling’s Cunning Hairdresser Theory of the Financial Crisis | New Economic Perspectives

On its face, this looks like a case of someone with an anti Fannie, Freddie agenda making unsubstantiated claims about the causes of the financial crisis. By the way, I am also anti-Fannie and Freddie because I believe those companies introduce a distortion into the mortgage market. Nevertheless, they were not primary causes of the crisis.

Lawrence Summers: In shutdown debate, focus on growth not deficit – The Washington Post

“If even half the energy that has been devoted over the past five years to “budget deals” were devoted instead to “growth strategies,” we could enjoy sounder government finances and a restoration of the power of the American example. At a time when the majority of the United States thinks that it is moving in the wrong direction, and family incomes have been stagnant, a reduction in political fighting is not enough. We have to start focusing on the issues that actually are most important.”

The Man Who Invented the Government Shutdown | TIME.com

“at the end of the Carter Administration one man changed all that with the stroke of a pen.

His name: Benjamin Civiletti.

As Jimmy Carter’s attorney general, Civiletti was asked for a legal opinion parsing out what exactly the federal bureaucracy is supposed to do when Congress doesn’t pass a budget by deadline. Congress had missed the mark many times before but the issue was becoming particularly urgent; in the four fiscal years from 1977 to 1980—every year of the Carter presidency to that point—Congress had failed to pass a budget on time. Remarkably, Civiletti determined that Carter’s request for a legal opinion on the matter “apparently represents the first instance in which this Department has been asked formally the address the problem as a matter of law.”” 

interfluidity » Why Scott Sumner should love the debt ceiling 

“the government has a much cozier relationship with its bank than your typical check-kiter. Suppose the government, in response to the insoluble problem presented by congressional spending mandates and a debt limit, simply decides to pay all its bills as old-fashioned paper checks. It then asks the Federal Reserve not to “bounce” checks presented for payment against insufficient funds, but simply to hold them and make payments on a first-in, first-out basis as funds become available. Everyone who deposits a US Treasury simply finds that the funds don’t appear in their account until weeks or even months later. (Banks, in order to protect their own cash flows, would revise their “hold period” policies with respect to checks from the US Treasury, making funds available only when the checks actually clear, like they might with deposit of a large personal check.)

Suddenly, the debt ceiling is moot. Every check issued by the US Treasury is basically a credit line that does not count towards the debt limit. The Treasury pays its bills, on time and as usual, in the form of paper checks. It’s just that those checks clear a bit sluggishly.”

Families hoard cash 5 years after crisis – KansasCity.com

This is exactly why deleveraging is still a potent threat to the world economy. If any of these economies loses gas through an exogenous shock like a long government shutdown, this is the psychology that will return en masse.

“An Associated Press analysis of households in the 10 biggest economies shows that families continue to spend cautiously and have pulled hundreds of billions of dollars out of stocks, cut borrowing for the first time in decades and poured money into savings and bonds that offer puny interest payments, often too low to keep up with inflation.

“It doesn’t take very much to destroy confidence, but it takes an awful lot to build it back,” says Ian Bright, senior economist at ING, a global bank based in Amsterdam. “The attitude toward risk is permanently reset.””

How Apple’s iPhone rapidly destroyed Nokia’s world leading Symbian platform 

A must read article on how Nokia lost its way and ceded the mobile market to Apple.

Disconnect Search, Built By Ex-Google And Ex-NSA Engineers, Lets You Use Google, Bing And Yahoo Without Tracking | TechCrunch