Here's my Top 10 items from around the Internet over the last week or so. As always, we welcome your additions in the comments below or via email to email@example.com.
My must read is #5 on price insenstive buyers. And I love it that I have a cartoon with the phrase 'fiduciary responsiblities' in it.
1. A landlord and tenant register? - Wouldn't it be great to be able to name and shame bad landlords and tenants?
We're seeing many of the great peer to peer apps like Uber and Air bnb using star ratings systems and online feedback keeping everyone honest and on their toes.
Why couldn't tenants and landlords do the same for each other?
It struck me on reading this latest piece on a boy who got rheumatic fever from living in a cold, damp and mouldy house in Johnsonville.
New Zealand's poor housing stock is a national scandal and some sunlight could be the best disinfectant.
"She identified that our house had no insulation, which is why my sons were getting so sick," Aspinall said.
Capital & Coast District Health Board said that, although the landlord had installed a heat pump, Snow's assessment showed it was poorly placed to heat the lounge and bedrooms.
However, Auckland-based landlord Peter Moon said he believed the house was insulated and, when he found out it wasn't, he contacted the family to try to help. "I'm aware of the problems she's got with it, but I need it empty to do all the work." "I said to her, 'If you can find somewhere temporary for a few months, you can come back.' They are damn good tenants ... I look after them as best as I can."
The Johnsonville house had been a family home since 1969, Moon said. "I've lived in it. I grew up in it and we never had any problems. "Nobody has ever been unhealthy in the house. It is the overcrowding. There are too many people in the house."
2. Trust - American casino mogul Steve Wynn has a few apt things to say about the Chinese Government intervention in China's stock market in recent weeks, particularly around the the nature of trust.
“I am not an expert on China and I’m not even a Wall Street expert, but I am a person who’s been in a public company for 40 years,” Wynn said during an earnings call on Wednesday.
“And my own experience, had I been consulted, I would have said don’t do that exactly. Because if someone thinks that you’re going to close the door on their ability to sell or trade their shares, you can only do that for a certain length of time and then the minute you finish doing it, the people scamper for the door because there’s a loss of trust.”
3. Migrant nation - This map courtesy of Amazing Maps shows the countries in the world who have the most migrants as a percentage of their population. It's not clear over what time period they measure it, but it sure shows New Zealand has a lot higher migration rate than most. The countries in the heaviest blue have the highest rates.
4. Excessive risk taking - It's fascinating to see that APRA, the Australian regulator of banks, is about to launch a report on how banks have been lax in their lending standards to rental property investors. Couldn't happen here could it?
Here's the SMH on the practices:
The chairman of the Australian Securities and Investments Commission, Greg Medcraft, on Thursday said the watchdog would in August publish a report finding shortcomings among how some lenders were testing borrowers' ability to cope with higher interest rates.
The report, based on surveillance of 11 banks and non-banks, had also found some lenders' credit checks used inadequate estimates of customers' living expenses, he said.
Even though banks are offering new borrowers interest rates of about 4.5 per cent, Mr Medcraft lenders and customers needed to assess whether borrowers could cope with interest rates of 7 per cent.
5. Price insensitive buyers - Jeremy Grantham at GMO is always thoughtful and this quarterly newsletter is an excellent look at why some people seem willing to buy anything at any price.
Sound familiar? Sounds like Auckland.
He argues the 'grown ups' at global central banks have been doing it. Can the great unwashed be condemned for doing it too?
Moral hazard abounds. See #1 above.
The size of the price-insensitive market participants is impressive. Monetary authorities and developed market central banks have each bought on the order of $5 trillion worth of assets for reasons that ultimately have nothing to do with earning an investment return on them. Regulatory pressures have caused pension funds, insurance companies, and banks to do likewise.
While it is somewhat harder to put precise numbers to the size of these investments, it seems a safe bet that the total is in the trillions as well. Other investors are in analagous positions for different reasons, as strategies such as risk parity and the exigences of life as a mutual fund portfolio manager push such investors to also buy assets for reasons other than the expected returns those assets may deliver. To date, these investors have tended to be buyers, and given their lack of price-sensitivity, they have pushed up prices of assets beyond historically normal levels.
6. Why don't we work less - Planet Money checked with Keyne's grandchildren recently about the great economists' prediction that his grandchildren would only have to work 15 hours a week because of massive productivity gains and the rise of the machines. It turns out his grand nephew and grand neice (he didn't have any children) work just as long and hard as the rest of us.
So where did Keynes go wrong? Two answers immediately spring to mind — one noble, and one less so. The noble answer is that we rather like some kinds of work. We enjoy spending time with our colleagues, intellectual stimulation or the feeling of a job well done. The ignoble answer is that we work hard because there is no end to our desire to outspend each other.
Keynes considered both of these possibilities, but perhaps he did not take them seriously enough. He would not have been able to anticipate more recent research suggesting that the experience of being unemployed is miserable out of all proportion to its direct effect on income.
Perhaps Keynes also failed to appreciate that there is more to keeping up with the Joneses than conspicuous consumption. We want to live in pleasant areas with good schools and easy access to dynamic employers. As a result, we find ourselves in ferocious competition for a limited supply of desirable houses.
The record is clear that tax cuts have not boosted growth. When growth is (appropriately) measured from peak to peak of the business cycle, the vaunted Reagan tax cuts in the early 1980s produced a period of average growth. Indeed, research by Martin Feldstein, President Reagan’s former chief economist, and Doug Elmendorf, the former Congressional Budget Office Director, concluded that the 1981 tax cuts had virtually no net impact on growth.
Virtually no one claims the 2001 and 2003 Bush tax cuts stimulated growth. Despite cuts in tax rates on ordinary income, capital gains, dividends, and estates, economic growth remained sluggish between 2001 and the beginning of the Great Recession in late-2007. The growth that did occur, however, is generally attributed to the Fed’s easy money policy.
Tax rates as determinants of growth fare no better in cross-country comparisons.Research by Thomas Piketty (Paris School of Economics), Emmanuel Saez (UC-Berkeley), and Stefanie Stantcheva (MIT) found no relationship between how a country changed its top marginal tax rate and how rapidly it grew between 1960 and 2010. For example, the United States cut its top rate by over 40 percentage points and grew just over 2 percent annually per capita. Germany and Denmark, which barely changed their top rates at all, experienced about the same growth rate.
The story is much the same when total tax burdens are compared. Over the 1970-2012 period, taxes as a share of GDP were 7 percentage points higher in the rest of the OECD countries (32 percent) than in the United States (25 percent). Yet, per capita annual growth was virtually identical in the rest of the OECD (1.80 percent) compared to the United States alone.
So, there is no reason to believe that tax cuts are an elixir for economic growth. There’s another problem here as well. As Piketty and company note, with or without the elusive supply-side effect, high-end tax cuts have exacerbated income inequality.
8. Totally John Oliver on mandatory minimum prison sentences. It's funnier than it sounds. And more serious.
9. Totally Clarke and Dawe - Justin Credible tries to answer a few questions. Or ask them. Or something.