Today's News Items.
14 August 2019. By John Ellis.
1. U.S. mortgage debt reached a record in the second quarter, exceeding its 2008 peak as the financial crisis unfolded. Mortgage balances rose by $162 billion in the second quarter to $9.406 trillion, surpassing the high of $9.294 trillion in the third quarter of 2008, the Federal Reserve Bank of New York said Tuesday. Mortgages are the largest component of household debt. Mortgage originations, which include re-financings, increased by $130 billion to $474 billion in the second quarter. The figures are nominal, meaning they aren’t adjusted for inflation.
2. The Trump administration is vastly expanding the scope of condominium purchases eligible for lower-down-payment loans. The move, to be announced Wednesday by the Federal Housing Administration, could help revive the entry-level condo market for first-time buyers because FHA-backed loans require only a 3.5% down payment and lower credit score than conventional loans. It also loosens financial-crisis-era rules and could expose the government to a higher probability of loan default if the housing market continues to slow and prices fall.
3. Inflation accelerated in July as an underlying measure of consumer prices posted its strongest two-month gain since early 2006. The consumer-price index, which measures what Americans pay for items from mutton to motel rooms, rose a seasonally adjusted 0.3% last month from June, the Labor Department said Tuesday. Excluding volatile food and energy, so-called core consumer prices rose 0.3%for a second consecutive month, the strongest two-month gain in more than a decade.
4. U.S. 30-year yields fell to their lowest level ever as investors sought shelter amid a fraught geopolitical backdrop and concern increased about the impact of the escalating global trade war on economic growth. Meanwhile, the stream of investors into the safest parts of the market has triggered yet another recession warning, driving the 10-year Treasury yield below the two-year one.
5. The U.K. yield curve inverted for the first time since the financial crisis in another sign that the global economy may be headed toward a recession. The gap between two- and 10-year yields dropped below zero after the nation’s inflation unexpectedly rose above the Bank of England’s target of 2% in the year through July. Bond investors have been driving into higher yielding assets -- typically those further out the curve -- in recent months. The U.S. curve is also close to inversion, widely seen as a sign of an impending recession.
6. Paul Krugman on what the bond markets are telling us: "If investors expect a boom, they also expect the Fed to try to rein in the boom by raising short-term interest rates (which it more or less directly controls), to head off potential inflation. The prospect of higher short-term rates then leads to higher long-term rates, because nobody wants to lock money in at a low yield if returns are going up. Conversely, if investors expect a slump, they expect the Fed to cut rates, and pile into long-term bonds to lock in returns while they can. So the slump in long-term yields since last fall, from a peak of 3.2 percent to just 1.63 percent this morning, says that investors have grown drastically less sanguine about the economy." The Wall Street Journal notes: "A plunge in bond yields has left investors with few alternatives to stocks."
7. The German economy shrank in the three months to June as trade tensions between the US and China weighed on its export-heavy manufacturing sector and sharpened the pressure on politicians in Berlin to loosen the fiscal purse strings. Germany’s output fell 0.1 per cent in the second quarter from the previous three months, underlining how Europe’s largest economy has gone from being the powerhouse of the region to one of its main laggards.
8. The euro zone’s GDP barely grew in the second quarter of 2019, data showed on Wednesday, as economies across the bloc lost steam and the largest, Germany, contracted thanks to a global slowdown driven by trade conflicts and uncertainty over Brexit. European Union statistics office Eurostat said gross domestic product (GDP) growth in the 19-country euro zone was 0.2% in the second quarter versus the previous quarter, a slowdown from 0.4% percent in the first three months of 2019.
9. Japan's core private-sector machinery orders saw the largest increase on record in June thanks to strong demand from the transport industry, government data showed Wednesday. The orders, which exclude ships and those placed by electric utilities due to their volatility, rose 13.9 percent from the previous month, the most since comparable data became available in April 2005. They totaled 960.3 billion yen ($9.0 billion), the largest amount since last August.
10. China’s industrial production in July grew at its lowest rate since February 2002, with the retail sector also taking a further hit amid a sharpening slowdown sparked by the US-China trade war. Industrial production – a measure of the output of the industrial sectors in China’s economy, including manufacturing, mining and utilities – grew by 4.8 per cent in July from a year earlier. This was down from 6.3 per cent in June, which had improved from May’s 5.0 per cent growth rate.
11. Christmas in August! The U.S. will postpone enacting an additional 10% tariff on key Chinese exports, including smartphones, laptops and toys, until Dec. 15, a move likely intended to dull the pain for American consumers during the critical Christmas shopping season. The Office of the U.S. Trade Representative made the announcement on Tuesday. The U.S. was set to impose the next round of sanctions on roughly $300 billion of Chinese products on Sept. 1, affecting virtually all Chinese exports still untouched by the trade war.
12. The US public has become increasingly hostile towards China as Donald Trump ratcheted up the trade war with Beijing and ramped up his verbal attacks on the Asian nation, according to a survey released on Tuesday. A Pew Research Center poll conducted between mid-May and mid-June, after the acrimonious breakdown of trade negotiations between senior US and Chinese officials, found that 60 per cent of Americans have an “unfavorable” view of China, compared with just 26 per cent who held a positive view. This marked a sharp increase in Americans who view China in a negative light compared with 2018, when 47 per cent of the US public said they had an unfavorable view of China, and the highest level of unfavorability since the Pew series began in 2005.
13. Beijing on Wednesday condemned anti-government protesters for assaulting two mainland Chinese men at Hong Kong International Airport, comparing their behavior to acts of terrorism, while an injunction was secured to ban demonstrations in all but two designated terminal zones.On the sixth straight day of protests that crippled flights at the transport hub and led to unprecedented violence on Tuesday night, airlines were scrambling to resume normal operations.
14. Authorities urged residents of a village in Northwestern Russia to leave their homes, days after a nearby Defense Ministry test of a nuclear-powered engine exploded, boosting radiation levels that alarmed nearby inhabitants. Russian officials’ failure to release full details surrounding the explosion, which killed at least seven employees of Rosatom, Russia’s atomic energy monopoly, and of the Defense Ministry, have raised suspicions over the severity of the accident and whether officials are covering up details.
15. It’s raining multi-colored plastic in the Rocky Mountains, according to the latest research that suggests microplastics are found in even the most remote parts of our planet. Plastic shards, beads and fibres were identified in more than 90 per cent of rainwater samples taken from across Colorado, including at more than 3,000 meters high in Rocky Mountain National Park, according to researchers from the US Geological Survey. According to the study, scientists say the find suggests “the wet deposition of plastic is ubiquitous and not just an urban condition."
16. Nature has an interesting (and counter-intuitive) look at the future of groundwater in sub-Saharan Africa. An analysis of aquifer replenishment in sub-Saharan Africa shows that reduced precipitation does not always deplete groundwater reserves, challenging the idea that these reserves will decrease in response to global warming.
17. There are two Big Tech stories today that are getting a lot of attention. One is a WIRED magazine cover story on the turmoil at Google. The headline sort of says it all: "Three years of Misery Inside Google, The Happiest Company in Tech." The other is a Bloomberg report that Facebook "has been paying hundreds of outside contractors to transcribe clips of audio from users of its services, according to people with knowledge of the work." Both stories strike me as over-wrought, but see for yourself.
18. Section 230 is one of the pieces of legislation that allowed today’s internet—and Facebook, Twitter, and YouTube—to develop. Now, it’s being accused of enabling everything from anti-conservative censorship to revenge porn, and politicians on both sides of the aisle are calling for change. Most recently, President Donald Trump drafted an executive order that would limit the provision. Though the executive order may change or be abandoned completely, expect the sound and fury over Section 230 to continue. The MIT Technology Review today offers an overview of how to understand the law that created the modern internet.
19. From the Democracy Fund Voter Study Group: "Democrats and Republicans are polarized on both economic and immigration issues, but views among Democrats are more concentrated than views among Republicans. Compared to Democrats, Republicans are more ideologically diverse. About a quarter of the electorate are “cross pressured” on economics and immigration — aligning with Democrats on one issue and Republicans on the other. The number of Americans who are liberal on economics but conservative on immigration is much larger than the number of Americans who are conservative on economics and liberal on immigration. Since the 2016 presidential election, Trump has lost support among both economically liberal/anti-immigration Americans and economically conservative/pro-immigration Americans. However, he may yet gain it back; these cross-pressured Americans are more likely to be undecided ahead of the 2020 presidential election." Read the whole thing.
20. Arrival: One of the biggest mysteries out there in the Universe is inching closer to answers. An astonishing eight new repeating radio signals known as fast radio bursts (FRBs) have been detected flaring from deep space. This brings the known total of repeating FRBs to 10. It means we're starting to build a statistical database of repeaters, which could help astronomers to figure out what these signals actually are.
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