The Housing Market's Double Dip

The LA Times greets my return to blogging with some grim news this morning:

Prices of previously owned single-family homes fell 0.8% in October from the same time last year, according to the Standard & Poor's/Case-Shiller index of 20 metropolitan areas. The closely watched index fell 1.3% from September to October as six metro areas hit fresh lows.

"It is grim, baby. We don't see any basis for sustained price increases in 2011," said Glenn Kelman, chief executive of online brokerage Redfin. "Prices are going to be in the doldrums all year, and usually you look for housing to lead the overall recovery, but that seems doubtful."

We're now starting to see housing data that fully reflects the end of the end of the housing tax credit earlier this year, and sure enough, prices have started to fall again. Ezra Klein points us to Gary Shilling for more, and I find Shilling partly persuasive and partly not. However, the bulk of his argument is sound, especially his observation that housing inventory is still abnormally high:

This huge and growing surplus inventory of houses will probably depress prices considerably from here, perhaps another 20% over the next several years. That would bring the total decline from the first quarter 2006 peak to 42%.

This may sound like a lot, but it would return single-family house prices, corrected for general inflation and also for the tendency of houses to increase in size over time, back to the flat trend that has held since 1890.

I guess, in the end, I'm not quite sure if I'm that pessimistic. But I'd say that a further decline of 10% is almost inevitable, and 20% is certainly quite possible. What that does to the broader economy is still a question mark.

Housekeeping Note

We're going to take another crack at painting my underground lair study on Monday, and that means I have to unplug everything, including my cable modem and thus my internet connection. At least, that's what I think I'll have to do. If I get desperate, I may find some local WiFi spot and do a bit of blogging, but probably not. Most likely, I'll be offline all day Monday and maybe a bit longer. However, I'll be back Tuesday evening at the latest. See you then.

The Priorities of the Left

My post earlier today about the decline of organized labor and the rise of rights-based activism within the post-60s liberal community provokes an obvious question: was this a good thing?

Obviously it was good for African-Americans and women and gays and others who benefited from it. But it wasn't so good for the economic fortunes of the working and middle classes. And that was almost certainly the tradeoff we made. In the 70s and beyond, probably 80% of the money and emotional energy that sustained the Democratic Party came from environmental and rights activists. But within the Republican Party, money and energy were about evenly divided between social conservatives and the business community. What happened after that was unsurprising: on social issues, where 80% of the liberal party was fighting 50% of the conservative party, liberals made a lot of progress. On economic issues, where 20% of the liberal party was fighting 50% of the conservative party, liberals steadily lost ground. And when Democrats decided to become more "business friendly" in the late 80s, we lost even more ground. That's how things played out, and under the circumstances that's pretty much exactly how you'd expect them to play out.

But if you could travel back in time and change things, would you? Would you prefer that organized labor had retained its traditional power broker role in the Democratic Party and fought the rise of corporate power and middle class wage stagnation more effectively, even if it meant that progress on social issues had been quite a bit slower than it was? Would you?

At the time this was all unfolding, I don't think anyone consciously realized the choice that was being made. But even now, when that choice is clearer in hindsight, I don't know if it was the right one. Comments?

The World's Real Oil Problem

Paul Krugman writes about the rising global price of commodities:

Oil is back above $90 a barrel. Copper and cotton have hit record highs. Wheat and corn prices are way up. Over all, world commodity prices have risen by a quarter in the past six months.

....Today, as in 2007-2008, the primary driving force behind rising commodity prices isn’t demand from the United States. It’s demand from China and other emerging economies. As more and more people in formerly poor nations are entering the global middle class, they’re beginning to drive cars and eat meat, placing growing pressure on world oil and food supplies.

And those supplies aren’t keeping pace. Conventional oil production has been flat for four years; in that sense, at least, peak oil has arrived. True, alternative sources, like oil from Canada’s tar sands, have continued to grow. But these alternative sources come at relatively high cost, both monetary and environmental.

Oil plays a role in the world economy that's far more important than any other commodity, so when I'm in a mood to worry I worry about oil prices. I don't know if we've hit peak oil, but we have reached the point at which the growth of supply has reached the point where it can barely keep up with growing demand in a normal economy. (More here about that.) This means that whenever the economy is growing at a decent pace (and driving up demand for oil with it), the price of oil will inevitably rise sharply and slow down the global economy (at best) or throw us into another recession (at worst). In other words, oil has become a permanent limit to world economic growth.

Or maybe not. Like I said, it's just something to worry about when I'm in a worrying mood. Feel free to ignore this if you have other things to worry about.

Democrats and Their Interest Groups

Neal Gabler thinks modern Democrats are a bunch of milksops:

In the days of FDR, the Democratic Party, despite its factions and disagreements, coalesced around one overriding tenet: muscular government action, especially in behalf of the powerless....Belief in the efficacy of government was a prerequisite to gaining the nomination. Democratic aspirants didn't lurch rightward or pray for common ground. They stood and fell on principle. But that was then. The fact is that nowadays you don't get the Democratic presidential nomination unless you are willing to soft-pedal activist liberalism.

OK, but why have Democrats become such wimps?

Sometime in the 1970s, the Democratic Party became basically an "interests" party. It stopped pressing government action as an overriding binding principle and began instead to appeal to individual interest groups: African Americans, Hispanics, women, labor, gays, youth and even Blue Dogs. Anyone who hopes to make headway in the nominating process has to find a way to appeal to many if not all of them. Still, most of these are situated at the left of the political spectrum. Prospective nominees must also appeal to elected Democrats, party officials and, perhaps most of all, those realists who, remembering McGovern's quixotic anti-Vietnam debacle, want desperately to win and believe that only a centrist can do so. This compels aspirants both to placate and temporize.

But this is only half the story. If power in the Democratic party fragmented and then flowed to individual interest groups dedicated to social issues in the 70s, it must have flowed away from a big, well-organized interest group devoted to government action as a way of comprehensively helping the poor and the working class. I wonder which interest group this could be?

Christmas Cat Blogging - 24 December 2010

Painting of the blog communications hub did not go as smoothly as hoped. In fact, it didn't happen, for reasons too complicated to spell out. So it'll happen on Monday and Tuesday instead, and there's a pretty good chance I'll be disconnected from the outside world both days. Then again, maybe not! Who knows. In the meantime, the economy is looking up (even I'm getting slightly more optimistic), so whether you celebrate Christmas, the war on Christmas, or some other holiday, I hope you have a nice one. And with that, here's our traditional holiday catblogging. Enjoy!

Housekeeping Note

This is a real housekeeping note. The communications hub of this blog is being painted today, and it turns out they can't paint around me. So I have to disconnect and let them get on with things. I'll be back tomorrow, though possibly with not much more than cat blogging. See you then.

Your Morning Joe

Michael O'Hare marvels at a fabulous new espresso machine that works only with coffee pods from the manufacturer at a price of (he figures) about $66 per pound:

What I can’t understand is how these geniuses were so dumb as to market a machine that uses tap water. How hard could it be to design a sealed aluminum non-refillable $15 water pod, filled with one of several different gourmet waters matched to the coffee blends (the coffee pods come in about twenty different color-coded blends), like, say, Milano da rubinetto, Pioggia pura romana da mattina, Nestlé’s own Poland Spring (in 3 elastic modulus grades) already in pods, Amazona prima colheita do verão, Flaque Boulevard St. Germain, Fiji-Dasani custom coffee blend (also approved for Mercedes engine cooling systems), Gelbschnee fondé puro (Nestlé’s local house brand), and so on. People who will pay five to ten times extra for stale coffee grounds will certainly pay through the nose for water with a name on it.

Apparently these things are endorsed by George Clooney (in Britain anyway; I'm not sure about the States) and, according to the Guardian, are selling like hotcakes. Mike suggests that you buy one of these things for someone you don't like. Sure, it's expensive, but your victim will be stuck with a lifetime of pain shelling out a dollar per pod for their morning joe. Merry Christmas!

POSTSCRIPT: Question for the coffee drinkers: is this any different from those K-Cup coffeemakers? I don't drink coffee, so I don't keep up with this stuff. Seems like pretty much the same concept, though.

Weird Science

This is from a small study which might turn out to be wrong, so take it with a grain of salt. (Or sugar.) But apparently the placebo effect might work even if patients know they're getting fake medicine:

Half the patients were given a bottle with the word "placebo" printed on it. The pills it held, they were told, were like sugar pills. The patients were told they didn't even need to believe in the placebo effect, but had to take the pills twice daily. The other half were given no treatment at all.

At the end of the three-week trial, 59% of the patients taking the placebo said their symptoms had been adequately relieved, far outstripping the 35% in the non-treatment group.

...."What seems to be the active ingredient is the warm, personal relationship," said Dr. Howard Brody of the University of Texas Medical Branch in Galveston.

Fascinating, no? Anyone want to take bets on whether this gets replicated in a larger study?

A Congress That Works! Huzzah!

Jon Chait on the flurry of congressional activity that closed out the year:

I strongly approve of the ends of the lame duck Congress, but as a small-d democrat, I don't approve of the means. Why should Congress have a period of time to act in which many members enjoy zero accountability before their constituents? The arrangement is ripe for abuse.

On the other hand, the manic productivity of the lame duck session appears to be a response to another anti-democratic mechanism, the filibuster. Mitch McConnell's block-everything, grind-down-the-clock method created a pent-up demand among moderate and even mainstream Republicans who waned to govern. So now they have a few frantic weeks to do a lot of things they wanted to do all along, but refrained out of partisan loyalty.

I'd look at this with a little wider lens. Basically, what happened this year is that we've finally reached the logical end state of a longtime problem. For as long as I can remember, it's been a truism that you can't get anything done in an election year. The out party doesn't want to give the president a victory and the in party is afraid to take on anything controversial that might hurt at the polls. So legislative progress in even numbered years is generally pretty paltry.

This year that dynamic turned pathological. There were, it turned out, quite a few issues that both sides really did want to address, but party discipline simply trumped everything. It wasn't just one thing that got held up, it was nearly everything. Republicans didn't want to hand Democrats a victory on DADT or New START or even a food safety bill, and Democrats were too cowardly to press for progressive tax legislation.

So we finally reached the nonsensical point at which both sides wanted to get things done but the upcoming election allowed none of it to move forward. Even though all of this stuff had supermajority support (hell, New START turned out to have the support of 71 senators), the only time it could get done was during a lame duck session.

I don't know if this was a one-off occurrence or a harbinger of things to come. I guess we'll find out in 2012. But until something finally implodes and produces a real groundswell for systemic change, maybe we should all be grateful for the existence of lame duck sessions. It might be the only time that the modern Congress actually works the way it's supposed to.