The Daily Cartoon and Live Briefing: Wednesday, October 30, 2024

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1. Ray W, says

   October 30, 2024 at 11:36 am

   CNN reports on today’s quarterly GDP Commerce Department report which unveiled 2.8 percent growth. This is the second of four major economic releases scheduled for the week.

   “The US economy seems to have pulled off a remarkable and historic achievement.

   “Gross domestic product, which measures all the goods and services produced in the economy, expanded at an annualized rate of 2.8% in the third quarter, the Commerce Department said Wednesday. That’s a slightly weaker pace than the second quarter’s 3% rate and above the 2.6% rate economists projected in a FactSet poll. GDP is adjusted for seasonal swings and inflation.

   “As the US economy continued to expand from July through September, inflation drifted lower toward the Federal Reserve’s 2% target during that same period, the report showed. Several economists tell CNN that the economy has finally pulled off an exceptionally rare achievement known as a soft landing, a scenario in which inflation is tamed without a recession.

   “‘I think we should declare a soft landing now,’ said James Bullard, former president of the Federal Reserve Bank of St. Louis, in an interview with CNN earlier this month.”

   Make of this what you will. Me? Some FlaglerLive commenters have been claiming for the more than three years that I have been more diligently reading Mr. Tristam’s work that the American economy has been destroyed. Some still make that claim. I have been commenting over the same time frame that something unusual has been happening to our national economy.

   My argument eventually coalesced into the idea that the $5.9 trillion in unfunded stimulus money that had been approved by both presidents was an unprecedented level of emergency spending; it was so much more than had ever before injected into a recessionary economy that no validated model existed from which economists could predict the outcome of all the spending.

   I did not know at the time that the Fed was also in the process of injecting another $3 trillion in the credit marketplace. I knew that the Fed had begun lowering the lending rate, eventually to as low as 0%. Banks could borrow money from the Fed for free and lend it out to consumers at low interest rates.

   I had read about but did not fully understand that making that much additional credit available to lenders at zero percent would allow banks to profit from 30-year fixed mortgage rates as low as 2.7%. I did not expect in the beginning that large quantities of cheap money would create such a frenzy in the homeowner’s marketplace that all over the country, including in Flagler County, average home prices would significantly rise. So many people wanted homes with low fixed mortgage payments that they began competing with other homebuyers in bidding up sales prices, often far above initial asking prices.

   Millions of homeowners sold their homes at unexpected profits and bought newer and/or bigger homes with lower monthly fixed payments, and they then used both the sale profits and the additional discretionary spending funds to remodel their new homes into dream homes.

   I acknowledged early in my comments that many economists were predicting recession if that much money ($5.9 trillion) was thrown at the problem. Injecting that much money would overheat the economy, the theory went. The Fed, in order to control the overheating economy, would then have to raise lending rates in an effort to cool the labor market side of the equation. Hiring would then fall. Unemployment rates would then skyrocket. The economy would then ricochet into recession. This was often called a “hard landing.” That was the standard model for economists, culled from studying prior recessions.

   As time went by, the economy kept rebounding from the 2020 pandemic-caused recession. Positive report followed positive report. Economist after economist shifted from predicting a hard landing to hoping for a soft landing. More and more positive economic news then began piling on more and more positive economic news.

   Today, a former president of a regional Fed bank says it is time to declare a “soft landing.” To him, there is no sign of recession in the near term. To him, the economic miracle has occurred. We haven’t been destroyed. The American economy is the envy of the world. We are better off economically than we were four years ago.

   Former President Trump deserves plaudits for his role in the crisis. President Biden deserves plaudits for his role in the crisis. Federal Reserve Bank Chairman Powell deserves plaudits for his role in the crisis. The American people deserve plaudits for their role in the crisis.

   Consumer spending accounts for 70% of total economic output. This is why immigrants are so important to us all. They work. They earn money. They spend what they earn. The famed “economic multiplier” means that every dollar an immigrant spends in his or her local economy turns into an economically expected three to seven dollars more dollars, depending on whether the money stays in the community or is sent out of the community.

   When a tourist comes to Flagler County for a weekend, that $200 or so each visitor spends per day on average turns into between $600 and $1400 more dollars in the local community, depending on what the money is spent on. If they buy gas, only a small part of the money stays here; most leaves the community and goes to the oil industry. If they play golf, more of that money stays here to churn and churn in the local economy. The local economy grows. The national economy grows. The local economy creates more jobs. The national economy creates more jobs.

   Immigrants are not trash. They are economic gold.

   “And those who were seen dancing were thought to be insane by those who could not hear the music.” Nietzsche.

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2. Ray W, says

   October 30, 2024 at 12:46 pm

   I have commented on two articles about the burgeoning Florida homeowner’s insurance crisis. Both articles used $300,000 homes as the framework for the costs of insurance today in Florida.

   Newsweek published the overall average cost of homeowner’s insurance in Florida: According to Insurify, a virtual insurance company, the average 2023 annual premium in Florida was $10,996. No other state has such a high average premium. I checked on the average homeowner’s insurance premium in Georgia. According to moneygeek.com, the average is $2,004.

   The reporter wrote:

   “The exorbitant costs are forcing Florida homeowners to either self-insure or under-insure because ‘insurance costs are so high and insurance companies have been pulling out of the state.”

   Make of this what you will.

   Me? More and more, people are going to rethink living in Florida. Some may be deferring their dream of owning a Florida home. Others may be forced out of their long-time homes.

   Who knows if today’s insurance rates reflect the true cost of insuring homes in Florida? If Milton had directly hit Madeira Beach and swirled through St. Pete, Tampa, and Orlando, as originally projected, instead of 30 miles south in Sarasota and directly across a relatively sparsely populated region south of Orlando, the costs from storm damage would have been much higher. The 14% rate increase in Citizens’ average premiums that was unanimously approved last June by the Board of Governers may not be the last of such large increases.

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