Housing bubble and tax free profits from home sales

Before the 1997 Taxpayer Relief Act, a person could face significant capital gains taxes on the sale of their house unless they upgraded to a more expensive house. With the passage of the Act, however, individuals can exclude up to $250,000 of capital gains from taxation, while married couples can exclude up to $500,000.

To qualify for the home sale capital gains tax exemption, you must have owned and lived in the residence for a total of two out of the last five years before the sale. That time does not have to be continuous, which would allow you to live in the house for the first year, rent it for three years, then live in it for the fifth year and still qualify.

This tax change was probably one of the single most important factors fuelling the housing bubble...if owners still had to upgrade to get the gain tax free that would've slowed things down a lot.

US money supply trend

It would appear that some of the quantitative easing is creeping into the hands of the public,

but they are holding tightly to the cash, which would make sense given that the realization of the need for saving for retirement is taking hold in the mainstream.

Oregon (and US) nonfarm payrolls stagnant for a decade

The source is the Oregon Employment Department; the peak in the middle of the decade was due to the housing bubble. For context, here is a chart of total US non-farm payrolls over a longer time scale:

The national trend during the decade shown on the Oregon chart is roughly the same during the same time period.  Oregon has an older demographic profile than the country; so I'd expect worker growth in Oregon to lag the national trend going forward.

US mortality and baby boomers

Here is a compilation of some data from the census of 2010:

	Death rate per 100,000 (Census 2010)
	35-44	45-54	55-64	65-74
Death rate per 100,000	184.4	420.9	877.7	2,011.3
Number in age group	41,277,000	44,705,000	36,275,000	21,463,000
Deaths per year	76,114.79	188,163.35	318,385.68	431,685.32
Percent of deaths per year	0.18%	0.42%	0.88%	2.01%

Here's a chart of deaths per year stat:

The point is that as the baby boom cohorts move into the older age brackets, the number of persons leaving the workforce for the cemetery grows by quite a bit. 

US defense spending since end of WW II

Notice that annual spending was fairly level throughout the height of the Cold War and Vietnam (1950-1975).  And that the post Cold War reductions were relatively small compared to the peak coinciding with the Gulf War.

 NYT Misses Elephant in the Room: Defense Service Contractors.

"In FY2010 alone, DoD service contractors cost taxpayers more than $200 billion—$50 billion more than the cost of all uniformed personnel."

Top ten US states - households with internet connection

Concentrated in NE and NW:

New Hampshire 86.2%
Utah 85.5%
Washington 83.6%
Massachusetts 83.4%
Connecticut 83.0%
Alaska 82.1%
Kansas 81.4%
Oregon 81.3%
Maryland 81.1%
New Jersey 80.6%

States at the bottom of the rankings are concentrated in the South.

Source: U.S. Census Bureau, Current Population Survey, October 2010.

Economic warfare - continued

Another tactic used by the Mossad was to set up what civilian law enforcement would call "cons" or schemes to bilk the target or "mark" of as much cash as possible. Of course, Eli's group chose political targets and the proceeds from successful operations were used to fund Mossad operations and other activities. One such successful activity, named "Operation Sundance" involved setting up a fake bookmaking business in Beirut, and convincing certain highly placed Syrian officials that they were in on the con. The resulting double cross left the Syrians' bank accounts empty and none the wiser until the perpetrators were long gone.

Global demographic data 2012

PRB.org has released their 2012 World Population Data Sheet that contains population estimates, projected growth rates, and age distributions for every country in the world. Their introduction is as follows:

Nearly all future population growth will be in the world's less developed countries, and the poorest of these countries will see the greatest percentage increase. In contrast, developed countries as a whole will experience little or no population growth in this century. The Population Reference Bureau's 2012 World Population Data Sheet offers detailed information on 19 population, health, and environment indicators for more than 200 countries.

Take a look...

Microfiction: Economic warfare

A global super-rich elite has exploited gaps in cross-border tax rules to hide an extraordinary £13 trillion ($21tn) of wealth offshore – as much as the American and Japanese GDPs put together – according to research commissioned by the campaign group Tax Justice Network.

James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, has compiled the most detailed estimates yet of the size of the offshore economy in a new report, The Price of Offshore Revisited, released exclusively to the Observer.

He shows that at least £13tn – perhaps up to £20tn – has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks, which vie to attract the assets of so-called high net-worth individuals. Their wealth is, as Henry puts it, "protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy". According to Henry's research, the top 10 private banks, which include UBS and Credit Suisse in Switzerland, as well as the US investment bank Goldman Sachs, managed more than £4tn in 2010, a sharp rise from £1.5tn five years earlier.

Eli was a  Mossad agent; his current task was to trace the sources of cash supporting covert groups that perpetrated attacks on Israelis, anywhere in the world.  Once located, his task was to create a plan to confiscate the contents of accounts holding the cash. 

Sometimes the confiscations were done electronically; occasionally physically.  Two years before Eli had led a team that had blown a hole in the side of a bank in Zurich and made off with twenty kilograms of gold bars being held there by a group that called itself Al Mohad.

Indicators point to 2nd half recession

Retail sales have peaked and are heading downward...

Mandatory defense spending cuts likely to occur...

Initial unemployment claims have stopped falling...

Partly due to intense drought, the agriculture bubble is likely to burst soon...

Q2 GDP revisions have been largely negative...

Consumer sentiment is heading south...

Exponential trend breakdown in electtricity usage...

Edward Hugh on France's economic prospects

"My view is France is far from being a "basket case", and is capable of implementing reform in a way which is different from much of Southern Europe. Look at the fact they didn't have a property bubble when Spain and Ireland did. Their banks were better regulated, it's as simple as that.

France may have a large state sector, but so does China. maybe people don't like that, but it isn't clear what this means for the long term growth rate.

In fact, France has a lot better demographic profile than Germany and the economy - despite the current account deficit - is more balanced with domestic consumption.

My bet: France is as much core Europe as anyone (more so than Finland or Holland imho) and the biggest risk to the French sovereign is from an Italian default."

Here's a chart from Edward:

Government spending in US decreased six consecutive quarters

According to the latest release of GDP figures from the BEA, combined federal, state, and local government has declined sequentially for six consecutive quarters:

2010:Q4

2011:Q1

2011:Q2

2011:Q3

2011:Q4

2012:Q1\r\

-2.8

-5.9

-0.9

-0.1

-4.2

-4.0

 This includes defense spending.

-5.9

-12.6

7.0

5.0

-12.1

-8.3

which is good news.

Proposed Obama science policy absurd

Echo Boom Bomb points out that

"according to the Obama administration quotas limiting the number of male students in science may be imposed by the Education Department in 2013. The White House has promised that “new guidelines will also be issued to grant-receiving universities and colleges” spelling out “Title IX rules in the science, technology, engineering and math fields.” These guidelines will likely echo existing Title IX guidelines that restrict men’s percentage of intercollegiate athletes to their percentage in overall student bodies"

This is absurd. Particularly since various government officials continue to propagate the idea that there are shortages of STEM workers.

Redistribution of income in the US

Income Is Definitely Being Redistributed Upward, but Why Do We Think It's Technology? | Beat the Press
Two key quotes:


"In short, it is easy to trace the vast majority of the upward redistribution over the last three decades to deliberate policy choices, as I argue in The End of Loser Liberalism: Making Markets Progressive (free download available). It is seriously misleading to imply that this upward redistribution was just the result of technology."

"the availability of low-cost imports raises the living standards of those who are protected from international competition. The latter group would include highly paid professionals, like doctors and lawyers. Note that it is not technology that protects these professionals from seeing their wages depressed by competition from their low-paid counterparts in the developing world, it is deliberate policy."

Microfiction:Close call

Jordan jogged along the shoulder of Canyon Road, the main north-south artery that was the outlet for dozens of neighborhoods in the northeast part of the valley.  The road followed a bench of foothills at the base of a mountain that rose steeply to a great height just a few miles east of the city limits. 

It was early evening, in midsummer; a daily run after work was part of Jordan's routine.  It was source of exercise and mental decompression at the end of each workday.  He ran at a moderate pace usually, not building for competitive racing, but wanting to burn calories and maintain good fitness.  His routes were out and back road runs, turning around at different spots depending on how long a run he felt like. 

As he reached the turnaround point, he noticed that a wide cumulonimbus cloud had built up to the south and seemed to be moving toward him fairly quickly. Flashes of lightning lighted up the underside of the cloud.  Jordan looked up with a twinge of anxiety at the power line that ran along the roadside all the way back to his apartment.  The thought of lighting striking the lines or a pole as he ran alongside made him shiver.

He started the run back at the same moderate pace, but after a half mile, he noticed that the storm was moving quickly in his direction.  He quickened his pace up to a more intense rate.  After a while, slowing down to ease the burn a bit, he noticed a lightning strike parallel to him off to the west.  There was also a thick column of what looked like rain below the base of the storm clouds.  

It was time to speed up the pace a lot.  Jordan picked up to just less than a sprint.  He felt a sense of relief at each power pole he passed, focusing on the next one as a mark of being closer to home and shelter. 

The storm was very close now, lightning strikes every few seconds around and behind.  Jordan was now a few hundred meters from the back door of his apartment.  He launched into a full sprint, not intending to slow until he reached the door.  His lungs and legs burned with the fire of spent energy.  Turning the corner, he raced through the parking lot and grabbed the door handle. Sliding it open, he tumbled inside and lay on his back gasping for air.

Thirty seconds later, an intense burst of marble sized hail begain battering the windows and roof. and lasted for fifteen minutes.  Getting caught in that would have been painfully miserable.

Microfiction: Operation K Insurgency

Dwayne Johnson sat in the dark in the middle of a wheatfield thirty yards from an electrical substation.  He held a twelve gauge shotgun loaded with five rounds.  Shortly, he was going to blast the substation with all five rounds. The plan was to knock out power to a significant chunk of the county, as an experiment.  He'd done a bit of research on the web, and learned that failure of trivial components of the power grid could cause sizeable power outages.  He figured five shotgun rounds would cause some kind of failure.

Dwayne was dissatisfied with things, and he figured to fight the Man in a creative way.  Not wanting to attract much attention and not wanting to hurt people; he planned to annoy the system in minor ways.  Causing a power outage for a few thousand homes seemed like an unconventional way to start..

He stood up and emptied the shotgun's magazine into the insulators and enclosures of the substations.  The sound of sparks and arcing currents carried, and the lights illuminating the substation went out.  Dwayne sprinted across the field, jumped in his car, and drove off.  Fifteen minutes later, he approached town, largely dark.  It had worked.

Experimental: Gridlock

Imagine, for a moment, what would happen if a power outage crashed the electrical grid across the enormous sprawl of a city that is the US east coast from Washington northward.  Millions of computers would drop off the global network; crippling botnets, emptying chat forums, role playing servers, and choking off the flow of commerce.

Sure, backup generators would kick on all over; government, emergency, and commercial sites would stay online.  Traffic online would fall drastically until residential computers powered by the electrical grid  returned to operation.  For millions, the "cloud" just evaporated. 

Personal habits would be disrupted, the cutoff from online activities forcing alternative choices.  Walking outside, the stars would be more visible without competition from billions of lights.  Vehicle traffic would drop off sharply, as there would be no point in going out when most public places would be dark.

Federal government spending shrinking

Year on year change is negative, not sure what the driver of this is; perhaps falling defense spending since we've exited Iraq.

US federal debt ceiling since 1981

From Wikipedia...under GW Bush went up significantly.

South American drug decriminalization

Colombia Decriminalizes Cocaine and Marijuana, As Latin American Momentum for Drug Policy Reform Continues 

"Colombia's Constitutional Court Friday approved the government's proposal to decriminalize the possession of small amounts of cocaine and marijuana for personal use. Anyone caught with less than 20 grams of marijuana or one gram of cocaine for personal use may receive physical or psychological treatment depending on their state of consumption, but may not be prosecuted or detained, the court ruled."

Key sources of economic data

Selected from  Using Graphs and Ranking Economic Data by Calculated Risk:

A-List
• BLS: Employment Situation Report (Employment Graphs)
• BEA: GDP Report (quarterly) (GDP Graphs)

B-List
• Census: New Home Sales (New Home Graphs)
• Census: Housing Starts (Housing Graphs)
• Census: Retail Sales (Retail Graphs)
• BEA: Personal Income and Outlays (graph)
• Fed: Industrial Production (graphs IP and Capacity Utilization)
• DOL: Weekly Initial Unemployment Claims (graph weekly claims)

C-List
• Philly Fed Index (Graph Philly Fed)
• NY Fed Empire State Manufacturing Index (Graph Empire Index)
• Census: Durable Goods
• Census: Trade Balance (Graph Trade Balance)

D-List
• BLS: Job Openings and Labor Turnover Survey (Graph JOLTS)
• Census: Construction Spending (Graph Construction Spending)
• ¹Census: Housing Vacancy Survey (Quarterly) (Graphs Homeownerhip, Vacancy Rates)
• AAR: Rail Traffic (Graph Transportation)
• ATA: Trucking (Graph Transportation)
• Ceridian-UCLA: Diesel Fuel Index (Graph Transportation)
• Fed: Flow of Funds (Quarterly) (Graph Household Net Worth)
• Manufacturers: Light Vehicle Sales (Graph Vehicle Sales)
• NRA: Restaurant Performance Index (Graph)
• Fed: Consumer Credit
• DOT: Vehicle Miles Driven (Graph Miles Driven)
• BLS: Producer Price Index
• Census: State Unemployment Rates, (graph)