Economía
The cost of poor lending
The Miami blues“A TODDLER drowns in the swimming pool of his neighbour’s vacant house. A firefighter dies falling through the floor of a vacant building. A gang take over an empty house…to advertise prostitution.” Thus begins an incendiary supporting brief filed by a trade union for police officers and firefighters in a suit brought by the city of Miami against Wells Fargo and Bank of America. The suit argues that mortgages granted by the banks to black and Hispanic residents who later defaulted caused the city to lose tax revenue and forced it to fork out more for services. This, it contends, entitles Miami to damages.
The case was largely dismissed in the trial court, reversed on appeal and then accepted by the Supreme Court, which heard oral arguments on November 8th. At issue is who can sue for alleged discrimination, and whether irresponsible loans can be blamed for broader economic damage. A separate court will consider whether the banks were actually guilty of discrimination (they deny it).
Part of civil-rights legislation passed in 1968, the “Fair Housing Act”, the statute under which the case…Continue reading
To those that have
PITTSFIELD, a city of 43,000 on the Housatonic River in western Massachusetts, is a quintessentially American place, but in many ways an unlikely spot for a housing boom. The 255-year-old former industrial hub boasts the country’s earliest written reference to baseball. Its economy was dominated by General Electric for much of the 20th century. But by 2000 it had experienced ten years in which hardly any new jobs had been created. Incomes were 12% below the national average. The city’s population had been shrinking for decades. And yet between 2000 and 2007, amid a nationwide, credit-fuelled property boom, house prices in Pittsfield jumped by 70%, or 8% per year.
These days, such rapid growth in economically struggling cities is rare. Whereas local housing markets rose and fell together during the housing bubble and bust, the housing recovery which began in America in 2012 has been patchy. Cities and towns with growing economies have seen big gains; places like Pittsfield have stagnated (see chart 1). Such trends are contributing to a widening of America’s already unequal distribution of wealth.
According to an annual…Continue reading
Botín cuestiona la utilidad de los bajos tipos impuesta por el BCE
La presidenta del Santander cree que esta política no funciona porque no ha hecho subir los créditos
Guindos cree que la política expansiva del BCE “está en sus límites”
El ministro de Economía alerta del peligro que supone el alto endeudamiento público y privado de España
Our election, your problem
IT IS not clear precisely how Donald Trump will govern, the extent to which he will carry out some of his scarier promises on trade and immigration, and who will be his economics top brass at the Treasury and in the White House. But a decent first guess is that President Trump will be bad for the world economy in aggregate; and a second is that his actions are likely to do more harm, in the short term at least, to economies outside America.
When America has in the past stepped aside from its role at the centre of the global economic system, the damage has spread well beyond its borders. In 1971, when Richard Nixon ended the post-war system of fixed exchange-rates that had America at its centre, his Treasury secretary, John Connally, told European leaders, “The dollar is our currency, but your problem.” This election result, to paraphrase Connally, belongs to America but is potentially a bigger economic problem for everyone else.
The scale and nature of that problem depend on the interplay of the two main elements of Mr Trump’s economic populism. The first is action to boost aggregate demand. Mr Trump favours tax cuts and extra public…Continue reading
Markets are hoping for Bush 3.0
CONVENTIONAL wisdom gets turned on its head quickly in the financial markets. Although many on Wall Street were gloomy about the prospects under a Trump presidency, the markets have performed a sharp U-turn after the overnight decline on election day.
So many people (including The Economist) had warned of the crazy policies of Donald Trump that there was always going to be a market for contrarians to say that he won’t be that bad after all. Especially among white, prosperous financial commentators there is a willingness to “normalise” Mr Trump—to tell the groups he has insulted and threatened to get over their fears. What Mr Trump does in office will be different from what he said on the campaign, they think. (If you want to see what minority groups have to put up with from Mr Trump’s supporters, look here.)
What investors clearly hope is that Mr Trump will get to implement some of his policies but not all—in particular the tax cuts for the wealthy and for business, increased military spending and financial…Continue reading