Editor's note: In the July issue of Townhall Magazine, where this column originally appeared, AEI's Alex J. Pollock explains why now is definitely not the time for the Fed or politicians to promote further rapid house price inflation.
Would it be possible to have a new housing bubble? Yes, of course. How long does it take to forget the lessons of the last crisis? By the historical record, about 10 years, and it is already eight years since the peak of the great U.S. housing bubble of 1999-2006, and five years since the end of the financial crisis of 2007-2009. As former-Federal Reserve Chairman Paul Volcker wittily observed, “About every 10 years, we have the biggest crisis in 50 years.”
Real estate is often at the center of financial crises, both here and in other countries, because it has the most leverage, that is, the most debt relative to value, of any economic sector. This makes it vulnerable to cyclical downturns in which prices go down when people thought they would go up. The U.S. had big real estate busts in the 1970s, 1980s, 1990s, and of course, the 2000s. Next?
Real estate is also a huge sector, so its troubles have big financial consequences. Housing in particular is politically potent and attracts government efforts to subsidize and expand debt. Of the $9 trillion in mortgage loans in this country, the 79.9 percent government-owned and heavily subsidized Fannie Mae and Freddie Mac represent $5 trillion.
When the government pushes credit at housing, it makes house prices go up. This leads to a push for yet more credit. Washington discussions are now turning to lowering mortgage loan standards to encourage more loans, especially to riskier borrowers. The Senate Banking Committee has approved a bill to have the government explicitly guarantee mortgages. The new head of the regulatory agency for Fannie and Freddie appears to be more interested in being a promoter of housing debt than a guardian of financial soundness.
All the principal central banks of the world, including the Federal Reserve, have committed themselves to perpetual inflation. They have also manipulated interest rates to extremely low levels. Central banks now routinely make what would historically have been shocking statements that inflation is too low. But they have succeeded in generating a lot of one kind of inflation: asset price inflation. This is certainly true in bonds, in stocks, in collectibles, and in houses.
Looking around the world a bit, we find this: “The biggest domestic risk is the nation’s housing market, where prices are rising fast and buyers are taking on more debt.” That was the view recently expressed by the governor of the Bank of England in discussing what one astute financial commentator called “the runaway U.K. housing market.” This is after England had a housing bubble and bust in the last decade, just like we did. The Bundesbank is worried about inflated house prices in Germany. Brazil is said to have a housing bubble. And China is already experiencing the opening stages of the painful deflation of its housing bubble. When central banks create a lot of money, it goes somewhere—often enough to house prices.
What about the U.S.? House prices on average have been rising rapidly since the 2012 bottom. The fourth quarter 2013 Case-Shiller 20-major city house price index was up 13 percent for the year. The broader 380-market CoreLogic-Case-Shiller Index was up 11 percent for the same period. From their trough, national average house prices are up about 20 percent. On the other hand, they are still 21 percent below their 2006 peak—not that we want to get back there anytime soon! Overall, does the current level look too high or too low? We need some historical perspective.
Graph 1 is the Case-Shiller National Home Price Index from its beginning in 1987. The bubble, the ensuing shrivel, and the recovery are readily apparent. The trend line is based on the period 1987-1999—the trend is about 3 percent annual price increases. The recent price increases have brought us just about back to the trend line.
Graph 2 gives us a lot more history—60 years, back to 1953. It compares the growth in the consumer price index to estimated national average house prices, with the egregious bubble obvious. The strong correlation of house prices to inflation is also obvious. On this longer look, house prices got down just to their trend, and have now pushed back somewhat above it.
I think we can conclude that we are not at this point in a housing bubble again, but now is definitely not the time for the Fed or politicians to promote further rapid house price inflation. A new housing bubble in the future is certainly possible, but the every-10-years crisis may arise from something entirely different—something now unthought of. •
Alex J. Pollock is a resident fellow at the American Enterprise Institute in Washington, D.C. He was president and CEO of the Federal Home Loan Bank of Chicago 1991-2004.
Last night, New York Times best-selling author Katie Pavlich celebrated the release of her second book, “Assault and Flattery: The Truth About the Left and Their War on Women,” in Washington, D.C. The event was attended by Townhall staffers, close friends, fellow journalists, and those, of course, whom helped bring this book to life. It was also, not so incidentally, Katie’s 26th birthday.
Hence the awesome birthday cake!
“This is the best week of my life,” Katie said last night after graciously thanking everyone for coming:
Anyway, dear readers, be sure to check out the rest of the photos below. And of course, pick up a copy of Katie’s book if you haven’t already!
1. Jonathan Garthwaite, VP & General Manager, Townhall Media.
2. Red State's Bryan Pruitt, Townhall editorial intern Kara Jones, and Townhall Marketing Assistant Christina DiSomma.
3. Human Events' Teresa Mull, along with Townhall staffers Cortney O'Brien, Daniel Doherty, Rachel Williams, and Sarah Seman.
4. Katie, Jonathan, and Townhall Managing Editor Kevin Glass havin' a good ol' time.
5. Katie being Katie.
6. Most of the Townhall Team.
7. Most of the Townhall Team...take two!
8. If you're wondering why Guy Benson is missing, he had other plans...
We forgive you, Guy. We'll catch you at the next one!
In spite of the recent tragedies of toddlers being killed or seriously hurt from being locked in a car, I guess it really isn't all that surprising that police are being extra-vigilant to protect kids from hot cars. Some cases, however, like that of a woman in Connecticut being criminally charged for leaving her daughter in a car, are downright ridiculous.
Officers were sent to 60 Middle Street on Tuesday where they said Christina Williams, 30, allegedly left her 11-year-old child inside a vehicle.
Police said the interior temperature of the car was about 85 degrees at the time they got to the scene.
When officers opened the car doors, they said the child was responsive and not in distress, and that the car was not "excessively hot."
Police said the child requested to stay inside of the car while her mother went inside a store, and Williams was located in the store and said the same thing.
The mother is due to appear in court at the end of the month.
While an 11-year-old certainly isn't entirely self-sufficient, they're certainly capable of taking care of themselves and letting themselves in and out of a car if they're about to overheat. Many 11-year-olds babysit, for instance. There's a huge difference between leaving an infant strapped in a car seat alone in a car for an extended period of time and leaving an 11-year-old in a not-overly hot car because she asked to stay there.
Williams isn't the only mother being accused of neglecting her children by leaving them safely in a car. Nickie Milem, a woman from South Carolina, is being charged with cruelty to children after she left her children in a running, air-conditioned vehicle with her sister-in-law while she ran into a grocery store.
Child endangerment is a serious crime--but not one that seems to be committed in these cases. This is the nanny state gone insane.
The rule of the law and the separation of powers are indispensable to our system of government. And yet, according to House Republicans, the president has violated his oath of office one too many times by encroaching on the rights of the legislative branch and re-writing laws as he sees fit. Hence why Republican House Speaker John Boehner is filing a lawsuit against him.
Obviously, there are many examples of President Obama circumventing Congress to advance his legislative agenda, but the Speaker of the House ultimately decided to sue him for a very specific reason: He unilaterally delayed implementing a provision under the Affordable Care Act that was wholly outside his purview.
“Today we’re releasing a draft resolution that will authorize the House to file suit over the way President Obama unilaterally changed the employer mandate,” Boehner’s office said in a statement yesterday. “In 2013, the president changed the health care law without a vote of Congress, effectively creating his own law by literally waiving the employer mandate and the penalties for failing to comply with it. That’s not the way our system of government was designed to work. No president should have the power to make laws on his or her own."
“As I’ve said, this isn't about Republicans versus Democrats; it’s about the Legislative Branch versus the Executive Branch, and above all protecting the Constitution," he wrote. "The Constitution states that the president must faithfully execute the laws, and spells out that only the Legislative Branch has the power to legislate. The current president believes he has the power to make his own laws – at times even boasting about it. He has said that if Congress won’t make the laws he wants, he’ll go ahead and make them himself, and in the case of the employer mandate in his health care law, that’s exactly what he did. If this president can get away with making his own laws, future presidents will have the ability to as well. The House has an obligation to stand up for the Legislative Branch, and the Constitution, and that is exactly what we will do.”
The White House has dismissed the lawsuit as a “political stunt,” and Nancy Pelosi herself has described it as a “legal boondoggle doomed to fail.” Nonetheless, according to legal scholar Jonathan Turley, there’s a real possibility that this lawsuit is more than just political theatre (via The Daily Beast):
While Obama and his cheerleaders in the media sneer at the notion of executive overreach, noted constitutional scholar and George Washington Law School Professor Jonathan Turley believes Boehner’s suit could prevail. “I think there is a case against the president for exceeding his authority…I happen to agree with the president on many of his priorities and policies, but as I testified in Congress, I think that he has crossed the constitutional line,” Turley told MSNBC the day Boehner announced his suit.
“When the president went to Congress and said he would go it alone, it obviously raises a concern,” Turley added. “There’s no license for going it alone in our system, and what he’s done is very problematic. He has shifted $454 million of the ACA from appropriated purpose to another purpose. He’s told agencies not to enforce some laws, like immigration laws. He has effectively rewritten laws through the active interpretation that I find very problematic. While I happen to agree with him, I voted for him, I think this is a problem."
As do House Republicans. In any case, the House Rules Committee will deliberate and discuss a bill next Wednesday on whether or not to sue President Obama, according to the New York Times. Stay tuned.
The media was all too quick to promote former Secretary of State Hillary Clinton’s book “Hard Choices.” Now, as her memoir has produced much less than desired, they’re all too quick to forget.
Clinton’s sales may not seem so bad on the cover, but as the NYT (begrudgingly?) explains in the piece, “A Provocateur's Book on Hillary Clinton Overtakes Her Memoir in Sales,” the numbers are disappointing considering what her publisher initially expected:
By normal nonfiction standards, “Hard Choices” has sold extremely well. But Mrs. Clinton’s multimillion-dollar advance and status as a probable 2016 Democratic presidential candidate have put added pressure on the publisher, Simon & Schuster.
Here are the specifics:
Current sales figures of 177,234 copies not including e-books, according to Nielsen BookScan, mean Simon & Schuster is unlikely to recoup Mrs. Clinton’s advance and could fall far short of the one million copies shipped to bookstores, industry executives said.
It is most interesting that Ed Klein’s “Blood Feud: The Clintons vs. The Obamas” overtook Clinton in book sales (check out my interview with Klein here), for his book is highly critical of both the Clintons and the Obamas. It also proves that the conservative book audience is still thriving. The NYT touches on this, yet the headline they chose suggests editors wanted to place more attention on the “controversial” “Blood Feud” author, who cites a number of unnamed sources in his book, rather than Clinton’s unsatisfactory sales.
At least they considered it news fit to print.
Speaking of books, have you bought your copy of Townhall News Editor Katie Pavlich’s second book, “Assault and Flattery?”
According to Border Patrol sources, violent MS-13 gang members are using the Nogales processing center in Arizona as a recruitment hub and as a transfer point for gang members to get into the United States.
The Red Cross has set up phone banks inside the processing center so unaccompanied minors can make phone calls to family members inside the United States and back home in Central America. According to sources, those phones are also being used by MS-13 members to communicate with gang members already in the United States and operating in cities like Atlanta, New York and Chicago. Further, many teenaged males inside the facility have approached Border Patrol agents and have said gang members have tried to recruit them from shared cells. According to the FBI, MS-13 regularly targets middle and high school students for recruitment.
"The National Border Patrol Council believes there to be serious security issues at the Nogales Processing Center. Agents' hands are tied due to the policies governing the care and lodging of juveniles and this has allowed gang recruitment and activity to flourish amongst those being detained," vice president of the National Border Patrol Council Shawn Moran tells Townhall. "Customs and Border Protection needs to do more to ensure that gang members that are in custody at the NPC are identified, prosecuted, and prohibited from benefiting from this crisis."
Earlier this week an internal Border Patrol summary confirmed at least 16 MS-13 gang members from El Salvador, Honduras and Guatemala are being housed in the processing center after graffiti was found on bathroom walls. These same gang members admitted to acts of torture and murder in their home countries before heading north to the United States.
"Border Patrol Agents (BPAs) and Customs and Border Protection Officers (CBPOs), assigned to The Nogales Placement Center (NPC), discovered that 16 unaccompanied alien children (13 El Salvadoran males, two Guatelmalan males and one Honduran male) currently being held at the NPC are members of Mara Salvatrucha (MS-13). The MS-13 gang members admitted to their gang associations following a discovery of graffiti at the NPC. Homeland Security Investigations (HSI), ICE Enforcement and Removal Operations (ERO), and the Office of Refugee Resettlement (ORR) were notified," the summary states. "Homeland Security Investigations (HSI), ICE Enforcement and Removal Operations (ERO), and the Office of Refugee Resettlement (ORR) were notified."
MS-13 members are required to be processed by Border Patrol and then are handed over to Immigration and Customs Enforcement, where they are often times placed inside the U.S. and given a court date. They rarely show up. By U.S. legal standards many gang members operating in Central American countries and traveling north are classified as minors due to being under the age of 18. However, many young males are actively engaged in violent cartel and criminal activity, yet are treated as children when processed through the Department of Health and Human Services or Department of Homeland Security systems.
Yesterday, Americans For Prosperity has launched their post-Independence Day offensive by running new ads in Arkansas and Louisiana. Arkansas Sen. Mark Pryor and Louisiana Sen. Mary Landrieu are some of the most vulnerable Democrats running for re-election this year. It also doesn’t help that Romney won both their states by ten-plus points or more back in 2012.
This ad running in Louisiana features veterans voicing their disappointment and frustration over the Veterans Affairs (VA) catastrophe. They ask her if government health care can’t adequately help the needs for veterans, how can it work for the entire country with Obamacare.
The second ad, also targeting Sen. Landrieu, deals with the new EPA regulations that are projected to kill jobs and raise electrical costs in the Bayou State. It’s been met with less than enthusiastic support from business owners.
The last TV spot targets Sen. Mark Pryor, tying him to President Obama for voting with him 90% of the time, increasing health care costs due to Obamacare, and the national debt.
This will be one of the largest ad campaigns Americans For Prosperity has initiated in this 2014 midterm cycle, according to Alex Roarty of National Journal. Right now, this new media campaign is costing AFP $940,000 in Louisiana and $920,000 in Arkansas.
From AFP’s press release:
Americans for Prosperity is continuing to hold these senators accountable for their big-government records that hurt hard-working families who just want to secure a better future. People shouldn’t have to live paycheck to paycheck because government bureaucrats believe our energy or health care bills should be higher. They shouldn’t have to worry about the debts their children will owe because elected officials keep voting for more government overspending.
“When it comes to energy prices, Senator Landrieu’s clout has yet to slow the Obama administration’s assault on affordable energy. Louisiana’s energy industry is going to be disproportionately harmed by the EPA’s proposed regulations, killing good-paying jobs and raising energy bills.
“When it comes to health care, the unacceptable treatment for our veterans should serve raise alarm bells for the rest of us: government-run care is not the answer.
“Many Arkansans may see their friends or their loved ones reflected on their screens in our latest ad on Senator Pryor’s record. For the sake of their well-being, they need Senator Pryor to stop voting with President Obama to keep growing our debt and our government.”
November is coming.
Some members of the armed services, all of whom are currently deployed in war zones, will soon be notified by the Defense Department that they will be involuntarily discharged from the military at the end of their current tours. Why? “Budget cuts.” It’s as simple as that. Shockingly, too, hundreds of Army captains have already been handed the devastating news, according to the New York Post, and more officers are expected to get it, if they haven't already, soon enough.
For obvious reasons, this is an outrageous and heartless way to “thank” combat veterans:
What is astonishing is that the Defense Department thought it would be appropriate to notify deployed soldiers — men and women risking their lives daily in combat zones — that they’ll be laid off after their current deployment.
As one Army wife posted on MilitaryFamily.org, “On some level I knew the drawdowns were inevitable, but I guess I never expected to be simultaneously worried about a deployment to Afghanistan and a pink slip because my husband’s service is no longer needed.”
Awful. To put things in perspective, the government wasted some $100 billion last year alone on frivolous expenditures, and yet it can’t even wait long enough to lay off combat veterans until they’re out of harm’s way? The author describes the Defense Department’s handling of this situation as a “stunning act of callousness.” True. But I’d go a step further, and say its actions are a stunning act of cowardice. This is no way to treat American combat veterans.
And yet, as we’ve seen with the unfolding VA scandal, and now this, combat veterans are often forgotten and mistreated by the same government that purports to represent them. It’s not fair and it’s not right, and Congress should be doing everything in its power to ensure these men and women are taken care of after they retire. Right?
Townhall News Editor Katie Pavlich’s new book ‘"Assault and Flattery" exposes the Democrat Party’s manipulative tactics in trying to convince women Republicans are taking away their reproductive rights. In reality, Pavlich explains, it’s the Democrats who are waging a war on women by telling them to vote with their lady parts instead of their brains and trying to take limit their Second Amendment rights with cries of "gun control!" It’s the perfect book to annoy liberals. Here are just a few places we went around the nation’s capital reading "Assault and Flattery" to prickle some feminist feathers.
1. Planned Parenthood’s downtown clinic in D.C.
The most pro-abortion organization in the country was our first stop. These 10 truths I learned about the business last month will shock you.
2. The White House.
The most “pro-woman” president in history? We think not.
3. At the National Organization for Women office.
4. Next to this “sexist” metro ad.
No, feminists, this ad is not “sexist.” Girls like shoes. Deal with it.
5. The Health and Human Services building.
For trying to force Christian companies to provide abortifacients to their employees, the HHS was another obvious destination.
6. Senator Dianne Feinstein’s (D-CA) office.
Sen. Feinstein, keep trying to suppress our Second Amendment freedom, we’ll keep reading how firearms can often be a woman’s best friend.
7. The Feminist Majority Foundation.
This liberal organization is doing its best to defend abortion clinics from the Supreme Court’s unanimous decisions to strike down buffer zones that would have kept pro-life activists 35 feet from clinic entrances. Pro-lifers still have their freedom to witness to girls with unplanned pregnancies, and we still have the freedom to read ‘Assault and Flattery’ wherever we choose.
8. Next to (discounted) copies of "Hard Choices."
It was certainly not a hard choice to pick up “Assault & Flattery" over Hillary’s overrated book.
9. House Minority Speaker Nancy Pelosi’s (D-CA) office.
10.The Democratic National Headquarters.
Dear Democratic Party, for trying to manipulate women into thinking Republicans are taking our “rights” away, you have been “Assault and Flattery” bombed.
Want to be featured on Townhall? Pick up a copy of “Assault and Flattery” and tweet a picture of you reading it to @townhallcom. You could be featured on the site!
Earlier this week, MRCTV’s Dan Joseph attended a protest hosted by immigration activist groups, specifically Casa De Maryland. Given the situation on the border, where undocumented minors are arriving to the United States in droves; do these activists discourage illegal immigration into the country?
Casa De Maryland’s Executive Director Gustavo Torres said they’re for comprehensive immigration reform. But, when Joseph pressed him to go record stating that he and his organization would discourage families from trying to enter the United States illegally, his staff initiated secondary protocol and whisked him away.
Soon afterwards, Dan Joseph found himself being subjected to the silent treatment by protest organizers, warning other participants not to speak with him.
Joseph wrote in a blog post for CNSNews.com that:
Some lawmakers believe that the recent influx of unaccompanied minors, mostly from Central America, is due to executive action that the president took in 2011, when he unilaterally granted amnesty to millions of young illegals currently in the United States.
Additionally, despite the activists [sic] claims that illegals are being deported at an alarming rate, statistics show that the number of illegal immigrant minors who have been deported is at an eight year low.