When the Supply Is Greater Than the Demand

or, what low interest rates do. I found this article at Curbed New York about the large number of unsold new condos in New York very interesting:

According to the StreetEasy report, there have been some 16,242 new condos constructed in the city in the past six years. Of those, more than 25 percent are still sitting on the market—including around 40 percent of the condos for sale on Billionaires’ Row, according to an analysis of data conducted for the New York Times by data guru Jonathan Miller.

Miller’s analysis makes StreetEasy’s look downright conservative: “By Mr. Miller’s count, which includes buildings that are still under construction, there are over 9,000 unsold new units in Manhattan,” according to the Times.

And the condos that have sold are not necessarily being used by their buyers. Around 30 percent of luxury condos that have closed have since re-appeared on that site as rentals, according to StreetEasy.

These are sobering, if not totally unsurprising, statistics, putting real estate insiders—a bevy of whom spoke with the Times—on edge. “People don’t realize this is already as bad as it was after Lehman, purely from a supply standpoint,” Mark Chin, the CEO of Keller Williams, told the Times.

I think that this is what happens when interest rates are extremely low. People speculate on building condos for the rich or ultra-rich because, as Willie Sutton said, that’s where the money is.

But there is a tremendous temptation to lose track of an economic fact. As prices for anything rise, the market for it shrinks until, ultimately, you’ve outraced the actual market for whatever it is. That may be what has happened in New York. The top .1% of income earners is something like 140,000 people and all of them don’t live in New York or want to, something New Yorkers may find inconceivable. They should remember that for some people in California there is no life east of Sepulveda.

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Quick Notes on Last Night’s “Debate”

I didn’t watch the Democratic presidential candidates’ “debate” last night; I have limited time and a limited appetite for stress. I have been listening to the coverage on the morning news and will follow it in the opinion sections of the newspapers.

So far what seems to me the frankest assessment came from former Chicago Mayor Rahm Emanuel. After a few minutes of being a good soldier and saying nice things about the candidates the savviest political strategist the Democrats have said something to the effect that the debate was a net negative for Democrats, that the candidates needed to stop saying things that would hurt the Democrats in the general election, and that everything that any of them said would be fodder for Trump to use against them.

There was one clip of Joe Biden which everyone seems to take at face value but it was yet another gaffe. He said that under Obama they didn’t take children away from parents or put people in cages. Actually, they did just not in the volume of the Trump Administration. A frequently used photo of “people in cages” was actually taken during Obama’s term of office. VP Biden should have just attacked Trump’s cruelty in general terms and omitted the details. The reality is that we take children away from their parents every day in the United States for example when their parents have been arrested for a crime.

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Germany Is Crushing Europe

It’s good to see someone other than me pointing out what is the obvious truth. From Philip Stephens at the Financial Times:

The eurozone needs strong incentives for politicians in debtor states to take the unpopular measures needed to improve competitiveness. The flawed assumption is that there is a straight either/or choice. Why not structural modernisation and fiscal support for growth-enhancing investment?

There has rarely been a better time for Europe to invest in its future. Inflation has disappeared. Germany is awash with fiscal surpluses, federal, state and municipal. The cost of borrowing is zero. In Emmanuel Macron’s France, Berlin has a partner that has shown it will take tough supply side decisions.

Fiscal support for the eurozone economy is not about digging-holes-and-filling-them-in demand management, though even that would be better than nothing. The continent faces a yawning investment gap. Communications networks need replacing (check your WiFi speed or cellular telephone connection in Germany). The decarbonisation required to meet climate targets demands the re-engineering of the continent’s economy. Europe is way behind the US and China in advanced computing and machine learning.

German leaders know what needs to be done they just don’t know how to get re-elected if they do it, as Jean-Claude Juncker quipped.

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Reality Bites

You might find this snippet of Daniel Henninger’s latest Wall Street Journal column, on the dilemma the Democrats are facing, interesting:

With Mr. Trump’s approval rating stuck permanently in the low- to mid-40s, and 57% thinking the country is headed in the wrong direction, one would expect Democrats to be buoyant. Not the nonactivist Democrats I talk to. They’re depressed.

They like Mr. Biden, but it’s striking how many don’t think he’ll make it to the nomination. And if he falters, for them there is no Plan B unless Mr. Biden (or in their dreams, the sainted Barack Obama ) were to throw his support to one of the “normal” Democrats at the bottom of the standings—Sen. Klobuchar, Sen. Michael Bennet, Montana Gov. Steve Bullock or perhaps an undeclared candidate such as Ohio’s left-leaning but blue-collar Sen. Sherrod Brown. History’s most reluctant dark horse, Michael Bloomberg, might even re-emerge in a post-Biden vacuum.

Their frustration is born of the belief that a “normal” Democratic candidate should be able to beat the increasingly mercurial Mr. Trump. It’s a plausible scenario, but what really depresses many Democrats is the expectation that a normal candidacy isn’t going to happen.

It won’t happen because the Democratic left holds the commanding heights of politics now—traditional and social media, whose combined powers of candidate intimidation (as CNN’s climate groupthink proved) seem impossible to overcome. Building out from this “base,” the Democratic left thinks it has a once-in-a-lifetime chance to win the presidency.

Or, alternatively, Trump might be re-elected. Feel lucky, punk? The key problem is that the non-“normal” Democratic presidential candidates do not share the views of the voters of the Democratic electorate but of the progressive wing of the Democratic electorate which is less than half. And Democrats are presently around 30% of the total electorate.

The non-“normal” Democratic presidential candidates do represent the views of the supportive media outlets which means that it’s very difficult for that message to get out. The assumption is that every prospective Democratic voter hates Trump as much they do.

Pointing to President Trump’s low approval rating is meaningless. People can disapprove of him yet vote for him anyway if the alternative is bad enough.

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Understanding 9/11

At Foreign Policy Daniel Byman observes that his students had not been born when the attacks on 9/11 took place and presents a fair backgrounder on the attacks. Here’s his conclusion:

Under current U.S. President Donald Trump, students find it hard to understand the idea that a terrorist attack might bring people together.Under current U.S. President Donald Trump, students find it hard to understand the idea that a terrorist attack might bring people together. After all, Trump used the Orlando attack as an excuse to blast a “dysfunctional immigration system” and an “incompetent administration.” Right-wing terrorist attacks and white supremacist gatherings during his tenure have led him to talk about gun rights and the “very fine people” involved rather than bringing Americans together.

Today’s students also lack a sense of historical perspective. In the late 1960s and early 1970s, there was an average of more than one airplane hijacking per week globally, and those two decades saw hundreds of bombings in the United States by groups ranging from the Ku Klux Klan to the Weather Underground. Indeed, on U.S. soil, both terrorist incidents and fatalities are down in the post-9/11 era compared with the years before.

I think the post-9/11 sense of national unity is greatly exaggerated. After all, the New York Times was back to publishing anti-Bush editorials by Thanksgiving 2001 and did so regularly for the rest of his presidency.

One thing I find missing from Dr. Byman’s account is that prior to 9/11 we had troops stationed in Saudi Arabia. That’s a pretty significant omission given that was the stated grievance that spurred the attacks.

I also think he skips a lot in dismissing the connection between Al Qaeda and DAESH. As I understand it DAESH was a splinter group from Al Qaeda in Iraq that disagreed with the main organization over when the caliphate should be declared.

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What Trump Values

I think one thing we can conclude from John Bolton’s peremptory exit from the Trump Administration is that Trump values loyalty (defined as agreeing with him and otherwise keeping your mouth shut). Every president of my lifetime has fit Alice Roosevelt’s famous characterization of her father, Teddy:

My father always wanted to be the corpse at every funeral, the bride at every wedding and the baby at every christening.

and Trump more than most.

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The Forgotten Voters

I see that Thomas Edsall is coming to see black voters more as I do. From his New York Times column:

The African-American electorate has been undergoing a quiet, long-term transformation, moving from the left toward the center on several social and cultural issues, while remaining decisively liberal, even radical, on economic issues, according to a series of studies by prominent African-American scholars.

“There has been a shift in the attitudes of black masses about the extent to which systematic discrimination and prejudice are the primary reasons blacks continue to lag behind whites,” Candis Watts Smith, a political scientist at Penn State, wrote in a paper published in the Journal of Black Studies in 2014, “Shifting From Structural to Individual Attributions of Black Disadvantage: Age, Period and Cohort Effects on Black Explanations of Racial Disparities.”

Smith argues that older black Americans with deeply ingrained memories of the civil rights struggles of the 1960s and 1970s have been joined by a younger generation, with the result that

African Americans’ attention has increasingly shifted from structural reasons of black disadvantage (e.g., systematic discrimination in the job or housing markets) to individual-based explanations (e.g., lack of individual motivation; oppositional attitudes to school and learning) of these disparities, especially in the post — civil rights era.

I don’t encounter young black Americans as frequently as I used to but middle-aged and elderly blacks are a lot more socially conservative than you might conclude if you get your information from the major news outlets. And, based on the times I’ve served with blacks on juries, they not only believe in law and order, they believe in punishment. Much more than I do I should say.

In the recent Chicago mayoral primary elections black voters voted for the most conservative candidate running. Lori Lightfoot didn’t get elected by blacks. Her primary supporters were whites living on the Northwest Side. And Toni Preckwinkle didn’t even carry her own ward in the general election.

I’m surprised at his figure that blacks comprise 25% of Democratic primary voters. I would think it was a lot higher. Maybe it’s just a lot higher here. Whatever their numbers or percentage middle-aged and elderly black voters do register and vote, much more regularly and faithfully than their white counterparts in my experience.

Democrats ignore them at their own risk but that’s become a very bad habit. Judging by the polling information more blacks support Joe Biden than they do either of the black (or at least notionally black) candidates running for president. Maybe that’s name recognition. Maybe it’s because of his association with Barack Obama. I think it’s because he’s seen as a more centrist candidate than Bernie Sanders or Elizabeth Warren and they think he can win.

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The Anniversary

As has been mentioned on many networks, in newspapers, and on blogs, today is the anniversary of the attacks on September 11, 2001. I don’t care to dwell on it but I do have a couple of points to make.

First, whatever others say we did not overreact to the attacks. If anything we underreacted. I think we did misreact and have said so ever since.

Second, all of the critical success factors behind the attacks are still in place with one exception: passivity. I’m not as convinced as some are that’s dispositive. Other than that we’ve changed very little. Oh sure, our travel is made incredibly inconvenient by security theater, clearly intended to convince Americans that we’re doing something. As I said that’s theater. How do I know? For a year and a half after 9/11 I traveled without hindrance with a boxcutter in my bag that I didn’t even realize was there. So much for security.

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Cycles and Epicycles

Colin Dueck is ready to proclaim the end of the “Wilsonian century” at The National Interest:

Liberal internationalists insist that American engagement abroad be on liberal or Wilsonian terms. But the Wilsonian internationalist vision, especially in its post–Cold War iteration, contains some very serious flaws that helped lead to Donald Trump’s election in the first place.

Unless and until today’s Wilsonians grapple with these realities convincingly, there is no sign that Trump’s appeal for a great many U.S. citizens will dissipate.

Unfortunately for his argument, there is no sign that killing people in order to save them has lost its charm for liberal interventionists, either.

I do agree with this characterization, however:

Fundamentally, a close attention to U.S. freedom of action and material American interests is no scandal. The true starting point of U.S. foreign policy is not to promote rules-based liberal world order through multilateral institutions, as such. Rather, the true starting point for US foreign policy is to promote the interests, security, prosperity, principles, and self-government of U.S. citizens. Other worthwhile American commitments—including those in favor of pluralistic regional systems abroad, along with specific U.S. alliances—follow from that starting point.

If only it were thus! A “rules-based liberal order through multilateral institutions” has persistent charm for those who don’t care to put up the jack to enforce such an order, however, e.g. the Germans.

To my eye the entire line of thinking suffers from a fatal flaw. U. S. foreign policy is not a coherent whole flowing towards some grand conclusion. It is a messy, chaotic emergent phenomenon formed from the interactions of several persistent and contrasting strands of political and foreign policy thought: idealisticic optimists (liberal interventionists), realistic optimists (mercantile interests), realist pessimists (Jacksonians), and idealistic pessimists like me. None of the strands ever vanishes completely; none is ever completely in the ascendancy. It’s more a change in emphasis than the sea change Mr. Dueck seems to envision.

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A Changing Urban-Suburban Mix

In the 1950s Americans moved from the cities into the suburbs, frequently to large, sprawling developments of dozens or hundreds of nearly identical and newly-built homes. By 1970 much of that process was complete. “Inner city” was synonymous with poor, frequently minority populations while “suburb” conjured images of middle class, white collar or professional people—mostly white.

That has been changing for some time. Poor blacks are moving out of the “inner city” into the adjacent suburbs or to the South in a reversal of the Great Migration of the 1920s. Derek Thompson remarks at Atlantic:

For many years, the New York, Los Angeles, and Chicago areas have seen more departures than arrivals among nonimmigrants. Domestic migration to these metros has been negative for most of the 21st century.

Also for many years now, America’s biggest metros have attracted high-income firms and young, highly educated workers. On the one hand, this phenomenon had led to the sparkling revitalization of many downtown areas, a golden age of fine dining, and an eerie urban selfsameness with green-plant-and-exposed-brick coffee shops and lunch-in-a-bowl restaurants. But on the other hand, this urban blossoming has also made many desirable downtown areas too expensive for non-rich people to start a family, forcing new parents to move out to the fringes of the metro, or leave entirely.

There’s little mystery about where people are heading, or why: They are mostly moving toward sun and some semblance of affordability. The major Texas metros—Houston, Dallas, San Antonio, and Austin—have collectively grown by more than 3 million since 2010. The most popular destinations for movers are now Phoenix, Dallas, and Las Vegas, which welcome more than 100,000 new people each year.

Depending on how you look at it Chicago is either a harbinger or an object lesson:

But in many ways, Chicago’s problems make it a canary in the metropolitan coal mine. Immigration to the area has declined by half since the early 2000s. High earners have swarmed the Chicago River banks, revitalizing the downtown area, but the more diverse middle class, especially the city’s African American population, is evacuating Chicago’s suburbs. During the Great Migration of the 20th century, when millions of black Americans moved to northern cities, the population of Chicago went from 4 percent black in 1920 to nearly 40 percent black by 1990. But this century has seen a “Reverse Great Migration,” as the metro black population is on pace to halve from its peak of 1.2 million by 2030. This could reflect a flight from high-crime neighborhoods and the racist legacy of redlining throughout Chicagoland. Less pessimistically, it might be a sign that a lot of young black families would just rather live where they can afford more house, like in the suburbs of Atlanta and Houston.

Each of these Chicago phenomena—declining immigration, revitalized downtowns coinciding with a middle-class exodus, and the specific decline of the black population—has spread from the heartland to America’s largest coastal metros.

I think that Mr. Thompson is sugar-coating what’s happening to some degree. If Chicago is any gauge the big cities have become fantastically corrupt. Political corruption is so normal we don’t even recognize that it’s corruption any more. For people to get ahead or live safely they either need to leave the cities or live in gated communities or buildings with security. That costs money.

I’ve said it before and I’ll say it again. I think that the 2020 decennial census will come as an enormous surprise to a lot of people.

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