8 Sept 2021

Health and social care bill

The Economist magazine has a good summary of the latest Boris (possible) blunder, here. The headlines focus on the idea that the new bill is going to “”fix the crisis in social care once and for all”, but the reality is that it’s just a fairly stiff rise in taxes on employment to raise money the large bulk of which will just get tipped into the black hole of the NHS. I know that the Conservatives are supposed to be the party whose whole function is to resist radical reform, but the NHS really is pretty terrible. Throwing money at it has been tried before, in the early 2000s, without any dramatic improvement, at least in the rather important area of keeping people alive.

Forced conversion to Battery Electric Vehicles (BEVs) is imposed on manufacturers but resisted by customers and is bankrupting governments

This article points out the problems with BEVs. Governments are forcing them on manufacturers, but to persuade customers to buy them is ruinously expensive. It’s like the idea that we can all be persuaded to go on a diet of spinach, for its health benefits, by a government that is prepared to subsidise its production sufficiently, and pay for it by taxing ice cream. It is a delusion. The sentiments are not so remarkable, but the fact that France, generally an exemplar when it comes to reducing carbon emissions, is increasingly sceptical. If the French, who can charge up their EVs with clean power from nukes, which have to run 24x7, what hope is there for US or Chinese consumers, who largely get electricity from burning fossil fuels?

Going into competition with US home buyers

Renting in the USA is expensive. It used to be cheap, but for reasons I don’t fully understand it has got a lot dearer. The crash of 2008 and the trend for millions of young males to play video games in their parents’ basements has been a drag on demand. But supply will have contracted to. House builders, like Pulte Homes, have to contend with expensive carry, demand risk, skyrocketing labour and lumber costs. But residential REITs don’t have these problems. With ultra-cheap funding costs, and very strong demand from a labour market on the move, the narrative seems very positive.

Slate did a hatchet job on some of these firms, here. I sympathise with the sentiment, but I am more interested in what is, rather than what should be. I came across the piece after reading Alex Manzara’s latest post. Blackstone is an incredible institution. It has immense lobbying power, as Mazara indicates, which translates into economic power. I suspect that Blackstone is more important than the composition of Powell’s portfolio, when it comes to persuading the Fed to keep printing.

Wrap

The number of job openings in the US rose by 749K to a new series high of 10.9 million in July, and well above market expectations of 10.0 million. The US government really thinking about thinking about letting the economy run hot. Remarkably, bonds barely moved. Equities (which one would have thought would benefit from an economy running above fully employment levels) sank, but not by much. Most commodities were higher, especially the oil complex, but this is just a catch up from weakness earlier in the week. The dollar was a bit stronger, but nothing major: DXY, at 92.7, was up 0.2%, not enough to depress commodities. Overall, this was a risk neutral day.

Image of the day

Edward Hopper.