Post 337: More Beer, Less Bubbles: When Policymakers Toast Fake Growth

• Beer maker Constellation Brands’ sales and share price are going down faster than its beer. 
• US office vacancy rate ticked down from last year. 
  • But is still over 25% in some Western cities. 
• When you buy a home the government assumes you’re paying rent to yourself and they add it to GDP making the economy look much stronger than it really is.
  • Particularly if there’s a housing bubble. 
    • Another reason policymakers like to drive housing price higher.
• Mercedes Benz sales have been falling for some time. 
  • And a look back. 
• In Financial Ructions: 
  • We look at an apologist for central banks. 
    • Who believes that government debt to GDP over 100% is nothing to worry about.
      • PM: Spoiler alert: It is.
  • There may be a new prime minister in Japan and some are likening her to the next Margaret Thatcher: Uh, no.
    • And gargantuan levels of government debt have sapped economic growth over the last 35 years.
  • One of the original architects of rampant investment in the unproductive housing sector in Canada, now says we need more productive investment.
    • Better late than never I suppose.
  • A journalist claims that the stock market is one of the best economic indicators.
    • No, it’s an indicator of spending through the wealth effect.
    • It no longer says much about the underlying health of the economy.
  • A sociologist is right about the cracks in our economic system.
    • But wrong with respect to how they got there.
• In our book review of Taxes Have Consequences:
  • President Kennedy distances himself away from the New Deal doctrine of the Depression era 1930s.
  • In 1932, local taxes were four times higher than federal taxes.
    • Not anymore.
  • Keynes cautions against high taxation.
  • From 1966 to 1974 the S&P 500 fell approximately 60% in real terms.