BASF Teams up with ABC and Miami-Dade Mayor Carlos Gimenez….July 15 Breakfast….

(MIAMI, July 14, 2015) – Mayor Carlos A. Gimenez, Associated Builders & Contractors and Builders Association of South Florida invite you to join them to discuss how to best engage private industry in addressing workforce development and unemployment in Miami-Dade County at the Employ Miami-Dade Forum Wednesday, July 15 at 8:30 a.m., at the Miami Dade College North Campus, 11380 NW 27 Avenue, in Miami.

WHO: Miami-Dade County Mayor Carlos A. Gimenez
Associated Builders and Contractors, Inc.
Builders Association of South Florida

WHAT: Employ Miami-Dade Forum, WHEN: July 15, 2015, 8:30 a.m., WHERE: Miami Dade College, North Campus, Conference Room 3249, 11380 NW 27 Avenue, Miami, Florida 33167

 

Unnecessary building code requirement? Really expensive…..Your BASF Membership today? Priceless!

Another hard-fought BASF Legislative Victory…..

Two key building code provisions were about to be implemented  – to industry’s detriment. BASF and FHBA, our state association in Tallahassee, and key builder members, worked hard to obtain a much needed one-year delay in two important code provisions:

  • The first delay relates to an additional Fire Access elevator, lobby, stair access and other requirements that would have affected any builder of high-rise structures (for any use).
  • The second delay is about a new ventilation test, which many builders were unaware of, even after education classes had been offered.

 
These two Building Code provisions have been DELAYED FOR ONE YEAR so that we can:

  1. Delve into the engineering and building science basis for adding a second fire service access elevator, lobby area, fire stairs and related space and equipment needs for what could be an unjustified and expensive “over-kill” code idea.
  2. Confirm that builders are sufficiently educated about the blower door test and ensure there are sufficient trained professionals to conduct these tests.
  3. These provisions were ready to be implemented in the June 30th, 5th Edition but we got the delay in the nick of time…..” 

Unncessary buildng code requirement? Really expensive…..Your BASF Membership today? Priceless! 

BASF Trustees meet with two Members of Congress on possible High-Rise Building Height Limits

BASF_trusteel

At their March 12 Quarterly Luncheon, the BASF Trustees will hear from two Members of Congress from the South Florida delegation regarding the possible FAA height limitations on downtown high-rise buildings. Congresswoman Frederica Wilson (D-24) and Congressman Carlos Curbelo (R-26) will be two of the four panelists to discuss this important development issue before the Trustees, a select group of builders and developers from Miami to Fort Lauderdale. For reservations, contact susanburns@basfonline.org or call BASF offices.BASF (Trustee Event eblast)

Unintended Consequences and Slower GDP Growth

Elliot Eisenberg, Ph.D.,
GraphsandLaughs, LLC
October 2014

Over the past 60 years GDP growth has been spectacular, averaging close to 4%/year with GDP doubling every 20 years. More recently, GDP growth has been lackluster, averaging about 2%/year since 2000. As a result, GDP now doubles every 35 years. In part this slowdown is due to the recession, slowing population growth and a lack of corporate investment in plant and equipment. These are temporary problems that should not be overblown.

By contrast, those who believe in “Secular Stagnation” ascribe the recent GDP slowdown to the fact that our economy is mature, that our best days are behind us and that technology can no longer deliver like it has. While I think the notion of Secular Stagnation is bunk, our GDP growth of the last century or century and a half has been, without a doubt, artificially inflated.

This is because we have ignored the “law of unintended consequences.”
Every time we invent something new, more often than not, something unexpected goes wrong. Burning coal, which brought about the industrial revolution, badly fouled the air leading to the premature deaths of millions. The automobile helped usher in acid rain, gaining access to cheap sugar created tooth decay, working at computers all day is making us fat, asbestos causes lung cancer, antibiotics create super bugs, aerosol almost destroyed the ozone layer, leaded gasoline lead to lead-poisoning, chemical dumping and the burning of fossil fuels releases mercury into the air and from there, rainfall washes it into the ocean and into fish. And now we face the enormously expensive issue of global warming. (And don’t even ask about Dodd-Frank).

My point is not that technological progress is bad. Quite the contrary, it’s great, but it’s not quite as great as we think because the negative consequences arising from it are never accounted for. The premature death of a coral reef, the rise in skin cancer rates and the eutrophication of coastal waters – to give just a few examples- are ignored when calculating GDP. And these costs, along with the costs of remedying these damages are both large and unknown. Moreover, monies spent cleaning up the messes caused by technological progress actually make GDP bigger. Now that we are more aware of “unintended consequences” we may be less optimistic about the future. And GDP growth going forward may be slower than in the past, but this is not due to Secular Stagnation. It’s simply a sign of economic maturation along with a better awareness of our impact on the planet.

Moreover, this realization should not cause us to give up on technological innovation. As a matter of fact, the only way to fix the problems mentioned above is with more technology. Genetically modified food is the only way we are going to feed the fast growing population of the planet and the impact of global warming and rising sea levels will only be mitigated with new building technologies and improved energy sources, even though they will undoubtedly cause unintended consequences.

Compared to 10, 20 or 30 years ago, GDP growth appears to be slowing. Some of the reason is cyclical, but some is because our estimates of earlier GDP growth were excessive because we did not take into account the unintended consequences of new technologies. What is for sure is that if we stop designing and applying new technologies to solve problems, GDP growth will slow further.

Elliot Eisenberg, Ph.D. is President of GraphsandLaughs, LLC and can be reached at Elliot@graphsandlaughs.net. His daily 70 word economics and policy blog can be seen at www.econ70.com.

Reservations About The Dollar

Elliot Eisenberg, Ph.D.,
GraphsandLaughs, LLC

Since the start of the Great Recession of 2008 and the Fed’s decision to inject trillions of dollars into the banking system, there has been constant talk of the US dollar losing its position as the world’s reserve currency, the position it has held since the end of WWII.  After all, our debt is huge and growing, DC is thoroughly dysfunctional, our share of the world economy is shrinking and China is increasingly pushing for a post dollarcentric financial system.  Despite all the concerns above, the dollar’s position as the reserve currency of the world is safe for a long while.

First, which currency can realistically unseat it?  The British pound is simply too small to do the job as the British economy is about 1/7th the size of the US economy.  As for the euro, while it is large enough, there are too many structural problems including weak growth, over taxation, an inflexible central bank and the outside possibility of the collapse of the monetary union to entice many central banks to significantly increase their euro holdings.

As for the Yen, Swiss Franc or Chinese renminbi, you have got to be kidding!  With a debt to GDP ratio greater than that of Greece, Japan makes the US look downright fiscally responsible. Moreover, Japan and Switzerland are both pushing down the value of their respective currencies making them that much less appealing to hold.  Lastly, the renminbi does not freely float and there are significant foreign exchange controls in place.  As a result, it will take at least a decade before China has the necessary legal framework and deep and open financial markets that are a necessary prerequisite before the renminbi can become a credible reserve currency competitor.

Second, because of increased capital flows between nations due to increases in trade and investment, central banks have been repeatedly told by their respective governments to hold larger quantities of safe and easy-to-sell assets which can be easily liquidated in time of crisis.  As a result, total foreign reserves have nearly quadrupled in the past decade and this has dramatically increased the demand for dollars.  For example, when foreign capital suddenly flees a developing nation, it puts downward pressure on the local currency.  By selling some of its dollar holdings to purchase its own currency, a country can stabilize its currency and avoid large currency swings.  Moreover, simply holding a large supply of highly liquid foreign assets, like dollars, discourages speculation and demonstrates that a nation has the necessary reserves to pay foreign creditors for things like oil and wheat.

Lastly, with large holdings of dollars the last thing foreign nations want to do is harm the dollar as that would reduce the value of their holdings and that, in and of itself, reinforces the dominance of the dollar and thus improves its stability.  That is at least partly why for the past 15 years 60% of world foreign exchange reserves have consistently been in dollars.  Were that percentage to slowly fall to 50% over the next few decades, it would matter relatively little.

To sum up, despite lots of talk, there exists no strong competitor to the US dollar and one is unlikely to appear anytime soon.

Elliot Eisenberg, Ph.D. is President of GraphsandLaughs, LLC and can be reached at Elliot@graphsandlaughs.net.  His daily 70 word economics and policy blog can be seen at www.econ70.com.

Interest Rates Yield No Recession

While Q1 GDP growth was 2.5%, it will probably be the best performing quarter of the year. Add to

Elliot that continued contractionary fiscal policy in the form of both the sequester and the Fiscal Cliff deal, continued weak employment growth, declining exports and a lackluster manufacturing sector and suddenly recessionary fears are palpable. After all, a recession will inevitably come and it has been almost six years since the start of the last one. Aren’t we kind of due? Turns out, the answer is no, no and no! If history is any guide – and it’s a very good one in this case – there is no recession in sight. Since 1970 there have been seven recessions, and interestingly enough, each one has been preceded by an inversion in the yield curve, a situation where short term interest rates are higher than long term interest rates. Rarely is there an indicator that is seven for seven over a period of 44 very dissimilar years. The last time the yield curve inverted and a recession did not follow was in 1966-67, and though there wasn’t a recession, the economy slowed substantially with GDP growth of less than 1% for 21 straight months.

Normally, interest rates are higher the longer the period of time money is lent. For example, today a one-year Treasury bill yields 0.15%/year, a 10-year Treasury note pays 2%/year and a 30-year Treasury bond pays 3.125%/year. After all, the longer you lend someone money, in this case the government, the more interest rate risk, inflation risk and credit risk you incur, and investors must be compensated for these risks.

However, from time to time this normal relationship breaks down. One explanation for this phenomenon is that by raising short-term rates (to slowdown an overheating economy with rising inflation), the Federal Reserve discourages bank lending, as banks generally borrow short and lend long. And when the yield curve is inverted, banks have much reduced profit margins, and this reduction in lending causes a recession. A second explanation for an inverted yield curve is that investors expect future short-term interest rates to decline because they expect a recession. As a result, investors expect the central bank to lower interest rates to counteract the expected recession. And when this happens, investors plow into low-yielding long-bonds to lock in yields they expect will be still lower in the future.

graphRegardless of the reason, from time-to-time the yield curve inverts. Today, the difference between ten-year Treasury notes and one-year Treasury bills is 1.85%. Assuming the Federal Reserve felt compelled to start raising short-term interest rates soon (and let’s be clear, it does not), it would take, based on history, about two years before yields on one-year Treasury bills were higher than yields on 10-year Treasury notes. And again using history as our guide, it generally takes another 12 months after the yield curve inverts before a recession begins. This suggests that we have at minimum three years before the next recession. Of course, given the expansionary state of monetary policy and the laser-like focus of the Fed in preventing a recession, my bet is we have quite some time before the recession of 2018!

Elliot Eisenberg, Ph.D. is President of GraphsandLaughs, LLC . His daily 70 word economics and policy blog can be seen at www.econ70.com