Adding to the low inflation environment we’re in, is Japan’s central-bank bond buying. By reducing the value of the Yen by about 20% in just a few months, it has made buying Japanese cars and other Japanese goods cheaper. And that puts downward pressure on prices of substitute goods. For example, to hold domestic market share, US automakers must minimize price increases by keeping wage growth low and strong-arming suppliers.
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Scared Debtless
In Q1 2013, total household indebtedness fell to $11.23 trillion, 1% lower than in Q4 2012 and way down from the peak of $12.68 trillion in Q3 2008. Mortgage debt now stands at $7.93 trillion, HELOCs are at $522 billion, student loans are at $986 billion (yikes) and auto, credit card and consumer loans total $1.8 trillion. While less debt is good in the long-run, deleveraging is delaying the recovery.
Size Matters
The Brown-Vitter proposal to force banks with assets over $500 billion to hold roughly double the capital of smaller banks, is overly simplistic. Big banks should be forced to hold extra capital to eliminate any “Too Big to Fail” funding advantage. Furthermore, all banks should hold more capital the bigger and more interconnected they are with other banks. After all, a failed huge interconnected bank will take others with it.
Housing Finance
With the mortgage refinancing wave largely over, mortgage originations will decline considerably in 2013, perhaps by as much as 50%. That said, home equity lines of credit will become increasingly popular as homeowners struggle to extract cash from their homes, yet preserve their 3% 30-year mortgage. Also, if the immigration bill moving through Congress changes the status of illegal immigrants, they could be a boon to the industry.
No Shoot
Rather than requiring gun-training, fingerprinting, outlawing assault weapons or “large” ammunition magazines or limiting the number of guns you can buy/day, instead require gun buyers to post a $10,000 bond for each gun purchased, and if the gun is involved in a crime, the bond is forfeited. This gives gun buyers strong incentives not to “give” guns to friends and family, prevents straw purchases and makes illegal guns more costly.