How Brexit Will Change the World

17 top economists, foreign policy gurus and historians look five years into the future.

.. Some of them think the Brexit vote is a sign of the sun setting on Europe. “Brexit could be a wake-up call, or it could be 1933 all over again,” says Danielle Pletka of the American Enterprise Institute. Dean Baker, co-director of the Center for Economic and Policy Research, is more optimistic, saying that Brexit would set Europe “back on a path of high employment and healthy growth.”

.. Some of them think the Brexit vote is a sign of the sun setting on Europe. “Brexit could be a wake-up call, or it could be 1933 all over again,” says Danielle Pletka of the American Enterprise Institute. Dean Baker, co-director of the Center for Economic and Policy Research, is more optimistic, saying that Brexit would set Europe “back on a path of high employment and healthy growth.”

.. In Europe, countries such as Poland, the Czech Republic, Hungary and possibly the Netherlands, will be watching to see if the Brits can pull this off; if the damage seems manageable, pressures to take a similar path are likely to build in at least these countries.

.. Russia has been in recession for two years, in part because its biggest market, Europe, has been buying less of its biggest export, energy. Is it going to do better if that market slows further? Almost surely not. Same for China. Losers all around.

.. The vote fortifies him and his supporters in their deepest belief: that hyper-pluralist, overly rule-bound, post-sovereign policymaking is doomed, prone to interest-group capture and stalemate, and unlikely to sustain popular loyalty over the long term. For China, the lesson is roughly the same.

.. If you want to say that the losers from Brexit are the world’s pluralist political orders, you can make a pretty good case.

 

.. Scotland will probably secede from the UK, which will have major consequences for British defense policy, given the basing there of the nuclear deterrent. Advocates of Trident modernization may get a boost from the isolation that Britain will feel in departing the EU, but they will need to find other basing arrangements (perhaps co-locating on U.S. bases).

.. I expect limited impact outside of the United Kingdom in the next five months. The initial market hysteria will soon be completely reversed, outside of the United Kingdom, and there will likely be a strong rally following Trump’s defeat in November. Within Britain, there could be a substantial impact. It is quite possible that the real estate bubble in London will burst

.. the UK will no longer be viewed as a safe haven for the world’s rich.

.. In five years I expect that the EU will have turned away from austerity and will again be back on a path of high employment and healthy growth. The Brexit vote, along with the growth of populist parties across the continent, both left and right, will have finally convinced enough of the EU elites outside of Britain that they had to take a course other than austerity in order to save the EU.

.. The main difference is that the UK will have a much smaller financial sector, with more of its wealthy being generated from productive sectors of the economy. (Okay, this is some wishful thinking—but it’s not impossible.)

.. The main difference is that the UK will have a much smaller financial sector, with more of its wealthy being generated from productive sectors of the economy. (Okay, this is some wishful thinking—but it’s not impossible.)

.. we may see British young people working on the Continent being sent home because they no longer have a valid work permit

.. In five years’ time, the consequences will be less far-reaching than many are predicting today. Every corporation that does business in the UK and the EU will have an incentive to lobby Brussels to make the “divorce” as amicable as possible.

.. And thus, a major casualty of Brexit will be the U.S. rebalance of its foreign policy toward Asia, a policy that depends on a stronger Europe to take on more responsibility in its neighborhood.

 

Housing crash in Canada could cost mortgage lenders almost $12 billion, Moody’s warns

The Moody’s report says rising levels of Canadian household debt relative to income, along with rapidly increasing house prices, have created conditions similar to those in the United States prior to the financial crisis of 2008.

.. suggested Canada-wide house price declines would be on the order of 25 per cent, while the red-hot markets in British Columbia and Ontario would experience steeper declines of 35 per cent.

How America Lost Its Mojo

U.S. dynamism is in the dumps: Americans are less likely to switch jobs, move to another state, or create new companies than they were 30 years ago (or 100 years ago). What’s going on?

Between the 1970s and 2010, the rate of Americans moving between states fell by more than half—from 3.5 percent per year to 1.4 percent. “It’s a puzzle and it’s the one I wish politicians and policy makers were more concerned about,” Betsey Stevenson, a former member of Obama’s Council of Economic Advisers, told TheNew York Times this week. Fewer Americans moving toward the best jobs and starting fewer companies could lead a less productive economy. On Thursday, the Financial Times reported that productivity “is set to fall in the U.S. for the first time in more than three decades.”

.. Whereas the middle class used to move toward productivity and jobs, like the River Rouge complex, they’re now barricaded from the most productive places by housing costs. So they’re moving toward cheap housing, instead.

.. Like smoking habits and fitness, entrepreneurship is a contagious behavior. “Exposing individuals to entrepreneurs may encourage them to start their own ventures,”

The Racist Roots of a Way to Sell Homes

The situation exposed black families to hucksters who peddled homeownership through contracts for deed, in which a home seller gives a buyer a high-interest loan, coupled with a pledge to turn over the deed after 20 to 40 years of monthly installment payments. These contracts enriched the sellers by draining the buyers, who built no equity and were often evicted for minor or alleged infractions, at which point the owner would enter into a contract with another buyer. In the process, families and neighborhoods were ruined.

Contracts for deed are making a comeback. They are increasingly being used by investment firms that have bought thousands of foreclosed homes and want to sell them to lower-income buyers “as is,” ..

.. Contracts for deed make gouging possible, because unlike traditional mortgages, there is no appraisal or inspection to ensure that the loan amount is reasonable. They also let an investor swiftly evict buyers for missed payments, rather than giving them time to catch up, as required under a mortgage. And they usually require the buyer to pay hefty upfront fees. Unlike a rental security deposit, however, the fee is almost never refundable.

Contracts for deed are similar in some ways to the subprime lending that contributed to the housing bust in this century. Investors in the contracts include some of the Wall Street players who inflated the mortgage bubble, including Daniel Sparks, the former Goldman Sachs executive, whose department was betting on a crash in 2007 even as the bank was selling toxic mortgage securities.

Cities for Everyone

At a national level, workers are on average moving, not to regions that offer higher wages, but to low-wage areas that also have cheap housing. That makes America as a whole poorer than it would be if workers moved freely to their most productive locations, with some estimates of the lost income running as high as 10 percent.

.. In brief, Mayor Bill de Blasio has pushed through a program that would selectively loosen rules on density, height, and parking as long as developers include affordable and senior housing. The idea is, in effect, to accommodate the rising demand of affluent families for an urban lifestyle, but to harness that demand on behalf of making the city affordable for lower-income families too.

Why Blacks and Hispanics Have Such Expensive Mortgages

High-cost lenders are targeting these communities, preventing them from building wealth to pass on to their children.

Why are blacks and Hispanics targeted with these risk financial products? Perhaps these differences stem not from the borrowers’ race but from their worse financial circumstances, a reason some would say justifies the higher rates. Not the case, according to a new study from the National Bureau of Economic Research, which finds that race and ethnicity matter substantially on their own.

.. According to them, even after controlling for general risk considerations, such as credit score, loan-to-value ratio, subordinate liens, and debt-to-income ratios, Hispanic Americans are 78 percent more likely to be given a high-cost mortgage, and black Americans are 105 percent more likely.

.. Why are African American and Hispanic borrowers ending up at the lenders who will charge them the most? High-cost lenders are much more aggressive in minority markets, the researchers say, which increases such borrowers’ exposure to these pricier loans.

.. Prior research has found that members of these minority groups are less likely to comparison shop for mortgage products, which in turn increases the chances that they’ll wind up with the first offer they receive, and those offers tend to be expensive ones.

.. Among their recommendations for decreasing the racial inequities in the mortgage lending market, the researchers suggest focusing on the way lenders do business, specifically ending the division of major lenders’ subsidiaries into “prime” and “subprime” entities, which can unfairly channel minorities into riskier, more expensive loans for no good reason.