Tim Kane on Economic Blogging

Top economic bloggers throughout the U.S. have revealed relatively gloomy outlooks on the country’s economy, but have also expressed original viewpoints and ideas regarding solutions to the problem. The most-preferred policy option to stimulate the economy was to “remove restrictions on who can be ‘accredited’ investors.” More than 70% of blogging participants also showed their support for the Keystone XL Pipeline, which would up more domestic areas to oil and gas exploration and drilling.

According to Tim Kane of the Kauffman Foundation, “The economics blogging community has proven to be very insightful with rich and diverse viewpoints, but by nature they understand the importance of entrepreneurship because that’s ultimately who they are.

“We’ve been fortunate to aggregate the insights of top economic bloggers, including expert scholars such as Jim Hamilton at UCSD and Brad Delong at UC Berkley, but also popular commentators outside of the ivory tower, with powerful results,” he added.

America: How to Tackle Unemployment

America is facing its worst case of unemployment since the Great Depression.  There are many reasons put forward as to why it is currently so bad.  One of them is that US companies are taking their capital and investing abroad rather than at home.  This could definitely be what has resulted in a staggering 3 million US jobs being slashed in the last 10 years.  Looking at the figures for job creations overseas during the same time frame, it is almost as many as the jobs that have been lost in America.  The message is thus clear: it’s time to bring your money back home and show a bit of patriotism, Americans.

China Catches the Eye of U.S. Executives

Investment firms and entrepreneurs throughout the U.S. have begun shifting focus to China. Jason Boyer, Brett McGonegal, Bradford Ainslie and Uwe Parpart, four former Cantor Fitzgerald managing directors, recently left the New York-based firm to join forces with Reorient Financial Markets Ltd., an asset manager under China’s Assets Supervision and Administration Commission.

In an interview, McGonegal said “it’s the marriage of a Chinese stated-owned enterprise with a government mandate combined with a Western distribution platform.”

 

China Introduces First Ever Property Taxes

In order to curb inflation and help bring down the cost of housing the Chinese government has instituted for the first time a property tax, which will go into effect this coming Friday, February 4th, 2011.

Curb Inflation

The tax will first be introduced into the key cities of Shanghai and Chongqing, and will only apply to the purchase of second homes. The reform comes in the wake of the recent startling growth of the Chinese economy, which posted an increase in GDP of 10.3% in 2010, its most robust growth since the beginning of the international financial crisis in 2008. The well-founded fear that along with such significant economic growth also comes inflation has stimulated Beijing to take this extraordinary step of instituting a property tax.

Overall prices have been rising, and the inflation rate for December, 2010 was close to 4.6%, a much higher figure than what the government was hoping to see. Since the cost of housing is one of the main driving forces of inflation, the government decided to take measures to help keep the cost of homes down.

Reduce Speculation

The hope is that the new property tax, which will be paid on a yearly basis and will cost between 0.4% and 1.2% of the purchase price, depending on how the home cost compares with market value, will reduce speculation on real estate.

The head of research at the China Real Estate Index System in Beijing, Ge Haifeng, explained that the property tax will have “a big psychological effect on potential home buyers. China’s housing market may get really quiet in coming months.”

The property tax in Shanghai will be between 0.4% and 0.6% on the purchase of second homes only. In Chongqing in southwest China the tax will have a wider range, from 0.5% to the maximum of 1.2%.

Mayor Hopeful

The mayor of Chongqing, Huang Qifan, is hopeful that the tax will have a positive effect on inflation and housing prices. He said however that the effects of the new tax might not be immediately felt, as he explained, “It is impossible for housing prices to fall overnight because of the property tax,” but, “it will help to curb speculation in the housing market.”

Some Dissension

Not everyone agrees that the institution of a property tax law is a positive move. A spokesman for the property development firm of Shui On Group stated that there is no “property bubble” now in China, and complained that the government restrictions on bank loans were causing financing to be more complex and difficult for the property development industry.

According to Michael Klibaner, the head of China research for Jones Lang LaSalle Property Company, the primary goal of the new tax is to prevent the amassing of properties, and not to control of prices.

“Previously there was very little holding cost for residential property because many people paid 100% cash for these properties. Now the holding cost is no longer zero,” Mr Klibaner said.

“When the holding cost is zero, it’s very easy to let these homes sit idle. It doesn’t cost you anything to let them sit there. Now there’s a holding cost – the hope is it will change the way people perceive real estate as an asset class.”

October: Largest Job Creation Month

Good news for an American economy that needs something positive.  According to the U.S. Labor Department, the American economy had the biggest job creation that it’s had in five months during October.  Economists were cautiously optimistic with this news.  As Carl Riccadonna, an economist at Deutsche Bank said, “This is not a gangbusters report, but it is very important. It shows us that the momentum in employment is building.”

In a White House statement, President Barack Obama said that the jobs report is “encouraging news” and he encouraged both Democrats and Republicans to propose more ways to boost the economy.