economics

Now It’s Nashville

Now rent control is coming to Nashville. In city after city, we are seeing reports of 20, 30, even 40 percent increases in rents. Market forces are putting pressure on rents nationwide.

Governments have been trying to set maximum or minimum prices since ancient times. The Old Testament prohibited interest on loans, medieval governments fixed the maximum price of bread, and in recent years, governments in the United States have fixed the price of gasoline, the rent on apartments, and the wage of unskilled labor, to name a few. 

Price controls hold within them the promise of protecting groups that are hard-pressed to meet price increases. Like all price controls, rent controls are supposed to protect those who are renting when the demand for apartments exceeds the supply and landlords were preparing to “gouge” their tenants. But what price controls actually do is distort the allocation of resources. See Venezuela for the inevitable conclusion to that plan.

The unrealistic assumptions behind the logic of those who argue for price controls are amazing. The first of those assumptions is that hikes in prices apparently have no impact on consumers’ demand for goods.

Governments may not know much, but they do know how to produce a shortage or surplus. Price ceilings, which prevent prices from exceeding a certain maximum, cause shortages. If you mandate that a product be sold below its value, those holding that product simply refuse to sell. This spawns a black market where the product is sold at its new (even higher) value.

Price floors, which prohibit prices below a certain minimum, cause surpluses. That is, dictating that consumers buy a product for more than it is worth causes consumers to stop buying. The surplus means many can’t find jobs, which forces some to work (under the table) for an amount below that minimum. (See illegal immigrants)

The law of unintended consequences is at work always and everywhere. People outraged about high prices of plywood in areas devastated by hurricanes, for example, may advocate price controls to keep the prices closer to usual levels. An unintended consequence is that suppliers of plywood from outside the region, who would have been willing to drive in to supply plywood quickly at the higher market price, are less willing to do so at the government-controlled price. Thus results a shortage of a good where it is badly needed.

This entire cycle of inflating the currency before installing price controls is another means of increasing government power.

“Inflate the money stock; when prices rise, impose price controls to correct the situation. These controls lead to shortages which ‘require’ government intervention to assure appropriate use of the limited supply and to allocate it and even to control and nationalize the production of energy. The powers of political authorities are increased; the open society is suppressed.”

Armen Alchian, 1976

This entire exercise is a means of grabbing more power and control by a government keen on stealing private property.

Private property rights contain three key features: (1) the right to make decisions about the physical conditions and uses of specified goods, (2) the right to sell the rights of ownership to other people, and (3) the right to enjoy the resulting income and to bear the loss of the use decision.

Armen A. Alchian, Universal Economics

Read more here about the government’s motives.

By Divemedic, ago

Rent Control Comes to Orlando

In February, I posted that communists in Florida cities were pushing for rent control. The attempt in St Petersburg ultimately failed because commissioners realized that it likely won’t work. Even liberal Miami Dade will likely not move forward. All of that won’t stop other cities from trying, so now that trend has come to Orlando, with one Orange county (where Orlando is located) commissioner pushing for adding rent control to the upcoming ballot.

Her plan calls for a rent hike cap of 5% or the rate of inflation, whichever is less. That is pure horseshit. Right now, the official rate of inflation is 8.9%, but the real rate is probably at least double that. So let’s be kind and say that my costs as a landlord increase by 12%. I am going to be held to a 5% increase?

The good news here is that this is going to take some time because Florida law is pretty explicit. As a reminder, landlords in Florida can’t raise rent during the term of the lease. As an example, my tenants sign a lease for a year, and the rent is laid out in the lease. That is the amount they pay for that year. When the lease is up, we can negotiate for another year, but that deal is separate from the year before.

No, what the left is talking about doing is restricting the increase from one lease to the next. In order to restrict the rate increase of a new lease, Florida statute 125.0103 is pretty explicit. There are a number of steps that have to be followed. First, the city has to declare a housing emergency.

Such governing body makes and recites in such measure its findings establishing the existence in fact of a housing emergency so grave as to constitute a serious menace to the general public and that such controls are necessary and proper to eliminate such grave housing emergency.

Orlando hasn’t even done this yet. So the first thing that they need to do is declare a housing emergency. A vote on this won’t happen until early summer. That brings us to step two, which is that they have to put it on the ballot and get a majority of voters to approve it:

Such measure is approved by the voters in such municipality, county, or other entity of local government.

Now if this makes it to the ballot I am betting it will pass, for the simple reason that people will usually vote for free shit that has to be paid for by someone else. That means landlords. That this also likely means a collapse of housing prices in central Florida won’t dawn on the voters until after it passes.

After all of that, the rent control is only in effect for one year. Following that, the entire process has to be repeated. Even then, the rent control doesn’t apply to seasonal rentals or to “luxury rentals.” A luxury rental is defined as a rental that would have cost more than $250 in 1977. According to the US inflation calculator, that would today be a rent of $1,159.

All of this means that rent control likely won’t happen, but it doesn’t mean that the left won’t use it to get their freeloading base to the polls in November.

By Divemedic, ago

Housing Bubble?

The Federal Reserve is watching housing prices increase and is claiming that there is a risk of a 2009-esque housing bubble. I am not so sure.

The prices of homes were skyrocketing in 2008. Everyone was in a panic to buy a house, flip it, and get rich. This isn’t that. I think that, unlike 2008, prices of everything are rising, and that is because the value of the US dollar is falling. That is, the US government has printed its way into this mess.

We are not on the verge of a housing bubble popping. We are on the verge of a collapse of the US dollar. In 2008, your home lost half of its value. In 2022, you are at risk of having your bank accounts lose half of their value.

By Divemedic, ago

Paramedic

One question I get all of the time is “What is it like to be a paramedic?” There are a few places that you can work as a paramedic in the peninsula of Florida. I have heard that things are different in other places, but this is how it is here. I described it 9 years ago, if you want to compare.

Most new paramedics want to work flight. The glamour of riding around in a helicopter is pretty alluring, but due to weight restrictions on helicopters, they generally won’t let you be a flight medic if you weigh more than 150 pounds. Flight medics typically have at least 5 years of experience with a 911 service to even be considered for the job.

The next best thing is running with a 911 service. Running with a 911 service is not as boring or routine as other jobs, so that is where nearly all paramedics want to work. The catch is that nearly all 911 EMS on the Florida peninsula is run by fire departments. The pay is pretty good with 911 service, so the competition is fierce. There will be 200 or more applicants for each position, so getting hired for one of these jobs is difficult. Starting pay for a dual (fire, paramedic) certification paramedic is currently about $50,000 per year.

Then there are hospitals and doctors’ offices. They are largely avoided by paramedics because nurses have managed to get employers to prohibit paramedics from giving medications. The reason is that nurses don’t want to be replaced by paramedics making less money. Hospital paramedics are also prohibited from inserting endotracheal tubes, because doctors make several hundred dollars for doing them. They aren’t going to let an hourly employee perform a procedure that a doctor can do for the price of a Lexus payment. So many medics (especially new ones who want the excitement) don’t take these as full time jobs. What winds up happening is the paramedic gets to do all of the things the nurse doesn’t want to do. You start IV lines, draw blood, bathe patients, change adult diapers, collect stool and urine samples, run ECGs, fetch drinks for patients, and other gopher work. A medic in a busy emergency room can expect to walk 20,000 steps (over 8 miles) per day. Starting pay for a hospital medic is around $36,000 a year with no experience.

There are also the theme parks. Most of the work there is simple first aid, with a few emergencies, and a bit of employee health. There are the big ones: Disney, Sea World, Universal, and Busch Gardens. There are smaller ones like Lego Land, Cypress Gardens, and even water parks like the now defunct Water Mania or Wet N’ Wild. Starting pay at these places can be odd, because some require experience, and quite a few only hire part time paramedics who already work elsewhere. Starting pay is between $18 and $23 an hour.

The paramedics who get the least pay and respect in this area are the ones working on non emergency transport ambulances. The pay is low and the working conditions are poor. Shifts are long, normally 12-14 hours each. You do not get a station to sit in on those times where you wait for your next call. You sit in the truck and wait. No reading, eating, sleeping, watching movies on your electronic devices, no texting, no phone use, and no drinking of anything except water. (Not even coffee) These jobs are easy to get, but turnover is high, and most people don’t stay for long, using this place to get experience and move on. These positions are where many medics who can’t get a job elsewhere wind up. Most medics work one of these jobs at some point in their career, but strive to get away from as soon as possible. If you work at one of these for more than 2-3 years or so, most employers will assume that there is a reason why you can’t get a better job and will avoid hiring you out of general principle.

One manager at a private ambulance company told me that his crews were not allowed to eat during shift, because he doesn’t pay them to eat, he pays them to haul patients so he can make money. Expect no meal breaks for the entire 12 hour shift. Another told me that patient care is secondary to keeping the customer (nursing home, hospital, etc) happy, and that the patient was just cargo, and no one cares what cargo thinks. One of my former EMT students was told by an employer when he complained about working conditions, that for every EMT that was working there, there were 7 more looking for a job, and if he didn’t like it, he could be replaced tomorrow. Starting pay for a transport medic averages $32,000 a year. In contrast, a kid right out of high school can get a job at a fast food place for $25,000. Delivery drivers for places like Sysco are making $50,000 a year.

A person aspiring to be a paramedic who isn’t a firefighter is better off going to nursing school. An RN has the same amount of schooling as a paramedic, but makes about double the pay.

That and burnout mean that only half of all paramedics are still working as paramedics five years later. The half of paramedics that leave generally eventually become nurses or respiratory therapists, the rest usually leave for other professions. I know one that became an ice cream man.

Even becoming a firefighter paramedic is a tough road. About half of the people who spend two years becoming paramedics and another six months becoming firefighters never get hired by a fire department. They wind up either moving on to other careers or taking jobs like non emergency ambulance jobs as they wait for the big break that never comes.

I got lucky. I spent two decades running 911 calls with fire departments. I have worked in all of the settings above (except flight- I am too heavy): three hospitals, four different fire departments, two doctor’s offices, three different theme parks, and two different ambulance companies. Each had its plusses and minuses. The biggest minus for most is pay, closely followed by poor working conditions.

In Florida, a nurse can challenge the paramedic exam and become a paramedic, but a paramedic can’t challenge the nursing exam. I can say with all honesty that nursing school doesn’t teach you anything that you didn’t already know as a paramedic. Even so, nurses who began their careers as paramedics make better nurses, especially if you are working in the ED.

By Divemedic, ago

Communists Press for Florida Rent Control

It’s happening everywhere. Communists in New York pushing to make all evictions for any reason illegal. They try to paint tenants as the victims.

This woman in Winter Haven, Florida had her rent increased by 58 percent, from $1545 to $2450. During the pandemic, the woman wasn’t paying rent, and the landlord collected nearly $6,000 in federal COVID stimulus money to make up for the year or so that she wasn’t paying rent. One of the stipulations on getting the COVID funds is that the landlord has to accept it as full payment for all back rent. So this landlord got screwed out of approximately $12,000 in rent that had to be written off. That six grand was less than a third of what he was owed. So he did what any business would do- he raised prices to make up for it. That apparently makes him the bad guy.

That woman’s case, like others, is being used to paint business owners as the evil, greedy ones for daring that their customers pay for the products and services that they receive. We are talking about a 40 year old woman who is living with her retarded 20 year old daughter and 9 year old son, while also taking care of her daughter’s toddler child. She is trying to raise three kids on nothing but government handouts. I wouldn’t have rented to her broke ass in the first place.

Meanwhile, in San Francisco, the local commies can’t afford rent, so they show up to protest at the landlord’s house, demanding that the landlords sell the apartment building they live in to a local non-profit at a loss. He bought the building for $6.5 million, and the tenants are using this intimidation tactic in an attempt to force him to sell the building for only $3.6 million.

All of this leads us to Tampa. A local communist newspaper called “Creative Loafing” is calling for rent control in the Tampa Bay area. The measure failed in Tampa, but across the bay in Saint Petersburg, the council has actually voted to declare a “housing emergency” and has begun walking down the road of rent control. So what does it take to make that happen under Florida law?

Landlords in Florida can’t raise rent during the term of the lease. My tenants sign a lease for a year, and the rent is laid out in the lease. That is the amount they pay for that year. When the lease is up, we can negotiate for another year, but that deal is separate from the year before.

To restrict the new lease, Florida statute 125.0103 is pretty explicit. There are a number of steps that have to be followed. First, the city has to declare a housing emergency.

Such governing body makes and recites in such measure its findings establishing the existence in fact of a housing emergency so grave as to constitute a serious menace to the general public and that such controls are necessary and proper to eliminate such grave housing emergency.

Saint Petersburg has already done that. Step two is that they have to put it on the ballot and get a majority of voters to approve it:

Such measure is approved by the voters in such municipality, county, or other entity of local government.

After all of that, the rent control is only in effect for one year. Following that, the entire process has to be repeated. Even then, the rent control doesn’t apply to seasonal rentals or to “luxury rentals.” A luxury rental is defined as a rental that would have cost more than $250 in 1977. According to the US inflation calculator, that would today be a rent of $1,159.

The only people who will come out ahead on this will be real estate attorneys.

Communists hate landlords. They want free shit. They are going to destroy the right to private property.

By Divemedic, ago

Price Controls Always Fail

In December, I did a post about rent control. I explained that there are all sorts of steps that property owners can take when the state attempts to control what they can charge in rent. It turns out that landlords in Los Angeles have done exactly that.

During the pandemic, LA passed an ordinance prohibiting landlords from raising rent from one lease period to the next. The definition of increase specifically excluded discounts when calculating base rent. The property owners used that. Let me explain:

The lease says that you can rent my property for $4,000 a month, but I will give you 4 month’s free rent per year, with the free rent being spread across the 1 year term of the lease. So the rent you actually pay is about $2,670 a month. The lease comes to an end, and you want to renew. When you do so, I tell you that I am only going to give you 3 months of free rent this year. That means you will pay me $3,000 a month. Even though you are paying me $330 more a month, I didn’t increase your rent, at least as far as the law is concerned. All I did was reduce your discount.

The tenants say that this is unfair, but I don’t see it as any more unfair than telling a property owner what they can charge for the use of their property. A landlord and a tenant agree to a lease for a one year term. The following year is a completely separate sale. Once the first year’s lease is concluded, that deal is complete. Now we are here to negotiate a completely different agreement.

Imagine if there were a law telling supermarkets that they cannot raise prices. Or a gas station that it can’t raise the price of gas. Or even a car dealership. It’s all been tried before, and price controls always fail in the end.

By Divemedic, ago

Who To Believe?

Two days ago, ADP released their monthly payroll report, saying that the economy lost 301,000 jobs during the month of January. Conservative Treehouse wrote a long article about this.

Reuters reported that U.S. private payrolls fell for the first time in a year in January as soaring COVID-19 infections disrupted business operations, raising the risk of a sharp decline in employment that would deal a temporary setback to the labor market.

Now keep in mind that the ADP report counts all active workers as employed regardless of whether they are paid or not during the survey week. In the government report, people who are out sick or in quarantine and do not get paid during the survey period are counted as unemployed in the survey, even if they still have a job with their companies. This means that if there were a pandemic causing large numbers of otherwise employed workers to be out sick, you would expect that the government job numbers would be significantly lower than the ADP number, but that isn’t what happened.

Two days later, just this morning, the US government claimed that there were 467,000 jobs added to the economy in January, even though the unemployment rate increased from 3.9 to 4.0 percent. The government is claiming that the economy is growing at a rate of 6.9% per year.

So which report is to be believed?

By Divemedic, ago

Store of Value versus Investment

There is quite the discussion in comments over at Peter’s place about the role of gold versus investments. It appears as though at least one user doesn’t understand that precious metals are a store of value, but not an investment.

What the Federal government has done (and is doing) with our fortune is a disgrace, but governments have done that since, well, ever. Nothing new. Inflation isn’t an increase in prices. Inflation is a currency becoming worth less. Sometimes a currency is tied to a physical asset like gold, silver, or salt. Sometimes it isn’t. To say that gold is money and dollars are currency makes you sound like an idiot.

If currency is not tied to a physical asset, then its worth is not set in stone, pun intended. Because it does not in and of itself have value, currency will inevitably and eventually become worth less. That is called inflation.

To protect yourself from inflation, you are better off holding something that has intrinsic value. That can be food, oil, livestock, or precious metals. Over the long term, precious metals are a great way to own an asset with intrinsic value. This is because food spoils, livestock dies (and needs to be fed), oil is bulky and difficult to store. Even non-precious metals are difficult to store. An quantity of gold takes up far less room than an amount of lead of similar value.

Because they have intrinsic value, assets like precious metals don’t increase OR decrease in value. They just are. In 1920, an ounce of gold could buy a nice Colt handgun. The same holds true today. The problem is that your asset (the gold) won’t appreciate in value. It is therefore a nonperforming asset, and not an investment.

An investment is an asset that will not just hold its value, it will increase in value. Things like real estate, stocks, bonds, and the like will change in value. Sometimes for the better, sometimes not. If I had bought a new Ford Mustang in 1964, I would be doing far better than if I had bought a 1964 Ford Anglia. Picking winners and losers is how fortunes are made and lost.

Even though it can seem like it, the stock market is not the same as a casino. As both an investor and a gambler, I will tell you that they are fundamentally different. Where the ball lands on the Roulette wheel is a random event, that is, the ball is just as likely to land on the ‘4’ as it is on the ’30’.

Not so in the stock market. Companies are managed by people. Management teams. Some are good at what they do, some are not. Companies that are well run tend to do well. Companies that are poorly run tend to not do well. But how to tell the difference? The same way that you judge people. Look at how they have performed in the past.

The problem here is that random events can ruin even the best companies. A big fire in a key factory. An executive gets caught embezzling. A government contract is awarded to a competitor. The best defense to this is to diversify. Own shares in many companies across many segments of the economy. That way, if one company fails, the rest can carry you through.

That is why I am a huge fan of index funds. I buy shares in managed funds that are filled with large companies. The S&P500 is the 500 largest companies in the nation. They are large because they are successful. Even though there are bad days and good days, the good days outnumber the bad. That is why the S&P500 tends to increase.

You don’t have to know about business or stocks or get involved in the day to day workings of the market. Buy into an index fund and let the money compound. There are many to choose from. You can get a fund that buys shares of S&P500 companies. You can get a fund that buys companies that pay dividends.

Once you are comfortable with index funds and want to pick a couple of individual stocks to experiment with, do it. Just be careful. Don’t put all of your eggs in one basket. Just a small purchase at first. Leave most of your invested money in those index funds, and just buy a few shares of the individual stock you want to play with.

In March of 2020, I saw the price of cruise line stock nosedive. I figured that it was an opportunity. I started by buying $5K worth of Royal Caribbean in March. By May, we wound up buying about $50K worth of Royal Caribbean at an average price of $30 a share. I began selling it off in December of 2020, at an average of $90 a share. I tripled my money in less than 6 months. During the same time period, gold went from $1500 to $1800 an ounce- a 20% increase.

That doesn’t mean that you avoid gold. Remember, diversify. Gold should be PART of your savings, not ALL of your savings. Entire books are written on this. If gold were the answer, then billionaires would all have a vault filled with coins that they swim in like Scrooge McDuck. They don’t. You shouldn’t, either.

By Divemedic, ago

Wow Mark, That’s Gotta Sting

The bottom fell out of Facebook’s stock price this morning, down 24% for the day, and 38% from its 52 week high. In fact, its current price of 241.33 is the lowest it has been since July 2020. Wow Mark, that’s gotta sting.

Meta missed on earnings, saw Facebook’s daily active users dip for the first time ever as a public company (DAUs down by 1 million) and cited headwinds from inflation, foreign exchange, and an app tracking transparency feature Apple.

Remember when Facebook knocked MySpace out as the new Social Media hotness? Now TikTok is doing the same to Facebook. Social media is driven by teenagers and their fads. They come and go. TikTok has a shelf life, too.

Zuckerberg made the mistake of thinking his money train would last forever. I hope this is the beginning of the end for that asshole and his political money machine.

By Divemedic, ago