Rent prices are rising fast, catching up to house prices

Except for in SF Bay area, NY, SF, Seattle, DC, and New Orleans, rents are increasing dramatically, to catch up with rising property prices.  

From Chapter 9, we know that in equilibrium, you have to be indifferent between renting and owning because renters can buy and become owners, while owners can sell and become renters.  In an earlier post we showed that the price-to-rent ratio was getting really big: 50 in SF, 30 in SD, 19 in Nashville.  Rising rents will help bring this down, and could suggest a movement towards long-run equilibrium.   

New Unicorns suggest fast pace of innovation!

Two popular innovation metrics are total factor productivity the difference between output (like GDP) and the inputs (like capital and labor) used to produce it, or the number of unicorns, startups that reach a $1B valuation.  While total factor productivity seems rather flat, 

the number of unicorns seems to be accelerating.

The US seems to account for about half of them, maybe due to its tolerance for inequality, and light-handed regulation.  

Unicorns are concentrating in several US cities, sometimes called "innovation clusters."

 More posts about unicorns and innovation. 

HT:  Elad Blog

G-7 countries collude to eliminate competition among themselves

 Countries compete for residents by offering to do more for less (lower taxes), in the hopes of attracting people and firms, e.g.,

Ireland’s low [12.5% corporate tax] rate has helped attract many of the new breed of footloose digital giants that don’t need to be close to consumers to sell to them, and can register their intellectual property—from which their profits derive—just about anywhere.

Like any cartel, the G-7 can make itself better off by fixing prices (corporate tax rates at 15%), thus eliminating competition among its members for residents and firms.

 Without competition to motivate them, I predict that:

1. these countries will become less responsive to those they are supposed to serve; and/or
2. they will "cheat" on the collusive agreement by competing in other dimensions, e.g., reducing property taxes, cutting red tape, giving away land, subsidizing wages.

Should Dropbox make or buy cloud services?

 By in-sourcing IT services, Dropbox saved $115 M over two years, doubling its gross profit margin.  

Actual spend as a percentage of COR is typically even higher than committed spend: A billion dollar private software company told us that their public cloud spend amounted to 81% of COR, and that “cloud spend ranging from 75 to 80% of cost of revenue was common among software companies”. 

Inflation and the weak dollar

 Good post about inflation, here is one part related to chapter 11

6) The USD is at a 3-year low. The way I look at it — and this is a vast oversimplification — is that a weak USD buys less in foreign goods, which increases the price of imports, contributing to inflationary pressures.

In other words, the falling dollar increases demand for domestic good because it raises the price of substitute imported goods.  

HT:   MarginalRevolution.com 

the reason behind the labor shortages, soaring wages

 

The graph above shows the labor force participation rate has fallen, two percentage points since the pandemic, decreasing the supply of labor.  A reduction in supply increases prices (wages increased at an 8.7% annual rate) and decreases quantity.  

HT:  marginalrevolution.com