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My husband and I live in Toronto, but we just bought a condo on 57th Street in a 25 year-old building. I have owned a condo in New York since 2005, and we moved to a bigger place near One57, or Oligarch Arms, and near other controversial sites designed to give wealthy outsiders stunning city views.
To us, New York outshines other capitals such as London or Paris because it’s the world’s biggest shopping mall, complete with 24-hour room service. It’s also a theme park for adults who like theater, art, museums, opera, comedy clubs, food, fashion and dynamic streetscapes. We have invested our after-tax Canadian dollars here rather than buying a place in Florida to golf and mall walk.
We’re not the only ones — figures are imprecise, but estimates are that foreigners like us have been buying roughly one-third of the city’s condos as second or third homes.
But as condo prices climb, along with density and heights, my husband and I have become public enemy No. 1. Populist resentment, new taxes and legislative threats have cast foreign buyers as pied-à-terrorists.
Mayor de Blasio even sideswiped us, along with rich locals, in his “Tale of Two Cities” campaign speech at New School: “One New Yorker is rushing past an attended desk in the lobby of a majestic skyscraper . . . while a few miles away, a single mother is also rushing, holding her two young children by the hands as they hurry down the steps of the subway entrance.”
As we say in Canada: Give me a break.
Attacking New York’s newest, part-time residents like us is fiscally foolish. The facts show that we are the solution, not the problem, to New York’s budget. We are walking wallets — and we just want to have fun.
Robust condo sales to people like us have brought economic development and jobs.
Even better, 63 per cent of us pay cash, a stabilizing effect on an over-leveraged real-estate market, because we can. We contribute to the GDP and are the gift that keeps giving. Every year we stay, we will pay condo fees, cable bills, dry cleaners, utilities and sales taxes. We will buy tons of concert, theater, art show, exhibits and hockey tickets.
My husband and I alone will fork out at least $25,000 a year in property and sales taxes.
Better yet, we don’t cost the city a dime because we don’t dump our kids into public schools or drive cars that damage roads and create potholes. We don’t make political demands, don’t crowd your libraries or hospitals and don’t deduct mortgage interest from our income taxes like New Yorkers do. If we break laws, we get tossed out. If we have broken laws, we cannot get in.
We are an economic fantasy come true. A captive tourism industry, we market the city abroad, like social media platforms on legs, boring to tears our friends and family about how wonderful and safe New York really has become. We support cheesy souvenir shops, park vendors peddling iconic photos of Depression workers on a girder and reworked musicals on Broadway. We bring in relatives and friends who love riding the horse drawn carts through Central Park. We buy the T-shirts and the labels at Barneys and Bergdorf Goodman.
Some locals grumble about the buyers of the lavish “safety deposit boxes in the sky” and whether they are hiding ill-gotten gains.
London and Paris may specialize in catering to despots, potentates, monarchs and questionable characters from former colonies, but New York City is different. Buyers here must submit to a rigorous process that requires us to pay for credit checks, police checks and proving we don’t owe taxes anywhere. Worse yet, we had to disclose on paper, for their perusal, all of our personal and business assets, stock and bond trades, cash and bank accounts worldwide. These figures had to be verified by banks, accountants or lawyers.
Such scrutiny makes us so desirable to America’s economy that Sen. Charles Schumer has proposed a bill to Congress that would grant visas to any foreigner paying more than $500,000 for a residence.
While unlikely, and somewhat daft, the facts show that we deserve a slap on the back, and not one in the face, for buying a slice of the Big Apple.
Appeared in the New York Post Feb. 23
I recently wrote an article entitled “What Is A Liquidity Trap & Why Is Bernanke Caught In It?” wherein I discussed the definition of a liquidity trap as:
“A liquidity trap is a situation described in Keynesian economics in which injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. Signature characteristics of a liquidity trap are short-term interest rates that are near zero and fluctuations in the monetary base that fail to translate into fluctuations in the general price levels.“
Importantly, this evidence is mounting that the Federal Reserve has now become trapped within this dynamic. The boost in asset prices caused by the increased levels of liquidity in the system has benefited the wealthy while doing little to jumpstart the real economy. As I stated previously:
“However, the real question is whether, or not, all of this excess liquidity and artificially low interest rates is spurring economic activity? To answer that question let’s take a look at a 4-panel chart of the most common measures of economic activity – Real GDP, Industrial Production, Employment and Real Consumption.”
“While an argument could be made that the early initial rounds of QE contributed to a bounce in economic activity; it is also important to remember several things about that particular period. First, if you refer to the long term chart of GDP above you will see that economic growth has ALWAYS surged post recessionary weakness. This is due to the pent-up demand that was built up during the recession that is unleashed back into the economy. Secondly, during 2009 there were multiple bailouts going on from ‘cash for houses’, ‘cash for clunkers’, direct bailouts of the banking system and the economy, etc. However, the real test for the success of the Fed’s interventions actually began in 2010 as the Fed became ‘the only game in town’. As shown above, at best, we can assume that the increases in liquidity have been responsible in keeping the economy from slipping into a secondary recession. Currently, with most economic indicators showing signs of weakness, it is clear that the Federal Reserve is currently experiencing a diminishing rate of return from their monetary policies.”
From this standpoint it was shocking to see someone, particularly Larry Summers, actually discuss this issue during a recent CNBC interview stating his case on why it is wrong to rely on monetary policy as the main driver of the economy.
The important point is that, for the first time that I am aware of, someone has verbally stated that we are indeed caught within a liquidity trap. This has been a point that has been vigorously opposed by supporters of the Federal Reserve actions.
Of course, the lack of transmission of the current monetary interventions into the real economy has remained a conundrum for the Federal Reserve as the gap between improving economic statistics and the real underlying economic fabric continues to widen. As Larry states, we are indeed in uncharted territory. With the direct manipulation of interest rates near impossible, it leaves only verbal (forward guidance) and liquidity (increases of excess reserves) policy tools available. The problem is that these tools have never been used to such a massive extent before in history. While analysts and economist continue to suggest, with each passing year, that stronger economic growth is coming; it has yet to be the case. As discussed previously, this is a tell-tale sign of a liquidity trap.
My belief all along has been and remains that a well thought out combination of both fiscal and monetary policy is the correct remedy for what ails the U.S. economy currently. However, up to this point, the Fed has been the “only game in town” to quote the famous words of Senator Chuck Schumer. I have to admit that I was pleasantly surprised by Larry Summers view point as I believe that it is the correct one at this late stage of the current economic recovery cycle.
- Senators vote to weaken entry-exit system in immigration bill (washingtontimes.com)
- Senators tackle student visas in immigration bill (sfgate.com)
- Warning: Biometric IDs Help Gov Decide Which Americans Remain Employed (occupycorporatism.com)
- The real Facebook: a photo database of every U.S. citizen (macleans.ca)
- Senators Vote Down Sessions’ Immigration Amendment (wtvy.com)