● Turbulent and Mighty Continent: What Future for Europe
By Anthony Giddens
Summary via publisher, Polity
The currency of the European Union, the euro, is used in economic transactions world-wide. Yet the EU is mired in the greatest crisis of its history, one that threatens its very existence as an entity able to have an impact upon world affairs. Europe no longer seems so mighty, instead but faces the threat of becoming an irrelevant backwater or, worse, once again the scene of turbulent conflicts. Divisions are arising all over Europe, while the popularity of the Union sinks. How can this situation be turned around? It is a mistake, argues Anthony Giddens, to see the misfortunes of the euro as the sole source of Europe’s malaise. The Union faces problems shared by most or all of the developed states of the world. Reform in Europe must go far beyond stabilizing the euro, formidable and fraught though that task may be. Introducing an array of new ideas, Giddens suggests this is the time for a far-reaching rethink of the European project as a whole.
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The sharp rise in new construction last month lifts the level of starts to the highest number since February 2008. Another way to consider the data: starts are now running at about twice as high as compared with the number posted during the depths of the Great Recession. The pace of new construction is still roughly 50% under the high points of the housing boom, although some of that was simply excess building that had little if any economic rationale. In any case, it’s clear that housing has recovered quite a lot of lost ground since this market imploded a few years back.

The strong profile that emerges in today’s data minimizes the worrisome signs that had been casting shadows recently. The year-over-year figures for both starts and permits had been trending lower through most of 2013. It wasn’t clear if this was a maturing of the housing recovery or something darker. The future’s still uncertain, of course, but today’s numbers on starts suggests that new construction is in no danger of slipping off the cyclical cliff any time soon.

Although the annual rate of starts turned sharply higher in November, the growth of permits relative to the year-earlier number is closing in on the lowest pace since 2010. For the moment, this isn’t terribly troubling because the current year-over-year pace of around 8% still suggests a healthy round of growth for home building. In fact, that’s the message in this week’s December update of the National Association of Home Builders/Wells Fargo Housing Market Index, which jumped to an eight-year high. “This is definitely an encouraging sign as we move into 2014,” said NAHB Chairman Rick Judson earlier this week. Today’s news on housing starts only strengthens Judson’s outlook.

What’s the risk for housing? Higher interest rates… maybe. When the Federal Reserve starts winding down its stimulus program, rates will move northward. In fact, rates have already moved moderately higher in recent months in anticipation that extraordinary run of monetary stimulus is nearing an end. The 30-Year conventional mortgage rate is currently around 4.4% (based on the national average), or up from roughly 100 basis points since the Spring. For the moment, it’s not obvious that higher rates will damage the housing recovery. But much depends on how fast rates rise and why they rise. If the Fed is tightening policy because economic growth is picking up, that’s a healthy change. For the moment, that’s still a reasonable bet.