The Capital Note — When ‘Cheap; Money Won’t Be, What Then?

Erwin Oropesa

President Joe Biden gestures during a meeting at the White House in Washington, D.C., June 28, 2021. (Kevin Lamarque/Reuters)

Welcome to the Capital Note, a newsletter about business, finance, and economics. On the menu today: the dangerous illusion of cheap money, cutting dividends is not the answer, home prices and inflation, warning signs from the Skew index, and fungi play the markets.

News and Views

TANSTAAFL and Ultra-Low Interest Rates
Ultra-low interest rates are an invitation to malinvestment, irresponsibility, and delusion (not mutually exclusive failings), especially when those rates are, even if only in part, the work of non-market actors.

Quite a bit of the borrowing that is under way at the moment (and has been for a while) is going to end in disappointment and tears. Eventually it will also lead to a major crisis in the government’s finances.

Brian Riedl, writing in the Washington Post:

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The Capital Note — About Home Prices

Erwin Oropesa

( Bet_Noire/Getty Images)

Welcome to the Capital Note, a newsletter about business, finance, and economics. On the menu today: home prices, Starlink, Arizona’s flatter taxes, and antitrust. To sign up for the Capital Note, follow this link.

News and Views

Raising (the cost of) the Roof
Well . . .

CNBC:

Home prices in April saw an annual gain of 14.6% in April, up from a 13.3% increase in March, according to the S&P CoreLogic Case-Shiller National Home Price Index.

Among larger cities covered by the index, the 10-city composite was up 14.4% year over year, from 12.9% the previous month. The 20-city composite was 14.9% higher, up from 13.4% in March.

Phoenix, San Diego and Seattle reported the highest year-over-year gains. All were up more than 20% from the year before.

“April’s performance was truly extraordinary. The 14.6% gain in the National Composite is literally the

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Capital Note: China Clobbers Crypto

Erwin Oropesa

Chinese President Xi Jinping on a screen during an event marking the 100th founding anniversary of the Communist Party of China at the Memorial of the First National Congress of the Communist Party of China in Shanghai, China, June 4, 2021. (Aly Song/Reuters)

Welcome to the Capital Note, a newsletter about business, finance, and economics. On the menu today: the EU goes after Google, China clobbers crypto, and the hurdles to Bitcoin as digital gold. To sign up for the Capital Note, follow this link.

EU Google Investigation

A week after France’s $270 million fine against Google for alleged monopolistic practices on its ad platform, the European Commission has announced a formal investigation into the company. The Wall Street Journal reports:

The European Commission, the EU’s top antitrust enforcer, said Tuesday that its investigation, which has been under way informally since at least 2019, will look at a

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