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Is there anyone more bland, more powerful, and less recognizable than Federal Reserve Chair Jerome Powell? He makes money moves more than Cardi B, and yet most people wouldn’t recognize him if he were sitting on their lap in the subway.
Why do relatively obscure banker meetings matter? Fair question, and it’s precisely why our GZERO team in Washington, DC, is covering the IMF-World Bank spring meetings this week.
For Masters of Monetary Policy like Powell, being bland is a strategy, not a characteristic. They speak in a purposely arcane language that requires near Bletchley Park decoding powers because everything they say makes news that impacts markets. This, in turn, affects things like your mortgage, your investments, and your grocery bill. It also impacts global poverty, which ought to make a lot more news. So understandably, they have to be careful and neutral to avoid panics or bouts of enthusiasm and ensure their signals leave lots of room for interpretation. But don’t mistake bland for lack of consequence. In global banking, bland is the brand, but influence is the purpose.
What have you missed so far?
Powell had a major bland moment at the Wilson Center’s Washington Forum on the Canadian Economy, which coincides with the spring meetings, where he hinted he would delay dropping interest rates because US inflation is proving more stubborn than predicted. “The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he said, as the finance world listened to him emphasize every SYL-la-ble.
Then, in case anyone missed it, he took out the verbal highlight pen. “We can maintain the current level of restriction for as long as needed.” Whoa. Treasury yields moved higher that very moment, and he wasn’t even done speaking. Translation for those not steeped in Bland Banker Speak: Interest rates are gonna stay higher for longer – at least until the inflation rate hits the target goal of 2%. Govern yourselves accordingly.
That news got a tiny corner of social media all ginned up, giving us the world’s first – and perhaps last – Federal Reserve Meme: Check out this AI-generated Jerome Powell hyped on rate cuts. Maybe Blands really do have more fun.
Meanwhile, Bank of Canada Gov. Tiff Macklem, who was on the same panel with Powell, hinted he might go in the other direction – and having had many conversations with him over the years, I can say that Macklem isn’t bland at all. Just last week, he held the key interest rate at 5% because inflation had centimetered up a titch, but he still suggested a rate drop was “within the realm of possibilities” as early as June.
What would that mean? For one, if Canada drops rates faster than the US Fed, the Canadian dollar would likely weaken considerably, so depending on which way you travel, things could get either a lot cheaper or more expensive.
In short, everything central bankers say makes a difference to millions of citizens, and still, most folks only pay scant attention to talk about inflation and interest rates close to home – not internalizing how much impact these decisions have on major issues like global poverty. For example, GZERO’s own Matthew Kendrick has been reporting from the spring meetings this week, covering the impact of inflation on the most vulnerable economies like Somalia and what is being done to help. You can read his surprising look at the Somali success story on debt reliefhere.
But if world bankers are all so smart, why are one in three countries worse off than in 2019? Why are so many falling back into poverty post-COVID? To find out, our Head of Content Tony Maciulis sat down with Ayhan Kose, the World Bank Group’s deputy chief economist, who told him, “When the food price goes up, the price of oil goes up. That has significant implications for these economies.” He also noted that some countries have experienced “the weakest growth rate on average since the 1990s.” What are the solutions? Watch Tony’s interview here.
News about IMF and World Bank financiers doesn’t often make the front page because it’s so complex, often depressing, and … well, kinda bland. There are other riveting events, like Donald Trump’s first criminal trial, the war in Ukraine, and Iran launching missiles at Israel to grab our attention, as they should.
But spare a moment for the folks who live in Blandlandia – those people at the IMF and World Bank spring meetings. They are participating in panels like “The Path for Taxing the Super-Rich – Towards a Progressive Global Taxation Agenda,” “Biden Pauses LNG; COP 28 Fossil Fuel Phase-Out Decision – Is World Bank Lagging on Fossil Fuels?” and even “The Polycrisis – How Unchecked Public Debt Fuels Corruption and Bad Governance.”
Beneath the bland, the story of our world unfolds. Since 1944, when both financial institutions were established, the World Bank itself has funded over 12,000 programs focused on economic development and reducing poverty. Has it worked? The record is mixed.
There have been big wins – like the reconstruction of Bosnia after the war, or working on debt relief programs, like Matt described in Somalia. But the World Bank also set a goal of eliminating extreme poverty by 2023, and its leaders admit they are not even close.
Meanwhile, the IMF, whose mission is to “firefight” big, macro-economic emergencies, like a currency collapse, comes in for much harsher criticism. Its Structural Adjustment Programs – loans to low-income countries in distress – have been subjected to extensive research, often proving that they have kept people in countries like Zimbabwe or across Latin America in poverty while enriching investors. Are these Western-designed programs just a neo-liberal form of colonialism, as some suggest, or pragmatic ways to get countries onto the path of economic development? The debates are so divisive that China has moved into the space in countries that no longer trust the IMF, using its Belt and Road Initiative to invest in infrastructure and push its own influence. So, politics are driving this as well.
The IMF and World Bank may not always make things better, and there is even paranoia right now that Donald Trump, if he wins in November, might withdraw the US from the World Bank, which would devastate developing economies. Still, these two organizations are relevant and demand our attention.
At GZERO, we are committed to covering these topics and making them accessible and interesting. So please tell us what you think. If you have suggestions for things we ought to cover, or questions about events like the IMF-World Bank spring meetings, send us a note here, and we will post answers to some of your key questions next Thursday.
Thanks for your remarkable attention to all these matters, and now, let’s get at the rest of the news.
– Evan Solomon, Publisher
Housing mania is gripping the United States and Canada – with millions wanting but unable to find an affordable place to live.
For years, both countries have faced a growing housing crisis. The pandemic exacerbated the struggle, and only now are governments starting to take the problem seriously. Still, securing affordable housing remains a daily struggle for would-be buyers, renters, and a growing number who are either homeless or under-housed.
In February, the median home price in the US actually fell to $400,500, a decline of 7.6% annually, but housing remains unaffordable for the majority of the country. In December, a mere 15.5% of homes were considered affordable (mortgage payment no more than 30% of monthly income). A recent poll found that around half of aspiring buyers said they can’t afford a down payment and closing costs, though a mere 13% of would-be buyers said there was “nothing” keeping them from buying. This suggests that even those who might be able to afford a down payment face other challenges in the market. High mortgage rates, around 7%, “historically” low stock, and a lack of targeted rental and non-market units are keeping homes out of reach for Americans.
With homebuilders waiting on lower interest rates to initiate new builds, pressure on the market may grow in the short term. Housing starts were down in March, nearly 15% below February and 4.3% lower than a year ago.
In Canada, it’s even worse. Last month, the benchmark price was a whopping CA$720,000, up 2% over February with mortgage rates hovering between 5 and 6%. Homeownership now costs nearly 63% of the median household income, up from 35% in 2002.
High housing costs are also driving up inflation – as in the US – and the country also faces a supply shortage. In 2022, the Canada Mortgage and Housing Corporation said the country would need 5.8 million new homes by 2030 to reach affordability. Yet, new builds fell in March, down 7% from February, and the six-month trend is also down, which means the country isn’t building nearly enough housing. There is one exception: British Columbia, with starts up 27% in Vancouver, as the province pushes new builds through a series of measures, including zoning reform to push beyond a focus on building single-family dwellings and pro-density minimum building requirements.
Why are houses so expensive?
Prices are high thanks to high demand and low stock, as usual, but there’s more to it. There’s also a lack of political action to build or encourage the building of housing people need where they need it – for instance, non-market units, purpose-built rentals, multiplex units – which is keeping stock low for segments of the population, including younger buyers and lower-income earners.
Ottawa ceased its involvement in building social housing in the 1980s and 1990s, which hasn’t helped. The US has long been a laggard on social housing, though in recent years some municipalities are starting to build publicly owned units.
Exclusionary zoning – or “not in my backyard” NIMBY-ism – has been another hurdle in both countries, with cities fighting the density necessary to build at scale and homeowners keen to protect their home values by keeping new housing out. A jump in the number of newcomers in Canada, about 471,000 last year, also contributes to market pressure.
Labor shortages are also hampering new builds in both Canada and the US, with the latter still slowed by the legacy of the Great Recession, which did more damage stateside than up north.
And then there’s the elephant in the room: the financialization of housing through which big institutional investors dominate the market looking for returns on their capital. This pernicious problem stems from seeing houses as assets first and foremost, a source of maximized profit, which invites speculation and market dominance by institutional investors who seek to inflate prices. Smaller investors, meanwhile, simply buy and flip properties.
Thinking of housing as an asset also means that individuals may see their homes as investments for retirement. Housing policy expert Carolyn Whtizman says “since the 1970s, the federal government has been treating housing, particularly ownership housing but more recently multifamily apartments, as the primary investment vehicle for retirement.”
“Housing in the US has always been an asset for the middle class,” says Noah Daponte-Smith, an analyst at Eurasia Group. “Your house is your primary retirement savings vehicle.”
Housing investors and those who rely on their homes for retirement planning want, even need,higher prices, which leaves millions priced out of the market or stretched to the brink.
In Canada, the share of investors and repeat buyers in the market has risen precipitously compared to first-time buyers, with investors accounting for 30% of purchases last fall. In the US, first-time buyers make up a similar share of the market at 32%, and recent data suggests institutional investors could make up as much as 40% of the single-family detached home rental market in the next five years or so, which means higher prices for renters and buyers alike.
What’s going to make housing affordable?
Solving the housing crisis will take years of commitment to a number of measures. Whitzman says Canada needs a period of stable house prices and rising incomes to produce an affordable market, but it also needs government involvement in building or incentivizing stock that matches the needs of buyers and renters at various price points. The same is true in the US.
The other side of the equation is income – namely, people need higher salaries. Half of Canadians now live paycheck-to-paycheck, and a whopping 78% percent of Americans are in the same boat, which leaves no room for saving for a down payment.
Stabilizing requires efforts and cooperation by governments at the national, state/province, and local levels. One approach could be ending the capital gains exemption on the sale of a principal residence to dampen demand, just as, according to Paul Kershaw of Generation Squeeze, taxing home wealth and using the cash to build affordable housing would have a similar effect while increasing stock.
What’s being done now?
In recent years, and especially in the last few months, the Trudeau government has awoken to the need to go all-in on housing. Its 2023 Housing Accelerator Fund helps municipalities build homes, trading federal cash for national building goals, including upzoning, transit accessibility, and affordability. The fund is expected to generate 750,000 new builds in the next 10 years, and so far the feds have greenlit 179 local applications.
In Canada’s federal budget, tabled on Tuesday, the government committed to several measures focused on housing affordability to build what it says will be 4 million homes by 2031. Those include longer mortgage amortization periods, $15 billion for construction loan programs, $6 billion in infrastructure funding, and buyer tax breaks. It also promised to “restrict the purchase and acquisition of existing single-family homes by very large, corporate investors,” but those details are to be determined in the fall after consultations, and the promise itself is full of asterisks, such as “existing” and “very large.”
Stateside, Daponte-Smith points out that while there is a housing crisis, “especially in major metro areas,” no national housing strategy exists. Instead, housing policies are “determined at the state and really even at the local level,” which means that every builder has to deal with a different set of local laws and zoning codes that control what they can build and how expensive it will be.
The Biden administration is increasingly aware that it needs a housing strategy. In March, the White House announced the latest in its housing affordability plan, which includes pressuring Congress “to pass a mortgage relief credit” worth $5,000 a year over two years along with $25,000 as a cash grant for down payment assistance for first-time buyers. On the supply side, the administration is also calling on Congress to boost new builds with builder tax credits and announced grants for new builds of affordable units for buyers and renters.
Electoral consequences?
Both governments are under pressure to deliver affordable housing but are hampered by long timelines, limits on labor and capital, the need to cooperate and coordinate across levels of government, and views that housing is an asset rather than a human need.
Voters expect the Biden administration, Trudeau government, and their state/provincial and local governments to deliver, and they’re increasingly impatient – meaning they may punish those that don’t at the ballot box.
With both Joe Biden and Justin Trudeau facing voters in November and by the fall of 2025 respectively, you can expect both men to continue working on housing affordability – to get first-time buyers into the market and rents down for those unable or uninterested in buying. But they’ll be battling an intransigent market that serves investors and incumbents, and the fact that even in the best-case scenario there will be a lead time between better housing policy and good outcomes at scale.
House of Representatives Speaker Mike Johnson (R-LA) speaks to reporters during a weekly press conference at Capitol Hill in Washington, DC, on April 16, 2024.
It’s a bit surprising that anyone wants to be Speaker of the US House of Representatives. Six months ago, Speaker Kevin McCarthy was ousted by fellow Republicans after he dared to cooperate with House Democrats on funding the government. His replacement, Mike Johnson, now faces a battle to retain the gavel as he attempts to navigate between Democrats and an increasingly fractured GOP with rabble-rousers like Rep. Marjorie Taylor Greene raising objections to foreign aid and threatening the Speaker’s job.
Facing threats from Republicans opposed to an aid package for Ukraine supported by the Biden administration, Johnson has cooked up a plan to “damn-the-torpedoes,” as Politico puts it, and go forward with the bill and two separate votes on additional aid packages: one for Israel in the wake of Iran’s attack and one for Taiwan. He also intends to pass two other bills (five in total), including one to increase border security and another that takes aim at Russia, Iran, and TikTok.
“My philosophy is you do the right thing and you let the chips fall where they may,” Johnson said about his plan to bring the bills to a vote this week. And fall they may as the MAGA crowd prepares reprisals, including meddlesome amendments or even a motion to vacate and boot Johnson from his position.
So now begins the battle between Johnson and hardliner Republicans, which in the next few days will shape not just the three bills in question and global geopolitics, but how Congress operates – or doesn’t.
The speaker struggle stands in contrast to a recent kerfuffle in Canada, where Speaker Anthony Rota resigned after his office welcomed a Ukrainian veteran who fought for the Nazis during World War II into the House of Commons. Rota was quickly replaced by Liberal member of Parliament Greg Fergus, and business in the Commons soon returned to its boisterous but mostly functional baseline.President Joe Biden speaks as he announces a new plan for federal student loan relief during a visit to Madison Area Technical College Truax Campus, in Madison, Wisconsin, on April 8, 2024.
With President Joe Biden and Prime Minister Justin Trudeau facing upcoming elections, the battle is on to capture young voters. Biden will face former President Donald Trump next November, and the next Canadian election is due by the fall of 2025, but both contests are already underway. Younger folks in both countries are turning increasingly sour on the status quo as they face affordability challenges and feel left behind.
Trudeau has expressly said his government was focusing on Gen Z and millennials, “restoring fairness for them.” And on Tuesday, his government unveiled its “Gen Z budget,” going all in on measures for parents with younger children (new cash for childcare and a school food program), students (interest-free student loans), and housing policy aimed at opening space in the market for younger buyers who’ve been shut out in recent years (with a first-time buyer, 30-year mortgage amortization period and tax breaks for home purchases).
In the US, young voters are focused on affordability, abortion rights, the environment, and student debt, and Democrats will need those folks to turn out on Election Day if they hope to retain the White House and make gains in Congress. Those 43 and under are frustrated with the housing market. Democrats are working to get on abortion rights on the ballot in key states, and the Biden administration is touting the impact of its Inflation Reduction Act on the environment. The president also hopes efforts to eliminate student debt will help alleviate some cost-of-living concerns for young voters.
But Biden is also facing a backlash from Gen Z voters over Gaza and US funding for Israel. The president had hoped tougher talk on Israel would boost his reelection bid, but that’s been complicated by Iran’s attack – although the administration has told Israeli Prime Minister Benjamin Netanyahu that it won’t support reprisals against Iran.
Both Biden and Trudeau need younger voters to turn out to vote for them. In 2016, Biden dominated the Millennial and Gen Z vote by about 20 points over Trump. And while Canada’s Liberals managed a minority government in 2021 with a youth vote that was likely a near-split with the Conservatives, younger voters played a crucial role in Trudeau’s 2015 majority government victory.
This means the coming months will see increasing efforts focused on wooing younger generations.
Signs welcoming Indiana Fever's new player Caitlin Clark, at Gainbridge Fieldhouse in Indianapolis.
It’s been a big week for professional basketball leagues catching heat. Fans were outraged to learn that college basketball legend and all-time NCAA top-scorer and top WNBA draft pick Caitlin Clarkwill earn a meager $338,056 over four years with the Indiana Fever.
That means, Clark’s earnings will be less than 1% of the 2023 NBA top draft pick, Victor Wembanyama’s $55 million deal. It’s even lower – much lower– than some NBA mascots.
Sure, Clark is set to make $3 million in ad deals, but the gender pay gap point remains, particularly as the league continues to grow. The WNBA draws fewer attendees, television viewers, and broadcast rights revenue, which means its players have a weaker collective bargaining agreement. But with a star like Clark – who is already helping set WNBA viewership records – that balance may begin to shift thanks to a one-woman rising tide that will lift other boats.
But Clark’s pay wasn’t the only pro basketball scandal. This week, Toronto Raptors forward Jontay Porterwas banned from the NBA after an investigation found him guilty of colluding with sports bettors. He was, according to the ruling, providing information to them and betting on games, including against his own team, and “limiting his own participation in one or more games for betting purposes.”
While Clark’s contract called attention to gender-based pay discrepancies, Porter’s ouster has raised questions about player’s involvement in betting scandals (and sponsorship deals with gaming outlets) – something that has become more common following the 2018 US Supreme Court’s decision to strike down federal laws against betting on professional sports. With a bigger pool of bettors offering more opportunities for such insider betting scandals, could it be time for the legal ban – or at least limits – to rebound?As the weather warms, the US and Canada are bracing for the potential of another record-breaking wildfire season. Canada’s 2023 wildfire season was the most destructive on record, with more than 6,000 fires tearing through tens of millions of acres and blanketing the US East Coast and Midwest in smoke.
Meanwhile, the US saw the smallest number of acres burned in more than two decades last year, thanks tohigh levels of precipitation and snowfall, which kept the West mostly out of trouble. But it also experienced its deadliest wildfire in over a century in Maui, Hawaii.
Canada's federal officials are warning that this season could be even worse. Warm fall and winter conditions, combined with droughts and next to no snowfall from December to February in essential areas like southern British Columbia and the Prairies impact soil moisture levels, raising the risk of fires.Detectives pose in front of the truck used in the Toronto Pearson International Airport gold heist as they give details of the arrests made one year on in Brampton, Ontario, on April 17, 2024.
22.5 million: Police have cracked the case of the biggest gold heist in Canadian history, arresting six people in the $22.5 million caper that involved the theft of a container at Toronto’s Pearson International Airport last year. Two of the suspects were employees of Air Canada.
⅔: No gains, no pain! Canada’s new federal budget increases the tax rate on capital gains from one-half to two-thirds for some payers. The measure, which applies to businesses and individuals whose capital gains earnings exceed $250,000, is projected to net about $19 billion over the next five years.
7: Haiti on Tuesday named the 7 voting members of a transitional council that is charged with selecting a successor to Prime Minister Ariel Henry. Henry, who was unable to return to violence-wracked Haiti following a trip last month to secure international aid, has pledged to resign once the council picks a new PM. The council’s mandate runs until 2026, but it is still unclear when it will actually take power. Last month, Canada dispatched troops to Jamaica to help train an international policing mission for Haiti.
3: After a boat crash brought down a bridge at the entrance to Baltimore’s harbor last month, interrupting shipping at one of North America’s busiest ports, the city opened two alternative shipping channels to accommodate cargo boats. Shipping giant Maersk has said those aren’t deep enough, but there is intrigue afoot: The company also said it had seen unconfirmed reports of a third channel set to open later this month that would be deep enough, and that it was waiting for local authorities to confirm. The ball’s in your port, Baltimore.
3.6 billion: The Canadian government will make available up to $3.6 billion in preferential loan guarantees for indigenous groups that want to invest in natural resources projects. Those projects could include, for example, massive energy transport projects like the Trans Mountain or Coastal GasLink pipelines, as well as a range of renewable energy projects.
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