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    High Lumber Prices Add Urgency to a Decades-Old Trade Fight

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    WASHINGTON — A trade dispute over Canadian lumber that began when Ronald Reagan was president has become a political problem for President Biden, with home builders and members of Congress urging the administration to try to strike a deal that could help bring down the cost of critical building materials.Lumber prices remain far above prepandemic levels, even after falling sharply in recent weeks, an increase driven in part by strong housing demand and an abundance of home improvement projects during the pandemic. The higher-than-normal prices are among a wide range of supply chain complications that have cropped up as the economy picks up steam.But unlike other commodities that have been in short supply, lumber is also the subject of a long-running trade dispute between the United States and Canada, adding a layer of diplomatic intrigue to the scramble for in-demand building materials. The two countries are locked in a thorny disagreement over softwood lumber, which is widely used to build single-family homes.In the latest chapter of the dispute, the Trump administration in 2017 imposed duties on Canadian softwood lumber imports in response to what it deemed unfair trade practices. Now, with lumber prices driving up the cost of new home construction, the Biden administration is facing pressure to seek a resolution to the long-running spat.“If you look at the structure of home building — a lot of wood there,” said Representative Brian Higgins, Democrat of New York, whose Buffalo-area district borders Canada. “So the cost of softwood lumber is going to profoundly influence the cost that is inevitably passed on to the consumer.”The National Association of Home Builders, an influential trade group, has been particularly vocal about the issue, and numerous lawmakers have taken an interest as well. Last month, a bipartisan group of nearly 100 House members, led by Mr. Higgins and Representative Kevin Hern, Republican of Oklahoma, wrote to Katherine Tai, the United States trade representative, urging her to seek a deal with Canada.But signs of diplomatic progress have been scarce, and Canadian lumber producers may soon face higher duties. The Commerce Department said last month that it tentatively planned to double the duties later this year, to 18.3 percent from 9 percent for most producers.The move was cheered by the American lumber industry, but it drew criticism from U.S. home builders along with the Canadian government and the country’s lumber industry. Chuck Fowke, a custom home builder in Florida and the chairman of the National Association of Home Builders, said the planned increase “shows the White House does not care about the plight of American home buyers and renters.”Commerce Secretary Gina Raimondo, who met with the home builders group last month, said afterward that she would seek to “identify targeted actions the government or industry can take to address supply chain constraints.”Finding a resolution to the trade dispute is unlikely to be a simple undertaking for the Biden administration. “There’s really nothing that the administration can do quickly,” said Scott Lincicome, a senior fellow at the libertarian Cato Institute, who criticized the lumber duties and the system that allows domestic industries to seek them.The United States and Canada have been at odds over lumber since the 1980s. The saga has gone on for so long that lumber disputes over the years are commonly referred to with Roman numerals, akin to the Super Bowl. The current dispute is called Lumber V; Lumber IV took place during the George W. Bush administration.The friction between the United States and Canada over softwood lumber stems in large part from the differences in how timber is harvested in the two countries. While most timberland in the United States is privately owned, most of Canada’s forestland is publicly owned, and companies pay fees set by provincial governments to harvest timber from their land.A lumberyard in Victoria, British Columbia. Canadian lumber producers may soon face higher duties. James MacDonald/BloombergA sawmill in Chemainus, British Columbia. The U.S. Commerce Department said it tentatively planned to double the duties this year to 18.3 percent for most Canadian producers.James MacDonald/BloombergAmerican lumber producers contend that the fees are artificially low and amount to an unfair government subsidy. The United States and Canada have reached a series of agreements over the years regarding lumber imports into the United States, but the most recent deal expired in 2015.“The core problem, and partly why you can never resolve this, comes down to structure,” said Eric Miller, a former Canadian official and the president of the Rideau Potomac Strategy Group, a consultancy.In 2016, toward the end of the Obama administration, the American lumber industry petitioned the government to impose duties on Canadian softwood lumber imports in response to what it contended were unfair trade practices. The proceedings continued under the Trump administration, which in 2017 imposed duties of 20.2 percent for most Canadian producers. The rate was lowered to 9 percent last year.The status of the long-running dispute took on a new urgency as the price of lumber soared over the past year. The National Association of Home Builders estimated in April that higher lumber costs had added nearly $36,000 to the price of an average newly constructed single-family home. A benchmark for the price of framing lumber set a record high of $1,515 per thousand board feet in May, four times the price at the beginning of 2020, before beginning to plummet. Last week, the price stood at $930, still more than double its level at the start of 2020, according to Fastmarkets Random Lengths, the trade publication that publishes the benchmark.“As an economist, it is very hard to understand why we’re taxing something we don’t produce enough of,” said Robert Dietz, the chief economist for the National Association of Home Builders.On the other side of the issue are U.S. lumber producers. The U.S. Lumber Coalition, an industry group, has argued that strong demand, not duties, is driving lumber prices and that the duties make up only a small portion of the total cost of lumber for new homes.The coalition credits the duties with strengthening the U.S. lumber industry, saying in a statement that American sawmills had expanded capacity in recent years, producing an additional 11 billion board feet of lumber since 2016. “More lumber being manufactured in America to meet domestic demand is a direct result of the trade enforcement, and the U.S. industry strongly urges the administration to continue this enforcement,” the coalition said.Dustin Jalbert, a senior economist at Fastmarkets, a price reporting firm, attributed the chaotic lumber market and high prices in large part to effects from the pandemic. At the start of the pandemic, he said, sawmills “assumed the worst” and curbed production, only for the housing market to rebound and for demand to soar.Mr. Jalbert said the duties stemming from the U.S.-Canada dispute were not a major reason for the high prices. “In terms of the short-term pricing situation, it’s lower down the list in terms of the factors that are driving the record prices that we’ve seen in the market,” he said.Mr. Dietz of the home builders association acknowledged in an interview last month that “you could suspend the lumber tariff and you’re still not going to cool off this market,” adding, “A lot of the driving forces are on the demand side.”The National Association of Home Builders, a trade group, estimated in April that higher lumber costs had added nearly $36,000 to the price of an average newly constructed single-family home.Wes Frazer for The New York TimesThe status of the long-running dispute took on a new urgency as the price of lumber soared over the past year.Wes Frazer for The New York TimesBut he argued that getting rid of the duties would still be a useful step. “This is not a moment where we need to be saying: ‘Well, that’s going to help, but it’s not going to solve the problem. Therefore, it’s not a solution,’” he said.Even if the lumber duties are playing only a modest role in the current market conditions, the issue has still grabbed the attention of lawmakers. Ms. Tai and Ms. Raimondo both faced questions about lumber during hearings on Capitol Hill this spring.“The home builders, the Realtors, everybody in my state is talking about the cost of lumber,” Senator John Thune of South Dakota, the No. 2 Senate Republican, told Ms. Tai last month.Ms. Tai seemed to fault Canada for the stalemate. “In order to have an agreement and in order to have a negotiation, you need to have a partner,” she told Mr. Thune. “And thus far, the Canadians have not expressed interest in engaging.”Adam Hodge, a spokesman for Ms. Tai, said the United States was “open to resolving our differences” with Canada over softwood lumber. But, he added, “That would require addressing Canadian policies that create an uneven playing field for the U.S. industry, and to date, Canada has been unwilling to adequately address these concerns.”A spokeswoman for Mary Ng, the Canadian international trade minister, offered a different take on the Canadians’ interest in engaging on the issue.“Minister Ng has raised the United States’ unfair and unwarranted duties on softwood lumber at every opportunity, including directly with the president, with Secretary Raimondo and with Ambassador Tai, and we welcome discussions,” the spokeswoman, Alice Hansen, said. Prime Minister Justin Trudeau also raised the matter with Mr. Biden on the sidelines of the Group of 7 summit in Britain this month, Ms. Hansen said.At a recent parliamentary hearing, Ms. Ng described the duties as “a tax on the American people” that makes housing more expensive for them.“We do believe that a negotiated settlement would be in the best interest of both countries,” she said. “But in the meantime, we must defend against these unwarranted tariffs, which we will continue to do.” More

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    The Federal Reserve chair says the United States needs ‘more inclusive prosperity.’

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    Jerome H. Powell, the Federal Reserve chair, said on Tuesday that the central bank was focused on returning the economy to full strength, and he emphasized that the Fed would be more ambitious and expansive in its understanding of what that meant.Speaking before House lawmakers on Tuesday afternoon, Mr. Powell emphasized that the Fed was looking at maximum employment as a “broad and inclusive goal” — a standard it set out when it revamped its policy framework last year. That, he said, means the Fed will look at employment outcomes for different gender and ethnic groups.“There’s a growing realization, really across the political spectrum, that we need to achieve more inclusive prosperity,” Mr. Powell said in response to a question, citing lagging economic mobility in the United States. “These things hold us back as an economy and as a country.”The Fed cannot solve issues of economic inequality itself, he said. Congress would need to play a role in establishing “a much broader set of policies.”But Mr. Powell’s explanation of full employment came as many lawmakers wanted to talk about the second of the central bank’s two goals: stable inflation. The Fed chair was quizzed repeatedly about the recent pickup in price gains, with Republicans warning that the trend could become dangerously entrenched — even quoting statistics about recent jumps in bacon and used-car prices — as Democrats warned that the central bank should not be quick to react to the price pressures.“There’s sort of a perfect storm of very strong demand and weak supply due to the reopening of the economy,” Mr. Powell said, adding that much or all of the recent overshoot in inflation came from short-term bottlenecks. “They don’t speak to a broadly tight economy.”Mr. Powell added that price jumps have been bigger than expected and that the Fed was monitoring them closely, but he said they were still expected to wane over time. He also acknowledged that economic data was uncertain now, given quirks in supply and demand as businesses reopen.“We have to be very humble about our ability to really try to draw a signal out of it,” Mr. Powell said.He said he had “a level of confidence” that strong price gains would be temporary but was not certain when bottlenecks would clear up. Nevertheless, the goods and services categories where costs are picking up quickly, like restaurants and travel, are clearly tied to the pandemic.“It should not leave much of a mark on the ongoing inflation process,” he said. More

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    The Fed Meets as Economic Data Offers Surprises and Mixed Signals

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    The central bank will release its policy statement on Wednesday, followed by a news conference with Chair Jerome H. Powell.Investors will scour the Federal Reserve’s policy statement and economic projections Wednesday for any hint that recent data surprises — including faster-than-expected inflation and slower job growth — have shaken up the central bank’s plans for its cheap-money policies.Economic policymakers are unlikely to make major changes at a time when interest rates are expected to stay near zero for years to come, but a series of tiny adjustments to their policy messaging and new economic projections could combine to make this week’s meeting one to watch, and an important moment for markets.The central bank will release new economic forecasts from its 18 officials for the first time since March, when the Fed projected no rate increase until at least 2024. Policymakers could pencil in an earlier move, pulling the initial rate rise forward to 2023.Markets will also watch for even the subtlest hint at what lies ahead for the Fed’s $120 billion in monthly bond purchases, which have kept many kinds of borrowing cheap and pushed up prices for stocks and other assets. Several Fed officials have said they would like to soon discuss plans for slowing their bond buying, though economists expect it will be months before they send investors any clear signal about when the “taper” will start.The Fed is scheduled to release the policy announcement from its two-day meeting at 2 p.m., followed by a news conference with Chair Jerome H. Powell.The central bank may want to use the meeting and Mr. Powell’s remarks to “start getting us ready, otherwise, we’re going to be in complete denial until we realize — ‘Ouch, the Fed is stepping away,’” said Priya Misra, head of global rates strategy at T.D. Securities. The point may be to say “they are not running for the exits, but they are at least planning the escape route.”As it charts a path forward for policy, the Fed will have to weigh signs of economic resurgence — rapid price gains as demand jumps back faster than supply, as well as plentiful job openings — against the reality that millions of people have yet to return to work. The shortfall probably owes to a cocktail of factors, as older workers retire, would-be immigrants remain in their home countries, and virus fears, child-care issues and expanded government benefits combine to keep potential employees at home.Many workers may simply need time to shuffle into new and suitable jobs, and the Fed is likely to signal that it plans to continue providing policy support as they do that. Here’s what else to watch for.The Fed is working with higher inflation.The Fed is aiming for inflation that runs “moderately above 2 percent for some time” so that it eventually averages 2 percent. Its policy statement has long noted that price gains have run “persistently below this longer-run goal.” After several months of above-2 percent inflation numbers, it may be time to update that language to reflect recent price spikes.The Fed’s preferred inflation gauge jumped 3.6 percent in April from a year earlier, and the more up-to-date and closely related Consumer Price Index inflation measure popped by 5 percent in May.But the Fed — like many financial economists — expects that pop to prove temporary. The 5 percent increase in C.P.I. happened partly because prices fell during last year’s intense lockdowns, making current year-over-year comparisons look artificially elevated. Without that so-called base effect, the increase would have been in the neighborhood of 3.4 percent.Prices are definitely up, but will it last?The Consumer Price Index slumped early in the pandemic, but now it’s up relative to its pre-pandemic trend growth.

    Data reflect the Consumer Price Index for all urban consumers, indexed so that 1982-1984=100.Source: Bureau of Labor Statistics, New York Times calculationsBy The New York TimesThat is still obviously on the high side. The rest of the surge came as wages increased and demand bounced back faster than global supply chains, fueling shortages in computer chips and causing shipping snarls. While base effects should fade quickly, it is unclear how rapidly supply bottlenecks will be sorted out. The semiconductor issue may clear up over the coming months, for instance, but some importers have estimated that a shipping container shortage could last at least into next year, potentially lifting prices for some products.Compounding that uncertainty, the jump in inflation came faster than officials had expected. If the Fed’s preferred inflation index stood completely still at its April level, inflation would grow by 2 percent this year. Instead, prices have continued to grind higher and are most likely already on track to exceed the Fed’s 2.4 percent forecast for 2021. That means officials are going to have to revise their estimates upward when they release new economic projections. The big questions are by how much and whether the revisions bleed into next year.Mr. Powell is likely to maintain that the recent surge is temporary, yet he will probably have to address the risk that inflation expectations and wages will rise more briskly, locking in the faster price gains. He has previously said that is a possibility, but an unlikely outcome.“He may be a little less strident than he was at the April press conference,” said Michael Feroli, chief U.S. economist at J.P. Morgan.Policy plans may take some tweaking.Economists at Goldman Sachs don’t expect the Fed to begin hinting that it is planning to slow its bond purchases until August or September, with a formal announcement in December, and an actual start to tapering at the beginning of next year.Even then, it’s going to take a long time for the Fed to really unwind its policy support. The Fed has suggested it will first signal that it is thinking of slowing bond purchases, then actually taper, and only then lift rates. Strategists at Goldman estimate that “even if the labor market recovery accelerates rapidly from here,” the first rate increase would probably still be “at least” 15 months away.Mr. Powell could say or suggest that the policy-setting Federal Open Market Committee is taking the first baby step toward that process — what has been called “talking about talking about tapering” — during his news conference.The Fed balance sheet has exploded The central bank is buying $120 billion in government-backed bonds each month, keeping its balance sheet steadily expanding.

    Source: Federal Reserve, accessed via FREDBy The New York TimesOfficials could also begin to pencil in a timetable for rate increases. The Fed’s so-called dot plot of interest rate projections showed no interest rate increases through 2023, the last year in the forecast, as of March. Many economists expect it to show one rate increase in 2023 after revisions.Labor is lagging.But the Fed’s outlook is likely to remain patient — signaling years of low rates ahead — because the job market has a lot of room left to recover. About seven million fewer people reported being employed in May than in February 2020.While recent job gains have been robust by normal standards, they’ve been slow compared with the hole that remains in the labor market. After climbing by a solid 785,000 jobs in March, hiring has slowed to a more subdued 418,500 jobs on average over the past two months.The Fed has two goals — stable inflation and maximum employment — and the recent hiring slowdown means the second target could take a little bit longer to achieve.“Bottom line, I would like to see further progress than where we are right now,” Loretta Mester, president of the Federal Reserve Bank of Cleveland, said on CNBC shortly after the May jobs report was released. “We want to be very deliberately patient here, because this was a huge, huge shock to the economy.”That’s why economists are looking out for tweaks this week — but no major shift away from the Fed’s supportive stance. More

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    Here Are The 5 Ways to Track the United States' Economic Recovery

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    The ebbing of the pandemic has brought price increases, supply bottlenecks and labor shortages. Key indicators will show whether it’s just a stage.This is a strange moment for the U.S. economy.Unemployment is still high, but companies are complaining they can’t find enough workers. Prices are shooting up for some goods and services, but not for others. Supply-chain bottlenecks are making it hard for homebuilders, automakers and other manufacturers to get the materials they need to ramp up production. A variety of indicators that normally move more or less together are right now telling vastly different stories about the state of the economy.Most forecasters, including policymakers at the Federal Reserve, expect the confusion to be short-lived. They see what amounts to a temporary mismatch between supply and demand, brought on by the relatively swift ebbing of the pandemic: Consumers, flush with stimulus cash and ready to re-engage with the world after a year of lockdowns, are eager to spend, but some businesses lack the staff and supplies they need to serve them. Once companies have had a chance to bring on workers and restock shelves — and people have begun to catch up on long-delayed hair appointments and family vacations — economic data should begin to return to normal.But no one knows for sure. It is possible that the pandemic changed the economy in ways that aren’t yet fully understood, or that short-term disruptions could have long-lasting ripple effects. Some prominent economists are publicly fretting that today’s price increases could set the stage for faster inflation down the road. Historical analogues such as the postwar boom of the 1950s or the “stagflation” era of the 1970s provide at best limited insight into the present moment.“We can’t dismiss anything at this point because there’s no precedent for any of this,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, a forecasting firm.On Friday, the Labor Department will release its monthly snapshot of the U.S. labor market. Last month’s report showed much slower job growth than expected, and economists will be watching closely to see whether that disappointment was a fluke. But don’t expect definitive answers. A second month of weak job growth could be a sign of a faltering recovery, or merely an indication that the temporary factors will take more than a couple of months to resolve. A strong report, on the other hand, could signal that talk of a labor shortage was overblown — or that employers have overcome it by bidding up wages, which could fuel inflation.To get a clearer picture, economists will have to look beyond their usual suite of indicators. Here are some things they will be watching.1. PricesChange in consumer prices from a year earlier

    Source: Federal Reserve Bank of San FranciscoBy The New York TimesConsumer prices rose 4.2 percent in April from a year earlier, the biggest jump in more than a decade. But the largest increases were mostly in categories where demand is rebounding after collapsing during the pandemic, like travel and restaurants, or in products plagued by supply-chain disruptions, like new cars. Those pressures should ease in the coming months.What would be more concerning to economists is any sign that price increases are spreading to the rest of the economy. Researchers at the Federal Reserve Bank of San Francisco studied sales patterns from early last year to categorize products and services based on the pandemic’s impact. Their Covid-insensitive inflation index so far shows little sign of runaway inflation beyond pandemic-affected areas.Economists will also be watching other, less pandemic-specific measures that likewise aim to discern the signal of inflation amid the noise of short-term disruptions. The Federal Reserve Bank of Cleveland’s trimmed-mean C.P.I., for example, takes the Labor Department’s well-known Consumer Price Index and strips away its most volatile components.“What we’re looking for is what does underlying inflation look like,” said Ellen Zentner, chief U.S. economist at Morgan Stanley.For those looking for a simpler measure, Ms. Zentner offers a shortcut: Just look at rents. The rental component of C.P.I. (as well as the “owner’s equivalent rent” category, which measures housing costs for homeowners) is the largest single item in the overall price index, and should be less affected by the pandemic than some other categories. If rents start to rise rapidly beyond a few hot markets, overall inflation could follow.2. Inflation ExpectationsConsumer inflation expectations in the short and long term

    Source: University of MichiganBy The New York TimesOne reason economists are so focused on inflation is that it can become a self-fulfilling prophecy: If workers think prices will keep rising, they will demand raises, which will force their employers to raise prices, and so on. As a result, forecasters pay attention not just to actual prices but also to people’s expectations.In the short run, consumers’ inflation expectations are heavily affected by the prices of items purchased frequently. Gasoline prices weigh particularly heavily on consumers’ minds — not only do most Americans have to fill up regularly, but the price of gas is displayed in two-foot-tall numbers at stations across the country. Economists therefore tend to pay more attention to consumers’ longer-run expectations, such as the five-year inflation expectations index from the University of Michigan, which recently hit a seven-year high.Forecasters also pay close attention to the expectations of businesses, investors and other forecasters. Many economists pay particular attention to market-based measures of inflation expectations, because investors have money riding on the outcome. (One such measure, derived from the bond market, is the five-year, five-year forward rate, which forecasts inflation over a five-year period beginning five years in the future.) The Federal Reserve has recently begun publishing a quarterly index of common inflation expectations, which pulls together a variety of measures. It showed that inflation expectations rose in the first quarter of this year, but remain low by historical standards.3. Labor SupplyUnemployed workers per job opening

    Source: Bureau of Labor StatisticsBy The New York TimesRestaurants, hotels and other employers across the country in recent months have complained that they cannot find enough workers, despite an unemployment rate that remains higher than before the pandemic. There is evidence to back them up: Job openings have surged to record levels, but hiring hasn’t kept up. Millions of people who had jobs before the pandemic aren’t even looking for work.Many Republicans say enhanced unemployment benefits are encouraging workers to stay on the sidelines. Democrats mostly blame other factors, such as a lack of child care and health concerns tied to the pandemic itself. Either way, those factors should dissipate as enhanced unemployment benefits end, schools reopen and coronavirus cases fall.But not all workers may come rushing back as the pandemic recedes. Some older workers have probably retired. Other families may have discovered they can get by on one income or on fewer hours. That could allow labor shortages to persist longer than economists expect.The simplest way to track the supply of available workers is the labor force participation rate, which reflects the share of adults either working or actively looking for work. Right now it shows plenty of workers available, although the Labor Department doesn’t provide breakdowns for specific industries.Another approach is to look at the ratio of unemployed workers to job openings, which provides a rough measure of how easy it is for businesses to hire (or, conversely, how hard it is for workers to find jobs). Data from the Labor Department’s Job Openings and Labor Turnover Survey comes out a month after the main employment report, but the career site Indeed releases weekly data on job openings that closely tracks the official figures.Both those approaches have a flaw, however: People who want jobs but aren’t looking for work — whether because they don’t believe jobs are available or because child care or similar responsibilities are keeping them at home temporarily — don’t count as unemployed. Constance L. Hunter, chief economist for the accounting firm KPMG, suggests a way around that problem: the number of involuntary part-time workers. If companies are struggling to find enough workers, they should be offering more hours to anyone who wants them, which should reduce the number of people working part time because they can’t find full-time work.“The data is not necessarily going to be as informative as it would be in a normal recovery,” Ms. Hunter said. “I would not normally tell you coming out of a recession that I’m going to be closely watching involuntary part-time workers as a key indicator, but here we are.”4. WagesPrivate-sector wages and salaries, change from a year earlier

    Source: Bureau of Labor StatisticsBy The New York TimesWage growth remained relatively strong during the pandemic, at least compared with past recessions, when low-wage workers, in particular, lost ground. Many businesses that stayed open during last year’s lockdowns had to raise pay or offer bonuses to retain workers. Now, as the pandemic eases, companies are raising pay again to attract workers.The question is whether the recent wage gains represent a blip or a longer-term shift in the balance of power between employers and employees. Figuring that out will be difficult because the United States lacks a reliable, timely measure of wage growth.The Labor Department releases data on average hourly earnings as part of its monthly jobs report. But those figures have been skewed during the pandemic by the huge flows of workers into and out of the work force, rendering the data nearly useless. Economists are still watching industry-specific data, which should be less distorted. In particular, average hourly earnings for nonsupervisory leisure and hospitality workers should reflect what is happening among low-wage workers.A better bet might be to wait for data from the Employment Cost Index, which is released quarterly. That measure, also from the Labor Department, tries to account for shifts in hiring patterns, so that a rush of hiring in low-wage sectors, for example, doesn’t show up as a decline in average pay. It showed a mild uptick in wage growth in the first quarter, but economists will be paying close attention to the next release, in July.5. Everything ElseThe indicators mentioned above are hardly a comprehensive list. The Producer Price Index provides data on input prices, which often (but not always) flow through to consumer prices. Data on inventories and international trade from the Census Bureau can help track supply-chain bottlenecks. Unit labor costs will show whether increased productivity is helping to offset higher pay. Economists will be watching them all.“During normal times, you can just track a handful of indicators to know how the economy is doing,” said Tara Sinclair, an economist at George Washington University who specializes in economic forecasting. “When big shifts are going on, you’re tracking literally hundreds of indicators.” More

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    Bitcoin Prices Stabilize After Volatile Weekend

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    Over the weekend, the price of Bitcoin briefly fell to around $31,000, more than 50 percent down from its high last month. It has recovered somewhat and is currently trading at around $37,000.“About $20 billion of long positions were liquidated last week,” Sam Bankman-Fried, the chief executive of the crypto derivatives exchange FTX, told the DealBook newsletter. “In terms of price movements: the biggest part of it is liquidations,” he said, suggesting the worst is over.But he also noted news from China late Friday of a crackdown on Bitcoin mining and trading. This added to other news of official scrutiny that has spooked crypto investors in recent days, from Hong Kong, Canada and the United States.

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    Bitcoin price
    As of 8:20 a.m. Eastern on May 24. Shaded area shows daily trading range.CoinDeskBy The New York TimesCompanies with Bitcoin on their balance sheets may be getting nervous. For accounting purposes, cryptocurrency is valued at its purchase price in company accounts. If it goes up in value, this isn’t reflected in a company’s accounts but if it falls, the value is impaired and puts a dent in quarterly profits. Three big corporate investors in Bitcoin are Tesla, MicroStrategy and Square. Here’s where they stand:Tesla: The electric vehicle company bought $1.5 billion in Bitcoin last quarter, at an average price of about $34,700 per coin, not far from its current price. Tesla’s chief executive, Elon Musk, has signaled that the company isn’t selling, but it probably isn’t buying, either.MicroStrategy: The business intelligence software company has spent about $2.2 billion on Bitcoin, at an average price of $24,450. The company bought more last week and is still sitting on big gains.Square: The payments company, led by the Twitter chief Jack Dorsey, bought two batches of Bitcoin for its treasury — $50 million in October at a price of about $10,600 per coin and $170 million in February at a price of around $51,000. It took a $20 million impairment on its holdings last quarter. It doesn’t plan to buy any more, its finance chief said this month. More

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    Existing-Home Sales Declined in April, With a Tight Supply and Record Prices.

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    Soaring prices and a shortage of available homes are starting to hold back the blazing U.S. housing market.Sales of existing homes fell 2.7 percent in April, the National Association of Realtors said Friday. It was the third straight monthly decline after a surge in transactions earlier in the pandemic.Mortgage rates have crept up since the start of the year, which has likely put a crimp in demand. But the main force holding back sales isn’t a lack of willing buyers. It is a lack of homes for them to buy — especially at prices they can afford.The median sales price of an existing home was $341,600 in April, up 19.1 percent from a year earlier. Both the price and the increase were record highs. The number of homes on the market rose in April but was down 20.5 percent from a year ago and remained close to a record low.As a result, competition for homes can be intense. The Realtors said that 88 percent of homes sold in April were on the market for less than a month. A quarter of buyers paid cash. At Redfin, the online brokerage, half of all homes sold in recent weeks have gone for more than their asking price, up from about a quarter a year ago.“Even if demand comes down, supply is the issue, and until we see more homes come on the market, that’s going to limit sales,” said Glenn Kelman, Redfin’s chief executive. “When you meet a new buyer you almost say, ‘Good luck.’”The increase in remote work during the pandemic has led to an increase in demand for homes, particularly outside of city centers. That demand has remained as the economy has begun to reopen, even as millions of millennials are reaching the age when Americans have historically looked to buy homes. But the combination of high prices and limited inventories is making it especially hard for young people to get into the housing market.“First-time buyers in particular are having trouble securing that first home for a multitude of reasons, including not enough affordable properties, competition with cash buyers and properties leaving the market at such a rapid pace,” Lawrence Yun, chief economist for the National Association of Realtors, said in a statement. More

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    Is It Time to Panic About Inflation? Ask These 5 Questions First.

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    Focus on exactly how and why prices are changing over time, and how these shifts might affect you.A price list at a bakery in 2017. Some price increases are more worrisome than others.Vincent Tullo for The New York TimesTo understand why inflation is so worrying to so many people, you could look at price charts for lumber or used cars or New York strip steaks. There is no doubt that the prices of many of the things people buy are rising at an uncomfortably rapid rate.But to really understand why there is a persistent longer-term buzz of inflation concern, you have to wrestle with the ways in which money itself is fundamentally ephemeral.Ultimately, most money is a mere electronic entry in the ledger of a bank. It is worth only what it will buy, and what it will buy changes all the time. Or as the humor publication The Onion once wrote, money is “just a symbolic, mutually shared illusion.”When prices move abruptly — as when an economy that has been partly shut down for more than a year tries to reboot — that inherent uncertainty becomes all too real. When wild swings like these can happen, what else might be possible?But inflation isn’t so scary if you focus on the precise mechanics by which the value of a dollar changes over time — and how it might affect you. In an inflation-scare moment like this one, you can boil that down to five essential questions:Is this a change in relative prices, or a change in overall prices? Are the prices of items becoming more expensive likely to rise further, stay the same, or go down? Are wages also rising? Is inflation so high and erratic that it is hard to plan ahead? And is this really inflation at all, or is it a shift in the price of investments like stocks and bonds?Let’s take these questions in turn, and look at what aspects of the current price surge look more benign, and which are worrying. Relative prices vs. overall pricesAt any given moment, some things are becoming more expensive and others are getting cheaper. That is how a market economy works; prices are what ensure that supply and demand eventually meet.Sometimes, this happens quickly. Airlines constantly adjust ticket prices; the prices of fresh vegetables bounce around depending on whether they are plentiful or scarce. Other times it happens more gradually. A hair salon may not raise prices the first day there is a line of customers out the door, but it will do so if it is consistently overbooked.Those shifts can be annoying — nobody wants to pay $1,000 for a short-haul plane ticket or see the price for a haircut double. But they are a healthy part of an economy working as it should.Typically, these relative price changes are not a problem of macroeconomics — something best solved by the Federal Reserve (by raising interest rates) or Congress (by raising taxes) — but a problem of the microeconomics of those industries.The core challenge of an economy emerging from a pandemic is that numerous industries are going through major shocks in demand and supply simultaneously. That means more big swings in relative price than usual.Last year, relative price changes cut in both directions (prices for energy and travel-related services fell, while prices for meat and other groceries rose). But this spring, the overwhelming thrust is toward higher prices. There are fewer goods and services with falling prices to offset the rises.Still, many of the most vivid and economically significant examples of price inflation so far, like for used cars, have unique industry dynamics at play, and therefore represent relative price changes, not economywide price rises. One important thing to watch is whether that changes — whether we start seeing uncomfortably high price increases more dispersed across the full range of goods and services.That would be a sign that we were in a period not simply of an economy adjusting itself, but one of too much money chasing too little stuff.One-off prices vs. long-term trendsNot all price changes have equal meaning for inflation. Much depends on what happens next.If the price of something rises but then is expected to fall back to normal, it will act as a drag on inflation in the future. This often happens when there is a shortage of something caused by an unusual shock, like weather that ruins a crop. In an opposite example, in 2017 a price war brought down the price of mobile phone service, pulling down inflation. But when the price war was over, the downward pull ended.On the other hand, a price that is expected to rise at exceptional rates year after year has considerably greater implications. Consider, for example, the multi-decade phenomenon in which health care prices rose faster than prices for most other goods, creating a persistent upward push on inflation.So an essential question for 2021 is in which bucket the inflationary forces now unleashed should be put.One piece of good news if you’re worried about an inflationary spiral: Futures prices for major commodities — including, oil, copper and corn — all point to falling prices in the years ahead.But then there are the labor-intensive service industries, those with no choice but to raise prices if workers are able to consistently demand higher pay. They bring us to a different essential question.Wage inflation vs. price inflationMedia coverage of inflation typically focuses on indexes that cover consumer prices: numbers that aim to capture what it costs to go to the grocery store, buy a car and obtain all the other things a person wants and needs.But more properly defined, inflation is about the full set of prices in the economy — including what people are paid for their labor. Whether there is wage inflation goes a long way to determining how people feel about the economy.Even relatively high price inflation is bearable if wages are rising faster. From 1995 to 2000, inflation averaged 2.6 percent a year. But the average hourly earnings of nonmanagerial workers were rising 3.7 percent a year, so it should be no surprise that workers felt good about the state of the economy.It is too soon to show up clearly in the data, but there are anecdotes aplenty that companies are rapidly increasing pay. Just this week, Bank of America said it would start a $25-per-hour minimum wage by 2025, up from $20, and major chains like McDonald’s, Starbucks and Chipotle have announced significant moves toward higher pay in recent weeks.For individuals who benefit from bigger paychecks, that will take the sting out of higher prices for goods. Some may end up better off financially than they had been in lower-inflation environments.Wages play an essential role in the linkage between higher prices and continuing inflation. In the 1970s, workers demanded­ — and received — higher pay. Then companies raised prices, which fueled further demands for pay raises.To experience a wage-price spiral like that, both parts of the equation need to come into play. That means it’s worth watching for evidence of whether pay raises are a one-time adjustment to an unusual job market, or the beginning of a shift in power toward workers after years of meager gains.Steady inflation vs. erratic inflationMany people take it for granted that high inflation is a bad thing.But in truth, it’s not obvious why a country couldn’t comfortably have prices rise significantly faster than they have in the United States in recent decades. Imagine a world where consumer prices rose 5 percent every year; workers’ wages rose 5 percent, plus a little more to account for rising productivity; and interest rates were consistently higher than Americans are accustomed to.In theory, the only problem would be what economists call “menu” costs, the inconvenience of companies having to revise their price lists frequently. (In a way, the pandemic shift away from physical menus in restaurants might even make that concern moot.)In practice, though, not many countries have managed to have higher inflation like that arrive steadily year after year. And there can be big negative consequences when inflation is erratic, swinging from 2 percent one year to 10 percent the next and so on.When inflation is erratic, it creates economic upheaval, essentially offering a windfall to either creditors (in the event of a surprise fall in inflation) or debtors (with rising prices).Over time, lenders would demand higher interest as compensation — an inflation risk premium. And that means that an economy with high and volatile inflation may get less investment, and hence less economic growth.So far, there is not much sign of that happening in the United States. Bond investors appear confident that whatever inflation takes place in the next year or two is a one-off event, not a new normal in which the value of a dollar is unpredictable.But keep an eye on markets for any evidence that is changing.Price inflation vs. asset inflationEven when consumer price inflation is low, some financial commentators may point to a worrying surge in asset inflation, meaning rising prices of stocks, bonds and other investments.Economists generally don’t think of asset price swings as a form of inflation at all. If stock prices rise, it may change the future returns on your savings, but it doesn’t change what a dollar can buy in terms of the goods and services you need to live.But semantics aside, it certainly seems apparent that millions of people have been plowing money into meme stocks and cryptocurrencies (as well as more traditional investments) that might otherwise have gone to bid up the price of home grilling equipment or other things in short supply.And while there is plenty to worry about in terms of bubbly signs in financial markets — and what it would mean if they corrected downward, as major cryptocurrencies did on Wednesday — that doesn’t mean they are making ordinary consumers worse off. You can’t eat Bitcoin; you can’t clothe yourself in shares of GameStop.Sometimes asset prices rise while consumer prices stand still, as in much of the 2010s. Sometimes consumer prices soar while financial assets languish, as in much of the 1970s. Other times, they move together.The implication: High asset prices and rising price inflation aren’t the same thing. Whether with asset prices or other aspects of inflation, being precise and detailed is a way to make the essential ephemerality of money a little more concrete. More