Memo To The Fed: Please Stop Helping
A topic around some articles and comments recently. I posted this Thursday: “Since 2000, Alexandria has lost 90 percent of its affordable housing. There are now fewer than 2,000 affordable apartments.”
“According to new research by Harvard University, almost 40 million Americans cannot afford to pay for housing. Since most of the new units being built are at the high end, “the number of modestly priced units available for under $800 declined by 261,000 between 2005 and 2015, while the number renting for $2,000 or more jumped by 1.5 million.”
‘NBC News sums up the findings this way: “Over 38 million American households can’t afford their housing, an increase of 146 percent in the past 16 years.”
One replied, “Totally amazing numbers. Yet all of us hoping for an end to the madness (ie a recession) are the monsters. Total job losses due to 2001 + 2008 recessions: 2.2 million + 8.8 million = 11 million.”
“Total impoverished thanks to the boom (that 146% increase in people who can’t afford housing since 2000): 22 million.”
Yesterday a reader posted this, “JULY 13, 2017. U.S. Fed buys $5.7 billion of mortgage bonds, sells none”
“The Federal Reserve bought $5.656 billion of agency mortgage-backed securities in the week from Jul. 6 to Jul. 12, compared with $3.683 billion purchased the previous week, the New York Federal Reserve Bank said on Thursday.”
“In a move to help the housing market begun in October 2011, the U.S. central bank has been using funds from principal payments on the agency debt and agency mortgage-backed securities, or MBS, it holds to reinvest in agency MBS.”
“The New York Fed said on its website the Fed sold no mortgage securities guaranteed by Fannie Mae, Freddie Mac or the Government National Mortgage Association, or Ginnie Mae, in the latest week. It sold none the prior week.”
Another reader replied with some quotes from this article, my post and a comment. “In a move to help the housing market begun in October 2011…”
“Five years ago, you could snatch up a median-priced condo in Orange and Los Angeles counties for about $280,000, 76 percent less than today’s prices.”
‘Mission f%^#ing accomplished. Memo to the Fed: please stop helping.’
I’ll add this from yesterdays post:
‘For 62 straight months, Southern California home prices have gone in one direction. Up.’
Little-known fact: The perceived housing shortage in California is a direct result of government intervention in the market.
1) The Fed’s Bubble reflation efforts led to investors of all stripes piling in to snap up any and all available inventory at affordable prices, in order to capture the financially-engineered wealth effects in perpetuity. This impacts the market behavior of San Diego homeowners, including several I know personally. The typical case when someone either moves up or moves away is to turn the formerly owner-occupied home into a rental property, as the SoCal housing religion guarantees that the more homes you own, the more money you will make. Of course all these rental and investment properties of convenience never show up on the MLS.
2) By locking in low tax rates until when a home is sold, Proposition 13 provides a strong incentive to never sell.
And the corrupt Cali govt pukes want to tax the poor and give even more subsidies to a billionaire:
http://wolfstreet.com/2017/07/16/california-bail-out-tesla-ab1184-ev-incentives/
You know, I wouldnt be surprised if they dont start incorporating the question “Do you live in California or Illinois?” into IQ tests. I take 10 right off the top from the average for a persons race when I find that out.
No matter whether one is for or against it, Prop. 13 is the architect of California’s ridiculous house prices.
It could also be that CA is a “walk-away” state.
Sure, it doesn’t help….but no-build NIMBYism matters a lot, too.
Although get your popcorn ready if what I suspect will happen occurs: the vaunted SFBA economy takes a dive just as a whole lot of new housing comes online (see San Francisco, also Fremont — building a bunch of huge new developments near Warm Springs BART).
3) CEQA, which allows frivolous lawsuits to slow/stop development (even those developments that follow all the CEQA rules). This makes it more costly to obtain approvals and build, but also discourages many developers from even trying to go through the process.
Some pesky facts:
CA has among the fewest homes per capita in the country (if not THE fewest homes per capita), among the most significant overcrowding problems (if not THE worst overcrowding problem), AND low vacancy rates.
Your government interventions have no impact on housing development (creation of supply), or impede people’s ability to occupy the homes that do exist.
If there was no housing shortage, regardless of your points above, CA should have more homes per capita (there is plenty of land), there shouldn’t be an overcrowding problem, and vacancy rates should not be so low.
It is quite possible (I believe almost certain) that the “perceived” housing shortage is, in fact, real.
Bigger and bigger government with more and more regulations and higher and higher taxes destroyed:
Affordable health care
Affordable housing
Affordable higher education
But yet a significant percentage of Americans want even bigger and bigger government with even more and more regulations and even higher and higher taxes…
The Federal Reserve isn’t owned by the government. It’s owned by banks. It earns a profit, it isn’t publicly audited. We don’t really even know what it does.
https://www.sanders.senate.gov/newsroom/press-releases/the-fed-audit
The Fed Audit
Thursday, July 21, 2011
The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. “As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world,” said Sanders. “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”
Among the investigation’s key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. “No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president,” Sanders said.
The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse. In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.
For example, the CEO of JP Morgan Chase served on the New York Fed’s board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. Moreover, JP Morgan Chase served as one of the clearing banks for the Fed’s emergency lending programs.
In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds. One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.
To Sanders, the conclusion is simple. “No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed’s board of directors or be employed by the Fed,” he said.
The investigation also revealed that the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans.
The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo. The same firms also received trillions of dollars in Fed loans at near-zero interest rates. Altogether some two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of AIG.
A more detailed GAO investigation into potential conflicts of interest at the Fed is due on Oct. 18, but Sanders said one thing already is abundantly clear. “The Federal Reserve must be reformed to serve the needs of working families, not just CEOs on Wall Street.”
How did a privately-owned organization gain the monopoly rights to issue U.S. fiat currency and control its disposition?
‘the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans’
Follow the money…
“How did a privately-owned organization gain the monopoly rights to issue U.S. fiat currency and control its disposition?”
It was something that was gifted by totally dumbed-down American voters.
You are a debt-slave: The rigged monetary system explained (a 13 minute video)
https://www.youtube.com/watch?v=KoiUTuMAJIQ
It’s interesting to study the institutions that were precursors to the Fed and what became of them. The First and Second Banks of the United States were both initially chartered for twenty years; both charters expired in ignominy due to insurmountable public outrage.
The Fed has lived more than twice as long as both institutions put together. But the fact that Americans have dismantled similar institutions for reasons similar to our objections to the Fed today is encouraging - people are capable of recognizing these dangers and organizing against them, and have historically been successful.
Or, for the glass half empty crowd, you could look at it another way: it’s an idea that just keeps coming back again and again!
–
The Second (1816-1836), in particular, sounds familiar:
“A private corporation with public duties, the bank handled all fiscal transactions for the U.S. Government, and was accountable to Congress and the U.S. Treasury. Four thousand private investors held 80% of the bank’s capital… The bulk of the stocks were held by a few hundred wealthy Americans. In its time, the institution was the largest monied corporation in the world.”
The First failed when:
“…arguments against the Bank were too strong. Foreign ownership, constitutional questions (the Supreme Court had yet to address the issue), and a general suspicion of banking led the failure of the Bank’s charter to be renewed by Congress.”
The Second failed when:
“Anti-Bank Jacksonian Democrats were mobilized in opposition to the national bank’s re-authorization on the grounds that the institution conferred economic privileges on financial elites, violating U.S. constitutional principles of social equality.
And:
“…that it had failed to produce a stable national currency, and that it lacked constitutional legitimacy. Jackson… privately characterized the bank as a corrupt institution, dangerous to American liberties.”
https://en.m.wikipedia.org/wiki/Bank_War
Bernie Sanders and his jokes …
“The Federal Reserve must be reformed to serve the needs of working families, not just CEOs on Wall Street.”
And how did he reform?
And what does the pocahontas have to say about the fed? Cricket I presume.
“Get to work Mr Chairman.” This is the only viable option….and they all know it.
Dems and Regressives may whine about growing income/wealth inequality and all that, but they have supported policies that has nothing but done the opposite. Suckers and their followers. Sad sad sad people.
And how did he reform?
There’s not a lot that he can beyond talking. We need to make him president. Then he can reform.
“… may whine about growing income/wealth inequality…”
They know what side of their bread is buttered and where it comes from. Congress (and other elected officials) serves the .01%. To paraphrase George Carlin, “it’s an exclusive club, and you ain’t in it.”
We need to make him president. Then he can reform.
He would also need a cooperative congress and supreme court.
We need to make him president. Then he can reform.
Like Obama?
Obama was too timid to challenge business.
He would also need a cooperative congress and supreme court.
That’s a good point. Keep it in mind next November.
“Obama was too timid to challenge business.”
No, Obama was a liar, subservient to bankers, and wholly devoted to the “no banker left behind” cause which ensured him a lavish lifestyle of opulence for the rest of his life.
It’s no coincidence that Jamie Dimon and Lloyd Blankfein were regulars at the White House, logging more visits than almost anybody else.
Fauxahontus Warren and Bernie Sanders both blocked efforts to audit the Fed.
Watch the magician’s hands, not the helper’s bosom.
How did we get here?
All current members of the Federal Board of Governors were appointed by obama and the democrats.
If Hillary had won - four more years of the same.
“…because of record low interest rates from the Fed, the country’s economy is in a big, fat, ugly bubble, with debt increasing while the only thing that looks good is the stock market.”
– DJT
Maybe something might change.
“It is so important to audit The Federal Reserve.”
—Feb. 22, 2016, DJT tweet
“Give to my foundation or lose access…”
- HRC
Now I get it: It’s Obama.
You get nothing.
Hint: obama was a symptom, not the cause.
“You get nothing.”
Thanks for mansplainin it all so cogently.
Try to fit this square peg into your round partisan politics hole:
April 17, 2017 - 10:00 AM EDT
Unsurprisingly, Trump has done complete 180 on Fed chair Yellen
By Douglas Rediker, opinion contributor
President Trump’s interview with The Wall Street Journal played out along a week-long spectrum of policy shifts that prompted an unprecedented use of the word “whiplash” in the Washington pundit class.
Sandwiched between salacious stories about White House palace intrigue (Steve Bannon in or out?), increasing risks of military conflict with North Korea and the use of a really big bomb in Afghanistan, were notable economic and financial policy pronouncements.
These included his support for renewing the U.S. Export-Import Bank, recognition that China is not currently guilty of “currency manipulation” and expressing new-found nuance about the double-edged benefits of U.S. dollar strength. All represent important and welcome steps along the presidential learning curve.
But the economic revelation with the most far-reaching impact was the president’s apparent willingness to consider re-appointing Janet Yellen to a second term as chairwoman of the Federal Reserve.
…
All current members of the Federal Board of Governors were appointed by obama and the democrats.
Started with Ray-gun and escalated under Jorge Bush. Yelling is continuing what the republican ‘chairmen’ Greenspan and Bernanke started & escalated.
“As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world,” said Sanders. “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”
Bernie hit the nail on the head with this one. Had the corrupt Clinton campaign and Democratic Party not installed Crooked Hillary as the candidate, and allowed Bernie to win the nomination as he would have if all the super delegates were not conveniently placed under Clinton’s name, I believe Sanders would have beaten Trump handily.
Bernie has some horrible socialist policies, but he resonates with voters, especially the young. Crooked Hillary blew it all up. But, but, but…. RUSSIA!!!
‘Progressive Democrats: Resist and Submit, Retreat and Surrender’
From the link:
Conclusion
Progressives turned full circle from supporting welfare to embracing Wall Street; from preaching peaceful co-existence to demanding a dozen wars; from recognizing the humanity and rights of undocumented immigrants to their expulsion under their ‘First Black’ President; from thoughtful mass media critics to servile media megaphones; from defenders of civil liberties to boosters for the police state; from staunch opponents of J. Edgar Hoover and his ‘dirty tricks’ to camp followers for the ‘intelligence community’ in its deep state campaign to overturn a national election.
Progressives moved from fighting and resisting the Right to submitting and retreating; from retreating to surrendering and finally embracing the far right.
Doing all that and more within the Democratic Party, Progressives retain and deepen their ties with the mass media, the security apparatus and the military machine, while occasionally digging up some Bernie Sanders-type demagogue to arouse an army of voters away from effective resistance to mindless collaboration.
The democrats still don’t understand why they lost…
++++
“Progressive accepted that multiple wars, Wall Street bailouts and the extended police state were now the price they would pay to remain part of the “Democratic coalition’ “
CONCLUSION:
NeoCons = Progressives
That’s all the needs to be said. There is no convincing to be made here, no argument to be held.
They are in it together! Get it?
CONCLUSION
Dogs = Cats
They are in it together, to force their stupid human owners to feed them for free in perpetuity. Get it?
Commie Bernie sure talks tough. Remember he did an about face on Ron Paul Fed Bill.
For a failed carpenter he’s done pretty well for himself. Being the patsy for the Klinton Krime Foundation netted him a nice lake house.
POS
Those are some really relevant facts and convincing arguments to allow big business to run everything.
Mikey - Let the adults talk.
An out of control Fed has nothing to do with “bigger government.”
It does make it much easier for governments to borrow.
Especially if you have a central bank not only creating the fiat version of Bitcoin from thin air, but also using it to buy unlimited quantitaties of debt and permanently bury it on the balance sheet.
There is no need to ever have another taxpayer-funded bailout so long as the Fed stands ready to purchase unlimited quantaties of bad paper.
We taxpayers are glad to hear that!
It’s all good until it hits you over the head like a ton of bricks that the Fed’s printing press is a stealth tax scheme that siphons wealth away from private American citizens into the hands of the banksters.
It’s the metaphorical equivalent of a favorite scene from the movie There Will Be Blood.
when you turn 62 you can get FREE tuition at all CT colleges…
http://www.aseniorcitizenguideforcollege.com/2010/03/connecticut.html
so true
Bigger and bigger government with more and more regulations and higher and higher taxes…
Wonder how much this will add to the cost of a house in California?
Affordable housing? What is that?
++++
California Requires Solar Panels on All Homes and Windmills on All Farms
townhall.com | 7/16/2017 | Bruce Bialosky
The California Senate Majority Leader Kevin de León has introduced a new bill that would mandate the Golden State get all of its electricity from renewable sources by 2045. This replaces a law that was passed in 2016 that dictated that renewable energy sources be 50% of all electricity produced by 2030. This bill moves that requirement up to 2025 with the 50% edict and establishes the new 100% standard 20 years later.
What has not been widely discussed in the press – and buried in the details of the bill – is that all new homes and all homes sold must have solar panels as their source of energy. All apartment buildings with more than four units must install solar panels by 2025, and all commercial and office buildings must do the same. As for farms, they must commit 25% of their acreage to windmills.
On tv 2 of the 5 broadcast channels have” how to flip”
shows !
So which editor at Townhall morphed “introduce a bill” into “California requires”?
Probably the same guy who thought that some nutjob at a Congression hearing automatically morphs into “they’re gonna raid your 401k.”
There will continue to be an exodus from this once beautiful state. The government mandating stuff is nothing but cronyism. If the free market dictates that this is a good way then so be it. Having the government “Central Plan” energy will go as well as Centrally Planned Healthcare & Education. Bet they are in bed with the Solar installers….called typical Democrat kickbacks.
Some cities in CA are already “horsetrading” the inclusion of solar infrastructure for other entitlement matters.
Oh, you want us to give you a break on XXXXXX entitlement issue? How about you spend $XXXk to make the development “solar ready”?
Done.
“According to new research by Harvard University, almost 40 million Americans cannot afford to pay for housing. Since most of the new units being built are at the high end, “the number of modestly priced units available for under $800 declined by 261,000 between 2005 and 2015, while the number renting for $2,000 or more jumped by 1.5 million.”
‘NBC News sums up the findings this way: “Over 38 million American households can’t afford their housing, an increase of 146 percent in the past 16 years.”
One replied, “Totally amazing numbers. Yet all of us hoping for an end to the madness (ie a recession) are the monsters. Total job losses due to 2001 + 2008 recessions: 2.2 million + 8.8 million = 11 million.”
“Total impoverished thanks to the boom (that 146% increase in people who can’t afford housing since 2000): 22 million.”
Somebody should send this to the South Park guys.
“Over 38 million American households can’t afford their housing, an increase of 146 percent in the past 16 years.”
These pukes need to work harder.
“You work three jobs? Uniquely American!”
-George Bush
I’m trying to play it cool but actually you made my day by highlighting my back-of-the-napkin math! Cheers, mate.
Two things impossible to ignore: the job loss numbers improved over time (albeit marginally post-2008), while the number of people struggling to afford housing gets worse and worse and worse.
Second, the people severely cost-burdened with housing include people from almost all economic classes except the tippy top. Paying more than 30% pre-tax income to housing could apply to single mother renters, young professional first-time-buyers, even wealthy senior citizens in fee-laden retirement complexes.
It’s actually quite an accomplishment to impoverish that many different types of people in one fail swoop. South Park would have a field day!
I’ve never seen such a clear connection between the actions of the Fed and the price of housing. If they really start selling MBS will that speed up the housing market decline?
That’s the reason that I don’t expect them to sell or even stop buying MBS.
Gotcha! 😁
Given enough time the market responds to the prices and overbuilds. From yesterday:
‘Luxury homes, priced at $2 million and up, may have reached a price peak and are facing an oversupply of listings, analysts said.’
And the easy money plays out too:
‘Of the 1,089 homes sold in the immediate past 12 months, 9.7 percent were short sales or foreclosures; and of the 1,377 condos sold, 5.6 percent were similarly distressed.’
It is actually much worse.
If the Fed increases interest rates to just “normal” - the Federal Budget implodes to pay the obama deficits ($17.3 trillion).
http://www.thefiscaltimes.com/Articles/2014/01/08/Rising-interest-rates-will-slam-Federal-Budget
Then the housing bubble then pops.
As housing prices crashes, the smoke and mirrors of city, county and state budgets implode.
Home owners no longer have the house ATM to fall back on, and then discover they owe much more on their house then it is worth. They walk with their 2% down-payment Mel Watts mortgages. Banks now implode. The Federal Deficits climb even higher with their “guarantees” of sub prime mortgages. The economy goes into a tailspin. Tax receipts plummet.
The REAL cost of the obama years of low interest rate and massive deficits now becomes apparent.
There is no escape.
‘There is no escape’
Sure there is. Some of this Bernanke/Yellen poof money goes away. Some people won’t get paid back. Happens all the time. IMO, we shouldn’t worry so much. That’s how they get us in these positions.
“Oh, we have to hand out trillions to our banker friends or you’ll all be eating gruel! Gruel!!”
No we won’t. For the vast majority of people who defaulted on their house loan, they just had to move. The horror, the boxes!
Example:
‘Total job losses due to 2001 + 2008 recessions: 2.2 million + 8.8 million = 11 million…Total impoverished thanks to the boom (that 146% increase in people who can’t afford housing since 2000): 22 million’
We’d be far better off, for the foreseeable future, without this kind of “help” from the central bank. That’s what I’d call escape.
Exactly this. Most Americans will benefit from deleveraging and deflation. Only the .01%ers benefit from the Fed’s “help.”
Escape (maybe) if we can pull off an Iceland.
If we are LUCKY.
Throw the corrupt bankers in jail and let their banks go bankrupt.
A severe economic depression.
A 35% crash of the dollar.
A 90% crash of the stock market.
GDP shrinks 10%.
https://en.wikipedia.org/wiki/2008%E2%80%932011_Icelandic_financial_crisis
Bankers revert to fishing as a source of livelihood…
Markets Main
As Banking ‘Fairy Tale’ Ends, Iceland Looks Back to the Sea
By Charles Forelle
Updated Oct. 10, 2008 12:01 a.m. ET
THINGEYRI, Iceland — Kristjan Davidsson went to sea as a deckhand at 16. At fisheries college he aspired to be a boat captain. For two decades, he sold fish and fish-processing equipment. Like his father, and practically everyone in this remote village, he owed his living to the fish his country pulled from the ocean.
But in 2001 Mr. Davidsson got bored. He joined one of Iceland’s newly privatized banks. He got rich. Now, he says, it…
“Oh, we have to hand out trillions to our banker friends or you’ll all be eating gruel! Gruel!!”
No we won’t. For the vast majority of people who defaulted on their house loan, they just had to move. The horror, the boxes!
• As far as I can tell, politicians spend most of their “work” time interacting with lobbyists and donors and bureau-/techno-crats.
• As a result, the decision-makers (politicians) implement the policies these interest groups want. And as long as the pol doesn’t lose his job, he’s doing it right. This decision maker is being persuaded by professional persuaders. The persuaders provide the talking points we hear repeated over and over in the media.
• This phenomenon occurs at local, state, federal-House, and federal-Senate level.
• The other issue is consolidation of Wall Street. Instead of modularized, fire-walled components which can innovate, prosper or fail without affecting other components or the economy at large, they’ve built a house of cards, in which damage to one component can credibly create unknown and destructive side effects. Again, this has been enabled by the system described above.
What’s going to change this system is politicians losing their jobs. Naturally, incumbent politicians and the interest groups which control them have made that as difficult as possible.
However, there is push-back building in the public. The success of non-traditional candidates in the US is an indicator. I’m going to watch Kid Rock’s Senate campaign with some interest (Google “Kid Rock Senate” for details).
Great post, Neuro…one other point I’d like to ad - Legislation is written by the Lobbyists. Does anyone truly think Congressional staffers are writing 1000 page bills?
I hadn’t heard of Kid Rock running, and after doing a Google search found a quote from the Democratic Party saying something to the effect of “we can’t afford to treat this as a joke”, suggesting their first inclination was that it was a joke. That’s fitting, as entrenched politicians have an out of control entitlement mentality on both sides, and feel above any outsider or regular Joe.
As one of the articles suggested, expect him to be mocked by the Dems as they try to discredit him as unfit for the position, etc., as if their corruption and greed is somehow helping the country.
People have the power to vote the insiders out, there just needs to be those who are brave enough to run, like Kid Rock, etc. I have no idea what his platform is, but I’ll be paying attention, hoping he shakes things up.
““Oh, we have to hand out trillions to our banker friends or you’ll all be eating gruel! Gruel!!”
No we won’t. For the vast majority of people who defaulted on their house loan, they just had to move. The horror, the boxes!”
Exactly. What’s really been going on behind closed doors, and oftentimes in plain view, is a mad scramble to prevent the moneyed special interests from losing their asses on their bad bets.
…is a mad scramble to prevent the moneyed special interests from losing their asses on their bad bets AND THE POLITICIANS that support them from being voted out of power.
“The horror, the boxes!”
TANKS in the streets! Oh wait, they’re just moving trucks.
“The horror, the boxes!”
I wish we could do a “thumbs up” on this blog.
“Oh, we have to hand out trillions to our banker friends or you’ll all be eating gruel! Gruel!!”
No we won’t. For the vast majority of people who defaulted on their house loan, they just had to move. The horror, the boxes!”
Hopefully we have wised up and if it happens again in their lifetimes it won’t work and bankers will be eating gruel.
At least for this generation.
Hopefully we have wised up
Not yet. Perhaps before it’s over though. That’s why it will be so painful.
” They walk with their 2% down-payment Mel Watts mortgages. Banks now implode.”
Perhaps this is why the Fed is buying up all the mortgages.
Who made it their job?
Congress? No.
The Senate? No.
Where in the US Constitution does it say the taxpayer needs to guaranteed mortgages so banks can’t go bankrupt and bankers get their lofty yearly bonuses?
So how did we get here?
It starts with an entire Fed appointed by one man. And the Fed repaying him by not having a recession in his term so that the Hillary beast could be elected as the “third term.”
I’m pretty sure that was the motivation. Think about this: say the Fed has a “mandate” for full employment. “OK, they say, let’s peel off a trillion bucks and start a war. Rio and Mike say that creates jobs.”
Isn’t this simple “mandate” kinda of a dangerous thing? They said openly, “we’ll get house prices up and create a wealth effect.” Now we have tens of millions more who can’t afford the roof over their head, and getting worse by the day.
Housing bubbles don’t make you rich. They make you poor. And then it blows up. All this sophistication, these ivory tower “technocrats”, meeting at 5 star hotels and sipping wine, and this is the best they can come up with?
Speaking of government/politicians taking over large swaths of the economy and the costs/benefits that brings, I just heard the term “government insurance bailout superfund” as it relates to insurance, and this is Rand Paul’s cogent response: http://www.washingtonexaminer.com/rand-paul-crony-capitalism-isnt-a-right-so-why-does-senate-healthcare-bill-give-insurance-companies-the-right-to-a-bailout/article/2628572
These ideas can be applied to the real estate sector, as well as the rest of the FIRE sector - any sector really.
“Housing bubbles don’t make you rich.”
They aren’t meant to make you rich, they are meant to make me rich.
“They make you poor.”
That they do.
“And then it blows up.”
That’s part of the process of making you poor.
“All this sophistication, these ivory tower ‘technocrats’, meeting at 5 star hotels and sipping wine, and this is the best they can come up with?”
It doesn’t have to be the best, it only has to work. And the enormous numbers of totally dumbed-down ignorant pukes make it work.
If these dumbed-down pukes had any sense they would not willingly play the game, but because they are totally dumbed-down ignorant pukes they willingly and eagerly line up to sign the debt-slave papers. Hence they work, I reap.
God’s Plan.
“If God did not want them sheared He would not have made them sheep.” - Calveras
Bahahahahahahahahahahahahahahahahahahahahahaha,.
because humans aren’t machines, emotions always trump logic.
always
Ben Jones: Isn’t this simple “mandate” kinda of a dangerous thing? They said openly, “we’ll get house prices up and create a wealth effect.” Now we have tens of millions more who can’t afford the roof over their head, and getting worse by the day.
Central banks may do more harm than good, says head of India’s central bank
MarketWatch
June 18, 2016
Raghuram Rajan, governor of the Reserve Bank of India, has been leery of the unconventional monetary policy tools used by central banks since the financial crisis. At some point, he said, pushing interest rates low seems to have the perverse effect of making people save rather than spend.
Perhaps the most cogent critic of Fed quantitative easing policy, Rajan says the asset-price boost that comes with it may disappear if these assets can’t grow into their valuation. That risks still haunts the U.S. economy, he said.
“A bridge that relies on wealth effects, you better hope that you got enough growth to justify the asset price increase which created the wealth effect in the first place.”
http://www.marketwatch.com/story/in-interview-indias-rajan-says-monetary-policy-has-run-its-course-2016-04-15
Rajan was forced out from his position as the head of the Indian Central bank in mid-2016. IMO, because he started questioning financial alchemy.
The FED’s mandate is to enrich their foreign owners pockets via strip mining the American public.
End.of.story.
‘a clear connection between the actions of the Fed and the price of housing’
Just doing my part to help people wake up and smell the rocket surgery.
“Just doing my part to help people wake up and smell the rocket surgery.”
Good luck with that.
Ben Jones: A voice in the wilderness.
Because I am such a wonderful person I am offering up to all of you HBB pukes a four-hour video that helps explain why you are pukes and why you will forever continue to remain pukes …
http://topdocumentaryfilms.com/the-century-of-the-self/
Hmmm….wonder if Hillary has watched this documentary…
++++
The final section takes us full throttle into the universe of politics. During the 1990s, in a desperate measure to regain the White House, the Democratic Party enlisted the assistance of Matthew Freud, a public relations expert and the great-grandson of Sigmund. With a determined reliance on focus groups, the party recalibrated their campaigns to fulfill the innermost desires of the American people. Shortly thereafter, Bill Clinton became the 42nd President of the United States.
Whether these tactics were employed for reasons of nobility or perversion is for viewers to decide. Regardless, The Century of the Self unlocks many essential human truths; chiefly, our vulnerability to influence and our need to be controlled.
“Bill Clinton became the 42nd President of the United States.”
And the trail of dead bodies just keeps on keepin’ on.
Why, just this week, two, count ‘em, TWO Clinton connected suicides. Peter Smith and Klaus Eberwein.
Jeebus.
I call BS. Bill Clinton didn’t win because of Freud or focus groups or recalibration or any other Dem nonsense. The only reason Bill Clinton won was that wildcard Ross Perot burst onto the scene with anti-trade policies (which Trump would adopt 35 years later) and siphoned ~15% of the vote away from Bush Senior. So the Dems needs to stop backslapping.
Bill and Hillary need to spend the rest of their lives in prison for these murders.
There is a trail of blood going back 40 years to Little Rock.
‘ A voice in the wilderness’
Out standing in his field.
That’s the site of a beautiful future McMansion tract home development. If they build it, investors will come to capture their Fed-funded wealth effects.
I once phoned a colleague, on a business matter, while he was literally out standing in a field on his farm. I told him I heard he was outstanding in his field, and he just didn’t seem to register the joke.
“I told him I heard he was outstanding in his field, and he just didn’t seem to register the joke.”
Deer hunting with Jesus.
Question: What happens if there is no “beautiful deleveraging”? What happens if the result of the top of the debt supercycle at the Great Depression was an anomaly, and with today’s government and central bank efforts, there is no deleveraging, only a debt plateau, where total debt grows much more slowly than it did during the runup of the debt supercycle?
I was looking at the New York Fed’ quarterly “Household Debt And Credit Report”. There’s been no deleveraging since 2008. Yes, the FORs are lower, but the Fed cautions that the FOR is difficult and limited value.
According to the economic philosphers, debt is necessary to juice the economy, to pull demand forward for consumers, and to let business cover temporary shortfalls. Thus there are ever more government supports for debt, FHFA increasing conforming loan limits, lower and lower down payments for mortgages. The talk about needing inflation because more urgent, as inflation is a wealth transfer from savers, trying to build net worth, to debtors, who build the net worth of others.
Debt both speeds up and slows the economy. It is both inflationary and deflationary. It is the yin and the yang. But for much debt, only one side makes money from it. And so we have an empire of debt.
With government and central bank policies constantly pushing up prices of housing, education and medical care, with the focus on trying to spark inflation, the government and central bank trying to make debt yet easier to access, the terror of deflation in the policy makers’ minds… what would incentivize a deleveraging of any sort, much less a “beautiful” one?
Sweden tried to raise its rates in 2010 (2nd link above, towards the bottom) but dropped them again. Has there been a change in thinking about debt and inflation at the Fed (this would be a black swan), or are they just trying to pull a Sweden? The investments of politicians and the behavior of the big financial firms would be clues to this, as they are the ones who hobnob with the central bank policy makers, at Jackson Hole, at Davos, in the halls of Congress.
What are the implications of the debt supercycle resulting in a merely slightly increasing plateau, not a deleveraging?
I have a suspicion that the Fed is very good at finance, but not at understanding the implications of the wealth transfers its finance efforts result in.
I think they fully understand it, but they can’t do anything about it. Doing anything meaningful means Fed’s private owners and the Governments around the world will have to take the pain. That ain’t happening.
I agree. Superman ain’t coming. The only, and I mean the ONLY way this central bank cabal ends is through some sort of violent convulsion, or series of violent convulsions, either natural or man-made.
There will be no “peaceful revolution”. When it comes to banking and government, ain’t no such thing, although if I’m mistaken, I’m all ears.
See above re: First and Second Banks of the United States. It helped to have an expiring charter, and a President on side, but it’s possible to peacefully unwind institutions that are enriching the few at the expense of the many.
We don’t learn this in school, but our current predicament is far from unprecedented. A surprisingly large component of US political history has been arguing between hard-money and easy-money groups, whether it’s watering down the gold standard with silver coins or watering down a stable fiat currency by loosening lending standards and suppressing interest rates. The pendulum swings back and forth, and just when change seems most impossible is when a critical mass against the status quo begins to coalesce.
Many people have predicted the Fed won’t survive a fourth bubble burst in three decades. Given the dramatic changes lately, maybe that’s not so far-fetched.
Thanks, Lurker. That does make me feel a tad better. I guess, when you live in a country that has been controlled by the Fed all your life, with an almost constant state of war, things start to look pretty hopeless.
Some people are quietly starting to discuss options.
Today I said a few prayers for John McCain, although I won’t mention what it was I was praying for.
They say vegetables are good for you.
Free Arizona! And Syria.
It is not as if we are the first to try this. In fact, it is a common theme through out history. Gengis Khan had an empire and it was greatly built in debt and fiat currency.
Looking through history on “empires built on debt”
It ends/leads to:
ruin
bankruptcy
misery
a wholesale change of the present form of government
war
Very interesting read Neuromance. I’d like to add…
Rational business investment assumes a level of growth - take away that growth and a highly variable portion of GDP can fall sharply. This makes it imperative that growth be maintained and when it falters, it MUST be restarted.
Post WWII, the US was the one industrial power with its capacity left intact and we quickly grew into many new markets, becoming the unchallenged economic hegemon. In the 60’s we tried bread and guns spending only to discover inflation (globalism had not yet arrived to limit pricing power). Volcker and 20% interest rates solved that problem and when those rates came down (combined with tax cuts), the economy grew smartly.
When growth faltered in the late 1980’s (S&L crisis), interest rates were slashed from 9% in 1990 to under 3% in 1993, providing fuel for growth (but also started a 1920’s style growth in the disparity of income). Go to 2000 and the tech bubble burst and growth slows to barely positive and “the maestro” decides to drive interest rates below 2% for over 2 years. This act of genius started a housing boom (and the mortgage equity extraction bonanza) as well as an equity boom.
We all know what happened in 2008. With interest rates at zero, Bernanke had the “courage to act” and printed more than $3T.
I’d say we are right back to June 2007. All time highs, all around. But in the bowels of the economy, stagnant wage growth, a grotesque redistribution of wealth (top 10% holds 76% of wealth) and corporations having been “financialized” (borrowing money to buy back shares and pay dividends), and the rot is plain to see.
Organic growth profits => replaced with globalization profits => replaced with speculative profits. I don’t the see next “=> replaced with.” I agree with Ben, that what is coming will not be catastrophic, though I believe it will be worse than Iceland (we all can’t be fisherman).
All that being said, I might just be spinning a yarn. Maybe they can just print money forever and keep the game going.
There’s been no deleveraging since 2008.
Depends on how you measure it…nominally? You are dead on right.
However, if you think about the amount of debt relative to the size of the economy, there has been deleveraging. Nominal GDP is up 26% from 2008 to 2016…real GDP up 12%. Nominal debt is roughly flat from peak in 2008 to now.
More interesting though, IMHO, is where the debt is growing the most. Despite home prices rising, we haven’t seen a proportional rise in housing debt (in other words, there has been a deleveraging on an LTV basis in housing since 2008). From the trough in housing debt in 2013, the total amount of housing debt has been rising more or less by inflation (and it should be rising by more than inflation if you are adding housing stock).
HOWEVER, when it comes to student loans, they continue to be piled higher and higher. NON-housing debt has greatly expanded…31% in 3.5 short years…
WHAT IS THE FED?
The Federal Reserve, “the Fed”, is the central bank of the United States of America that was created in 1913 by Congress. It is a banking cartel that has a government-granted monopoly on the creation of money and credit. The Fed literally loans “money” (Federal Reserve Notes) into existence. Federal Reserve Notes are paper promises backed by nothing of intrinsic value and they are only functioning as money because the government forces them on the public through legal tender laws. Federal Reserve Notes are referred to as dollars but are not. The definition of a dollar is a weight of silver (371 grains). To put it simply, the Fed is a group of banks running a national counterfeiting operation with the protection of the government.
Meanwhile, Bitcoin is headed back to its intrinsic value: zero.
http://www.marketwatch.com/story/bitcoin-slides-below-2000-as-cryptocurrency-selloff-continues-2017-07-16
Do an equity cash-out and buy the dip.
Oh, and hurry.
“Bitcoin on Sunday traded as low as $1,836, according to news and research site CoinDesk, down about 8% on the day, and almost 40% from its high of $3,018 on June 11. Meanwhile, ether, the currency used on the Ethereum network, traded as low as $155 on Sunday, down about 60% from its high of $395 on June 13.”
This a mere flesh wound. We won’t learn the real lower bound on the range of cryptocurrency values until the Fed finally follows through on plans announced long ago to normalize interest rates.
RE: Ethereum
Ya gotta love a cryptocurrency whose name resembles the aether, whose existence the Michelson-Morley experiments disproved.
https://en.m.wikipedia.org/wiki/Michelson%E2%80%93Morley_experiment
Learned about his today. Huh, we got us some
McJordan, McLeBron,McNike sneakers:
https://fivethirtyeight.com/features/you-see-sneakers-these-guys-see-hundreds-of-millions-in-resale-profit/
Guess they ain’t building any more sneakers, hence the USSIC ( used sneaker salesman industrial complex)
About 10 years ago, the urban community for some reason latched onto the Timberland brand of hiking boots and T-shirts. At the time, the logo for Timberland was a little tree in a circle, only about an inch in diameter, simply embossed on the boots in the same color. That is, the logo had been hard to see. Timberland had been known for high
Seemingly overnight, the low-price mall stores were suddenly stocked with Timberland T-shirts and jacket with the tree logo at last 18 inches, wide enough to fill the whole shirt. The logo on the boots was now embossed on the tongue, in black, and 3-inches in diameter.
The message was clear: no more low-key logos as an indicator of quiet quality. The new urban customers wanted to be seen in Timberland from fifty yards away.
So it doesn’t surprise me that these folks are willing to pay so many bucks for sneakers. Looks are EVERYTHING in this community.
“According to new research by Harvard University, almost 40 million Americans cannot afford to pay for housing. Since most of the new units being built are at the high end, “the number of modestly priced units available for under $800 declined by 261,000 between 2005 and 2015, while the number renting for $2,000 or more jumped by 1.5 million.”
Meaning there is less government subsidized housing, and less cheap land right next to the city.
But is that really a problem? Shouldn’t enough new supply at the high end lead people to upgrade, in a series, eventually reaching the bottom? Any evidence this is happening?
Moreover, for $20,000 and a little sweat equity you can carve an extra unit out of a McMansion IF the government will allow it. And there are all those abandoned or nearly abandoned 800-1000-square-foot detached houses built after WWII that need to be rebuilt.
all those abandoned or nearly abandoned 800-1000-square-foot detached houses built after WWII
The problem is that those house aren’t where the jobs are. I’ts not worth spending $40K to renovate a $75K house in the Rust Belt. And the ones in cities where there are jobs — like DC area — these houses have already been cosmo-flipped, or given minimal renovation and rented out to a clan of immigrants.
But is that really a problem? Shouldn’t enough new supply at the high end lead people to upgrade, in a series, eventually reaching the bottom? Any evidence this is happening?
I’ve only seen anecdotal evidence. Ben posted an article the other day about how folks in the SF Bay Area were noting a softer market for resales in places where lots of new condos were built.
Building new, higher end homes WILL eventually end up effecting prices of all homes…however, that effect takes much longer to trickle down than if new entry level homes were built (where the effect is more immediate).
so am I reading it right?
unless there is some form of job loss, there will not be any relief in Bay area housing problem?