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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Here is a question for you guys: If you’re buying leaps and puts from CBOE and cleared by the OCC is there any concern that if there is a significant (say 40%+) downturn - like the dot.bomb - that there may not be resources to pay you off? (You guys have discussed all the interrelated financial instruments floating around these days.)
I’m more concerned about hedge funds.
Recall the Enron MO. What that company turned out to be, in effect, was an off-the-books, unregulated futures and options market.
Now the at the CBOE and other formal exchanges, the exchange and all its members back up its members’ bets, so unless they all go under, you get paid. And they have rules in place to ensure that members are adequately capitalized to guard against collateral damage. The government backstops the rules. So to the extent that one can be protected from counter-party risk, one is protected.
Not so with hedge funds.
That’s the ultimate wet dream for a perma bear. You’ve got these puts that are 5,000 baggers but there’s nobody to buy them from you. I guess that could happen if a nuke went off or something or Ebola became widespread in the U.S.
That’s why you don’t try to pick the absolute bottom.
I would be interested in discussing potential tax law changes that would raise revenue and adversley effect Real Estate (Just Like the 1986 Tax Reform Act)…..
I would love to know what folks on this blog intend to short in the stock market when the wheels fall off the RE in the new year.
Or, any other ways there are of making money while this catastrophe unfolds
“– that there may not be resources to pay you off?”
Haven’t you heard of Murphy’s law of amateur option investing? The once-in-a-lifetime event that sends your options deep in the money coincides with the moment it becomes clear that your counterparty is MMMM corporation better known as Madame Merriweather’s Mudhut Malaysia, the ultimate guarantor of $370 trillion in derivatives.
An interesting question. Past precedent for defaults in the stock market caused Stutz Motor works to go out of business in the 20’s. An abbreviated version: In Stutz’s case, an organized short position was created by members of the NYSE, Stutz then bought all the shorted stock and demanded that the “shorts” must cover. To protect its members the NYSE delisted Stutz - putting the company out of business (unable to get loans). In the commodities markets, there have been many attempts to control the market, the Hunt brothers in Silver is the most memorable (by no means the most profitable); a synopsis: the Hunts bought large quantities of silver bullion as well as large positions in silver futures. The Hunts wanted to take delivery, insufficient silver bullion was available. Silver went from $10 to $50, the exchanges then declared liquidation of positions only. The Hunts lost all their oil holdings - not technically BK, but not close to as wealthy as previously. Other examples; Potatos; Soy Oil (the most profitable of all the short squeezes- traders were long); and surprisingly US T-Bonds - surprisingly because the 30 yr T-Bond (the primary future contract traded) is one of the most liquid markets in the world, trading dollar volume in one hour that is what what the world stock exchange dollar volume is in a day - (for those who do not remember in the early ’80s the 30 yr US TBond yielded ~14.5%) the contract for delivery was based on a yield of 8%. The world wanted delivery of the 14% bonds and there were none around. Another liquidation only. In summary, the exchanges have done in the past what was in the best interest of its members. I see no reason to change that policy.
Now that the bubble and bust is no longer the opinion of society’s outcasts, the next question is the effect on the rest of the economy.
Inflation as the U.S. abandons the buck to stop a recession? Or a recession?
Just looking at year-over-year employment figures around the country. Detroit is awful, employment growth in booming Austin and Charlotte cut in half compared with last year. But Milwaukee is doing a little better, even though a power tool company is named after the town.
And, speaking as a hardcore tool-hound, Milwaukee’s power tools are the real deal. They’re the ones I’m saving up for.
Its going to hit everyone.
1. Pickup truck sales, according to a Ford PR guy (lost the link), are driven by contractor sales. You had better believe those will be down.
2. Tools. Look at all that new earth moving equipment purchased in the last few years. Not to mention saws, concrete cutting/drilling, etc.
3. Print shops. Oh, their business will fly, but eventually realtors will *need* to cut costs.
Housing is the big dog of the economy. When it shakes to dry off, everyone gets covered in mud.
Neil
I know people in print and other communication-related fields. Although some of them deal with real estate agents, the word on the street is that so many of the agents are such flakes that it’s hard to do ANY kind of business with them. It takes forever to get them to make up their minds and GET STARTED with any project. (Which, IMHO, points to an underlying “not enough money” problem.)
Why didn’t these businesses look at this as a one-time windfall? Like, why are furniture stores going out of business after 25 years? Did they seriously think that the spike in business would be permanent? You would think they would KNOW, or at least guess, that this business would slow eventually. They could have put away some rainy-day profit, and then prepared to revert to 1999 business levels. Yes they’d have to lay people off, but not enough to go under.
Ditto for tools, lumber, fabric… I don’t get it.
First-Timers Begin Looking at Houses Again
The Wall Street Journal Online
http://tinyurl.com/y4f2om
A statistic showing FTB at a 20 year low. Then some cute annotates about some FTBs. No real numbers to show an increase (unless I missed it in the article).
WSJ RE industry boosterism. Are we surprised?
That article is crap. In many people will not trade up because if they do it will increase their property taxes when they give up their homestead. Those of you that dont know about the homestead tax exemption in Fla dont sweat it. In laymans terms you go from paying maybe 1200 for a 300,000 home to 10k to move up to a 500,000 home. Sounds fun huh
“In much of the country, renting remains a bargain”
Make that “all of the country”. I haven’t seen an exception.
Some media reports portray the foreclosed as victims of unsavory lending practices. After reading these reports, suppose a large percentage of negative equity borrowers adopted the ‘I am a victim attitude’ and walked away from their financial obligations, creating a ‘foreclosure mini-mania.’ What would be the impact on our financial system?
Hey mavenFL,
The article feature Mr. Dunn stuck in his house as the builder lowers prices makes me think that the forclosure mania is what we are going to see. People that strapped won’t have any choice.
RE jobs were 9.8 % of employment in 05 - historical 6.7%?
chop 20% and you trim employment by almost 2%- from what I see RE jobs are reverting to the mean quickly, and stats will show increases as they go from 1099 to wmt greeters w 80% pay cuts
the discussion now is effects of the bust
Considering the overbuilding that continues to this day, I fully expect RE jobs to eventually overcorrect to the downside.
My wife and I live in Queens NY. We want to buy here. In 1997-98 the houses we are interested in were around $300,000. Now they are still around $600,000-$650,000, down from $700,000 in ‘05.
A return to the mean should put the prices at around $400,000, which I think is fair value for these houses.
Am I being realistic that the prices will come down to this? When can I expect that I could buy.
I know it’s all conjecture, but I’m hoping the end of ‘07.
I’m thinking it depends where in Queens. With the big Wall Street bonuses, LIC, Jackson Heights, and esp. Forest Hills might become even more expensive. But other areas might keep on dropping.
jackson heights is a cesspool imo-sure some nice pre-war coops and a major train close by but it is like south america
over on roosevelt ave unless that is
what you are looking for, if
a pre war coop is what you are after kew gardens is similar but a much nicer area with the lirr close by and some decent restaurants, forest hills is totally overpriced and filled to the brim with an aging population of pain in the neck blue hair types and a huge russian population as well
ed i would wait it out for a sfh in queens at those prices where are you looking? fresh meadows, bayside douglaston?
just hang in there the prices will be down alot more
lic is great is you if you work in midtown
my wife and i both like it,
it is just too damn expensive for a place
500k for a 600sq ft box, i think i will wait
in fact my wife even said yesterday maybe we can rent for a long time! it is finally sinking in
btw i live in a coop owned by my wife’s family with dirt cheap housing cost so i am in no rush to buy these days
and i just save and invest more and max the old 401k
good luck
sorry for the screw up
lic is great if you work in midtown
in fact i am almost ready to make my weekly trek up the block to fidelity to drop off a check
beats writing a huge check once a month for 50% or so of my take home money so i can “own ” a home
Take the median household income, multiply by 2 — that’ll be your price in 2009. Forget Wall Street bonuses… for those still employed there by then they will only be a fond memory.
We are looking mainly in Astoria and Forest Hills (not F H Gardens!) for an attached house.
I am still amazed that POSs that were under $200,000 8 years ago are still over $500,000 now.
I think there is something like 16 months of inventory in Queens, so I really expect and hope for the shf next year.
Wall Street in swimming in bonuses right now. But if there’s a recession and the market tanks, the firms are very quick to lay-off.
We all know there is a huge excess of inventory due to overbuilding. What will happen to this excess inventory? Will there be entire neighborhoods of (mostly) empty houses? Will they be bulldozed or just left there? Or is the excess inventory mainly in condos where condo buildings will have a signifigant fraction of empty units?
Some will be bulldozed, some of the Mcmansions will be converted to 4 flats, and many will be converted to low to moderate income section 8 housing. The suburban American lifestyle post WWII is no longer economically sustainable.
I think many of us are looking for various “reversions to the mean”. One of the things which is out of whack from a hitorical perspective is the cost differential between the coasts and the flyover states. California has always been more expensive than Nebraska. But the cost differential is now much greater than in the past. I expect the pricing multiplier to eventually get back to more normal values. My question is: will it *all* come from price declines on the coasts; or should we expect that prices in flyover-ville might actually come up as a component of this reversion?
IMHO this is a nation wide bubble. The flyover states bubble is popped. This is an affordability issue if the house in Nebraska costs 150K and the average salary is 25K it is as unaffordable as California RE is to an average californians income.
Hoz –
Can you see any route for the “soft-landing engineers” in DC to get housing price inflation back on track before full reversion to historical affordability levels (in terms of median price / median income ratio or median price / median rent ratio) plays out?
My thoughts run along the same veins as Ian McFarlane’s thoughts on asset bubbles “No one has a clear mandate at the moment to deal with the threat of major financial instability, but I cannot help but feel that the threat from that source is greater than the threat from inflation, deflation, the balance of payments and the other familiar economic variables we have confronted in the past.”
Ian Macfarlane was the governor of the Reserve Bank of Australia from 1996 until his retirement in September.
The least painful view to the finance community would be to keep housing prices unchanged with a large inflation in incomes etc to make housing more affordable. This would be the most painful scenario for the rest of us. I do not believe inflation has ever been a benefit to the majority of the population.
Inflation is most beneficial to those who have access to the money first. From Von Mises’ example, say commodity X (take your pick from Fed Reserve Notes, gold, silver, whatever) are used the common medium of exchange. As new gold comes into the stock, in this case, gold mines are the ones with access to the new “money” and profit most. They are able to purchase goods and services at the old prices with their new money. Those selling these first purchased goods and services are the next to benefit. As the new stock trickles through the economy, at some point, a new equilibrium is reached. Obviously, those who sell goods and services last in the chain are the ones who lose the most.
Once this new equilibrium is reached with no new influx to the stock of money, ratios are back to where they were, just “inflated” in relation to the common medium of exchange. In other words, everthing costs more, but I don’t get anymore satisfaction from a gallon of gas, an apple, a house, etc., than before.
Based on our current form of money, those in lending get first access. Those businesses surrounding lending get second access and so on. Is it possible to have inflation and keep the masses content? Of course it is, but it will need to be carefully managed to ensure the disparity doesn’t get out of hand. If enough people get squeezed, then they are literally left out in the cold and you get social upheaval.
It isn’t really that cosmic. History is riddled with examples of what is transpiring today.
Same idea, but a lot better explanation. Thanks :>)
Don’t “those lending” get the benefit last? It’s the borrower who gets to “spend” it first (new plasma TV, whatever), while the lender waits X years for the loan to eventually be repaid (with interest, of course). The axiom I’ve always believed is that inflation benefits a borrower, deflation benefits the lender (so long as it doesn’t cause the borrower to default).
I concur with Caveat Emptor, which is why I am doubting the Fed is really interested in using high inflation to save idiots who bought houses they cannot afford. I know the Fed did inflate with wild abandon during the late 1970s, but I am assuming that BB would rather not repeat G William Miller’s short time in office which resulted from reckless monetization of the debt.
Whoever gets access to the money first. Borrowers are technically getting the money first, but the lenders create the debt through the fractional reserve lending. Borrowers have to pay it back. The lenders get the fees and interest from money that wasn’t there to begin with.
Those who borrow have to pay it back. When you are smart/lucky enough to take the borrowed money and put it where a bunch of others are doing the same, you can reap the benefit of others doing the same (sound familiar). It works until it doesn’t. When you are the lender, you are getting a benefit from something you created where it didn’t exist before. Someone pays off the loan, you still made money from fees, interest, etc. You just need to make sure you aren’t the one holding the bag when the music stops. This goes for both the borrower and the lender. It is boom times while it lasts, and a bust when it stops. Those who make out like bandits were getting the money first, and put it somewhere just prior the bust that didn’t get affected. Where that may be is what folks are trying to figure out, at least I am.
My apology if this was already posted, but yesterday’s WSJ had a front page article entitled “Housing, Auto Slumps May Defy Usual Role as Recession Harbingers.” Inside is a graphic (”Sizing Up Housing’s Influence) which repeats a point I recently made in a blog post here, by showing that seven out of the previous eight residential construction slowdowns (since January 1955) have heralded recessions. The only exception was in November 1963, which was also the shallowest construction recession (15% drop); all of the other seven cases featured construction declines of 25% or more, followed by recession.
So far the depth of the current construction slowdown is officially reported at 29%, though numbers like “40% drop in new home orders” come to mind. Is there reason to believe that this time is different, as the article suggests? And if so, what is that reason, besides “the experts say so?”
Housing, auto slumps may defy usual role as recession harbingers
Thursday, December 14, 2006
By Greg Ip and Christopher Conkey, The Wall Street Journal
WASHINGTON — New home construction is plummeting. Car sales are weakening. Investors have driven long-term interest rates well below the short-term rates set by the Federal Reserve. All these factors are present today, and all have been precursors of past recessions.
But the U.S. central bank and much of Wall Street are now betting that the old rules don’t apply, and that a recession next year, while possible, is unlikely.
“This time will be different,” Ed Leamer, who heads the forecasting center at the University of California at Los Angeles’s Anderson School of Management, predicts in a report. “This time the problems in housing will stay in housing.” It’s a prediction, he admits, that “keeps us up at night.”
http://www.post-gazette.com/pg/06348/746139-28.stm
Ben,
Before the spring diluge gets here:
AS OF Dec 2006:
Total National number of houses (new, resale, condo’s) for sale.
Total National number of real estate agents.
Thanks!
my topic suggestion is holiday cheer around the workplace
anyone getting a larger bonus? bigger x-mas party?
or is it a more mellow atmosphere?
just curious how the rest of the countries workforce is doing this season
as you know in nyc it is different here and the big parties are in full swing. my wife’s law firm is throwing a big bash tonight in some pricey place off park ave
woo hoo
I think that this is an great topic suggestion, though I have to admit it made me laugh. I just accepted a job offer for less than $25,000/year. It’s in the nonprofit sector, but I think that despite what you might conclude from the pay, the job will be quite challenging and interesting.
FWIW my husband also works in the nonprofit sector, and as anyone involved with a nonprofit can tell you, corporate largesse is critically important. So big Christmas parties would be an excellent sign…but not one that either of us are expecting. From what I am told, donations are down this year. Surely that is an economic indicator in and of itself.
Peggy — “donations are down this year. Surely that is an economic indicator in and of itself.”
I’d think that there is a super-high correlation between the two.
If this is the first downturn in housing that ended strictly because it exhausted itself out, what happens in a year when we possibly have a recession and start to see job loses? what happens if we have spiking interest rates because of a dollar crisis?
How many of those I/O and Neg-ams are still going to default, even if interest rates don’t budge and the people keep their jobs? People can no longer sit tight and ride it through. Mortgage payments are going to go up before appreciation starts up again, especially if there are fire sales on the alligators.
Exactly. I know several people back in Georgia who have ARMs that are due to reset. Even though long term rates are fantastic right now, they are really upset because they got very comfortable paying the teaser
Will the FED chose to save the dollar or save the economy (housing)?
Interest rate cuts are good for the economy and for housing. A possible re-flation of the housing bubble? But will increasing GOV and consumer debt kill the dollar value?
Or, rate increases so foreign countries like Japan, China, England, etc. will still buy our Treasury bonds, bills, and notes? After all this is what has been the financial engine behind GOV and consumer spending, buying MBS’s so banks don’t have to be responsible for the loans they make, etc. This has been keeping interest rates relatively low the last few years.
Or do nothing for a while? Then when does the FED have to do something (or do they)?
My suggested topic is: What large ticket (non real estate) item are you trying to sell, or would like to sell now, or have sold in the last year in anticipation of it not selling in 07?
For example: I just sold my 34 foot boat and was worried I would not be able to sell it in 07 due to recession, lower house prices, tight credit. I am very happy to sell the boat now and was worried I would have to lower the price or keep the boat for years to come. Taking the funds and putting them into savings.
TOPIC: How many people do you personally know that are either buying or have bought a house that they can’t really afford, or are using an existing house as a piggy bank to fund purchases that their wages wouldn’t normally support?
I can count at least 4 households that are either tight month-to-month with the possibility of getting tighter with loan resets, or are already at the end of thier rope, but are still using Mortgage Equity Withdrawals to fund Christmas…
I think my next door neighbors have never met a HELOC they didn’t like.
Since moving here I’ve met exactly one person who is in the process of purchasing a home. Everyone else I know has either owned for many years or is renting. I’m absolutely sure that this “buyer” cannot really afford the house. She told me that she has two sources of income (pension from a 20-years-and-out job and income from her current full-time job). Yet she also said that without the $0 down and closing cost assistance offered by the builder, she would not be able to afford to buy the house. She concluded by saying, “Aren’t the housing prices here crazy?” All I said was, “Yes, they sure are.”
Oh, I forgot: I also know a man who has lived here 3 years and has refinanced 4 times within that time period. He currently trying to refinance again but is having a lot of trouble. So I’d guess there’s no way he can really afford to live in his house. It’s really a shame because he bought before the big run up in prices here. He should be sitting pretty.
Arroyo — good topic, along with “How many people do you know who, in spite of all the bad housing news, appear to be proceeding on a house purchase right now; are they planning to low-ball?
Herb Greenberg has a Christmas present for all the Gekkos out there…
————————————————————————————
HERB GREENBERG
Is it brains or a bull market?
Investors shouldn’t lose sight that there are two sides to each trade
By Herb Greenberg, MarketWatch
Last Update: 10:53 AM ET Dec 15, 2006
SAN DIEGO (MarketWatch) — To repeat what I said on Kudlow & Co. Thursday night: “It’s said you should never argue with a crazy person. I’ll add that you should never argue about a crazy market.”
And that pretty much describes where we are - in a market that hangs by the thread of oil until it decides the risk of rising oil prices is irrelevant; in a market that hangs by the thread of the latest economic indicator, until it decides that indicator is irrelevant; in a market that one week is enthusiastic about the Fed’s likelihood of cutting interest rates and the next week enthusiastic when it looks like a cut is less likely.
This is a market, as I’ve written previously, that lacks conviction and will fall in a vacuum on the whiff of something unexpected - like aging Karl Wallenda, the most famous of all high-wire walkers, falling to his death from a skywalk in Puerto Rico when the wind shifted in a direction he hadn’t expected.
Is the economy growing or is the economy slowing? (YRC Worldwide (YRCW37.94, -0.43, -1.1% ) , a trucker that should have its fingers on the pulse of the economy, says the latter.) Doesn’t really matter because, as of today, the market sees both as good.
Not to worry: All that really mattes is “global liquidity,” a catch-all to explain the inexplicable.
“Unnatural,” is the way market strategist Jeff Saut of Raymond James explains this market in his latest missive. “Markets typically go up, correct by 25%, and then re-rally if the are going to trade higher,” he writes. “This, ladies and gentlemen, has not been the case recently as the averages have ‘unnaturally’ vaulted higher without so much as ANY correction.”
He further marvels at how the SEC caved in to a New York Stock Exchange petition in mid-October to reduce margin requirements “for an already over-margined hedge fund community. And that ‘mysterious surprise’ gave the major market indices another leg up (read: re-rally)….Why in the world would one introduce more leverage into an already over-leveraged hedge fund community is a mystery to us!” (And to us!)
http://tinyurl.com/y2lpxj
“… ‘unnaturally’ vaulted higher without so much as ANY correction.”
Could “soft-landing engineering” in perpetuity be the X-factor which explains such unnatural market behavior?
How about a topic on the pitfalls of homeownership most people are not even aware of when they purchase-especially first timers. For example, maintenance costs, taxes, insurance, HOA’s (my favorite topic), bad neighbors, barking dogs, crime, traffic… How should these things be factored into home pricing?
And for, *ahem*, “investors”, VACANCIES.
Earthquake risk, hurricane risk, insurance-premium-increase risk, apartmentization risk (this is my term for what happens when $1m McMansions are partitioned into quadraplexes that house four immigrant families)…
Crash — another good topic, especially if we can elicit first-person surprise/horror stories from posters.
Buying a house unaware you are surrounded by “Greeks” and every Friday and Saturday night listening to the wild drunken parties. Nope, not a fan of those frat boys and girls.
Here is a topic I would like discussed…when is the bubble finally going to hit the resilient markets? I hear that many markets are already down 20% YOY, but for Coastal LA, nothing is being reduced and everything is selling (albeit slowly).
Since these areas typically attract move-up buyers, they likely came in with a lot of cash upfront. What is it going to take to move these markets?
Easy… no move-up buyers due to absence of “a lot of cash” (i.e., equity in existing property).
TJ, you are right. First time buyers in LA are really screwed because they can’t count on selling their existing home and roll over that equity into the new one. We do have the cash for a downpayment, but for us it would take a major price adjustment to get us in the market. If not, we are looking at paying for a mortgage two or even three times what we pay for rent.
Could we have a discussion about the ticking property tax bomb?
I rent in Newton, MA. Essentially all of my colleagues have had their property taxes double over the last 10 years — despite city taxes limited by law to 2.5% increases. Even with a few tax-increase overrides, the real increases far outpaced the Prop 2 1/2 restrictions. No-one cared that much when their house values were skyrocketing (it was a kind of brokerage fee). But now with a collapsing market and looming foreclosures, I predict tax wars will soon break out all over the map. (Local towns have become addicted to very agressive spending.) As a potential buyer, even if prices fall dramatically, property taxes and assesments may very well still make it too costly to buy.
Good post! In California, due to prop 13, there is little worry about taxes. In States “Marked to the Market” property taxes are a nightmare. I know several couples that are selling houses they have owned for 9+ years as a result of property tax increases. Their incomes did not keep up with tax and insurance increases. This is an untalked of consequence of this bubble. And as you point out “Local towns have become addicted to very aggressive spending.” I can visualize everything from complacency to assessors getting shot.
On a related note, a lot of the condo boom in Center City Philadelphia was encouraged by a recent law granting 10 year tax abatements to new construction. When those ten years are up . . . whammo! I’m assuming the new owners expect to sell out before then? I’m wondering to whom? I doubt the city will reset the abatement.
Philadelphia itself redid the method it used to assess property taxes just after we sold and got the heck out of dodge - it had been based on land/age/improvements, and they changed to a “comp-based” model - I heard tax assessments in our old neighborhood (manayunk) went up a LOT (thanks in part to comps like ours, we sold for 3x what we’d paid four years earlier, with no improvements. I still feel a little guilty). So people there were very grumbly about the fact that they were paying a mint (in property taxes) for 60-100 year old rowhomes while the kiddoes buying in the rapidly built new construction condos (with parking!) didn’t have to pay anything.
Of course as the Inquirer pointed out, the high valuations on the new condos more than made up for any property tax savings! Naturally.
Could get very ugly in Greater Philadelphia - there is a pretty high amount of residential inventory when you count the neighborhoods. And the business tax environment is notably poor.
Honestly I hope things aren’t as bad as I anticipate, since I’ve been really happy to see the positive changes the boom has wrought in Philadelphia (most of them at least). So maybe it really is “different” there.
I posted this morning about Larimer County, Colorado voting down a property tax increase for prisons. When home values were going up that was easy. No so much now. Not only will tax increases become more difficult to swing, lower property values mean less revenue to the cities/counties. Will gov have to learn to live with less or will they go the route of Larimer County and try to tack on more “user” fees?
Who is the man behind the stock market’s curtain, and how long will collective public perceptions ignore his role in shoring up the markets when investers are getting a case of cold feet?
Important questions for priced-out renters:
1) Has there ever been a national price decline in the US which bottomed out one year later (as many REIC members are predicting)?
2) If the answer is no, then is there some high-level “soft-landing engineering” plan in place to make sure that “this time is different” which we would be at peril to ignore?
A potentially inflammatory topic, but one worth mentioning, is the issue of post-Bubble-implosion scapegoating. There’s plenty of blame to go around, but the human trait of focusing on a simple, convenient “them” will doubtlessly come into play again.
It goes without saying that FBs are already blaming everybody but themselves for their poor judgement and consequent financial predicament. And as things get uglier, I think the scapegoating is going to get uglier, too. “I was a fool who got my head handed to me, and it’s the fault of the __________.”
For the record, I think the villains of the piece are the FBs themselves - caveat emptor, fools - followed in quick succession by realtors and mortage brokers. I do NOT blame the government, the Republicans, the Democrats, builders, Asians, immigrants, the media or the Jews, as some posters in here have not-so-subtlely insinuated.
Your thoughts?
What about the Russians?
I’m interested in the perspective of the readers of this blog who live in Hawai’i. It seems to me that all of the problems kicked around on this blog are by far more exaggerated, more pronounced there. I admit, though, that my perception could be wrong.
I have a friend who works at U of HI in Honolulu, and in a conversation the other day, he mentioned that his daily ride to work has him pass by a “squatter’s village”. When he first arrived, he figured that it was homelessness just like that on the mainland, until a colleague informed him that most of the “homeless” people there held two or three jobs, but still couldn’t afford a place to rent, much less buy. And that was why they lived there.
Is this an exaggeration? Are stories like this common?
If this is common, the social dynamics must be terrible. I can’t imagine the spite that exists between, say, native Hawai’ians and mainlanders/overseas speculators.
“It seems to me that all of the problems kicked around on this blog are by far more exaggerated, more pronounced there.”
One obvious example: Quality-adjusted prices are higher and incomes are lower than in California.
BB to CH: “Help reduce the value of my currency, please…”
———————————————————————————-
Bernanke calls for renminbi revaluation
By Krishna Guha in Beijing, Edward Luce and Eoin Callan in Washington and Alan Beattie in London
Published: December 15 2006 06:06 | Last updated: December 15 2006 23:55
Ben Bernanke stepped into a political minefield on Friday when he released remarks branding China’s undervalued currency an “effective subsidy” for its exporters that was distorting patterns of production and trade.
Although the Federal Reserve chairman dropped the phrase in a speech in Beijing, using instead the less inflammatory term “distortion”, the Fed was standing by the language of the original text.
His comments were welcomed by US manufacturers. Frank Vargo, of the National Association of Manufacturers, said: “This is a very important message. The administration has been talking simply about currency flexibility. But Bernanke has come out and called the currency undervalued and told Beijing it is distorting the Chinese economy. That is significant.”
Mr Bernanke’s original draft talked about “the effective subsidy that an undervalued currency provides for Chinese firms that focus on exporting rather than producing for the domestic market”. If the Bush administration were to agree that the Chinese exchange rate manipulation constituted a “subsidy”, the US could in theory take China to the World Trade Organisation for violating trade pacts.
Hank Paulson, the Treasury secretary who led the delegation and faced pressure to harden his rhetoric, said: “All I can say is that the chairman of the Fed is entitled to his independent comments.”
http://www.ft.com/cms/s/8ed90514-8c01-11db-9684-0000779e2340.html