Weekend Topic Suggestions!
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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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I WANT A BUY AMERICAN THREAD.
Or ways we can try to help our economy - as opposed to just watching it tank.
Totally agree with you in all respects. Not only that, i think it is way past time that some of these money grubbing Investment Banks, Brokerages, et al, together with some of the great successful business people take time to look at what is happening economically to the country and start to put back. So much unpallatable destruction everywhere one looks.
The Housing Bubble is Over, everybody enjoy the view.
New names for the HBB?
Housing Depression Blog
Better Meth Labs and Grow Houses
Housing Ennui Blog
Or how about a whole new blog devoted to all of those experts who wrote all of those articles in the past few years, you know, the ones that painted us all as ultra-paranoid, “I see bubbles” mumbling, borderline-schizophrenics?
You know there are tons of those pages still floating in cyber-space humorously mocking us from the near past.
I just laugh at how sure they all were that we were so wrong about the bubble. But, hey, they are in that “People Are Smart” crowd!
Good news and bad news on the credit crunch–
The good news: It is over.
The bad news: Similarly to NOLA after Katrina was over, some sectors may never recover from the damage.
The really bad news: It’s not actually over, because nothing the Fed has done so far fixed the fundamental problem, which is a loss of trust. The bad debt lays out of sight and out of mind, but it has not spontaneously vanished in the wake of August’s liberal helicopter drops of liquidity, nor this week’s surprisingly-large FFR cut.
Credit storm passing for Wall Street firms
But aftermath may hurt as mortgage, structured-product markets shrink
By Alistair Barr, MarketWatch
Last Update: 3:45 PM ET Sep 21, 2007
…
SAN FRANCISCO (MarketWatch) — The credit storm is passing for Wall Street’s biggest firms, but once lucrative, and now ravaged, mortgage and structured-product markets may never be rebuilt entirely, analysts said on Friday.
http://www.marketwatch.com/news/story/credit-storm-passing-wall-street/story.aspx?guid=%7BE12F8C24%2DD469%2D4643%2DAB98%2DA881EB0D852E%7D
And how many years and new regulations is it going to take before investors will invest in mortgage backed securties again or even in loan packages ? And why would anyone invest now in loans in a declining market ?
The loan products that were marketed to the sheep were the highest risk junk you could imagine. With agents, appraisers , lenders ,and borrowers conspiring in fraudulent liar loans and hit the mark appraisals how can these lenders ever be trusted again ,or the borrowers for that matter ? When are the criminal investigations going to begin ? Why is Countrywide Funding’s CEO allowed to exist after this insult to the business world with his big contribution to toxic fraudulent sub-prime loans( that he wants to be bailed out of after he dumped his stock ). This guy Mozillo has no excuse because he knows how loans should be underwritten ,yet hes looking forward to doing business with FHA and he is calling for a increase in the loan amounts and another 1% cut in the interest rates . I guess all the dumb Americans exist to make guys like him rich ,and our tax dollars are there to bail out his junk loans and the rest of Wall Street .
I guess I would like a topic of discussion on how trust is restored when we know lenders could care less about breaching their duty to prevent fraud if they think they can pass on the loan to the secondary market in this new age lending world of ours .
What will happen to all of the barely lived in & brand new, never lived in… houses & condos?
The strict new bankruptcy rules pretty much rule out FB’s from getting back in the game.
It only leaves one avenue…
I suspect we will dangle citizenship to foreigners that meet financial considerations, in the purchase of these white elephants…
Makes sense….they bought a chunk of NASDAQ. Might as well bring the bad decorating to America.
how about the striped jeans?
“They will see our bulges and show us their big American breasts.”
SD’s City Govt has proposed a “Land Bank” (not sure how they plan to charge the taxpayers for buying up the white elephants…).
I can see a public motive for trying to avoid neighborhood blight, but why can’t they just let the market take care of reselling foreclosed homes? I guess they plan to make sure that housing stays permanently unaffordable, and charge area taxpayers for the pleasure of keeping it so.
Panel urges fight on foreclosures
Land bank to buy lost homes in county part of proposals
By Emmet Pierce
STAFF WRITER
September 21, 2007
Responding to the spike in home foreclosures that threatens many of the region’s neighborhoods, the San Diego City-County Reinvestment Task Force yesterday forwarded a series of sweeping recommendations to the City Council and the county Board of Supervisors.
(Graphic: Foreclosures in high-minority census tracts)
Among them is a proposal to create a regional land bank to buy foreclosed properties and to prevent neighborhood blight. The homes then could be turned around to create affordable buying opportunities.
http://www.signonsandiego.com/uniontrib/20070921/news_1b21loans.html
Per SD County “Land Bank” posted by the Prof.
(Sorry if it posts twice, this wonderful, longed-for CV rain is messing with the sat connection.)
Sheesh!
Third time’s a charm. (What an anticlimax.)
********************
See?
Taxpayer bailout…one way or another.
Had to have somewhere to put all the new underclass coming across the southern border. First get them to build their own houses at under market rates, then sell them the houses at vastly inflated prices, then extract all the money they’ve been sending “home” as PITI, then confiscate by foreclosure, and rent them out as “affordable housing” thereby subsidizing the people who financed their construction in the first place…the city fathers.
Very very clever. You and your financiers happy now, Senor Fox/Bush?
Already happening.
“Going to England to tout Sarasota
STAFF REPORT
SARASOTA — The Sarasota Association of Realtors is sending a team of six agents, accountants and lawyers to England later this month to tout the area’s real estate and answer questions about how to invest.
“The team is expecting to cover topics such as the current Florida property market, procedures for buying and selling real estate, legal and tax implications of owning property in the United States and fees and commission associated with professional networks,” the association said.”
http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20070919/REALESTATE/709190685/1201
Ziprealty already has a website in French, Korean and other languages.
These units will collapse to below rental income value and then be snatched up by investors. But since rental income value will also be falling (not as bad as price), it will be tricky to time the bottom. Probably in 2010.
Pre-boom houses were built by guys that drove white pickups and did 8-12 a year so that they could use their best crew on each stage of construction. Once the boom ensued they couldn’t get any buildable land and they had to go work for the corporate giants. Now that they’ve been laid off and the giants are walking away from deposits and options, is anyone out there seen the small builders come back and start to profitably produce homes that undercut the corporate builders’ costs?
No, small builders and trades are hurting, badly.
Agree. I’ve recently been seeing newer vans all over the place with contractor names on them that I’ve never heard of. I recently had a contractor going door to door in my neighborhood, pitching his remodeling services. I didn’t give him a remodeling job, but I did give him a couple bucks to haul away some junk from my garage. He was more than happy and my junk was quite comfortable in the back of his new Ford Superduty…
This will happen, again only firmly, in 2010 or so…before that, it will be tricky and be start-stop-BK-restart-stop- etc…
Some pawn shops around Detroit have stopped taking construction equipment, trucks etc. because so much of it is being given up for whatever monies can be gotten.
The war on savers. Will it succeed?
Not a lot of happy campers amongst us savers
after this weeks FFR cut by BB.
My primary topic suggestion:
What’s the best / safest way to deploy cash?
T-bills, CD’s, ?
Personally, I have a solid 7 figures in cash spread across
T-bills and CD’s. Average maturity 1 year. Average return 5%+
Is there a better way?
My goal is to preserve capital until the really good RE buying opportunities come about in my area (Irvine, Ca) in a few years.
Secondary topic:
Is there a way to hedge cash against the real possibility
of hyper-inflation during the nex 6-12 months?
Would be most interested to read advice and strategies
from others.
I too would be very interested in others’ survival strategies. Good questions.
Good topic. I too what like to hear some thoughts on where to put cash.
I am considering some GMAC corporate bonds that are 6 month maturing with 7.1% payout.
GMAC is hurting. Think about all those FB’s that will not be able to pay their car loans….
I’d like to hear when people believe hyper inflation will rear it’s ugly head.
Last week.
I’m not sure this “war on savers” catchline makes sense.
Savers right now are the ones with the money. It sounds like people here are looking for the government to subsidize them by paying them higher interest?
Why not go out and invest that money for better (non-govt sponsored) returns?
where can I find a non-govt sponsored return?
Foreign bonds? Foreign equities? Gold? Derivatives of those here? There’s a ton of possible ways of putting money to work that are decoupled from the Fed rate.
(Sorry if I missed the sarcasm.)
I would call it a “war on savers” because the Fed/gov’ts actions are actively devaluing our savings. Yes, we are the ones with money (rather than debt), however, those with debt benefit from a devalued currency. Those of us holding dollars do not. You’re correct that we can seek out ways to store our “wealth” other than dollars (gold, foreign currencies, foreign bonds, physical assets), but to me it is fundamentally wrong that I have to make “more risky” investments just to preserve purchasing power due to fed+gov’ts explicit actions to devalue the currency.
Those of us holding dollars do not.
The path is then obvious: Don’t hold dollars.
but to me it is fundamentally wrong that I have to make “more risky” investments just to preserve purchasing power due to fed+gov’ts explicit actions to devalue the currency.
So we can
1. “play the victim” to the government, bitch and moan about war-on-savers, or
2. invest for greater-than-inflation returns in “risky” investments
and we choose #1?
The reality is that dollars are at risk because of government (and have ALWAYS been at risk), equities are at risk because of market conditions. One pays more than the other. Why would anyone investing choose dollars?
The path is then obvious: Don’t hold dollars.
I agree. I’m not trying to “play the victim” to the government here. I’m holding gold, silver, canadian royalty trusts, foreign bonds, hard currency funds, etc. I get your point that playing the victim doesn’t get anyone anywhere, really, and there are actions one can take to persevere in the current economic situation.
HOWEVER….
It doesn’t *have* to be this way. There was a time (what, 30 years ago? definitely 100 years ago) where this wasn’t the issue. There IS a fundamental problem with fiat currencies. Yes, there are downsides to hard currency as well (restrictions on economic growth, for one). I don’t see anything wrong with speaking out against the current system or trying to change the government, which controls the basis of our nation’s currency. I think that’s what most here are doing. They’re simply wanting their government to enact policies that support sound financial decisions, saving, investment, and ultimately reward those who work and produce value for society. Our current system does not do such things.
It’s true that in a certain sense, any store of wealth has risk associated with it. It’s a question of balancing risk against likelihood of retaining value. Unfortunately, not everyone can hold things other than dollars. Most people likely need some form of liquid savings for emergencies. If you don’t want to hold this money in dollars, what do you do? Open a bank account in a foreign country? Foreign CDs? Everbank? Most of these have high minimums, like $10k. Not an easy minimum to meet for many of the “responsible” people in this country.
There was a time (what, 30 years ago? definitely 100 years ago) where this wasn’t the issue.
??? Inflation 30 years ago? Double digits, and usually held up as a model of what not to do. 100 years ago? Real depressions. Is that a desirable system?
I don’t think that our system of mild inflation was arrived at willy-nilly. There are some very good reasons to keep it around, many of which are evaporating from the collective social memory.
Perhaps you are right after all, a good depression would remind us why they are to be avoided.
Think of your (noninflating) labor market income as a Wall Street IBer target of the War on Savers, and perhaps the catchline will began to make sense.
Nope. I’m not a victim, I’m a saver. I just invest with the expectation that the powers-that-be are going to benefit their own interest rather than mine.
It has never been different.
Gold, oil, foreign currencies, and T-Bills, in that order.
I know many do not believe in buying gold because:
A: You can’t eat it
B. It draws no interest
C. It ain’t real money
D. Etc. and other nonesense
Reasons to own gold:
A: Gold has a 5000 year “recorded history” as a medium of exchange. During the Roman Empire (2000 years ago) the value of 1 oz. of gold was fixed at 100 loaves of baked bread. Today 1 oz. of gold will still buy at least this much bread.
B: Since 1913 (94 years ago) when the FED was created the dollar has lost 97.5% of it’s purchasing power. Compare that to the purchasing power of gold and you have your investing question answered.
C. The dollar is “toast” (carbon black variety).
D: Read the U.S. Constitution to determine what is real money.
E: There has never been a fiat currency that over time did not go to it’s intrinsic value of zero.
F: The dollar is backed by the “full faith and credit of the US guvment, (What Faith, What Credit?)
G: The value of gold is backed by it’s own intrinsic value (guvments can’t print it).
The reason that I added T-Bills and foreign currencies is that you need liquidity and never put all your investments in one area.
The FFR cut was merely the first volley in the escalated War on Savers. Yesterday HP agreed to come on board with the D-ratic Congress’s plan to expand the conforming loan limit, which will have the combined effect of (1) bailing out lenders who made stupid loans; (2) keeping homes in bubble zones unaffordably priced and (3) driving up rents.
22 hours ago
Limiting Loans or Letting Loose Again? The Fannie/Freddie Conundrum
Posted By:Diana Olick
…
So back to my original question: is raising the cap on the conforming loan, which allows Fannie and Freddie to sell higher-priced loans, just a big ol’ bailout of a market gone awry and a message that says, “Okay, you screwed up, we’ll just raise our loan limits to help you out”? And if the loan limit is actually based on home prices, which are actually going down, then isn’t this a bigger bailout than even its face value?
http://www.cnbc.com/id/20889594
Sorry for the double post; thought my first attempt to submit this comment was lost forever in cyberspace.
The FFR cut was merely the first volley in the escalated War on Savers.
Yesterday HP agreed to come on board with the D-ratic Congress’s plan to
expand the conforming loan limit, which will have the combined effect of
(1) bailing out lenders who made stupid loans; (2) keeping homes in bubble
zones unaffordably priced and (3) driving up rents.
BTW, I believe the writer of the following piece said “sell higher-priced
loans” when she meant to say “buy higher-priced loans.”
22 hours ago
Limiting Loans or Letting Loose Again? The Fannie/Freddie Conundrum
Posted By:Diana Olick
…
So back to my original question: is raising the cap on the conforming
loan, which allows Fannie and Freddie to sell higher-priced loans, just a
big ol’ bailout of a market gone awry and a message that says, “Okay, you
screwed up, we’ll just raise our loan limits to help you out”? And if the
loan limit is actually based on home prices, which are actually going
down, then isn’t this a bigger bailout than even its face value?
http://www.cnbc.com/id/20889594
When one wonders about how the housing bubble could have possibly gotten so out of hand, with $700,000 mortgage loans made to Central Valley strawberry pickers earning $20,000/year in income, one need look no farther than the rush to bail out the lenders who made the foolish loans. The “get-out-of-jail-for-free” card which rewards the bad actors on Wall Street and in Greenwich, CT (a second time!) for making these highly-lucrative yet destructive loans comes courtesy of unwilling, unwitting Main Street USA taxpayers.
Good article, and right on the money. The Fannie/Freddie thing to me, is virtually the *only* important topic this weekend. What effect, if any, will it really have on the housing market, assuming that the limit is actually increased? I’ve already seen a wide variety of opinion on that here. My own take is that it will have little effect.
“My own take is that it will have little effect.”
I am hoping you (and Ben) are right about this, but nhz’s posts raise my doubts, not to mention the evidence MLS used home listing prices are staying remarkably high in CA despite a dearth of buyers. It seems to me like the banks are holding out for a bailout.
It’s a bailout or bankrupt
One size does fit all…
“It seems to me like the banks are holding out for a bailout.”
********
This exactly captures my recent thoughts on this… except it’s not just the usual banks that are waiting.
“…except it’s not just the usual banks that are waiting.”
Please elaborate.
It occurred to me that since mortgage lending was “gear up” so significantly by Wall Street in the last half decade, at least, the prime suspects for waiting for a bailout now include various IB’s, many hedgies and the CFC’s of the world and their ilk.
And those are not “the usual banks”.
It will also be a war on drivers. Seeing yesterday’s closing oil prices, can you imagine what gasoline will cost by Thanksgiving?
All those suckers…er, homeowners who wanted a rate cut haven’t thought about how they are going to pay double for food and energy next year.
clarrity,
the housing bubble is gone.
move on.
how can you take what you learned by this bubble and see the future? I do not know, I do know housing is finsished.
Its no longer what you dont know, its what you know for sure that just isnt so.
I need this forum to complete an education that is ongoing, painful, but ongoing.
dont stop coming here to exchange ideas….
thank you ben jones. I will buy your book.
So, when will it be a good investment to buy? What will be the signs? Do you see a REIT for residential in the future? Just how long can banks hold their REOs?
In other words, when can I make a killing on the upswing?
I would wait until folks like yourself stop asking questions like “when can I make a killing on the upswing” because it is too embarrassing, in light of the common knowledge that “real estate is a terrible investment.”
I made a killing in the bubble. Then hybernated bear. When should I wake up?
Hi Ben, been lurker for a long time–very occasional poster, really like what you’ve done and the community you’ve created.
weekend idea is a discussion of all the battlefield conversions to acknowledge the bubble. Below is an article with quotes from Greenspin that bring mendacity to new heights. As if he was some passive observer of the bubble rather than the guy manning the air hose.
Greenspan: House prices to drop much lower
Former Fed chief says it’s unclear if economy is headed for recession
Reuters
Updated: 8:11 a.m. ET Sept 21, 2007
VIENNA - A big overhang of property will bring U.S. house prices down further, but it is too early to say if the economy will plunge into recession, former Federal Reserve chief Alan Greenspan was quoted as saying on Friday.
Greenspan said in an interview with Austrian magazine Format that low interest rates in the past 15 years were to blame for the house price bubble, but that central banks were powerless when they tried to bring it under control.
“It’s a difficult situation, there is an enormous overhang on the real estate market,” Greenspan was quoted as saying. “Many buildings which just have been finished can’t be sold …”
“So far, prices have dropped only slightly. But it was enough to cause alarm around the world,” he said. “Prices are going to fall much lower yet.”
“However, it is too early to answer the question about a recession. We simply don’t know yet. It depends on how flexibly the economy can react,” he said.
Greenspan said deregulation and the introduction of market economies in the former Communist bloc after the Berlin Wall fell in 1989 had caused a global boom and a worldwide reduction of interest rates, which both helped fuel the property bubble.
“There is no doubt about the fact that low interest rates for long-term government bonds have caused the real estate bubble in the United States,” he said.
“The Federal Reserve began a series of interest rate increases in 2004. We were hoping to bring the speculative excesses in the real estate sector under control. We failed. We tried it again in 2005. Failure,” he said.
“Nobody could do anything about it, neither us nor the European Central Bank. We were powerless,” he said.
(c) Reuters 2007. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
Bulloney…….maybe 5-6 1% increases would have stopped the bubble in its tracks, but all those 1/4% increases…geez
================================
“Nobody could do anything about it, neither us nor the European Central Bank. We were powerless,” he said.
But remember the constant press coverage……….17 increases. An unprecedented number of interest rate increases.
Never before in history had the FED raised rates some many times, so consistantly, working hard to contain “inflation”.
What a Joke! I can’t believe people even listened to this dribbel. I agree a 1% rate increase each time, may have done some good. But then, Wall Street Brokers wouldn’t have cheap money for deal cutting.
““However, it is too early to answer the question about a recession. We simply don’t know yet. It depends on how flexibly the economy can react,” he said.”
So whether there is a recession or not depends upon if there is a recession.
The media shouldn’t assume that FB’s voices are the only ones that count and that a “crisis” for them is a crisis for everyone. Falling prices don’t hurt the first time buyer hoping to break into the market. First time buyers enable people to become second-timers and so on. Why do the media continue to use this word to describe people being expected to repay what they’ve borrowed, instead of using it to describe people who have been priced out of the market and seen their savings thwarted by mutant price runups?
In line with this questionable and flagrant overuse of the word “crisis” in this situation, is the bewildering mention of a “moral hazard” on CNNMoney this morning to describe our government NOT being more generous with FB’s. Why are we using this term to describe government not bailing everyone out, when we should be using the term to describe lender/broker/agent/flipper/consumer greed pricing people out of homes?
My weekend topic suggestion would be examining what other bass-ackwards terms the media is using that clearly favor The Plight Of The Poor FB.
That is all.
The cheerleaders on the business news always twist everything that is said . I watch it right in front of my eyes . Also, for every one person that makes a honest comment ,they have three people cheerleading to offset the comment or the host makes a final comment to sum up the cheerleaders point of view.I have never heard a discussion by MSM about this housing boom being a outright mania of speculation in real estatethat was funded by fraudulent lending set up by Wall Street and that is why prices are crashing .
“Gobal Markets “will save us , or,” the Global markets are strong “is the new buzz words ,and it reminds me very much of the chants and hype from the real estate salespeople during the housing boom.
I guess my feeling about the new global markets hype is that I want America to be strong and if corporations only benefit and America doesn’t over all, than what good is it .
octal77-looks like a plan to me.
If home prices are deflating, why are people so concerned about inflation?
Because we need to eat and put gas in our cars, too.
If home prices are deflating, why are people so concerned about inflation?
Assets such as R/E, autos(?), some household goods, etc are now
priced into a deflationary spiral.
Commodities such as energy, food, etc are now priced
into a inflationary spiral.
A very odd situation indeed.
It’s a repeat of the 70s stagflation but this time we are beyond broke.
stagflation? Yes. But it will be a split economy. Food and energy costs are not in the “core inflation.” Thus the fact they are inflating is only “interesting.” But you will have huge wage and housing deflation over the next few years. Let’s face it, all of those contractors, Realtors ™, mortgage brokers, and others will need work to eat. (Heck, more hours to eat due to food inflation and declining wages.)
Did you see the Nevada labor report? Quite a few “foodservice and bartender” layoffs. A coworker reported that Sunday traffic on the 15 (back from Vegas) is light. So this is significant.
Got popcorn?
Neil
It will not last. If the probable deflation in housing continues, demand will collapse and commodity prices will collapse as well. If you go back and read about the late 29-30 time period there was also a fear of inflation in commodities. It did not last. Cash in its many forms is king.
1. Did the fed do the right thing? Does lowering rates in a “mostly” inflationary environment help at all?
2. On a related note: Should we invest in companies that make wheelbarrows? These might need to be used to hold all the dollars required to buy a loaf of bread.
Remember the Twenty million mark notes that were printed in post WW I Germany?
I was in Brazil during their hyper-inflation. You would go into a bar or a hotel and the prices would be written in chalk. It was possible to order lunch and have the price go up before you paid the bill.
i watched the youtube video of ron paul going after bernanke yesterday. bernanke responded with a very short answer to ron’s several minute long question regarding the impact the rate cuts are having on the u.s. dollar.
his answer basically said that the fed is very aware of the potential consequences but since core inflation is only 2.1% it’s all good.
i would love to see a thread dedicated to core inflation. how is it calculated? who calculates it? what are the relationships between who calculates it or determines the how and the people who use it for their own economic purposes and even a history of the number.
I thought core inflation was everything but food and gas, which is obviously a bogus statistic in the present climate. As to how it’s calculated, that is a very good question indeed.
I believe there is a good information about inflation calculations on shadowstats.com (I think that’s where I came across them). Anyway, another major issue with the fed-cited CPI calculations is “owner’s equivilent rent” rather than including true housing prices. In bubbly areas the cost of owning can be 2-3x the cost of renting. So this skews the statistic for the “average” person even further.
Yeah, try this:
http://www.shadowstats.com/cgi-bin/sgs/article/id=343
Who uses food and gas??? that stuff is irrelevant
http://www.newyorkfed.org/research/staff_reports/sr236.html as a start.
Maybe not a weekend topic but I’d be curious what people here think about ethanol. Now that oil appears to be shooting towards $100 there will be more pressure for alternative solutions.
What about ethanol from sugar cane? I just received a prospectus from a new sugar can ethanol plant to be built in the Imperial Valley. Thoughts on sugar cane ethanol? Thx.
Good to see that there are strategic plans to transition from corn to other raw materials for ethanol production! Sugar cane is a perfectly acceptable source of material for ethanol. In fact, better than corn!
One only has to look at Brazil where they have ELIMINATED their foreign oil imports by utilzing sugar cane to produce ethanol for their transportation fuel needs.
That proposed plant in IE might be worth looking at more closely for possible investment.
Hope this info helped.
Corn is bad because it takes too many non-solar-energy resources like water, fertilizer, processing fuel etc to make it worthwhile on a large scale. And it’s just bad to compete with a food crop or arable land. We’ve already seen that.
Sugar cane is good for Brazil, but I don’t think we should import EtOH from them because 1) it will just make us dependent on Brazil instead of the Middle East. It’s an improvement, but dependence is dependence 2) Brazil can’t support everybody’s ethanol needs unless they cut down the Amazon rain forest, which would be a disaster.
EtOH from celulosic sources is the only solution I see. The US is full of land which can’t support anything, but can support switchgrass and stuff.
Either ethanol or butanol from cellulose is the way to go. If you go to the middle of the country its amazing how much land there is that can’t be used for farming (even with government subsidies) that can be used for growing switchgrass and other plants for cellulose.
Personally, I think we will end up using butanol rather than ethanol since butanol is more like gas. You can put 100% butanol in your car right now and it will work. In fact, some tests have shown that your car with get a slightly higher MPG from butanol than from regular gas. Butanol can also be transported in pipelines unlike ethanol.
cellulose ethanol is the mid-term solution. Long term let’s look into an algae or bacteria to create an diesel substitute that is far more efficient.
Short term cane derived ethanol has a place. But realize it will be uneconomical in a decade.
I disagree on importing Brazil sugar cane; yes it would counter-stimulate the US ethanol industry. But if we cannot compete in the world market…
$100/bbl oil is almost here… that just blows me away.
Neil
We get far more Ethanol from sugar cane then corn and a higher quality burn (less pollution)….but we are Americans, we hate being the best… we chose vhs over beta
Sugar cane grows in sub-tropical regions like South Florida and South America.
I will not grow in MOST of the US, and takes lots of water.
It grows in swamps. Forget about this as an alternative.
The US wastes most of the gas we get in ridiculous SUV-type vehicles and huge power boats, and does not know the meaning of conservation. The solution is not to WASTE gas.
Converting crops to gas is bad economic policy.
The solution is to institute a policy encouraging smaller familes and low immigration. Only by reducing population can man eventually live within his means and environment.
Oil and Gold are both non-renewables, taken from the bowels of the earth…
When you drill or mine for either, you extract as much as possible.
There is still a lot of oil underfoot, and to waste food products, in the growing of faux oil is simply absurd.
Ethanol is a net loss product. It takes more energy to produce ethanol than is gotten out of it at the pump, energy that could have been used to do the same job.
Oil, gas, uranium and most renewables exceed ethanol on power achieved vs. power used.
Great! Let’s take the driest place in the country and grow a tropical plant there.
Sure the government will subsidize Big Sugar to locate operations there. Lotsa jobs for out of work Mexicans as well….
I thought I saw a bits buckets, but it’s gone now.
HUD Secretary Alphonse Jackson was on Nightly Business Report yesterday. Main quotes:
—–
1.What we have said is this. We’re going to look at raising the cap, but we want it with strong regulatory reform.
2.So yes, we are entertaining the idea of lifting the cap 2 percent a year.
3. [Q: we're also talking about a temporary lifting of the cap. Why temporary?] Because really as I just said a few minutes ago, Susan, they can sell off some of the jumbo loans and still have enough liquidity to make and underwrite other loans that are moderate income that their charter dictates that they do.
4. So we will help basically 500,000 low and moderate income persons. Now I will tell you, Susan, there are some people we are not going to be able to help. Those yuppies who took out these jumbo loans and also wanted two cars. Clearly they were educated enough to understand the fine print. But many teachers, fireman, police, nurses were not in that same position. And we feel an obligation that we must help them. Thirdly, we will not help any person who this a second home. A large percentage of that two million are second homes. And we are not going to bail those persons out.
—–
Transcript here: http://www.pbs.org/nbr/site/onair/transcripts/070920b/
Scroll about halfway down.
I’m not sure I like what he said about yuppies vs. firemen. Does he think firemen didn’t buy new cars too? What about yuppie doctors who know less about finance than, say, teachers? Where do you draw the line?
This Jackson character is such a nimrod. How will lifting the cap on jumbo loans help low and moderate income folks. Gonna shoehorn them into 500 or 600k houses on a 45k salary? Riddle me that one.
And this quote…
“Clearly they(yuppies) were educated enough to understand the fine print. But many teachers, fireman, police, nurses were not (educated enough to understand the fine print).
OK then, so teachers, among nurses and cops, are too “uneducated” to read loan documents. Illiterate and innumerate?
Define “yuppies”, Mr. Jackson? Most teachers need a MA, but at least a BA.
Where is the reporter who will question Alphonse on his muddled ‘thinking” And they sent this clown to China to sell MBS…
“Clearly they(yuppies) were educated enough to understand the fine print. But many teachers, fireman, police, nurses were not (educated enough to understand the fine print).
There’s a reason there’s a “closing”. Even an idiot can figure out that if you need to sit 5 people together in a room at a title company to sign dozens of documents that something *important* may be happening and you need to pay attention.
Plus in many states you’re required to have a master’s degree in order to land a f/t permanent job. Many nurses have BS degrees now too.
Nimrod=Hunter? Jackson is a hunter?
He obviously thinks firefighters and nurses are imbeciles.
I think we’ve clearly figured out who the imbecile is…
Six people ripped homeowners off for 10s of millions of dollars … whiskey fox tango?!
Pa. Mortgage Broker Files for Bankruptcy http://www.forbes.com/feeds/ap/2007/09/20/ap4138810.html?partner=alerts
For instance, a homeowner wanting to refinance a $100,000 mortgage at a lower interest rate could take out a new loan for $150,000 and use the money to pay off the first loan. The homeowner would then hand $50,000 to OPFM to invest and make mortgage payments to the company for the remaining $100,000 of the second loan. OPFM would take over mortgage payments on the full $150,000 loan.
But Case said the investments stopped at some point and the company ran aground.
“It only works if the money is invested. Unfortunately, it wasn’t,” Case said. Homeowners now face mortgage payments on the larger loan, he said.
Perhaps we could take about the dollar being the new peso.
The “main stream” propaganda gang already had stories out about how it is GOOD to have a falling dollar because it promotes exports.
I saw several interviews from business owners that this was great for their business. So, I guess bad news is good news. Welcome 1984 !
The export States of America
Wouldn’t we need actual stuff to sell?
How about slightly-used granite countertops? Does that count?
They’d just take it for granted.
Businesses do like to pay less to their employees, except that with falling “real income” comes more cries from the proletariat to “do something” about their poverty, which means higher taxes from government officials and more government interfere in the economy which affects the economy even more. It really is a shame we’re not much more sophisticated than primates overall when it comes to understanding and accepting economic realities.
I would like to know why the commercial property building still seems to be booming. Around Detroit, there seems to be a constant stream of new commercial development, despite the ongoing recession here and now the housing market issues. Is there some kind of disconnect between residential and commercial building???
Thanks in advance.
I think commercial will be lagging. Once the lenders want the cap rate increased, a lot of the deals of the past won’t make sense.
Here’s a topic:
What’s the best way to spread the word to the press, the general public, and our legislators that a taxpayer-funded bailout for sub-prime borrowers is “Bad For America”
Interestingly, when I spoke to a few people about this–people who were responsible borrowers–they were in general favor of “helping” the specuvestors witht he liar loans because “it will keep property values from falling”.
So it may be an uphill value. Joe Sixpack–even if he’s not in trouble with his mortgage–wants to keep his fantasy money.
reuven -
Are you in the Alt-A Bay Area? [SF Bay] I’m guessing you may be from recent posts.
In any case, it’s the delusional thinking of prudent recent housebuyers around here… that helping specuvestors is the right thing to do.
They are all high, mighty and moral when it comes to the issues of “healthcare for all”, “no war for oil” and the “new Americans”.
But when it comes to their own actual situation, they will have none of it.
How about a weekend topic about individual moral relativism in real estate?
It’s a freakin’ Bay Area contagion.
I am bi-coastal, with a house in Sunnyvale, California, and in Orlando Florida (I work in the “Theme Park” industry, so I’m in Florida about 25% of the time).
I own my property outright in both places (have a 3/2 house in Sunnyvale). I don’t care what it’s “worth”. I’m living in it. It can drop in value 50% for all I care. The value never existed in the first place.
At least, Sunnyvale is a nice place to live. I think the prices are 50% too high. But for the most part, people bought their homes to live in.
Florida is simply silly. I think the entire economy is based on people buying and selling houses to each other. Everyone I meet there thinks their “investments” financed with I/O mortgages with balloon payments will make them rich! And if I doubt them, they think I’m jealous or something, so I’ve learned to keep my mouth shut. At least half the homes and condos sold in the past year were bought as “investments”
Of course, now they’re all losing their shirts. I know people who were certain the ticky-tacky house in Lake County they bought, or their condo (that was a 10-year-old rental with a slapdash conversion) will make them rich when they flip it.
(Repost because first attempt got lost)
Topic idea:
How do we effectively spread the word to Legislators, the Press, and fellow Taxpayers that a bailout for specuvestors and their liar loans is Bad For America?
It seems that your average “Joe Sixpack” supports this–even if he’s not in trouble with his mortgage–because he doesn’t want to lose his precious “property value”. People like their imagined wealth, and it’s a relatively cheap trinket for our Govenrment to throw to stupid Americans to keep them happy.
I think it’s possible what we’re hoping for may not happen. What if foreigners take advantage of the low dollar and start buying residential real estate. After all, a $1 million home is only about $700,000 in euros; an $850K home is only about $600,000 in euros. Also, why wouldn’t inflation drive up the cost of a home in the U.S.? We have stagflation in home prices vs. wages now.
The common wisdom seems to be don’t jump back into the market (whether it be stocks, real estate, etc) until there is blood in the streets. I was wondering if anybody thinks this might apply to the US dollar as well? It’s been falling for 5 years now and probably still has a ways to go but at some point, could it start appreciating again? Granted it’s a fiat currency but then so is every other major monetary system on the planet and the US does have a longer history of stability than most.
The counterargument is that the Fed is working ever-so-hard behind the scenes to pump in liquidity so that everyone starts buying stuff again. It is quite hard (at least for me) to see how the resulting tension between deflationary market forces and inflationary helicopter drops will resolve.
A few weeks ago there was an interesting discussion about how HBB’ers spend their money. Most of us are financially conservative…um, frugual…okay let’s face it, we are downright cheap! What do we “splurge” on?
important topic in the coming earnings discounting season
MARKETWATCH FIRST TAKE
The U.S. is on sale
Commentary: The Dubai-Nasdaq deal is only the beginning
By MarketWatch
Last Update: 8:56 AM ET Sep 21, 2007
LONDON (MarketWatch) — This week’s announcement that Dubai’s investment company will take a 20% stake in the Nasdaq may have set off alarm bells in Congress, but it’s probably just the beginning.
…
Politicians may not like it, but they’re unlikely to do anything meaningful about it, unless they suddenly decide to stop living like subprime borrowers and clean up their balance sheets.
http://www.marketwatch.com/news/story/us-sale/story.aspx?guid=%7B11409019%2DB055%2D42C3%2DB32C%2DBDDBAB0169FF%7D
This editorial was reprinted in “The Week” via the Seoul Korea Times. It considers a topic I’ve not seen discussed much on HBB, and seemed appropriate for a weekend discussion…particularly in light of the spirited gingoism that periodically appears on this excellent blog.
Having long maintained that the housing bubble and subsequent economic fallout was either engineered or allowed as a means of transferring foreign treasuries into American-held corporate entities, this essay seems pertinent…particularly now that these same foreign governments may well end up owning a major chunk of the American real estate market.
(Dubai having purchased nearly 20% of NASDAQ yesterday come to mind.)
Here it is, what you y’all think?
“Move over, private-equity and hedge funds. There’s “a new bogeyman of international finance,” said economist Nouriel Roubini in the Seoul Korea Times.
“A vast and growing pool of state-controlled funds,” known as sovereign-wealth funds, is now worrying investors and policy makers alike. They’re alarmed that government institutions could be one of the stock market’s biggest players in coming years. “That the biggest of these institutions are in China, Valdimir Putin’s Russia, and some unstable petro-states adds another worry to the mix.” The rise of the funds is “a direct consequence of the accumulation of more than $5 trillion in foreign reserves by emerging-market economies.” No longer content to earn puny returns on government bonds, these countries are pouring their excess funds into U.S., European, and Japanese stocks–China’s 10 percent stake in Blackstone Group is just one example. But the emergence of sovereign-wealth funds “is causing a backlash in the form of ‘financial protectionism.’” The uproar over Dubai Port’s attempt to buy the firm that manages most U.S. ports is just one example. More controversies are almost inevitable. Get used to them, because sovereign funds are “here to stay.”
Am I just imagining that I saw AG explain the Greenspan put to Jon Stewart on Comedy Central’s Daily Show just a couple of nights ago? (AG did not explicitly call it a “Greenspan put,” but he did explain to Jon how the big FFR cut this week served to spark a stock market rally, which is good for the economy.) Perhaps this interview was intended to be comical?
latest news
THE FED
Kohn disputes notion of Greenspan or Bernanke ‘put’
No. 2 Fed official says central bank always takes a big-picture view
By Greg Robb, MarketWatch
Last Update: 8:00 AM ET Sep 21, 2007
WASHINGTON (MarketWatch) — Federal Reserve vice chairman Donald Kohn disputed Friday the notion that either Fed chief Ben Bernanke or predecessor Alan Greenspan operated in a manner intended to bail out investors who made bad bets, thereby implicitly encouraging them to make worse bets in the future.
In short form, this perceived tendency is known as the “Greenspan put” or the “Bernanke put,” so coined because a put option protects its holder from a loss on an investment. The existence of such a “put” has been a popular debate in the financial press since global markets erupted in turmoil early last month.
Many commentators draw comparisons between Greenspan’s interest-rate cuts in the wake of the collapse of the hedge fund Long-Term Capital Management in 1998 and Bernanke’s actions during the current credit crunch.
Many commentators have said the Fed’s surprise move to cut rates by fully half a percentage point on Tuesday was such a bailout.
http://www.marketwatch.com/news/story/feds-kohn-disputes-notion-greenspan/story.aspx?guid=%7B366BFFAE%2DBC6B%2D4FA5%2D9912%2DA9F032228001%7D
http://www.investopedia.com/terms/g/greenspanput.asp
http://www.crossingwallstreet.com/archives/2007/09/greenspan_on_th_1.html
Someone else brought this up earlier in the week (I am sorry - I cannot remember who.) I’d like some discussion on not only how interest rate cuts and increasing inflation hurt the elderly on fixed incomes, but also on how we can communicate that to the financially illiterate in a way that shows the harms of the last few years. Thanks!
Here is a link I found. In the section “Seizing Assets Through Inflation Taxes” there is a very good description on what inflation will do to people on a fixed income and I thought it did a good job explaining it.
http://news.goldseek.com/GoldSeek/1190214870.php
Inflation taxes are the only politically viable form in the long wake of the Raygun antitax revolution. R-cans love them because they are regressive and poorly understood by the sheeple who pay the highest rates.
Thanks SunDevil - I will look forward to reading this.
PB - I was at a “motivational conference” when a stadium full of middle class and lower middle class cheered Steve Forbes declaration that the biggest problem facing Americans was the “death tax.” I’m guessing less than one percent of these people had a net worth over 2 million dollars an individual, but they stilll cheered. It’s very sad.
Economics lesson not yet learned: Unregulated wild-wild-West-style debt
securitisation creates rampant moral hazard which is very harmful to the
globalized economy.
What “cures” are U.S. policymakers pursuing?
1) Ignore the problem and hope it will go away.
2) Pump in lots of liquidity in an attempt to reflate some bubble — any
bubble will do!
3) Stick Main Street taxpayers with the tab for a govt insured bailout of
the mortgage lending industry and their Wall Street support network.
4) Export the moral hazard of monetary policy debauchery to other parts of the world (witness King’s flip flop on bailing out fools).
Good luck with that plan!
Securitisation
When it goes wrong…
Sep 20th 2007 | NEW YORK
>From The Economist print edition
A generation has prospered from the wholesale transfer of risk through
securitisation. Now it is paying the price
Reuters
“THE medium-term outlook for the company is very positive,” declared
Northern Rock’s chief executive, Adam Applegarth, unveiling its first-half
results in July. He spoke of a credit book that was “robust”. Who would
have guessed that less than two months later Britain’s fifth-largest
mortgage lender would be fighting for its life, its branches besieged by
customers demanding their savings back?
The run on Northern Rock is the most dramatic symptom of the contagion
gripping the financial markets. Here was a bank that had grown rich from
the innovations of recent years, using abundantly stocked wholesale
markets to fund its lively growth, using those same markets to offload
bits of its loan book as and when they became unattractive.
http://www.economist.com/finance/displaystory.cfm?story_id=9830765
“But do not expect a rush back to the ways of the 1960s. Securitisation has become far too important for that. Indeed, it has not yet fulfilled its promise. Wall Street eggheads may be licking their wounds at present, but they will soon be coming up with even more products. And, given time, there will no doubt be another wave of buying. More importantly, the transformation of sticky debt into something more tradable, for all its imperfections, has forged hugely beneficial links between individual borrowers and vast capital markets that were previously out of reach. As it comes under scrutiny, the debate should be about how this system can be improved, not dismantled.”
I have an idea: How about if governments let the invisible hand slap down bad actors, instead of forcing taxpayers to bail them out?
the “black box” is currently spitting out:
Quality Tranches of the SIV’s CDO’s and other “investment Vehicles” going forward that will be a boondoggle of returns.
Count on it.
Fed’s Warsh Quashes Bailout Talk
By BRIAN BLACKSTONE
September 21, 2007 1:45 p.m.
WASHINGTON — Federal Reserve governor Kevin Warsh on Friday cautioned against assuming that the Fed will prop up asset prices or protect individual financial institutions.
“We should be extremely wary of protecting financial institutions and their various stakeholders from incurring losses,” Mr. Warsh said in prepared remarks to the State University of New York at Albany. (Read the full speech.)
“The desire for well-functioning markets does not require us to insulate asset prices or individual financial institutions from the buffeting of the marketplace,” he said.
http://online.wsj.com/article/SB119039313742135405.html?mod=googlenews_wsj
A Fed Panic and a Massive Bailout of American Banks Paid for by the Entire World
by Prof. Rodrigue Tremblay
Global Research, September 21, 2007
thenewamericanempire.com/blog
http://www.globalresearch.ca/index.php?context=va&aid=6832
Northern Rock Bailout: Why Central Bankers Can’t Have Integrity
Posted by Bill Bonner on Sep 21st, 2007
Poor Mervyn King. The man is the head of the Bank of England. He was just trying to do the right thing. When the credit crisis began this summer he, alone among central bankers, stood firm. No bailouts, said he. If we rescue reckless lenders and imprudent speculators, he opined, it could “sow the seeds of a future financial crisis”.
http://www.dailyreckoning.com.au/central-bankers/2007/09/21/
subprime meltdown
Countrywide Gets Another $12 Billion In
Bailout MoneyFinancingReuters is reporting that Countrywide has announced that it has secured an additional $12 billion in financing to help it hang on through the housing slowdown.
http://consumerist.com/consumer/subprime-meltdown/countrywide-gets-another-12-billion-in-bailout-money-financing-301915.php
How do you Warsh away this kind of candid remark?
AFX News Limited
Former Fed chief Greenspan says some bailout ‘inevitable’ in stabilizing economy
09.18.07, 6:09 PM ET
WASHINGTON (Thomson Financial) - The Fed may not want to bail out speculative investors, but that’s bound to happen when policymakers look out for the health of the broader economy - as they did today, former Federal Reserve Board Chairman Alan Greenspan said today.
Asked if today’s decision to cut the key federal funds rate by half a percentage point amounted to a bailout for hedge funds, the former central banker said elements of a bailout are ‘inevitable’ whenever the Fed tries to keep the economy out of recession or keep financial markets from freezing up.
‘In order to punish those who are undeserving, you have to punish the whole economy and the deserving,’ Greenspan told Fox News in an interview after the rate cut announcement. The converse is also true, he said.
http://www.forbes.com/markets/feeds/afx/2007/09/18/afx4132007.html
Fed governors are still puzzling over whether there really are signs of contagion out there. I guess bank runs in the UK over US subprime debt are not sufficiently convincing evidence?
AFX News Limited
Fed governor Warsh says market turmoil not a sure sign of subprime contagion
09.21.07, 2:16 PM ET
http://www.forbes.com/markets/feeds/afx/2007/09/21/afx4144054.html
There ya go! As long as the stock market is near its high, it’s all good!
As evidence of this theory, he said markets relying less on the securitization of mortgages have fared better in recent weeks, and the stock market is still near its high.
(I used to go by watching&waiting, but that handle has obviously outlived current events)
Ok, over the past week watching Alan make the rounds promoting his book, I can not help but wonder (a) who the hell is buying his book? and (b) how in the world does he expect me to believe this whole mess wasn’t all very well planned out and precisely calculated by him and his fellow econs, beginning on or around (or dare I say, for the real conspiracy nuts among us - before!) September 11th of 2001??
I don’t know… I just can’t bring myself to buy Greenspan’s whole “nope, didn’t see it coming… (even though I live, eat and breathe economics)” nonsense.
He is so full of what we Montanans like to call top grade buuuuullsheeeeeeeeet. Which is fine, I have rubber boots but something about him rubs me wrong. Maybe the whole “didn’t realize it until ‘05 or ‘06′? If he’d say ‘03, ‘04.. I’d forgive that, but ‘05, ‘06?! That piles it higher than my boots can comfortably wade in.
Any intelligent person knows he had his lying lips blowing on the pretty little pink wand and his wrinkled little hand was dippin’ it in and out of the soap suds long before any of us figured it out. He knew long ago the end result, hell he probably wrote his thesis on the “possible outcomes resulting from the necessary evil of a post-terrorist-attack-on-American-soil credit bubble”. He was probably one of the first ones posting on this here blog!
Since he obviously thinks so low of me as to insult MY intelligence, now I’m thinking I can’t trust anything about HIM…
Hmmm…I bet he DOES dance nekked and sacrifices small mammals and orphans to Molech on a full moon at the local Freemason’s lodge! And he probably IS one of those unholy glowing-red-devil-eyed, human-suit-wearin’ chupacabra-reptilians who crash landed in New Mexico! They go around mutilating poor innocent cows, scaring my rancher friends for their own sick perverted alien fun.
All this and he wants me to buy his book?!
I think not.
Just how over built are we? One house/condo for every man, woman, child, cat and dog?
One vacant house for every 44 American households. See Ben’s deskclearing thread.
Jim Rodgers of Beeland Interests on the FED.
http://tinyurl.com/334u9d
Ron Paul questions Bernanke on the rate cut.
http://tinyurl.com/36kqkj
Ron Paul is talking about “moral obligation” to folks whose policies depend on propagating a steady stream of deceptions. Good luck with that tactic.
I don’t know how to put this. I really,really like Ron Paul but I don’t think he has what it takes to be elected president. He doesn’t have a lot of charisma and he isn’t a very compelling speaker.
I got a real kick out of Jim Rodgers and I thought Mark Faber was very interesting.
Jim Rogers’ comments are a must-see! Why can’t our govt leaders shoot from the hip with conviction like that guy? I don’t see how incoherent mendacity can possibly trump forceful honesty — our Fed is fighting a losing battle.
Am I just imagining this, or is there an unusual level of post-FOMC-meeting spin currently underway to try to clarify their intentions?
And am I correctly understanding Kohn’s comment as an explicit acknowledgment that the housing bubble is bursting???
That is huge.
Fed chief triggers bond volatility
By Eoin Callan in Washington
Published: September 21 2007 23:27 | Last updated: September 21 2007 23:27
Don Kohn, Federal Reserve vice-chairman, underlined the US central bank’s concerns about inflation in the wake of this week’s rate cut, saying explicit price goals could provide greater certainty.
The senior Fed member has in the past opposed the US following other central banks and setting formal inflation targets, and his comments during a speech in Frankfurt on Friday triggered volatility in bond markets.
There has been heightened concern about the risk of resurgent inflation after the Fed aggressively cut interest rates this week amid the crisis in credit markets.
Peter Hooper, an economist at Deutsche Bank, said: “The Fed is concerned about gains in inflation expectations giving way as they counteract the significant tightening of credit conditions.”
Mr Kohn and other Fed speakers yesterday also sought to defend their decision to cut interest rates by 50 basis points to 4.75 per cent. Critics said the move could create moral hazard by encouraging Wall Street to take big risks in the hope of bail-outs.
Kevin Warsh, Fed governor, said the central bank was under no obligation to rescue banks from losses. “The desire for well-functioning markets does not require us to insulate asset prices or individual financial institutions from the buffeting of the marketplace.” Ethan Harris, an economist at Lehman Brothers, said: “Fed speakers seemed somewhat defensive, arguing that their actions did not increase moral hazard and were aimed at the real economy.”
Mr Kohn did not give guidance on future interest rate policy but did acknowledge the role played by weakening house prices in the Fed’s decision to cut rates.
House prices tend to be seen “rising by the escalator and falling by the elevator”, he said, adding that central banks’ response to bubbles was often more dramatic when they burst than when they inflated gradually.
http://www.ft.com/cms/s/0/b322ac1a-6890-11dc-b475-0000779fd2ac.html
No, you are not imagining the spin. It’s real.
How about discussion on the benefits of lower home prices? No one in the MSM talks about the other side of the coin, that there are many benefits to lower housing costs. When trade with China was opened up it was touted as being a great thing for the average American, because of the lower prices. Why shouldn’t housing costs be viewed the same way. Lower cost housing is a benefit to the average American, it leaves more money in their pockets at the end of the month. High housing costs are a burden to the average American. I have a few ideas.
1. Future foreclosure rates will be lower, buyers won’t be overextended.
2. Eventually SSI and Medicare will become a major problem, tax will be raised to pay for it. It will be important that young people have low housing costs, so that they can afford the tax increases.
3. Low housing costs give people more discretionary income to spend in the economy on goods and services other than mortgage interest. Which helps promote a more diverse and vibrant economy for everyone.