Taking A Realistic View Of The Continuing Correction
Some housing bubble news from Wall Street and Washington. Bloomberg, “Wells Fargo & Co., the biggest bank on the U.S. West Coast, said fourth-quarter profit declined as borrowers fell behind on $1.56 billion of loans. Net charge-offs, the cost of bad loans that won’t be fully repaid, jumped to $1.2 billion from $892 million in the third quarter. The bank said the provision for future loan losses almost tripled to $2.6 billion.”
“‘Given the weakness in housing and the overall state of the U.S. economy, it is likely that net charge-offs will be higher in 2008,’ said Mike Loughlin, chief credit officer.”
“Wells Fargo is the second-largest U.S. mortgage lender after Countrywide Financial Corp.”
From MarketWatch. “J.P. Morgan Chase said Wednesday its fourth-quarter profit fell 34%, driven down by a $1.3 billion write-down of subprime assets and deteriorating performance in its home equity business, and a big drop in investment-banking activity.”
“‘Our lower quarterly results were affected by the investment bank’s markdowns in subprime-related positions and weaker trading. In addition, our consumer home equity and subprime loan portfolios performed worse than we expected,’ CEO Jamie Dimon said.”
The Journal Sentinel. “Development loans that turned sour in the struggling housing market, Marshall & Ilsley Corp. said. M&I said it wrote off $192 million in bad loans, many of them tied to the real estate construction industry in the bank’s Florida and Arizona markets. The Milwaukee-based bank also added $235 million to its reserves in the quarter to cover potentially bad debt.”
“Ambac Financial Group Inc. ousted its CEO, slashed the dividend 67 percent and will raise more than $1 billion to preserve its AAA credit rating after announcing the biggest-ever writedowns by a bond insurer.”
“Ambac will report a loss after reducing the value of securities it guarantees by $3.5 billion, according to a statement today.”
“Ratings companies are threatening to lower the credit rankings of Ambac and its largest competitor MBIA after their guarantees of bonds linked to subprime mortgages began plunging in value.”
“Bondholders in structured investment vehicles, caught in the collapse of the subprime mortgage market, suffered a 47 percent drop in the value of their investments, according to Moody’s Investors Service.”
“Mortgage debt made up 23 percent of SIV assets, with most having no direct subprime link, Moody’s said in July.”
“In some cases, ‘dramatically low’ prices have been quoted, Moody’s said, citing one SIV that received bids averaging 7 percent of face value for a collateralized debt obligation with the highest Aaa credit ratings.”
The Associated Press. “Credit rating agency Standard & Poor’s said Tuesday it is increasing its loss assumptions for subprime mortgages originated in 2006 and packaged in bonds sold to investors.”
“When reviewing ratings, S&P will now assume a 19 percent loss rate on 2006-vintage subprime loans, compared with a 14 percent loss assumption previously. Cumulative losses from 2006-vintage subprime bonds have more than doubled since July 2007.”
“Once S&P is finished adjusting its ratings assumptions, it will review all outstanding mortgage-backed debt. Bonds and debt originated in 2005, 2006 and 2007 are likely to be affected the most because they are more sensitive to the current weakening in the market, S&P said in a statement.”
From CNN Money. “The number of adjustable-rate mortgages issued by lenders declined in 2007 as loan delinquencies and economic problems took their toll on interest rate discounts, according to Freddie Mac’s annual ARM survey.”
“As of October 2007, the government-sponsored loan buyer said, ARMs made up 17 percent of loan applications, their lowest level since June 2003.”
“Over the past year, delinquency rates on ARMs surpassed those of fixed rate mortgages, according to Freddie’s chief economist Frank Nothaft. Rates hit 3.1 percent in September, as opposed to the 0.8 percent delinquency rate of prime fixed-rate loans.”
The Boston Globe. “The Massachusetts Attorney General Martha Coakley asked a state court yesterday to block Fremont Investment & Loan from commencing foreclosure actions against 500 borrowers in Massachusetts.”
“Attorneys from her office told a Suffolk Superior Court judge the state wants to review each mortgage that is subject to foreclosure and try to stop proceedings on any loans they believe were made fraudulently.”
“An attorney for Fremont, James Carroll, challenged the state’s request. ‘We cannot hand over that decision-making power to the attorney general,’ he said. ‘That would be unprecedented.’”
“Fremont mortgages were ‘a recipe for disaster,’ and Fremont was aware its mortgages contained ‘multiple layers of risk’ to borrowers, said Jean Healey, assistant attorney general.”
“In the request for an injunction, state lawyers argued the loans were ’structurally unfair’ and Fremont made them without regard to borrowers’ ability to pay.”
The Gatehouse News Service. “In response to the housing crisis, U.S. Rep. Phil Hare has called for a moratorium on home foreclosures. Hare said the government cannot bail everyone out, but it has to start by imposing a moratorium on foreclosures, he suggested maybe for 90 or 120 days.”
“‘If we don’t, we’re looking at a hit to the economy that will absolutely make sure we are in recession,’ he said. ‘It doesn’t do anyone any good at all to repo homes.’”
“While Hare did not let consumers off the hook entirely, he puts much of the blame for the problems on real estate agents who artificially increased home prices and steered people to loans they knew the buyer couldn’t afford.”
“‘These are professionals who knew they weren’t going to make it. I think you have an obligation to go after these guys … they’ve been there and done that and know what it means. People don’t, unfortunately, read all the paper work,’ he said.”
“Hare said he knows firsthand how destructive losing a home can be. After his father lost his home, he became an alcoholic.”
“‘My dad was never the same after that, and he never did anything wrong,’ he said. ‘Everything he worked for was gone.’”
From CBS 5.com. “Contra Costa County Supervisors passed a resolution Tuesday asking subprime mortgage lenders to voluntarily agree to a six-month moratorium on foreclosures in the county.”
“‘It’s no secret that Contra Costa, Solano and Alameda County are the hardest hit counties in the Bay Area,’ Supervisor John Gioia said.”
The Detroit News. “Southeastern Michigan homebuilders in 2007 had their slowest year since at least 1969, according to data released by Housing Consultants Inc.”
“The report showed that only 3,482 permits for new homes and condominiums were issued in 2007 in Wayne, Oakland, Macomb and Livingston counties, a 48.1 percent drop from 2006. That’s the lowest recorded number of permits issued since the region’s county governments began reporting the numbers to the Southeast Michigan Council of Governments in 1969.”
From Builder Online. “The continued existence of Kimball Hill Homes, one of the housing industry’s largest privately owned builders, as a business entity now hinges on the outcome of its negotiations with lenders over the terms of its debt and finding some way to stop the cash draining from its operations.”
“In its 10-k filing, which had been delayed for several weeks, Kimball Hill reported that it’s lost $220.5 million in the year ended Sept. 30, 2007, exacerbated by $240 million in impairment charges.”
“As a result of this erosion in buyer demand and its impairments, Kimball Hill’s operations incurred negative cash flow of $17.1 million, and its net worth fell below levels for one of the covenants in its senior credit facility.”
“In its 10-k…it states that it has ’substantial doubts about whether we will be able to continue as a going concern.’”
The Chicago Tribune. “‘The company’s losses from operations and default under its senior credit facility raise substantial doubts about its ability to continue as a going concern,’ auditor Deloitte & Touchee said in a letter that accompanied Kimball Hill’s filing, which is required because the company’s debt is publicly traded. The company itself is privately held.”
“In the filing, Kimball Hill said, ‘We are not in compliance’ with the loan terms. ‘We are currently unable to borrow additional amounts” under the senior credit facility.’”
“In 2006, Kimball Hill built 4,000 homes and had more than $1 billion in sales. Numerous Chicago-area home builders have reduced staffs, cut prices and offered special financing and other incentives to buyers in an effort to spur sales in a weak housing market.”
“Analysts have reported that new-home starts in Chicago fell to 17,000 over the last year, off from a peak of about 32,000 when the industry was at its high point two years ago.”
“In today’s troubled housing market the dreams of the Chicago Spire developer will meet reality when its sales office opens.”
“After a four-month delay, Dublin-based Shelbourne Development Ltd. will start selling the 1,194 super-luxury units it plans to build in a twisting 2,000-foot-tall tower designed by architect Santiago Calatrava.”
“‘There’s interest in the building because it’s one-of-a-kind,’ a Shelbourne spokeswoman said last week. With most units priced from $750,000 to $15 million, she added, ‘it will appeal to a specific audience.’”
“‘In this market, for the Spire to get several hundred contracts to move ahead with construction will be difficult,’ said James M. Kinney, president of a Chicago-based, high-end broker.”
“‘If they introduce 600 units priced at $2 million or more, that’s a 71/2-year supply for the downtown Chicago luxury market,’ Kinney added.”
The Memphis Daily News. “New Q4 residential building permits in Shelby County were down 63.7 percent compared to permit numbers for fourth quarter 2006, according to the most recent data.”
“The decline has been gradual but noticeable after two record-breaking years for local homebuilders.”
“‘It’s always kind of ebb and flow,’ Memphis Area Home Builders Association president Doug Collins told The Daily News. ‘There’s a shortage, so we build a bunch of houses to catch up. And then at some point we get caught up and nobody told us that the numbers were going to fall. Then we’ve got inventory and we’ve got to reduce it.’”
The National Association of Homebuilders. “Builder confidence in the market for new single-family homes was virtually unchanged for a fourth consecutive month in January as mortgage-market problems and inventory issues continued to pose challenges, according to the latest NAHB/Wells Fargo Housing Market Index.”
“‘Builders are taking a realistic view of the continuing housing market correction and doing what they should to get inventories under control and restore greater balance to the supply and demand equation,’ noted NAHB President Brian Catalde, a home builder from El Segundo, Calif.”
“In January, the index gauging current sales conditions for single-family homes remained unchanged at 19, while the index gauging sales expectations for the next six months rose two points to 28. Meanwhile, the index gauging traffic of prospective buyers rose one point to 14.”
“Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.”
“‘Builders are anticipating a time when market conditions will support an upswing in building activity – most likely in the second half of 2008,’ said NAHB Chief Economist David Seiders.”
MBIA, you’re up next against the wall!
“Bond insurer MBIA (MBI 14.15, -1.90) has pared some of its losses after Fitch Ratings affirmed the company’s AAA credit rating according to Bloomberg. MBIA was taken also taken off negative watch at Fitch.”
http://finance.yahoo.com/marketupdate/overview
Bond insurance is a complete joke. The reason insurance works is that it spreads risk around. The risk of you having a car accident is not correlated with other drivers, the risk of your house burning down is not correlated outside your neighborhood, the risk of your having a heart attack is not correlated with other people, etc.
But obviously bond defaults are correlated right across the economy. They are uninsurable, as no insurance firm could possibly have enough capital to cover a systemic default.
But, but, but… they worked just fine as long as housing prices continued to go up… like they are supposed to, remember ? Housing prices always go up, remember ! Its the darn housing prices that are causing the problem, not the insurance. Oh, wait… the insurers were supposed to factor that in. Never mind…
So many issues like this were obvious to people with average intelligence, but the “experts” & “CEOs” chose to ignore risk. It is best that they are made to suffer. Instead Bernanke & other crooks want to interfere and make things worse for the rest of us in the long run.
Fed Expected to Remain Cautious On Rate Cuts
Wednesday January 16, 11:17 am ET
The Fed may not be alone in its fight. Both Congressional leaders and President Bush are talking about a fiscal stimulus package, which could range between $75 billion and $100 billion. If consensus emerges, it then becomes a question of whether the legislation can be enacted – and its measures implemented — fast enough to make any difference in the economy.
Jones, for one, isn’t quibbling about the timing. “My feeling is that you have to throw everyone at it.”
http://biz.yahoo.com/cnbc/080116/22682134.html?.v=2
can someone please correct me if i’m wrong about this. all of this is happening so that people will feel better about playing with borrowed money?
Either they will remain cautious, or else they want to increase the umph when they ‘unexpectedly’ cut 1/2 point.
RE: Either they will remain cautious, or else they want to increase the umph when they ‘unexpectedly’ cut 1/2 point.
Highest inflation rate in 17 years and the FED’s cuttin’ rates.
LMAFO…yeah, like they’ve got it all under control.
J6P just startin’ to come to the conclusion all ain’t right in Nowheresville as American Idol has it’s lowest rated seasonal opener in 4 years.
Imagine what would happen if the sheeple wake up? Imagine the irony if the “stimulus package” (that sounds rather naughty) ended up being frittered away - or how about spent on physical gold? Wouldn’t that be strange?
How long until Joe Ultra-light 6 Pack pulls out of the market entirely and has no choice but to save or be lucky to afford dog-food to eat? Hmmm….
It’s like trying to insure against a category 5 hurricane that has a 3,000 mile wide eye and is moving due west from Bermuda with a 100% probability of making it’s way from Charsleton, SC to San Francisco before it finally peters out.
The problem is when you seek to spread risk around the market interprets it as reducing risk, and thus ends up taking on a shitload more of it. And that is where we stand today.
“‘If they introduce 600 units priced at $2 million or more, that’s a 71/2-year supply for the downtown Chicago luxury market,’ Kinney added.”
And how much luxury condo supply is currently vacant and on the market, or in the construction phase? Sounds like a lot of luxury inventory for those Europeans to soak up… particularly when we are counting on them to prop up Florida and NY and every other puffed up market in the US.
Haven’t we run out of European GFs yet?
Just because some Gold Coast residents hired some Eastern European nannies it makes Chicago’s condo developers think they all want to live here. Oh yeah, the 2016 Olympics - yeah that’s why.
Chicago’s bucking for world city status. Just as cities like Madison and Milwaukee try to hang with Chicago, so does Chicago try to hang with NYC, Tokyo, and London.
Maybe with oil close to $100 a barrel, there has to be a bumber crop of Iranian and Gulf Arab GFs waiting to be tapped.
Here is the website for the building. I believe Kunstler would describe this structure as fatally grandiose. It actually looks like an inverted screw, although the architect claims that the shape “represents the elements, the ideas of fluidity and growth, the beauty and perfection of the geometrical force.”
One thing — if this actually gets built, anybody above the 70th floor and hoping for the view shown in the panorama had better be prepared for many, many days of zero visibility. I once had a job interview high up in the Standard Oil building. It was snowing and the cloud ceiling was below the floor I was on. When I looked out the window all I could see was a thick gray mist and blowing snowflakes.
http://www.thechicagospire.com/
My wife’s office is pretty high up in the Sears Tower. When the clouds get that low, they are rarely very tall. If the 70th floor is in the clouds, the 90th floor is probably not. It’s a very surreal site to look out the window and see clouds below you, with only the tops of the Hancock and Aon (formerly named the Standard Oil Building) interrupting the view.
I just did a quick search and found a pretty poor photo of the effect
I was offered a job in Chicago long ago. The offices were in the Sears Tower, don’t remember the floor but near the top. The folks I’d talked to at first were in some other area (don’t remember where now). The final interview was in the Sears Tower. One look at it and knowing thats where I’d be located I said no way. In the last interview I told them I was no longer interested.
I did the same thing once, but it was a job in Hong Kong. My final interview included a video of the campus I would be teaching. I bailed before they could shut it off. Too many people, too little space.
That could be the most annoying website I’ve ever been too.
Building the ‘world’s tallest building’ has a surprising correlation with economic downturn. NYC’s skyscraper boom peaked just as the Great Depression hit. Completion of the Sears Tower coincided with Chicago’s economic problems after the oil shock of the early 70s. And Malaysia went into the 1997 Asian Crisis just as the Petronas Towers took the crown from Sears.
Look for the emirate of Dubai to hit the wall when the Burj Dubai is completed.
I doubt this Chicago tower will ever get built.
I’ve noticed that correlation as well. IMO it’s not coincidence.
This “Erection Index” is actually rather reliable. I had a page about it on Wikipedia, but it got deleted.
Try “the Curse of the Skyscraper” there isn an article online by that title some were.
Wow thanks. what? It’s not built yet? hahahaha
Everybody I know calls the building the “Birthday Candle.”
Nothing against Calatrava, he’s a great architect.
But not everyone wants to live in an Overpriced Dong.
looks like a screw? as in screwed if you puchase this overpriced thing.
But not everyone wants to live in an Overpriced Dong.
Excuse me, I never paid for a Dong in my life! (harrumph)
*still chuckling about the Erection Index*
“state lawyers argued the loans were ’structurally unfair’ and Fremont made them without regard to borrowers’ ability to pay”
A side (moral) question…did the borrowers take the loans without regard to “borrowers ability to pay”? As in “I don’t really need to read the loan docs, just show me where to sign”.
I doubt the borrowers ever intended to pay, so the ability to pay was irrelevant as were the pesky details hidden in those loans. They were going to sell at a profit or cash out refi in x amount of time.
I wonder what the state of Mass is going to do when they determine that the fraud lies with the borrowers, not the lenders.
I wonder what the state of Mass is going to do when they determine that the fraud lies with the borrowers, not the lenders.
Send them to a state employee “housing counselor” in the Dept. of Consumerism who explains to them the difference between right and wrong what constitutes a lie.
Payment for the session will be deducted from their state income tax return.
Send them to one day’s rehabilitation, “Idiocracy”-style.
I would be many people think that the relationship between lenders and borrowers is like a relationship between an adult and a minor. Although the minor may consent to intimacy and possibly lie about his/her age, the adult is ultimately responsible and jailed.
Frankly, I hope the State prevails and the courts say that loans made without regard to FB’s ability to repay cannot be collected. Then sanity will return to mortgage world. Income verification and 25%+ downpayment will be required. When that happens, the average house price will come down to historical levels (2 or 3 times the average household income).
they run around like a chicken with its head cut off trying to fix this mess but at the end of the day the chicken is still dead.
It’s surprising to me that a congressman would be so economically inept. Preventing even slimy mortgage companies from foreclosing will further drive up risk, decrease investment, and increase the depth of the recession. I keep wondering why ANYONE would willingly invest in mortgage securities today? The risks are enormous, you’re much better off in Vegas, or with the lottery.
This could end up with the govrnment telling lenders who they have to lend to, and how much intrest they can charge. You don`t think so? Ever heard of “affirmative action” ??
It would be sweet to see the lenders done in by their own greed. They were all too willing to make loans that should never have been made just to collect their fees/commissions.
The lenders didn’t care whether a borrower was doing anything fraudulent. Why should the AG? If there were proper underwriting by the lenders, there would have been far less opportunity for there to have been any fraud on the part of the borrowers.
“‘Given the weakness in housing and the overall state of the U.S. economy, it is likely that net charge-offs will be higher in 2008,’ said Mike Loughlin, chief credit officer.”
You mean we are not at the bottom yet? I thought these writedowns were to be the ‘kitchen sink’. I guess their house has more than one kitchen.
Seems like we’ve been seeing a kitchen sink write off every quarter since August. And the kitchens keep getting bigger…
“Seems like we’ve been seeing a kitchen sink write off every quarter since August. And the kitchens keep getting bigger… ”
Mmmmmmm… Granite and Stainless write-downs… Mmmmmmm… Built-in expresso machine forclosures…
Mmmmmmm… Doughnut
Only those who want to pretend that the subprime (2/28, 3/27 and 80/20 piggbacks) are the only problem.
One look at the number of jumbo loans that are:
Fixed interest-only but with no amorization of principal
Adjustable interest-only but with no amortization of principal
Adjustable interest-only option and with negative amortization if the minimum interest is not paid
will rapidly dispel any idea that the ‘bottom’ won’t happen until the enormous number of those loans hit their reset trigger to principal and interest.
Silly!! The Feds are going to come in with a big “economy stimulus pack” that is going to make everything ok instantly. Why just this morning the DOW shot up with only the mention of it. It takes so little to excite a bull — a couple billion here or there and they are dancing down Wall Street. Question (to me) is how long can we afford to throw money at the problems?
We can throw money at problems as long as we can borrow.
RE: We can throw money at problems as long as we can borrow
You really mean we can throw money at the problem as long as the printing presses keep churning out the fiat paper currency.
“We can throw money at a problem for as long as we can print it.”
Pres. Mugabe, Zimbabwe
You dont have to borrow… Just keep the printing machine on 24/7.
“Mortgage debt made up 23 percent of SIV assets, with most having no direct subprime link, Moody’s said in July.”
“In some cases, ‘dramatically low’ prices have been quoted, Moody’s said, citing one SIV that received bids averaging 7 PERCENT of face value for a collateralized debt obligation with the highest Aaa credit ratings.”
Wouldn’t this be the “market” one is supposed to mark to??
So, lemme see here, a legislative solution to foreclosures is to not have them anymore, generated by the same legislature who took campaign contributions from the financial entities lobbying them for less oversight and accountability.
So what happens to the balance sheet of the lenders who can’t foreclose, and isn’t getting paid?
isn’t = aren’t
Seems fair to me. They get to learn the lesson that sometimes the knife cuts both ways.
At least this guy only talks about a freeze for 90 to 120 days. The woman running for Congress from Maine wants to freeze foreclosures for 5 YEARS.
Her article even stressed there would be no foreclosures for any reason. Hah, every home buyer who came close to being upside down would smile, say, “Thank you,” and stop making payments.
Then, we would have to find a new government agency to make home loans. No one else would touch the market. My grandkids would have to live in whatever they inherited.
Stupid people.
Just for reference, what is the political affiliation of this Maine woman?
I think I already have a pretty good idea based on the stupidity of the proposal.
“In response to the housing crisis, U.S. Rep. Phil Hare has called for a moratorium on home foreclosures. Hare said the government cannot bail everyone out, but it has to start by imposing a moratorium on foreclosures, he suggested maybe for 90 or 120 days.”
While he’s at it, he should impose a moratorium on murder, rape, burglary, lead in toys, steroids, and Britany Spears.
Oh wait, you mean I can’t wave this magic wand and make everybody do what I say?? Magic pixie dust my A$$!
RE: Britany Spears.
What a moratorium on Britany Spears news?
Egads!
My day will be absolutely ruined should I not be kept fully informed as to whether she is wearing her undergarments or not!
“Then, we would have to find a new government agency to make home loans. No one else would touch the market. My grandkids would have to live in whatever they inherited.”
I disagree. Loans will still be made, only to those people who will pay a hefty downpayment and who demonstrate the means to repay. House prices will collapse to sane levels. Then, why can’t our grandkids (if they receive useful education and are gainfully employed) become part of the “ownership society”?
Ah, but any government stupid enough to ban foreclosures may also be stupid enough to ban housing prices from going down. Maybe put in “trade limits” on housing prices, so they can’t go down more than 1% per year. So… in 40 to 50 years I’ll be able to afford a place based on that logic!
In a state without a one-form-of-action law, wouldn’t a moratorium on foreclosures still leave the lender with the remedy of getting a judgment for breach of the note, and then levying on the property? Same result (lender gets the house), just a more convoluted procedure.
Also, even in California, which has very strong mortgage-debtor protection laws, the one-form-of-action law doesn’t extend to actions for fraud. If foreclosures were suspended, look for an explosion of fraud lawsuits by lenders. Since virtually everybody who’s gotten into trouble with a suicide loan lied to get it, that might be a useful avenue for the lenders — if only they hadn’t typically been complicit in the fraud themselves.
A Different Recession
The Old Remedies Won’t Work This Time
Harold Meyerson
Washington Post
“…because the coming recession will not be normal, and our economy is not fundamentally sound. This time around, the nation will have to craft new versions of some of the reforms that Franklin Roosevelt created to steer the nation out of the Great Depression — not because anything like a major depression looms but because we face an economy that’s been warped by two developments we’ve not seen since FDR’s time….”
http://tinyurl.com/2eczkh
Thanks for the link, Hoz!
The first of these is the stagnation of ordinary Americans’ incomes, a phenomenon that began back in the 1970s and that American families have offset by having both spouses work and by drawing on the rising value of their homes. With housing values toppling, no more spouses to send into the workplace, and prices of gas, college and health care continuing to rise, consumers are played out.
The solution’s easy. Reinstate polygamy, then send more spouses out to work
The polygamy angle also crossed my mind.
Nah…I vote child labor. Give them something useful to do except sponge off their folks and complain about how rough they have it on MySpace…
“Workin’ in a coal mine, going down down”
Spoiled little snots would soil themselves if they had to do real work
RE: Spoiled little snots would soil themselves if they had to do real work
The teen weenies around here refused to work in any environment which does not have A/C.
Retail is the desired gig.
They get to chat amoungst themselves while ignoring the customers ’cause they’re too ignorant and scared to know how to interact with anybody.
Big with their iPods but there’s little sustenance beyond that.
Make that polyandry–one woman, many working husbands.
ummm….. why????
Not sure I could handle a household of plural wives…
That is soooo hot
Works better the other way around. The guys would just go out together and score hot young tail and forget about the wife.
The other way around, the girls have each other to bitch at and about (in-house drama session). They got themselves a built-in network, which they love, so they can all blab with each other and play with babies and they only have to have sex 1/# of women as often and the guy gets laid all the time. It’s best that way.
I know you are joking, but we might very well see this in another form: negative household formation.
1) Younger singles and even families move back in with the folks.
2) Retired seniors move in with the kids.
3) Young, professional singles and couples share apartments more than at present.
This isn’t an entirely bad thing, we generally have way more housing space (and bathrooms) than we really need. But this development will certainly bring down home sales and prices.
This is already happening. I read this article yesterday and was rather depressed.
http://www.nytimes.com/2008/01/16/us/16ohio.html
RE: I read this article yesterday and was rather depressed.
Yup…When your 49 and forced to sell the Harley which is the one thing in life that give you a little pleasure in your existence-the ballgame’s pretty much up.
The gun’s will be comin’ out next. Just ask Kunstler.
From said article:
Shari Joos, 45, a married mother of four boys in nearby Wellston, said, “If you don’t work at Wal-Mart, the only job you can get around here is in fast food.”
“BooHoo woe is me, my Walmart job don’t pay a dern thing!” Try reading a book or two instead of watching the idiot box and praying to goddess Oprah!!
hd74…
Probably the last thing most FB’s will hold clear title to, will be their guns.
Try reading a book or two instead of watching the idiot box and praying to goddess Oprah!!
No, please don’t! The rest of us highly educated folks have enough competition as it is (from ready to be outsourced Indians, for example).
Why encourage even more competition from the locals for rare good paying jobs? //sarcasm off//
close
second clueless attempt to shut off ital
Not necessarily a bad thing in my book, either — tighter family / social / kinship in the US would be a good thing all around, I think. We’ve become too fragmented as a society.
Another side effect: I think we’ll see much higher rates of family-based childcare as belts get tighter. My sister has the luxury of getting my mom’s help with childcare when she needs it. It’s a positive for everyone involved, not just financially.
Who better to help out with the kids than your own family?
“Who better to help out with the kids than your own family?”
Blasphemy. Don’t you know it ‘takes a village’ (ie. a communist state)?
How people ever managed to raise children before the wonderful creation of communism is a miracle. Must have been a fluke that families raise their own kids for thousands of years on their own before Karl Marx and Hillary Clinton came along.
This doesn’t really jive with a mobile workforce, though.
Indeed, as jobs become fewer and fewer, people will have to move to find them; they’ll also have to move to escape high-tax states and rapidly expanding urban crime zones.
In the near future, with rampant inflation in everthing but wages and housing prices, Wal-mart just won’t cut it. What happens when the average American can no longer afford to put gas in his car take to go to his minimum-wage, not-quite-full-time, no benefits job?
This is already happening in the Bay Area, particularly amongst the 18-28 yr. olds.
Actually, that’s what I did/am doing. I moved in with my parents and pay a small rent and some of the non-mortgage bills. My mother in particular has always wanted my brother and me to live as simply as possible and save whatever we can.
If I were not living at home, I’d have a roommate, so what’s the difference? (Aside from getting dragged to many a family event I pled off in the past…)
Well, it’s a little different when you’re 18-24. If you’re, say in your late 30s and beyond, and had already established your own household for 20 years, and THEN you have to move back in with mom and dad, it’s quite another matter.
It is not healthy to live with your parents that long AND you will never have a date.
credit card hooked up directly to the 401k account
Was watching a Peter Schiff appearance on youtube recently. The other talking heads were going on and on about how much better we have it than our folks.
PS told a story about how his grandfather raised 7 kids on a carpenter’s salary without grandma working.
The talking heads kept trying to get PS to admit that he had it better (which he did, with a caveat) without understanding that no way a carpenter today raises 7 kids even with his wife working.
(a good read on this subject is the Two-Income Trap)
With housing values toppling, no more spouses to send into the workplace, and prices of gas, college and health care continuing to rise….not to mention food…
And having already played the credit card (ooh, I made a pun), and with the goverment having already played all of ITS credit cards (deficit spending, low interest rates), everybody is completely played out.
Even FDR still had some ballast to throw overboard. We on the other hand, are sunk. What’s left to try? A Biblical Grand Jubilee?
Clear, succinct and right on target.
“This time around, the nation will have to craft new versions of some of the reforms that Franklin Roosevelt created to steer the nation out of the Great Depression…”
World War II is what steered the nation out of the Great Depression, due to the massive economic stimulus and the reduction in the private labor force. But to call it a “reform” is a stretch.
We were already on the rebound when the US entered WWII. The war provided an XL kick in the pants, economically speaking.
No, actually I don’t believe we were. We were still in the middle of a recession that started in 1938 and killed whatever progress had been made in ending the 1929 Depression.
The resession of 1937 along with FDR court packing sceam ended the New Deal reforms. i think it was LBJ who said that congress wouldn’t pass the time of day for FDR after that. The recovery from the depression dates from the spring of 1938.
Hi Chris O
It’s recessions when the economy recovers from bad investments and allocations of resources - so the recession that started in 1937 laid the groundwork for the subsequent recovery.
War isn’t really an economic stimulus, just ask Japan or Europe how the years after WWII felt. It just so happened that the productive capacity of our competitors were bombed into oblivion while ours remained intact. Not to mention how all those young males we buried never went back into the soup lines, so unemployment was way “down”.
Actually WWII put the finishing touches on it -through massive government spending.
By spring of 34′, the stock market had gained back about 25-33% of its loses.
Employment was rising until ‘37 (mini-reseccion when Fed pulled back liquidity) and then pickes up again in ‘39.
The oft cited ‘unemployment was still at 15% in 37-39′ is correct BUT it overlooks the facts that (1) many groups where still in the workforce seeking employment then who are no longer participating in the workforce now, and (2) the count included all seeking work - not just those counted now as unemployed who are getting unemployment or the few ‘discouraged workers’ who are no longer eligible for unemployment but have been seeking work for a year or less. In particular, Social Security was not making payment in the late 30s - first payments were not until 1940. Try adding all the over-65s in to the workforce to day and see what happens to the unemployment stats since there are around 42,000,000 of them. 4.6 % unemployment translates to 7,078,000. Even adding 1/2 of the retirees (21,000,000) would jack that to 28,000,000 or 18.4%. (Keep in mind that there are more 65-75 year olds than there are 80-90 year olds.)
Massive public spending during the 30’s was tried - sort of. The amounts seemed enormous at the time but even then the economists were urging that far more be spent to get any real effect. In retrospect the amounts spent by the gov’t in the 30’s were not enough to completely rejuvenate the economy because what it really took was the amounts spent by the gov’t from 1939 -1946. Who do you think was spending all the money during WWII? It was the Federal Government - not private business.
The reforms of the New Deal included:
(1) Social Security - reduces the number of people competing for jobs by retiring older workers
(2) Child labor laws - ditto as it removed younger workers from the labor force and reduced competition for jobs
(3) FHA and Freddie Mac - restored the mortgage market so banks could lend and keep their liquidty by selling off the mortgages
(4) SEC - made corporations release the info about the true status of their profits and losses (good for the stock market)
(5) Agriculture - kept the food supply from collapsing as farmers had been in a severe depression since the end of WWI and couldn’t evenbreak even on the costs of producing food
(6) Wage/hour (FLSA) - by limiting hours worked without overtime it encouraged hiring more workers rather than having the existing workers do 12-14 hour days (and, yes, they really did work those kind of hours) Also minimum wage put a floor on wages that equalized the cost of labor for businesses so they wouldn’t have to keep cutting to stay competitive
And those things were most definitely reforms!!
Right, but today if a company does not “feel” like paying minimum wage, they send the taks offshore and get it done cheaper than ever. Our problem is that we are getting stuff done so cheap in China it is rediculous, yet remain a “work ethic” society. We need something like a manned mars mission to rebuild our engineering knowhow and economic status. Short of this or something like it, plan on a very third world future here in the USA.
Great post.
Well, we did win the war, and that makes a difference on how the war affects the economy.
Also, we were rebounding from the second recession that FDR’s policies triggered in 1937, but still not coming out of the Depression pre-WWII. WWII either distracted pols from a lot of domestic meddling or smoothed the sins of that meddling. And rebuilding Europe and Japan in the 1950s was a massive economic boon - again, something not accomplished through FDR’s social engineering.
It’s hard to imagine now, but Benito Mussolini was the epitome of a modern 20th century leader, in the early 1930’s…
Much of what FDR did was fascism-light, emulating Il Duce.
Do stay away from the drug addict Rush - he rots your brain.
I’ll put my degree in the social, political and economic history of the 1930’s up against your right-wing idols any day.
(1) The social policies (not the same as the FHA and SEC which were solely designed to save capitalism) such as FLSA and Social Security were largely modelled upon the systems of Great Britain, France and Germany (pre-Hitler and introduced by Bismark in the 19th century.)
(2) The more social-type programs were intended to do 2 things:
(a) keep people from starving by creating jobs (WPA, CCC etc) which would help
(b) reduce and head off any social unrest. There was a strong current among the desperate of looking to fascism as an answer and turning towards a dictatoship. (FDR loathed Townsend and Long; and Smith and Coughlin - definitely Fascists and supported by Henry Ford who had contributed liberally to Hitler through the 1920’s)
You have to be utterly and completely ignorant to confuse the New Deal programs with Fascism. Fascism is a right-wing political system. (Like I said, Henry Ford adored the German National Socialist Party and gave them millions.) It emphasizes the preservation of the wealth of the very upper classes; expects the middle and lower classes to conform and accept a lesser role in the society (including wages, housing and anything else) while they carry the burden of taxes and excuting the gov’t policies (literally the cannon fodder); militarization and glorification of the gov’t and war; and a partnership between industry and government that rewards the upper 5-10% and leaves out the rest. Neither Hitler nor Mussolini did anything to improve the income or living standards of those who were not the upper 5-10%. In fact, under Hitler, the first to suffer cuts in income and food were the bottom 80-90% - have to sacrifice for the good of the country was the line they were given.
If you are going to pretend to offer opinions on social and political and economic history, I suggest you go study the subject first.
And the point your missing, Missy, is that the TPTB designed the 1929 crash via the Federal Reserve TO IMPLEMENT the communistic New Deal ‘fixes’.
____________________________________________________
Comment by AnnScott
2008-01-16 14:10:17
Do stay away from the drug addict Rush - he rots your brain.
I’ll put my degree in the social, political and economic history of the 1930’s up against your right-wing idols any day.
(1) The social policies (not the same as the FHA and SEC which were solely designed to save capitalism) such as FLSA and Social Security were largely modelled upon the systems of Great Britain, France and Germany (pre-Hitler and introduced by Bismark in the 19th century.)
(2) The more social-type programs were intended to do 2 things:
(a) keep people from starving by creating jobs (WPA, CCC etc) which would help
(b) reduce and head off any social unrest. There was a strong current among the desperate of looking to fascism as an answer and turning towards a dictatoship. (FDR loathed Townsend and Long; and Smith and Coughlin - definitely Fascists and supported by Henry Ford who had contributed liberally to Hitler through the 1920’s)
You have to be utterly and completely ignorant to confuse the New Deal programs with Fascism. Fascism is a right-wing political system. (Like I said, Henry Ford adored the German National Socialist Party and gave them millions.) It emphasizes the preservation of the wealth of the very upper classes; expects the middle and lower classes to conform and accept a lesser role in the society (including wages, housing and anything else) while they carry the burden of taxes and excuting the gov’t policies (literally the cannon fodder); militarization and glorification of the gov’t and war; and a partnership between industry and government that rewards the upper 5-10% and leaves out the rest. Neither Hitler nor Mussolini did anything to improve the income or living standards of those who were not the upper 5-10%. In fact, under Hitler, the first to suffer cuts in income and food were the bottom 80-90% - have to sacrifice for the good of the country was the line they were given.
If you are going to pretend to offer opinions on social and political and economic history, I suggest you go study the subject first.
You have to be utterly and completely ignorant to confuse the New Deal programs with Fascism. Fascism is a right-wing political system.
Amen. Funny how the right likes to smear FDR’s accomplishments by comparing him to real right-wingers — and then turning around and calling him a socialist.
Neither Hitler nor Mussolini did anything to improve the income or living standards of those who were not the upper 5-10%.
I have to disagree with that assessment, however — pre-WWII, Hitler curbed runaway inflation, rebuilt Germany’s military infrastructure, completed numerous public works projects, and allegedly achieved full employment (by kicking women out of the workforce, among other less-than-savory means).
He was despicable, but he did bring a degree of stability to 1930s Germany after the complete chaos of the Weimar era.
To ignore his successes is to misunderstand his rise to power.
IMO.
I’d pit my knowledge against yours, any day.
Are you as hard boiled in person, as you are in print?
Ann — Put your degree to work and tell us what to think about FDR’s executive order that made criminals out of those who continued to own gold:
http://en.wikipedia.org/wiki/Executive_Order_6102
Facism was created by a former socialist Mussolini. The Nazi called themselves “Nation Socialist” as opposed “International Socialist” like Stalin. If the Nazi were not socialist why did they call them selfs socialist?
What was was World War 2 other than the Great War of Socialism, with Hitler and Mussolini and Japan’s Military socialism fighting Stalin, FDR and British Fabian socialism for word supremecy? This war of socialism killed millions of people and distroyed Eroupe and East Asia.
It also distroyed all of these socialistic systems. By defeat. Germany, Italy, Japan, and FDR in congressional elections (what ever happend to the WPA and the CCC other New Deal agences? explain that}. Or by economic stagnation, Britian and the Russia.
The failure of Goverments to deal with the Great Depression lead to WW2 and that failure includes FDR and his programs.
Thank you Ann. I can always count on you to counter the RushRot.
Mussolini attempted to define “fascism” in The Big Book of Fascism:
“Anti-individualistic, the fascist conception of life stresses the importance of the State and accepts the individual only insofar as his interests coincide with those of the State, which stands for the conscience and the universal will of man as a historic entity…. The fascist conception of the State is all-embracing; outside of it no human or spiritual values can exist, much less have value…. Fascism is therefore opposed to that form of democracy which equates a nation to the majority, lowering it to the level of the largest number…. “
Sounds awfully like Socialism to me. What part of “National Socialist Party” do people fail to understand, even ostensibly well-educated people?
Ann’s right…… again.
Ann Scott
Hey keep your shirt on. I can of like Rush !!
Ann, I simply don’t see how you could have any kind of extensive background in the intellectual, social, and political history of the interwar years and still insist on cramming everything into the Procrustean “left-right” framework.
The New Deal was heavily influenced by Wilson’s World War I-era economic policies, which were themselves based in large part on Germany’s “war socialism,” which was the express basis for Mussolini’s fascism, which was the basis for the Nazi version. Mussolini, in fact, was widely admired by statists on both the right and left (until he allied himself with Hitler, and then Hitler cheesed off the Communists — who had supported him as long as he and Stalin were allied — by invading Russia in 1941). Mussolini always thought of himself as a man of the Left.
Not saying that progressives and fascists and communists were the same thing, but there were inarguably some fascinating crossovers. The common thread was the subordination of the individual to the State, a sense that classical Manchester liberalism was outmoded, and a disregard for tradition.
Saying “Progressivism can’t be similar to fascism, because fascism was a right-wing phenomenon” is a circular argument. If it can be shown that both Progressivism and fascism had signficant overlaps, then simply labelling the one “left wing” and the other “right wing” is an exercise in semantics, nothing more.
“You have to be utterly and completely ignorant to confuse the New Deal programs with Fascism.”
Considering that the head of the NRA (the New Deal one — the National Recovery Administration, not the gun group) had a picture of Mussolini, who he idolized, on his office wall, and drew deeply on fascist imagery for the agency — right down to the “blue eagle” insignia — would you care to qualify that statement?
“[Fascism] emphasizes the preservation of the wealth of the very upper classes…”
Based on that, I am very close to calling BS on Ann’s claim to have any kind of advanced degree focused on the history of the 1930s. (Full disclosure — I have a piddly little BA in history, with an emphasis on the interwar years.) Nazism absolutely did not emphasize the preservation of upper-class wealth. It was a thoroughly populist movement. Its propaganda was stuffed with imagery of parasitic industrialists (often, but by no means always, depicted as Jewish) preying on “real” German Arbeiter and Bauern. And they absolutely hated “the vons,” or the traditional aristocracy.
True, many upper-class Germans supported the Nazis — but it was an alliance borne from a fear that the only alternative was the Communists, since basically everybody — left and right alike — seemed to agree that traditional liberal democracy had no future.
Economic populism has always had some overlap, at the fringes, with anti-Semitism — which is why, unfortunately, Ron Paul finds himself getting the support of some very unsavory people. From being legitimately concerned about the greed, moral slipperiness, and excessive power of international bankers, it’s only a hop, skip, and a jump to pointing out that an awful lot of those guys have traditionally been Jewish, and it’s off to the races.
That’s why I’m so thankful for this real estate bubble, which has at least introduced some tan blonde SoCal Realtorbunnies to the cast of villains.
>ome of the reforms that Franklin Roosevelt created to steer the nation out of the Great Depression…
Like trying to pack the Supreme Court.
I’m still loving the idea that FDR hated Long. True, he did personally, but not enough not to steal the idea for Social Security from him.
And I don’t recall ever hearing Rush talk about FDR. Not really a listener. I do remember my college sophomore American history class talking about two recessions during the Great Depression in 1934 and 1937 (which was fairly serious) and pretty well directly attributable to FDR’s spending policies.
If massive deficit spending was so awesome in 1935, why does it seem to suck so much now?
What stupidity. Meyerson’s idea: Let’s enact all kinds of new regulatory burdens on employers and expand the welfare state.
Yeah, that’ll fix things right up. For China and India, that is.
Would you prefer a rebellion? That is what happens when the dispossessed (here the 90% whose incomes have not kept up with inflation and whose jobs are heading to India) become desperate enough.
Just ask the French in the 18th century, the Germans in the 19th century (headed off by Bismark through social reforms and the creation of a social safety net), the Russians in the 20th century……….
With all due respect, Ann, there’s only a smidgen of difference between Marxism-Communism-Leninism and fascism.
The term “fascism” was basically coined by the Soviet communists to discern the non-followers of Moscow from those eagerly led by Stalin.
Hitler’s, Roosevelt’s and Mussolini’s economic policies were virtually identical.
The 12 million that were drafted into the military in WWII (and let’s not start dicussion about what/who led the US into the war, Reuben James/Erich Topp and all), which eliminated unemployment.
As to redistributing income to people in order for them to withdraw from the labor force, I’d just call it robbery.
It only has a positive economic effect on the robber.
PS. I’d put my near two decades of living under communism against your degree.
Revolutions are almost never made by the truly desperate and destitute. More commonly, they happen when the standard of living has been on the way up (not down) but is interrupted by an external shock. That’s what happened in the case of the French and Russian revolutions, both of which happened in countries where the standard of living had been rising rapidly. In the French case, the external shock was a financial crisis brought on, in large part, by the French support for the American Revolution. (Thanks, Louis! Sorry about your head.) In the Russian case, of course, the shock was World War I and the Romanovs’ being discredited by their incompetence in conducting it.
But the Marxist model of revolutions being driven by an immiserated population simply doesn’t hold up to the actual historical record. More often than not, truly destitute societies — just get more miserable. And truly repressed societies — tend to stay that way. Revolutions typically happen when a formerly-repressive regime tries to relax the reins just a little bit — as Louis XVI and Gorbachev tried to do, only to see things get away from them. Also, they typically happen when a society finds itself on the verge of prosperity, but is frustrated at some delay that keeps them just short of it.
As for Germany, there’s no credible evidence that Germany was heading towards a “rebellion” in the years before Bismarck took the wind out of the sails with his social welfare reforms (which were cynically calculated to do just that).
If I understand correctly, and correct me If I am mistaken, but it was in part the lack of regulation by the government and Fed that alllowed to get into our current situation.
Am I wrong?
It was entirely the fractional reserve lending / fiat money system. This government mandated fraud CREATES the need for regulation. Without this fraud, you would not have had the Great Depression or any of the recessions in the 80.
A quick history lesson on the banking system from the civil war to 1913 (FED creation) and you will see that most of the bank rushes and panics were the result of fractional reserve lending fraud or intentional market manipulation by the big banks.
To understand more about how Fractional Reserve Lending crosses the line from legal contracts into fraud and government price fixing you should read this article:
Fractional Reserve Banking
You’re correct LostControl.
When people talk about wages stagnating, they are not seeing the big picture. Wages are skyrocketing - if you happen to be a CEO of a public corporation. The Wall Street crowd just had another banner year, with sweet bonuses. The truth is, America has been going backwards for a long time and Wall Street is the reason. The gangsters have basically looted the nation, and now we are stuck with the aftermath. The only reason they get away with it is because they own the media, and shield themselves from all criticism. And in a sort of “in your face” sort of way, the media actually glamorizes these people that basically used the system to steal our money. Every day you see shows about massive wealth. It poisons us, and leads toeven greater scams.
In reality, it’s really a twisted situation. The media pumps up these bubbles and other scams. Wall Street legitimizes them and helps distribute it to the masses, while our government and courts make damn sure the game continues without consequences.
This country doesn’t need reform. It needs a revolution.
All this guy is recomending is old remedies, from 70 years ago no less. Mister Meyerson is more like what he probably thinks Herbert Hoover than what he thinks FDR was. The world of the 1920’s and the 1930’s is long gone. Policies to deal with problems are from 70-80 years ago are not going to work in todays world.
“After a four-month delay, Dublin-based Shelbourne Development Ltd. will start selling the 1,194 super-luxury units it plans to build in a twisting 2,000-foot-tall tower designed by architect Santiago Calatrava.”
I wonder if they’ll paint a large bullseye on the 213th floor and charge extra for that unit?
“The combined weakness in wealth — that is both housing wealth and stock market wealth — and some softness in employment growth seem to be suggesting that the robustness of consumer spending going forward may not be as healthy as we thought it was just a few months ago,”
Luckily all this housing stuff is contained and didn’t spread to the debt markets, employment, stock market and consumer spending areas of the economy. Oh, wait…
How is it possible that nobody saw this coming ? You’d figure that when you pay someone a few hundred thou (or a few million) a year that they could think for themselves and see the risks in how the ponzi scheme was run for the last several years. But apparently not.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aJ3n7g1Qv.U8&refer=home
‘Former Federal Reserve Chairman Paul Volcker thinks the U.S. central bank is to blame for allowing bubbles to inflate asset markets, and says that current Fed chief Ben Bernanke is in a tough spot.’
‘Too many bubbles have been going on for too long … The Fed is not really in control of the situation,’ the Times quoted Volcker as saying, in clear criticism of both Bernanke and his predecessor Alan Greenspan.’
Funny they couldn’t figure out the too many bubbles, too long part of that while the bubbles were being blown ! Sheesh !
Yesterday CNBC talked about alternative energy being the next bubble. The search is on.
We already that that… its called ethanol. Which then sparked a bubble in grain prices which has yet to burst.
For the life of me I can’t figure out what the next bubble will be in. I’m looking but not yet seeing.
Water.
Government work programs. Maybe they’ll get some 62.5 year olds to quit their ‘retirement careers’ at Wal-Mart to take a chance on having a stroke or a heart attack rebuilding bridges in Minnesota in the winter for $28.50/hr to help pay off their Brandeton retirement condo AND the house back in Latrobe, PA.
clean air
So now that the fed realizes the problem with cheap money (ie blowing bubbles) it will now hold the line on any further interest rate cuts and possibly increase the interest rate to fight off inflation and prop up the dollar. Right ? We know that dropping the rate to say 0 or 1% will just blow another bubble, right ? We understand that, right ?
Ben, I think the current situation is nothing more than a repeat of the late 70s stagflation era. The problem with Central Bankers these days is that they are always looking for the easy way out by inflating bubbles. If Bernanke has any gumption he will realise that housing will crash no matter what he does because there is simply a glut of inventory out there which will only clear with time, and lower prices. As such the smart thing to do will be for him to call the bluff of the market and raise rates. Wall Street will holler but it will send a powerful message to the market about his inflation fighting credentials. The dollar will also rally and guess what - every dollar will become more valuable and Americans will start getting more bang for the buck. There is going to be a recession whether he likes it or not, and he might as well use the opportunity to wring inflation out of the system and put the American economy on a sounder footing. It however all depends on whether he has the cojones to do it, but with his track record so far I won’t bet on it.
Like the limo driver in This is Spinal Tap said “Sammy (Davis) does what he wants, as long as Frank (Sinatra) says it’s ok.” LOL
If Ben Bernankes masters say it’s ok to man up and raise rates, then he will.
‘Former Federal Reserve Chairman Paul Volcker thinks the U.S. central bank is to blame
Paul Volcker did the right thing back in the late 70’s and early 80’s by raising interest rates to cool down the economy. It was painful, but it was needed during that time. Greenspan on the other hand was the bubble master for Wallstreet and created bubble after bubble resulting in short term thinking. In my opinion, Bernanke should raise the short term interest rates back to 5.25 and let Wallstreet and the realestate market work out it’s mess it created without any help from the fed. It may be painful for the awhile, but good for the longterm.
Painful as in all of the big banks fail and everyone’s savings goes with it. Inflation is the only hope to save the banks. Defaulting banks can destroy faith in the dollar just as fast as printing money (if not faster). Ultimately, all fiat money reaches it true value 0. So you have to ask yourself, how long can they keep the game going?
He would be fired that day. No way he gets away with that.
`The Fed is not really in control of the situation,’
Or is it that they are trying to be too much in control of the situation? Why not use jujitsu and let Mr. Market do some of the work for a change…
Nobody PANIC or MOVE ANY SUDDEN MOVES but it’s now a RACE to cook the books in DreamHouse, USA….GO !!!!
so many bubbles…so little time…
Part of the problem is the government is bought and paid for by Wall Street and big corporations. Not surprisingly they are dictating to the Fed the solution THEY believe will fix the situation, but it is the exact opposite of what is needed to solve the problems. I think we are seeing what happens to capitalism when it is taken to extremes. FDR always said he made the choices he did to save capitalism, and I can see now what he was talking about. The medicine that is needed to save the system is not what Wall Street wants to hear, so they scream bloody murder. But if the action they demand does not solve the problem, they will scream that it was done wrong. If they were smart they would STFU and let the Fed do what is needed.
Regulation is an excellent example. The purpose of regulation is to make sure the system doesn’t get so out of control that it risks ALL PLAYERS. Regulation keeps the system healthy. The housing debacle is case in point. I also think regulation can be overdone, but the best way to avoid that is by not acting in such a way that extreme regulation is required. And just as important as regulation is enforcement. Sadly enforcement was also missing and we now see the result. Some will claim that more regulation isn’t needed, and that enforcement is the problem. Maybe so, but when you screw the pooch you deserve to get a heep more of both. And housing is the perfect example.
The Detroit area is truly in meltdown. Bloomfield Hill is or at least was one of the premier places to live. The houses are beautiful, the entire area was where the millionaires lived and compared very favorably (if not better) to Birmingham or Grosse Point (other best known spots in Detroit as places to live).
Today you can buy stunning houses for something like $300k-$400k. And these are list/wish prices, I suspect you could knock off 30%-40% in an actual sale. In Cal or NY the same houses would go for several million. Today.
I know this area well. My wife spent yesterday looking thru realtor.com after I told her about the problems going on there, she was astounded at the RE price drops.
The property taxes on these houses are also unbelievable. They (and the insurance) would be more than the mortgage. I suspect the infrastructure there is in chaos, forget city services, schools, police. From what I’m seeing I’d bet its all gone. One would have to think the entire place will turn into slums, the equivalent would be Central Park in the 70s on Park Ave in NY or Chevy Chase/Bethesda in DC metro going under. Simply incredible.
Detroit and its metro area have sooooooooo many beautiful buildings. I really hope it’ll rebound. Eventually, it will, I’m sure.
But the next decade or so doesn’t look so promising.
All Michigan would have to do would be to enact Right to Work laws, and automotive manufacturing jobs would flood into Michigan, due to the infrastructure and knowledge base there.
I’m sure the UAW won’t permit that anytime soon, though.
I’m a retired labor lawyer. That “Right To Work” nonsense is way way off blown in importance. That jsut means that people who work at a unionized facility do not have to join the union. In fact, the vast majority in states that have such laws DO JOIN.
Give it up.
Be grateful for the unions. If not for the labor movement of the late 19th and 20th century you would:
(1) be working 10-14 hour days 6 days a week or maybe 7
(2) getting paid no more than someone in India
(3) have no recourse if you were injured on the job. You get stuck with the medical bills and get fired to boot.
(4) no recourse if you had to work in dangerous or unsafe conditions
(5) could be fired for any reason at all including race, age, religion, sex, national origin and physical or mental handicap unrelated to the ability to perform the job
(6) get laid off and there would be no unemployment
(7) have no health insurance through your job so you don’t have to go out and try to buy a non-group policy paying 3-5 times as much and get turned down for coverage because you once had acne or sprained an ankle
Yeah…..those labor movement folks of the 19th and 20th centuries sure were evil and what they did has made your life miserable…..
The labor movement of the 19th and early 20th centuries was absolutely critical to workers’ welfare. The American labor movement of the late 20th century has been led by people as mind-blowingly stupid as American business management. Which is saying a lot.
Apparently someone is talking about it, because the radio and TV ads are already flying saying that signing a right to work petition is the worst thing anyone could ever do.
I grew up on the St. Clair river. I saw the Edmund Fitzgerald pass by from the end of the elementary school playground. I left Ann Arbor a week before finals one year and kept going until I reached Texas. I went back a couple years ago, and said “Where has all the water gone?”
– I is in a funky mood tonight
Gee Deep, you should have stayed to graduate. UofM is a tremendous place with an excellent reputation.
Bloomfield Hills is still in pretty decent shape IMHO, having spent a little time around there and Birmingham myself this summer. Infrastructure wise some of those Oakland County cities are still holding up ok, though the traffic there drives me nuts.
Their problem is that the overall area they’re in is in decline and those top end areas seem to drop faster because the pool of buyers who can afford 300-400K and up in any town around here is spiraling down. With another 50,000 jobs projected to leave the state in ‘08, I don’t see how that changes.
“In some cases, ‘dramatically low’ prices have been quoted, Moody’s said, citing one SIV that received bids averaging 7 percent of face value for a collateralized debt obligation with the highest Aaa credit ratings.”
The problem for the people bidding on this stuff is that nobody knows what the real story is for the assets and the mortgage holders. I think at this point everyone knows that housing will drop another 20%. If this asset package was second mortgages and the owners lied about their income, the debt instrument is almost worthless. 7% might be a very good bid for that.
The losses are going to be horrendous as this unravels. We aren’t anywhere near the bottom yet. The tide is still going out and a lot of companies are swimming nekid ! Stark naked ! The fun is just beginning.
And what sill the S&P500 fall to when consumer spending is REALLY impacted ? Not just the little -0.4% that we are seeing now. Like -20% !
Fun times ahead ! Or not.
The plunge protection team just took off. They are a little early today.
I think that its fitting the markets should rally given all the positive, economically sound news we have had lately. We are due for a 100 point rally.
Rumor hit the street of an intra meeting rate cut. Why? The next scheduled meeting is in less than 2 weeks.
Oh, and word is out the govt will send every household in America a check for $1000. Surely people will take that money and rush out to buy the latest fashions and a big screen TV. They’ll dine in the nicest restaurants and and go buy an IPOD or IPhone.
Hey, give me a check for $1000 and I’ll use it to pay off some debt.
Scary thing is, there is $1 trillion in counsumer debt. The U.S. govt sending out the $1000 checks and everyone using it to pay down their debt would result in 1/10th of the debt being paid off.
Or, thinking of it another way. Households have been going $600 billion a year further into debt. Throw $1000 at each household and that is 1/6th of the debt we’ve been adding.
It is nothing!!!!!
Back to my bailout I proposed last summer. Every household that makes less than median gets 1 year’s income. If you make more than the $50K median, then you lose $.20-$.50 for each extra $1 of income. Exclude non-citizens, anyone that made money off the housing bubble (realtors, mortgage brokers, people that sold and didn’t buy like kind, HELOCed and already walked away, etc.).
If you have more than 1 year’s total debt, then the money goes directly to paying down your debt. If you have less than 1 year’s total debt, then the check is sent to you.
The result would be fewer people under water, renters with downpayments to go buy, and inflation. People with cash in the bank would be slightly compensated for loss in purchasing power of their money by the cash payout.
I think $2T is enough. $100B? Misquito biting an elephant.
Of course, this $2T payout would have to be accompanied by the return or usuary laws, heavy mortgage legislation and regulation, and a healthy dose of market protectionism to make sure the money didn’t just flow out to China on the next boat of cheap crap flooding our markets.
We can hand the $2T to the lenders in the name of the debtors to pay down the debts, or we can wait for the debtors to all be bankrupt and have the govt. spend the $2T liquidating insolvant lending institutions, insurance companies and pension funds.
“Oh, and word is out the govt will send every household in America a check for $1000. Surely people will take that money and rush out to buy the latest fashions and a big screen TV. They’ll dine in the nicest restaurants and and go buy an IPOD or IPhone”
Personally, I will use the $1,000 to buy exactly one ounce of gold, just out of principle. Not that I wouldn’t buy gold anyway, but that purchase will be particularly, almost devilishly, satisfying. It’s my way of sticking it to the man. “Let them have their Tartar sauce.”
“But you are the man, so your saying you’re going to stick it to yourself?”
And what’s to stop the sheeple from going out an piling on more debt (especially credit cards) after the government has paid it off for them? Nothing.
1) The credit card debt isn’t the biggest problem. Total consumer debt is $1 trillion. Mortgage debt is $10 trillion. The mortgage debt pipeline has already been closed off to people that can’t afford to repay the loans.
2) Usury limits. Lock maximum interest rates to 10% or 2x CPI inflation rate, whichever is more. Put strict restrictions on fees like late fees, over limit fees, cash-advance fees, etc. When they can’t book huge gains, the banks will suck back the max limits on people without large incomes or ability to repay the debt.
Putting a cap on interest rates would greatly reduce the amount of debt available and banks would make sure they are lending only to people that can afford to pay it back.
We have a debt to income ratio problem in this country. People have too much debt and not enough income. This is the real root of the problem with the economy.
2 choices to fix the debt/income ratio problem:
Reduce debt with mass govt bailout to ALL “not rich, not housing bubble beneficiaries”, not just those that were stupid.
Increase incomes…. how?
I know that we can reduce consumer debt by dumping that debt on the federal government. We then inflate the debt away by the federal government borrowing the money from the Fed (devalue the dollars held by China and the oil states).
I don’t know how we can ensure that inflation will translate into higher wages.
Exactly! Tell Joe / Juan he is getting 1000 and he will spend it well before it’s in his hand. That 1000 be leveraged into 3000 debts in no time. Ever seen Joe/Juan who is getting a good size tax return spend money? It’s like the classic Sailors on shore leave, same thing with a Gov 1K check in the mail.
All I want is a million dollars.
Can you say “socialism”?
Sure … I knew you could?
1980’s: Contra freedom fighters
2000’s: Contra feedom fighters
“Contra Costa County Supervisors passed a resolution Tuesday asking subprime mortgage lenders to voluntarily agree to a six-month moratorium on foreclosures in the county.”
“Wells Fargo is the second-largest U.S. mortgage lender after Countrywide Financial Corp.”
Orange you glad you’re not # 1, Orwell’s Fargo?
“In some cases, ‘dramatically low’ prices have been quoted, Moody’s said, citing one SIV that received bids averaging 7 percent of face value for a collateralized debt obligation with the highest Aaa credit ratings.”
Thank goodness they had the highest AAA ratings, otherwise it could have been a bloodbath…
If the odds are looking long, then it will not be a surprise.
U.S. ECONOMY
CPI opens door for Fed
Benign core retail-level inflation up 0.3%, possibly giving Fed leeway to cut rates.
• Odds looking long for a surprise rate cut
marketwatch.com
“New Q4 residential building permits in Shelby County were down 63.7 percent compared to permit numbers for fourth quarter 2006, according to the most recent data.”
“The decline has been gradual but noticeable after two record-breaking years for local homebuilders.”
63.7% yoy is a ‘gradual’ decline???? Elvis lives.
s
Does anyone else wonder about indexes which are virtually unchanged for four months straight? Or is this merely a clear indication that a bottom has been reached?
‘The National Association of Homebuilders. “Builder confidence in the market for new single-family homes was virtually unchanged for a fourth consecutive month in January as mortgage-market problems and inventory issues continued to pose challenges, according to the latest NAHB/Wells Fargo Housing Market Index.”’
It means they don’t want to admit that business could get worse.
I read the blurb in the Valley Times about the Contra Costa County Board of Supervisors passing the non-binding resolution about foreclosurers, why not ask to stop car repossesions and banks to forgive credit card debt too? This is just getting really stupid. Instead of holding people responsible for their poor financial decisions the Board of Supervisors has decided all of these people are victims. I agree they are victims…victims of their own greed and stupidity. But I think they should be allowed to suffer the consequences so they hopefully will learn their lesson.
Geez…where is this all going to end?
“…where is this all going to end?”
Everyone will want to become a homeowner in order to capture some of the govt’s largess for that protected class.
“‘Builders are anticipating a time when market conditions will support an upswing in building activity – most likely in the second half of 2008,’ said NAHB Chief Economist David Seiders.”
When you wish upon a star
Makes no difference who you are
Anything your heart desires
Will come to you
“‘Builders are anticipating a time when market conditions will support an upswing in building activity – most likely in the second half of 2008,’ said NAHB Chief Economist David Seiders.”
“NAHB continues to forecast modest improvements in home sales during the balance of 2007″ - David Seiders, March 2007 (http://tinyurl.com/2o7pst)
The likes of David Lereah, David Seiders, Lawrence Yun… they all keep saying that things are gonna turn around soon in a certain amount of time, but those times pass with their predictions obviously proven wrong over and over and over. Yet the media KEEPS QUOTING THEM! This is a travesty of epic proportions.
Supposedly the late day selloff was caused by the Treasury saying it will not back increase of conforming loan limits w/o broader reform.
It has been a constructive day, no matter what the chest beaters say.
Seeya tomorrow.
M&I spinoff saves profit
Metavante gain offsets losses on bad loans
By PAUL GORES
pgores@journalsentinel.com
Posted: Jan. 15, 2008
Although stung by development loans that turned sour in the struggling housing market, Marshall & Ilsley Corp. said Tuesday it posted a profit in the fourth quarter with the help of a $526 million gain from the spinoff of Metavante Corp.
Historically, we have benefited from solid credit quality even during weak economic cycles, but that is not the case in this cycle.
- Mark Furlong,
M&I chief executive
M&I reported net income of $493.9 million, or $1.83 a share, up from $205.4 million, or 79 cents, in the year-ago quarter.
Nearly two years ago I casually asked a branch M&I bank loan officer I knew if there was anything that scared him about the growing subprime mess. I know they were origionating loans like mad.
His only comment to that question was “REASSESSMENTS”.
Last year, an M&I Vice President dissappeared and was later found floating in Lake Michigan off Milwaukee.
It MIGHT BE coincidence, but I know alot of people are asking..”Who knew what and When?”
Yikes, they’re COOKING the BOOKS and it’s time to invest in a shovel and save under fencepost number***out in the south 40
http://www.jsonline.com/story/index.aspx?id=707635
“It doesn’t do anyone any good at all to repo homes.”
This kind of thinking really pisses me off. It would do me a hell of a lot of good to repo homes, because the asset price would and should fall, and all of us that have been saving massive amounts of money away for the day of reckoning would buy at a reasonable price and thus stimulate the economy. It would do the banks a hell of a lot of good to write down the losses today, get them off their books, and move on with someone that can actually repay their loans.
Right now, there are millions of people living in homes they can’t afford, and millions like myself living WELL below my means stashing away tons of money that could be instead used to stimulate the economy. The Fed helps nobody by trying to keep the tables from turning.
Reduce the interest rate to zero, and I still won’t blink.
“Mortgage meltdown: Now the rents”
“NEW YORK (CNNMoney.com) — Home prices dropped last year in most cities around the nation, and now rents are flattening out in many of the markets worst hit by the housing downturn.”
http://tinyurl.com/24xtqm
What a lot of us have been observing anecdotally is now confirmed.
“In some cases, ‘dramatically low’ prices have been quoted, Moody’s said, citing one SIV that received bids averaging 7 percent of face value for a collateralized debt obligation with the highest Aaa credit ratings.”
BWAAHAHAHAHAHAHAHAHAHAHAA!
Maybe I’ll start offering 7% of appraised value at future open houses.
Reduce the interest rate to zero, and I still won’t blink.
I will just refi my mortgage down to $600 a month.
Don’t you wish. The Fed rate, not your mortgage rate.
The Bank of Japan did the zero (prime) rate (OK, it was .5%) in the 90’s and that created more bad loans and the Nikkei is around 13,000Y, far off its 1989 high of ~ 39,000Y.
You’d think people would figure out that government intervention doesn’t work.
You’d think.
“While Hare did not let consumers off the hook entirely, he puts much of the blame for the problems on real estate agents who artificially increased home prices and steered people to loans they knew the buyer couldn’t afford.”
While it’s high time to point the finger at realtors for their role in this debacle, they’re just one element of the “axis of weasels” - the other two being crooked appraisers and mortgage brokers - who deserve to be held fully accountable for their actions. Of course, the FBs themselves don’t get a pass - most were stupid and greedy, and many if not most were complicit with “liar loans” and similar dodges.
Americans Pay for Housing Boom’s Excess
Wednesday January 16, 4:41 pm ET
By Madlen Read and Joe Bel Bruno, AP Business Writers
U.S. Banks Seeing Higher Delinquencies on More Than Just Mortgage Payments
http://biz.yahoo.com/ap/080116/earns_banks.html?.v=1
Problems in the subprime mortgage market are rapidly spilling over into other areas of the economy. No matter what the experts call it — a recession, slowdown or even the makings of a depression — it’s clear banks are under mounting pressure to be more cautious about lending.
This entire debacle has shifted into another gear. Citigroup loses $4.6 million every hour last quarter? This thing is getting downright scary. I really don’t see myself buying a home anytime soon. And the worse it gets, the less likely I will be to pull the trigger.
See my article on Inflation vs. Deflation for more on why the dollar will ultimately reach 0 value. I got tired of reposting a lot of my ideas so I wrote that article. I am really VERY interested in HBB feedback.
Interesting and very explanatory. As a non-economist, I don’t know if the theretical underpinning holds, but it seems to from what I do know. Thanks.
Let’s see. Stocks dropping. Real estate dropping. Oil dropping. Dollar rallying. Gold faltering.
Sounds like Deflation is taking hold.
A one or two day trend in gold is not faltering. Just wait until the government is forced to bail everything out and becomes the borrower of last resort!
In China in 1947-49, those that were able to buy Gold, were able to hightail it to Taiwan and miss out on the Great Leap, Cultural Revolution and other assorted fun.
Gold is usually valued in monetary terms, but sometimes takes on magical properties of it’s own…
Here’s what happened towards the end in 1949, pure mayhem.
http://www.prints4all.com/cgi-bin/commerce.cgi?preadd=action&key=NIMKN537
Looks like a very tight rhumba line!
It was an odd feeling back in 2006 when I bought two ounces of gold at the $730 peak and that peak has not been touched for over a year. But I did the right thing. Certainly I bought gold in January 2007 that week when it was $609 per ounce. I win some, lose some, but I win in the long run because I buy a little at a time. Then last weekend I bought one ounce when spot was $896 per ounce. I’m hoping for a 10% correction. Right now it’s about a 4% drop from the height. It does not matter anymore. BB will cut rates again. David Cee’s candidate Hillarious Clowntoon is proposing to freeze interest rates for 5 years. Can you imagine what that will do to gold? Can you say $5,000 per ounce in year 5?