The Mortgage Feast Has Turned Into A Famine
Some housing bubble news from Wall Street and Washington. Associated Press, “An industry group said Tuesday that pending U.S. home sales fell in February to the lowest reading since the index began. The National Association of Realtors’ seasonally adjusted index of pending sales for existing homes fell to 84.6 from January’s upwardly revised reading of 86.2. The index stood at 107.6 in February 2007. A reading of 100 is equal to the average level of sales activity in 2001, when the index started.”
“The previous low was August’s reading of 85.8, recorded at the height of the credit crunch.”
“The PHSI in the Northeast remains 25.4 percent below a year ago. In the Midwest, the index is 17.4 percent lower than February 2007. The index in the South is 30.3 percent below a year ago. In the West, the index is 17.1 percent below February 2007.”
From Bloomberg. “Bank holding companies including Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. have the thinnest safety cushion against losses in seven years. The margin may erode further in coming weeks. Credit ratings on $704 billion of bonds have been cut this year following the collapse of the U.S. housing market.”
“As a group, regulated banks had a total risk-based capital ratio of 12.79 percent at the end of last year, according to data compiled by Bloomberg. The figure was the lowest since 2000, before the last U.S. recession. How much commercial banks have already cut back on lending will be known in mid-April when most report earnings.”
“‘All I know is the first-quarter reports are going to be pretty bad, and there’s a lot more to come,’ said L. William Seidman, who was chairman of the FDIC from 1985 to 1991. ‘Our experience was that if the economy got in trouble, it took at least a year for the banks to get into trouble.’”
“‘The important thing to remember about capital ratios is that they are minimums,’ said Ralph Sharpe, who was director of the Office of the Comptroller of the Currency’s enforcement and compliance division from 1984 to 1994. ‘In good times everybody looks good, but when the tide goes out, you see who is not wearing their bathing suit.’”
The Times Online. “House prices in Britain plunged last month by the worst figure since the financial crisis in the early 1990s.”
“Halifax, the country’s largest mortgage lender, revealed today that March prices dropped by 2.5 per cent, the biggest monthly fall for 15 years, beaten only by a 3 per cent fall in September 1992 when on ‘Black Wednesday’ John Major’s Government took sterling out of Exhange Rate Mechanism.”
“It appears to show that the rapid withdrawal of 100 per cent mortgage loans, with Abbey yesterday being the last lender to abandon such a loan, the demand for higher deposits and the raising of rates on mortgages has driven a sudden slowdown in the housing market.”
“The data from the Halifax follows the Nationwide reporting that house prices fell by 0.6 per cent month-on-month in March, a fifth successive decline. Latest figures from the Bank of England show that mortgage approvals edged down to 73,000 in February from 74,000 in January. This was the second lowest level since current records began in 1999.”
“Halifax’s chief economist Martin Ellis said: ‘Overall, we expect there to be a modest (low single digit) decline in UK house prices this year. Any declines, however, should be viewed in the context of the significant price rises over recent years.’”
“UK prices have increased by 171 per cent over the past ten years and by 51 per cent over the last five years. The average UK price has risen by £120,860 during the past decade from £70,696 to £191,556,’ he said.”
This is Money. “While some of Britain’s estimated 750,000 landlords are rich on equity built up in the past decade, others are recent investors who bought over-valued property, much of which - especially new-build flats in large, urban blocks - has proved difficult to let.”
“Rosemary Jane, like thousands of other educated, middle-class homeowners, believed property investment was the sensible way to supplement her pension and finance a comfortable retirement. But her foray into buy-to-let has left her staring into a financial abyss where everything she owns, including her home in Portsmouth, is in jeopardy.”
“And at 57, retirement is out of the question - probably for a long, long time.”
“Rosemary bought three properties in 2004 whose values were questionable at the time and which are now falling. She easily found loans, but the repayments depended on her achieving high rents - which never materialised.”
“Ideally, what Rosemary wants is for the property club that recommended the investments - to take the Manchester property off her hands and also release her from a pledge she made to buy another house in Florida, which has yet to be built.”
“When complete, the US property is likely to be worth less than the $240,000 (£125,000) she promised to pay in 2004. But this is a moot point as she will never find a lender to offer her a mortgage.”
“Rosemary says: ‘Nobody would give me a mortgage on the Florida property and it is unlikely I will ever be able to remortgage the Manchester flat away from Northern Rock either.’”
“David Sandeman (a) property research specialist , says the average flat built since 2005 is fetching about 26% less than its original price and more than 15% will not sell at all.”
“‘This is the tip of the iceberg,’ he says. ‘Everyone is just realising now what these properties are worth - and their values will be pushed down more. Investors are battling to refinance. They will go back to the brokers who found them mortgages in a flash three years ago - but there won’t be any mortgages there now.’”
The Observer. “Location, location, location, the mantra of Britain’s property owning classes, has turned into frustration, frustration, frustration.”
“Cheap and easy mortgage loans have for the past decade fuelled a housing boom that has turned Kirstie Allsopp and Phil Spencer into TV stars and spawned a host of glossy ‘property porn’ mags and supplements encouraging us to fantasise about grander, more expensive homes.”
“But the mortgage feast has turned into a famine because of an unwelcome American export: the credit crunch. ‘There is no doubt this is a very difficult situation,’ said one bank executive. ‘Some borrowers will really feel the pinch, and repossessions will rise, though they are low at the moment. We are already seeing house prices begin to fall across the country.’”
“In the space of just one day last week, more than 300 mortgage deals vanished from the market, according to Moneyfacts. Almost 3,000 were withdrawn in March, taking the number of products available to fewer than 5,000. To put that in perspective, the figure stood at more than 15,000 before the credit crunch began last summer.”
“Twenty-four-year-old Liam Tarry bought a house in Norwich 18 months ago but is now preparing for life as a tenant again because his mortgage has become unaffordable.”
“Tarry bought the house with a friend who took on most of the mortgage. But a few months ago the friend moved out, leaving Tarry facing a remortgage of more than three times the size of his existing repayments.”
“‘My plan was to profit from house prices, which I suppose was foolish,’ he says. ‘But, then again, I could not have predicted that house prices would fall and that lenders would stop lending.’”
“Akira Mori, Japan’s richest man, spent a record 231 billion yen ($2.3 billion) buying Tokyo’s Toranomon Pastoral Hotel last September. He now says it’s worth closer to 200 billion yen.”
“‘The boom we’ve enjoyed for the past few years is over,’ said the 71-year-old CEO of Mori Trust Co. ‘Investors were convinced that prices would keep rising, so in about six months, they’ll probably rush to get out regardless of price.’”
“Global real estate financing has evaporated as defaults by U.S. homeowners saddled banks and securities firms with $232 billion of losses and asset writedowns.”
“‘People who bought properties last year at a very high price, they’re in trouble,’ said Toshio Masui, president of Japan operations for (a) Los Angeles-based buyout firm. ‘Everybody was overpaying. People with a bunch of stuff in their portfolio are now running around trying to get refinancing, and they won’t get it.’”
“‘We should be prepared for another round of real estate deflation that may last for some time,’ said Akiyoshi Inoue, president of Tokyo-based Sanyu Appraisal Corp.”
“While total returns for real estate investments in Japan, including capital gains and rental income, have been positive since 2002…the housing market has been showing signs of strain. Condominium sales are set to fall for a third year in 2008.”
“Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, reduced property loans by 7.7 percent as of Sept. 30 from a year earlier. Regulators have sought to prevent a bubble like the one that burst in 1991, leading to 15 years of falling land values.”
“Japan’s previous property boom lasted 16 years, making Mori’s father Taikichiro Mori the world’s richest individual in 1991, according to Forbes. When Taikichiro Mori died in 1993, the family’s $15 billion fortune had been cut in half in just two years, Forbes reported.”
“‘Japanese investors suffered a severe shock when the last bubble burst, and because they lived through the crash, they’re bound to be cautious now,’ said Junko Miyakawa, a senior analyst at Tokyo-based Shinsei Securities Co.”
“Regulators at the Tokyo-based Financial Services Agency may have sought to curb lending to prevent a new bubble from forming, said Katsuya Takanashi, CEO of Secured Capital Japan Co., which manages about 550 billion yen of real estate assets.”
“‘The FSA doesn’t want to repeat the bad-loan problem that trapped Japan’s economy for such a long, long time,’ he said.”
From Conde Nast. “The former Fed chief is on the defensive and one of the biggest charges against him, WSJ’s Greg Ip tells us, ‘is his decision to slash interest rates to 1% in 2003 and wait to raise them until 2004, and then only slowly.’”
“Greenspan explains that policy makers were motivated by the specter of Japanese-style deflation which descended upon that country in the 1990’s after booms in its stock and real estate markets the previous decade.’”
“The irony of course is that in keeping interest rates low after the tech-stock boom of the late-90’s, Greenspan (implicitly or explicitly depending on who you want to listen to) encouraged both the consumer spending binge and the real estate bubble.”
“In hindsight, it appears that in trying to maneuver around an outcome similar to Japan’s ‘lost decade,’ Greenspan and his compatriots only succeeded in delaying it.”
From Reuters. “In an interview in Tuesday’s Wall Street Journal, Greenspan…has lashed out again at his critics, saying he was being blamed unfairly for the credit crisis and that he had no regrets about decisions he took while at the helm.”
“Greenspan said rock-bottom interest rates actually went against his ‘19th century’ aversion to easy money. ‘My inner soul didn’t feel comfortable,’ he is quoted as saying.”
“Critics say Greenspan, under whom U.S. rates went from 6.5 percent in late 2000 to 1 percent in mid-2003, eased policy too much and then took too long to tighten again. That, they say, spurred excessive mortgage borrowing and stoked the housing bubble that is now the root cause of the credit crisis.”
“But Greenspan said the Fed cut rates to spur growth and prevent deflation and, at that time, dissenting votes on the policy committee were from those who wanted rates even lower.”
“Analysts also blame Greenspan for failing to press for stricter rules for bank lending to consumers with weaker credit records, and for not anticipating the subprime mortgage meltdown.”
“In the interview, Greenspan admits he was wrong about the improbability of a housing bubble. But WSJ reporter Greg Ip says Greenspan does not share some foreign central bankers’ belief that their job is to defend against excessive asset-price inflation. No sensible policy, he maintains, could have prevented the housing bubble.”
“‘I am reasonably certain that I am right here,’ Greenspan is quoted as saying. If proved wrong, he says, ‘I will change. I do not have a vested interest in holding wrong ideas.’”
The Arizona Republic. “The recent rise in Phoenix’s housing prices means that in some cases the cost of owning a house grew too high compared with the cost of renting one, says a new report from the Center for Economic and Policy Research, in Washington, D.C.”
“The report says that when ownership costs exceed 50 percent, it indicates a bubble. Some ‘extraordinary’ gaps include New York City, where it costs 109 percent more to own a home than to rent; San Diego, 133 percent; San Francisco, 161 percent; and Los Angeles, 168 percent.”
The Boston Globe. “Owning a home in Boston is about 70 percent more expensive than renting an essentially identical home. Therefore the government should stop trying to keep owners in homes and instead let more people return to renting. Those families could spend the extra money on other needs…says a new study from the National Low Income Housing Coalition.”
“The study joins a growing chorus making the point that home ownership is a misnomer in many cases. Many ‘homeowners’ are people with little equity, no equity or even negative equity who are basically making monthly rental payments to a mortgage company.”
“The group argues there is little long-term benefit to ownership because prices in cities including Boston likely will continue to decline…And even if they could, they’d be better off paying half as much and investing the difference in stocks.”
From The Housing Bubble March, 14, 2005. “Think about this statement from Greenspan the next time he says there is no collapse looming. From the 1999 (FOMC) transcript, ‘Owners’ equivalent rent is going to start to accelerate unless I misread how asset prices interact with consumer prices. The reason is that the ratio of owners’ equivalent rent to the value of housing has been going down continuously, and the implicit rate of return that that is suggesting cannot credibly be expected to continue.’”
For those who say the Fed and US government have an infinite ability to create money:
‘Although America’s current economic crisis is expected to pass, the snowballing federal deficit threatens to bring more serious troubles in years to come, the United State’s former comptroller general said Monday afternoon. During the meeting, Walker said the federal government is losing billions of dollars annually on both Social Security and Medicare, and that the current deficits will only increase without a significant change in policy.’
‘It’s the rule of holes,’ he said. ‘When you’re in a hole, stop digging. But we can’t stop. We’re in a $53 trillion hole, and we’re still digging.’
‘Walker expressed mostly contempt for beltway politics. ‘Washington is badly broken,’ he said. ‘It is completely out of touch with reality.’
‘ Both Blinder and Walker touched upon a host of economic concerns in a 45-minute session with local media representatives before their Monterey lecture. They agreed there are many more economic problems than turbulence in the housing markets. ‘These longer-run issues are far, far more important than any of these crazy things going on now,’ Blinder said.’
‘Walker said the debate over whether the economy is in recession pales in comparison to potential long-term economic devastation posed by drastically underfunded entitlement programs. Just as many investors in mortgage-backed securities didn’t realize their potential exposure, many people don’t have any idea about huge unfunded federal liabilities, Walker said. ‘We have $44 trillion-plus in off-balance sheet, unfunded obligations for Social Security and Medicare alone,’ he said.’
‘Blinder said a foreclosure-relief bill authored by Rep. Barney Frank, D-Mass, and Sen. Chris Dodd, D-Conn., could help millions of people facing foreclosures. But the nation’s economic ills go deeper, he said. ‘The financial system is a leaking boat, and it has more than one leak,’ he said.’
It is very difficult for me to have any respect for someone working for Mr. Pete Peterson. IMHO the lowest form of human life on the planet.
“…..huge unfunded federal liabilities…….”
The government will pay them as long as they can. Then they won’t. World’s biggest game of musical chairs to follow immediately afterward.
Bet on Wall Street being “too big to fail” we, after all, don’t want the “system to break down”……..expect pensioners/taxpayers/Main Street to be thrown under the bus. For a preview, see New Orleans, post-Katrina.
I’m long Smith and Wesson, Remington, Olin, and Springfield Armory
I’m long Anheuser Busch and Kimberly Clark, the makers of beer and kotex…
I read somewhere once that Los Angeles has emergency evacuation plans that ban people from bringing out guns, booze or drugs.
The three things that people will insist on having….
Right on, Hoz.
None of his points is new, and none has stopped the government printing fiatscos. And none will.
IMO you’re just wrong. This country is over-indebted and we’ve had the money creation. Now comes deflation. Your idea of an all-powerful Fed is about to be proven wrong. Look at how the media now openly mocks them. Like I said before, keep believing this stuff. We need counter parties.
Ouch!
Deflation? We could have hyperinflation where they simply print more $100 bills and issue credit out of thin air.
Google depression deflation
You’re better off googling “hyperinflation,” or “Weimar, Germany.” The financial powers that be will never allow a depression to happen; from their point of view, hyperinflation would be the lesser of two evils.
If you truly believe hyperinflation will occur, you should buy the most expensive house in your city. It will be easy to pay off the mortgage with one of those new $50 million dollar bills ( I think I we should call them Greenspans )and with change left over you could buy a latte at Starbucks.
We’re already seeing deflation — in the housing market!
Did you see CNN the other day where Zimbabwe had printed 50 Million dollar notes =1 US$. It took 3 of em to buy a loaf of bread. 150 million for a loaf of bread? It was only 100 million last week…sheeesh.
Actually, I think we’ll have both: hyperinflation, then a deflationary crash. The worst of all worlds: you can’t buy a house and hope to have the debt hyperinflated away since the hyperinflation won’t last that long, but your savings will be eaten up during the hyperinflationary period.
The problem will be resolved with the Amero, North American Union, and whatever else it takes to turn the US into a 3rd world ghetto.
Ben, we need YOU to keep believing your stuff. I sincerely hope you’re right. This country needs one huge enema.
But I agree with Gulfstream. The rich and powerful are rich and powerful for a reason.
All joking aside, I really wish I knew where to place my bets/investments (one and the same, now).
The laws of nature agree with Ben……but the Federal government and Wall Street can only be bailed out if there is inflation.
How long can the Wall Street pukes, and their “Pi##-Boys” in DC delay the inevitable? Long enough to get out while the gittins’ good?
Just an uneducated J6P view…..
For me the inflation/deflation debate is rather hard to get my J6P mind around.
Please don’t laugh, but tell me where my kitchen table logic is off.
My understanding is that hyper-inflation occurs when the governing authority, in an effort to spend more than its income ( and also cheat its citizens unknowingly out of their hard earned cash) , literally prints paper currency as it loses value which causes it to continue to lose value thereby reinforcing the “need” for more paper currency creation.
This causes velocity to increase as immediate spending, and not saving is encouraged.
The term “print money” is thrown around a lot, but my understanding is that this is not happening in a literal sense in the US and that debt creation is the order of the day, directly by government issued debt, unfunded liabilities and government backing bad paper so banks can continue to lend.
This is kind of like trying to fill a leaky swimming pool by watering the lawn. Some may go in the pool, but it is not the most efficient way to fill the pool. The leak needs to be plugged, but no one wants to drain the pool to make it possible.
So if we continue not to have paper currency inflation, and defaults destroy more money, causing layoffs, causing contraction in spending, causing more layofss, then velocity of money will also slow and increase deflationary pressure,
and……………….
OMG, now you see why I am confused.
Once my mind starts to try to think about this I get stuck in some kind of mental centrifical perpetual motion self reinforcing closed end sub program/main program loop and repeat mode, loop and repeat mode, loop and repeat mode…….
Ben - you’re right, because after a certain point of additional money creation, we hit hyperinflation. And central bankers do not want hyperinflation - they want to inflate as much as possible before deflation.
But there is no limit to the amount of money the Federal Reserve can create - they create money (deposits at the Federal Reserve) when they purchase assets. Even the Wall Street Journal is admitting this on a front page article (this from the front of the Wall Street Journal Online ):
WASHINGTON — The Federal Reserve is considering contingency plans for expanding its lending power in the event its recent steps to unfreeze credit markets fail.
Among the options: Having the Treasury borrow more money than it needs to fund the government and leave the proceeds on deposit at the Fed; issuing debt under the Fed’s name rather than the Treasury’s; and asking Congress for immediate authority for the Fed to pay interest on commercial-bank reserves instead of waiting until a previously enacted law permits it in 2011.
• The Issue: The Fed has sold or committed a lot of its Treasury portfolio to support markets. Some worry it will soon run out of room to do more.
• The News: The Fed is considering several contingency plans for getting more lending capacity so that won’t happen.
• The Bottom Line: The Fed has lots of firepower left before it has to turn to these contingencies.
No moves are imminent because the Fed still has plenty of balance sheet room for additional lending now. The internal discussions are part of a continuing effort at the Fed, similar to what is under way at foreign central banks, to determine its options if the credit crunch becomes even more severe. Fed officials believe the availability of such options largely eliminates the risk of exhausting its stockpile of Treasury bonds and thus losing its ability to backstop the financial system, as some on Wall Street fear.
British and Swiss central banks also are contemplating contingency plans. For now, the European Central Bank is reluctant to consider options that require substantial modifications of its standard tools.
The Fed, like any central bank, could print unlimited amounts of money, but that would push short-term interest rates lower than it believes would be wise. The contingency planning seeks ways to relieve strains in credit markets and restore liquidity without pushing down rates.
The Fed is reluctant to heed calls from some Wall Street participants and foreign officials for the Fed to directly purchase mortgage-backed securities to help a market that still is not functioning normally.
Before the credit crunch began in August, the Fed had $790 billion in Treasury securities on its balance sheet, about 87% of its total assets. Since then, it has sold or lent about $300 billion. In their place, the Fed has made loans to banks and securities firms to assist them in financing holdings of mortgage-backed and other securities. Some on Wall Street say the potential for further declines in Fed treasury holdings could leave it out of ammunition.
[Chart]
The Fed holds assets to manage the nation’s money supply and influence the federal-funds rate, which banks charge each other on overnight loans. When the Fed buys Treasurys or makes loans directly to banks, it supplies financial institutions with cash; in effect, it prints money. The cash ends up as currency in circulation or in banks’ reserve accounts at the Fed.
Since reserves earn no interest, banks lend cash that exceeds their required minimum. That puts downward pressure on the federal funds rate, currently targeted by the Fed at 2.25%. The Fed could purchase securities and make loans almost without limit, expanding its balance sheet. That would cause excess reserves to skyrocket and the federal funds rate to fall to zero. The Fed would contemplate such “quantitative easing” only in dire circumstances. The Bank of Japan took this step this decade after years of economic stagnation.
Weighing the Possibilities
So the Fed is seeking ways to expand its balance sheet without causing the federal funds rate to drop. The likeliest option, one the Fed and Treasury have discussed, is for the Treasury to issue more debt than it needs to fund government operations. The extra cash would be left on deposit at the Fed, where it would be separate from bank reserves on deposit and thus would have no impact on interest rates. The Fed would use the cash to purchase an offsetting amount of Treasurys in the open market; for legal reasons, it generally cannot buy them directly from Treasury.
Treasury’s principal constraint is the statutory limit debt. Treasury debt was $453 billion below the limit Monday. In the past, Congress always has responded to administration requests to raise the limit, sometimes only after political theatrics.
Fed officials also are investigating the feasibility of the Fed issuing its own debt and using the proceeds to purchase other assets or make loans. It has never done so; the legality is unclear. Some foreign central banks, such as the Bank of Japan, do so.
Another possibility is seeking congressional approval to pay interest on banks’ reserves immediately instead of waiting until a 2006 law permits that in 2011. If the Fed paid, say, 2% interest on reserves, banks would have no incentive to lend out excess reserves once the federal funds rate fell to that level.
Congress put off the effective date because paying interest on reserves reduces the Fed profits that are turned over to the Treasury each year, widening the budget deficit. Although preliminary explorations suggest Congress would be open to accelerating the date, the Fed is leery of depending on action by Congress.
The Fed is inclined to use any additional maneuvering room to lend through its existing and recently expanded avenues. Officials are reluctant to buy mortgage-backed securities directly. They worry that such purchases would hurt the market for MBS that the Fed is not permitted to buy: those backed by jumbo and subprime and alt-A mortgages, which are under the greatest strain.
Moreover, the Fed is not operationally equipped to hold MBS and would probably have to outsource their management. Such holdings wouldn’t help avert foreclosures much, since the Fed would have little control over the mortgages that comprise MBS.
“We need counter parties”
As far as SS and Medicare are concerned our counterparties are Drs, drug companies, and HMOs. I think they will keep accepting US$ as long as the Fed can print them. They will just put their prices up to match inflation.
“fiatscos”
Excellent pun, if that’s what it was.
$53 trillion hole 1 trillion seconds=32,000 years
Once the rest of the world wakes up to this fact, look out below in the Treasury markets. The irony is that mortgages will go up, not down, as the Fed continues to ease.
The problem with Greenspan’s grilling on his monetary and regulatory policies is that no one is grilling him on his role in the Social Security Commission of the early 1980s, which he headed.
My generation, and those after, were made a promise — pay vastly higher payroll taxes and accept a lower retirement age and Social Security would be “saved” for you.
Well, we have $2 trillion in IOUs based on our excess payments, which we could redeem by cutting spending on other things or taxing ourselves a second time to pay back Social Security. Or we can accept lower benefits again. How about that heist?
I made a post about hyperinflation and great depression II that mysteriously vanished.
I see mass defaults on debt due to hyperinflation and depression. They won’t have worthless dollars to pay back.
Hyperinflation would not cause mass defaults on existing debt.
Do you see why?
??
Inflation is the way out of debt. You devalue the notes of the lenders with hyper-inflation, and ease the payments to the borrowers.
But, you’ll say, what about hyper-inflation with no wage growth? You can’t have hyper-inflation without massive wage growth to go along with it, or the inflationary spiral will stall out before it gets going.
Wage increases with fixed principal amounts make it easier for homedebtors to pay back their debt.
I agree. Probably the biggest mistake in modern US history.
test
I’m 46. You’re about my age right? So we’ve been paying the higher FICA since college, our whole careers beyond the paper hat jobs.
But I’m not counting on Social Security. Far from it. Work till your health fails, and then (if the Democrats are in) our generation will be entitled to medical marijunna followed by legal assisted suicide in lieu of Medicare.
And what will the Reps offer you that’s any better?
WT Eco
spot-on summary. and people dont realize that social security was not established to be the PRIMARY retirement financial support for retirees, but just a SUPPLEMENTAL support. So many lazy, shortsighted people did not plan for their golden years in advance & now scream bloody murder over any thing to do with Social Security.
I lived in Florida on & off for a long time and lemme tell ya that was the third rail of politics. ANY ATTEMPT to address the Social Security problem was met with a withering attack from the AARP and their massive VOTING bloc. I remember newspaper interviews with wealthy retirees, asked if they would forego their small, modest SS payments?
HA! HA HAH!! Hell no, they “EARNED IT”, was the universal answer. Greedy, clutching, grasping, old crones shreiking over nickels & dimes. Yeah, pretty much formed my opinion about the despicable greedy wealthy retirees in FL. Not all but quite a few. And these same people would bicker endlessly over who pays what share of the meager tip @ Dennys early bird specials, but feel entitled to pilfer salt, sugar, catsup, silverware, anything not nailed down to the table. Seinfeld nailed the image perfectly! At least the Canadian tourists left a quarter tip. (ok so it was Canadian heh heh …)
Typically, politicians didnt want the hassle, gave up & just deferred it to the future.
Well, golly gee, guess what? NOW is yesterdays FUTURE, with most of the senior generation curled into a fetal position in a long term nursing facility, oblivious to the world. Hey, what do THEY care, they GOT THEIRS ?!?!
I’d like to leave my heirs a better world if possible, but by the looks of things it’d take a revolution to restore morality to this country.
“And what will the Reps offer you that’s any better?”
Nothing, because both parties suck, and their members should be savagely flogged for their actions. Nonetheless, that doesn’t stop many people from making partisan statements out of sheer cluelessness regarding the sorry state of the U.S. and its political system.
It isn’t just Florida…..out here in fly-over land, we have any number of cities packed to the rafters with the same types, except they go to McDonalds for an Egg McMuffin and a bottomless cup of coffee, and sit around bitching to each other about how things would be different if everyone listened to them.
Sorry……I’m not that far away from being 65 myself, but if it gets to the point where all I have to do is sit around and bitch, instead of doing something productive, I think I’ll end it the old Pawnee Indian way (sit on the ground wrapped in a blanket, and let the kids shoot arrows into me).
Hey Aquis……are you the one that told the story awile back on this blog about the retirees visiting Denny’s, then wandering around the parking lot trying to locate their Crown Vics with the “Panic alarms”?
That story cracked me up. Pretty much describes every Denny’s in the country, on Sunday morning
hey there GStream
I’ve mentioned Dennys a few times & the lines out the doors at 6am but never knew about the panic-alarm locator method. Thats is effin HILARIOUS !!! In fact, I might try that sometime if I ever get around to installing an electronic alarm (now just a hidden manual ign cut-off switch) in my small corolla. The car gets swallowed up out of sight by giant SUVs here in Sac area, and I wander around in my middle aged befudlement swearing at the young whippersnapper cart boys until I finally find it.
Maybe a jack-in-the-box antenna ball. in a black mohawk. that cracked me up when I saw it last year. very creative.
(I bet the retirees Crown Vics were all tan or beige, the universal lemming conformity color, especially among the sea of Tahoes & Suburbans parked along the road at Byers Gymnastics with the obligatory pinched-face stressed soccer mom dropping off ONE child. What a waste of resources, all for that “image”).
ok, I’m done. for now.
Reminds me of my waitressing days of long ago. I saw one 4-top of old biddies finish their lunch, head out the door and the last one up from the table stole my tip on her way out!
Ya know, I was kinda indignant but you gotta laugh.
I’m on the backside of 55 and can’t remember how many times the “government” has fixed the looming social security crisis for the “foreseeble future.”
Accept a lower retirement age? I didn’t know it ever changed except to go higher for boomers and younger. Hell I’ll accept a lower retirement age anytime.
nice catch, Mister Not In Montana
Changing the Social Security rules by having workers wait until age 70 or beyond will go a long ways toward solving the SS insolvency situation.
The rules were made when American’s lifespans were much shorter than they are today.
Not a popular idea, but … it’s one that would work.
I welcome flamers to submit alternative suggestions.
“Changing the Social Security rules by having workers wait until age 70 or beyond will go a long ways toward solving the SS insolvency situation.”
Wouldn’t bother me in the least. My wife and I are on track to comfortably retire in our mid-50s thanks to our financial prudence and saving everything we could in our younger days while having to choose between mac & cheese or PB sandwiches for dinner. By the time we get to retirement, SS will likely have an extremely onerous means test and we won’t get squat from it anyway. Bring the age increase on; it would be a fitting punishment for non-savers to have to work until they’re dead, I say.
It’s not a complex equation, money into the system generally needs to equal money out of the system. As of today, the only way it will work is:
1. Increase taxes (pick your favorite method, either a stealth tax on all via higher payroll taxes for companies, or a direct tax of the wealthy);
2. Decrease benefits outright across the board;
3. Decrease benefits via delay in being able to collect SS, and thus shortening the during which you collect benefits;
4. Decrease benefits by means testing (if you don’t need the SS, you don’t get it).
I favor #4, but that won’t work either (read aqius’s post above about wealthy retirees screaming bloody murder for their SS that “they earned”). By the way, I’ve heard a similar statement that “I just want out of SS what I paid in”. My response? You’ve already spent what you put in–that’s why this country is in so much debt.
I’m only in my 30’s, but I’m already preparing to pay for my own retirement. I discussed with my wife the other day that I’m glad we don’t own a home, or else we wouldn’t be able to save as much for retirement. I consider myself a very forward thinker, so it scares the hell out of me when I think about all the handouts people are going to expect from the government due to their less than forward thinking.
#4 is pretty much the worst of your 4 options as it rewards people who do not save money for retirement. If #4 becomes law, expect people to stop funding 401ks/IRAs. It would make sense to convert your savings to untraceable, yet easily transferable items so as to appear to be destitute and receive full benefits from SS.
#4 doesn’t work because the cost of means testing for Social Security is far greater than the benefit that would be received by limiting Social Security payments to wealthy recipients. There just aren’t that many of them. Remember that 70% of present recipients don’t have any other income. And many of those with other income rely on Social Security for the majority of their income.
Simple but complete fix for SS.
1) Means test eligibility
2) Remove the 100k cap on contributions
Fixed.
Skip-
I think you can phase out SS so that on the margin it isn’t a 100% detriment to saving. In other words, you would still get something, but not as much.
Peoninchief-
Good point.
I think the biggest problem is that SS has become a retirement plan, not a safety net. It needs to go back to being a safety net. The problem is that I just don’t see that happening with demographics as they are–there are too many people that feel entitled to their SS.
So, higher taxes, or decreased benefits through delay until 70 years old, and/or removing the 100k cap on ss wages.
yay.
Rental Watch, I’m in my 60’s and have always assumed SS would be good for nothing. But SS isn’t really the problem, anyway. The Medicare cost is projected to be an order of magnitude larger than the SS cost. Tort reform might help.
I can’t carp too much about “the younger generation” that doesn’t save for retirement: they CAN’T, because they’re already up to their ears in student-loan debt. Having been an academic, I feel entitled to bitch and moan about greedy college faculty (yes, faculty). I can remember sitting in a shared faculty office and listening to people complain about their low salaries when the actual job would’ve left them time to do another half-time job (at least) on the side. Naturally the administrative depts of colleges are bloated too, especially the “recruiting” (sales) offices.
Exeter,
Agree 100%, in addition to SS being available only to legal residents and citizens, and possibly raising retirement age.
It’s really not that difficult, and YES, it is taking from those who can afford it and giving to those who cannot. Sometimes that is better than the alternative…and I’m speaking as someone who should be fully funded in retirement and will not get SS.
The question I have is when will the government stop treating SS like their own personal ATM?
Over the years the government has borrowed from every source possible. There’s no plan to pay any of this back that I’m aware of. How can they pay it back when they can’t stop borrowing? It’s no different than J6P over extending himself and then going into bankruptcy other than the government can use smoke, mirrors, and various tricks to prolong the reality. I’d like to be part of the solution versus the problem and I think the simple answer is for the government to show some fiscal restraint by stopping the spending and then raising taxes. Nobody seems to like either of these solutions, so the question now is how do we fix the system prior to a total collapse?
How can they raise taxes on the people when the people barely have jobs and are in debt over their heads? The money simply doesn’t exist.
My recollection is that the medicare portion of SS is going to be a far larger problem than the retirement income.
I suspect the eventual fix will be a much older age to collect both the retirement and medicare portion of SS. While the retirement income portion might be means tested, I am skeptical the medicare portion will be.
Don’t worry Ben,
The Democrats will simply raise taxes and viola - problem solved! You see, there is ALWAYS more tax money available to use for the “common good”, you just simply have to make the “rich”* pay their “fair share”**.
* Ask a liberal to define “rich” = crickets chirping
** Ask a liberal to define “fair share” = dopey blank look on their face
The simple fact is that more “entitlements” were promised than will ever be able to be paid out, and painful cuts WILL occur, regardless of what Hillary or Barack promises.
There will be time when it is right to get out of the dollar permanently, since that is the currency system that the entitlements were promised under. I don’t think it has to do with the current housing bubble and credit meltdown, since other countries will ultimately get the worst of it - see Britain. But once the boomers really try to collect on government benefits en masse, the whole dollar debt system will collapse. That WILL be the time to own real property. This will all go down in the next 10 to 15 years, IMHO.
If you look at the way the tax code actually operates, the government defines “rich” as anyone making more than about 3X the poverty level.
It can’t be any other way under the current system - if you defined “rich” more realistically (say: > $250K annual income), there wouldn’t be enough taxes collected. So “rich” has to be defined down, well into the middle class, in order that the tax system can collect sufficient revenue.
This is expedient politically, because the government can claim that they are collecting taxes on the “rich” whilst shaking down the middle class. It’s much like the “starving children in Africa” line that your parents used to get you to clean your plate at dinner - hey, look at all you’ve got!
The reason it as to be this way is that there aren’t enough truly rich people to pay the bills. Even if you took 90% of the income generated by the top 5% of income-earners, it wouldn’t make a dent in the total amount that the government needs to collect. That was tried, in both the US and GB, and it failed miserably. The only way to collect enough money is to tax the stuffing out of the average wage earner, and let their large numbers make up for the smaller amount collected from each.
Now if the government were not spending like it wasn’t their money, things might be different. But that’s not the system we live in - we currently have a system in which politicians achieve maximum personal benefit by spending the greatest amount of Other People’s Money possible.
This is where inflation comes in
The middle class will see a nominal increase in their salaries over time but not their buying power. They will move into higher tax brackets and the alternative minimum tax will take a bigger and bigger bite out of their deductions. People with kids in high tax states earning as little as 75,000 a year are getting hit with this now. When the guy at McDonalds earns 75,000 a year the Gov will be getting a larger percentage of his buying power every year at tax time.
Everything goes in cycles, my guess is we have a strong period of deflation (? a year or two) followed by fairly rapid adn prolonged period of inflation if the economy recovers at all. The FED gov will continue to pump out more and more food stamps to prevent riots, while more and more of the middle class looses spending power and ends up impoverished.
What do you call it when people work for nothing but food and housing. It’s not slavery, but dam close.
Modern day feudalism? Except maybe we won’t be bound to the land. Oh goody.
Let me guess, az. Doing my best Kreskin imitation, I see that you are a wealthy Republican deriving most of your income from investments. I wouldn’t like them danged ole Democrats, either.
Texas Rules -
since when did it become a bad thing to be rich? What is wrong with being rich?
Wealth comes from hard work and smart investments. Are these morally culpable sins? I see them as achievements to be celebrated. Investments are putting money in places that cause growth. They’re necessary for people to start businesses, to buy capital, to give people jobs. Just because investments can be managed by a bank or hedge fund doesn’t mean they’re evil or unethical.
Let me guess, texas rules: You’re a upper-middle class democrat who drives an SUV with your two kids. You became educated on government guarunteed loans. you deride republicans for making money off investments but your IRA or 401K is invested in mutual funds.
Wealth comes from hard work and smart investments.
Uhh . . . have you been awake for the past 20 years?
True, wealth comes from hard work, but obscene wealth comes from gaming the system. What is that truism: great wealth comes from a great crime.
Balzac’s quote…from his multi-novel The Human Comedy…
the source of every great fortune is a great crime.
Wealth comes from hard work and smart investments.
damn straight it does.
signed…Bill & Hillary
I can always count on a partisan to wheel out the boogeymen…Look out for dem dar librulls!!!! lmao.
This is EXACTLY WHAT GROVER NORQUIST WANTED. YOU’RE ON YOUR OWN… NO PESKY ENTITLEMENT PROGRAMS, BECAUSE “WE JUST CAN’T AFFORD THEM.”
Vote accordingly this November, please.
Be nice if everyone worked hard and was smart enough to make those good investments. Unfortunately, we were not all born equal in that respect. Someone has to do the grunt work. And there’s always someone else who wants all the power and wealth and will bitch about entitlement programs — which they are fortunate to never have to use. Lucky them!
The rich benefit from entitlements in two ways.
One the obvious corporate welfare.
Two the less obvious, preventing riots. What happens when unemployed people don’t have enough to eat and there are no food stamps. RIOT, and commit crime. If it comes down to watching my family starve you bet I’d be right in there with them.
Bingo!
The “social safety nets” are not benefitting the poor as much as they benefit the wealthy — by feeding the poor enough to keep them from coming after your food/housing/money.
I always laugh when “capitalists” want to avoid any kind of taxes or provide anything to those less well-off. Like they think the poor will just disappear and die off. Good luck with that.
I agree, in theory, with Ben that the government can’t just keep printing money.
The problem I have is, in practice, the present government (both parties - all three branches) do not have the political strength to call BS on the Barney Frank’s and Chris Dodd’s of the world.
And why is that? Because they know they will get voted out of office - or they are at least very afraid that it might happen. And I don’t blame them. These hacks are repeatedly re-elected and no one in the media or elsewhere in the political landscape challenges them.
We on this blog have very similar thoughts about how we got here and what the solutions are. Given what I see and read elsewhere, we are but a small minority.
I didn’t see anything in your post that demonstrates that the US government/Fed can’t print as much money as they feel like. Could you be more specific?
“It appears to show that the rapid withdrawal of 100 per cent mortgage loans, with Abbey yesterday being the last lender to abandon such a loan, the demand for higher deposits and the raising of rates on mortgages has driven a sudden slowdown in the housing market.”
More proof that easy lending was the root cause! When everyone with a pulse could get a house, all that demand naturally inflated prices!
“House prices in Britain plunged last month by the worst figure since the financial crisis in the early 1990s.”
“Halifax, the country’s largest mortgage lender, revealed today that March prices dropped by 2.5 per cent, the biggest monthly fall for 15 years”
The mortgage market is freezing as banks compete to NOT have the lowest, most attractive rates. Housing prices are starting their dive, and yet there is still little worry amongst so many people I know.
I have friends in London who still this week insist that their properties will NEVER go down in value because everyone wants to live in London. Or more precisely, sub in their individual suburb:
“My flat will always hold its value because people will always want to live in [take your pick: Chelsea, Kingston, Ealing, Feltham, Hounslow].” OK, just joking about Feltham and Hounslow… but still…
The worst of it is that in order to even afford their property “investment”, they have no money left over at ALL to put forward to savings or retirement. So in the end, all they’ll have to show in 10 to 30 years is an old, devalued flat — and near-zero in savings. Sad. And worrisome.
Show them what happened to America house prices and try to reason with them to sell, rent and buy it back in 10 years. If they don’t listen, they are a lost cause. I have taught people all kinds of things and those who don’t listen to my words of wisdom learn the hard way.
What happened to American house prices? Ha! That’s the problem: “It’s different here!”, the refrain we’ve been hearing for several years now from California, Florida, Arizona, and everywhere else. Sure it’s different, yeah, sure — every overinflated housing market will fail in its own special and disastrous way.
At least I won’t have to pay for their inevitable bailout there in the UK, unless I move back there that is, and that’s un-bloody-likely! At least I hope it is.
It’s either “different here” or “different this time”.
The simplest of rationalizations to keep you from facing reality. Also, coincidentally, the most expensive two phrases in the English Language.
Well, maybe you can save a few FB’s or make a bet: If your house loses 15% of it’s value, you sell it before it falls further
The hubris of this guru!
Better to remain silent and let people think you are a fool…
Now, now, be nice to gurus!
Everone’s a guru on the Intertubes.
Yeah, I’m in the process of having a ‘heated’ discussion with some Blighty friends about thier supposed ‘cast iron’ Housing Market.
Lots of ‘ well, places in my area are still appreciating’…
I keep on trying to show them the horror-show going on over here, and they keep telling me ‘but…but…we’re TOTALLY DIFFERENT from America!’
Tell me the same thing in 2 years time, matey
“But the mortgage feast has turned into a famine because of an unwelcome American export: the credit crunch.”
So let me get this straight.
This Brit thinks their problems are American made?
Who else are they going to blame it on? You don’t expect them to blame themselves or their bankers, do you?
Yes they do, it so much easier to blame someone else rather than look at your own faults. There is a case that the UK housing bubble started before the US, but because you burst first all the blame is laid at your door. First is everything no one remembers second.
I suspect the primary blame belongs at the door of the largest, most leveraged banks, since they would have been responsible for injecting the most phony credit into the system.
So…we have 33 * Wall Street to beat. Any offers?
Don’t you remember all the bad earnings reports being blamed on the “Asian Flu” in ‘98? It’s easy to pile fault on the crisis du jour.
“Greenspan said rock-bottom interest rates actually went against his ‘19th century’ aversion to easy money. ‘My inner soul didn’t feel comfortable,’ he is quoted as saying.”
Ahhh, evil-goat poopies here. Al doesn’t HAVE an inner soul, or an outer soul, or any other kind of soul. He was probably having prostate trouble and mistook the symptoms. He needs an office visit from Yog-Sothoth.
Is this “H.P Lovecraft Appreciation Day”, Gal?
Thats the second time today you’ve tempted fate by mentioning ‘those who must not be mentioned’
Vote Cuthulu ‘08 - why vote for the LESSER evil?!
‘My inner soul didn’t feel comfortable,’ he is quoted as saying.”
1. What soul?
2. What did you expect when you sold it to the devil?
3. Uncomfortable? Wait until you get to hell.
LOL
Ahh, nothing like the kindness of HBB-ers
{From Reuters. “In an interview in Tuesday’s Wall Street Journal, Greenspan…has lashed out again at his critics, saying he was being blamed unfairly for the credit crisis and that he had no regrets about decisions he took while at the helm.” }
And I have no regrets about all the bad things I’ve been saying about Greenspan all these years. I started cursing the guy in 98 and haven’t quit.
‘My inner soul didn’t feel comfortable,’ he is quoted as saying.”
Am I supposed to give a flying frack? (bonus points for getting the reference)
This is - in a nutshell - one of the many things wrong with this country. The “feelings” in the depth of his putative and in any event irredeemable soul are of no interest or consequence to anyone but him or his shrink. His actions on the other hand, affected millions.
/frack Greenspud’s feeelings
BSG
‘Washington is badly broken,’ he said. ‘It is completely out of touch with reality.’
Haven’t we been saying that that our current govt. has been in total and complete denial? The paid mealy mouthed pukes they put in front of the camera to lie and lie and lie doesn’t work. Nobody believes them anymore. I and many other refused to buy into their scheming scamming story that the economy “is roaring”. Not in 2002 nor 2004 nor 2006. Added to that layer of lies is the wall street crime syndicate, govt. hucksters, “think” tanks and deceptive elitist scum like Kudlow, Boylover, Lowry, Snow and the other usual suspects.
There aren’t enough lightpoles to hang these thieving liars from.
“Haven’t we been saying that that our current govt. has been in total and complete denial?”
Exeter, for the first time in a long while I completely agree with your political rant! I blame the CURRENT GOVERNMENT for their role in this economic cesspool. Between the Democratic Congress that has been in power since January 2007 and has done NOTHING productive with regard to the economy or anything else, and the lame duck Bush administration, the incompetence has been breathtaking.
With fools such as Dodd, Schumer, and other “socialize the losses” Stalinists from the Democrat-controlled Congress calling for ever increasing taxpayer-funded bailouts of housing scammers (what are Hillary and Barack up to now - $30 Billion?), it can’t be too soon to get this current government out of power! I for one am greatly looking forward to seeing Pelosi and Reid thrown out on their rears come January 2009. As for the Executive, it seems that only John McCain is refusing to pander to failed speculators for their votes - so he’s the guy for the HBB crowd.
“Between the Democratic Congress that has been in power since January 2007 and has done NOTHING productive with regard to the economy or anything else”
WTF? How about the recent Republican Congress that didn’t do jack for several years with respect to restraining spending and providing oversight of the executive branch?
Repeat after me: BOTH PARTIES SUCK!
Repeat after me: BOTH PARTIES SUCK!
Yep, I have been saying that for years. Unfortunately it generally falls on deaf ears, to many fingers in the ‘taxpayer’ pie. I think our system will have to break down completely before it can be re-built, and it will at some point in time. No way around it.
I agree. BPS! Things have become soooo polarized in this country. I think both parties had their admirable strengths in years past (I liked that the Demmies actually stood for civil rights, the environment, and the little guy in years past, and that the Repubs were strong in defense and fiscal restraint), but it seems we have nothing but extremes in all areas now.
Yeah, right, McCain is going to be our savior, just like Bush was in 2000, and 2004. How many times do we need to fall into this pit of propaganda? Terror, terror, terror. And the Dems may be misguided in their attempts to bail out Main Street, but at least someone is pushing back against the Wall Street golden slush fund. Oh, and somehow years of GOP rule is brushed aside, because, by golly, those Dems have been in charge (by a slender margin) for a whole Year! Though, according to Atty. Yoo’s quaint torture memo, the President has the constitutional right to do ANYTHING during a time a war. War, what War?, everyone is too busy feeling “pain at the pump”, the number one concern today. Folks are stressing, stressing, that the Armada they bought 6 months ago actually costs $100 to fill a week. Imagine that, who knew? And I doubt we’d be having some of the hearings grilling CEOs and Iraqi contracts to Blacburton/Haliwater were in not for intrepid Senators like Waxman. Oh, and yeah, Dems will raise taxes. Geesh, imagine that, we’re spending 4 bucks for every dollar we take in. How does that work? Subsidies to agribusiness, subsidies to Exxon, subsidies to our military contractor complex. 4 billion in pallets of US dollars just disappear, poof! Y’all bought yerself an Embassy in Baghdad the size of the Vatican.
Since NYCBoy doesn’t appear to be around, I’ll say it…..I like your anger.
Hey, I was just rattling ex’s cage, since in the bits bucket this morning he claimed to be nonpartisan (yeah, right).
Trust me, there was a very good reason that conservatives did not come out to support Republicans in 2006, and they lost the Congress to the “vote for Change” Democrats. So far though, I haven’t seen any change (never expected to of course).
For all the other issues and faults, you have to admit that McCain is showing a little fiscal sanity backbone compared to “$30 Billion Barack” and the other one.
“Hey, I was just rattling ex’s cage, since in the bits bucket this morning he claimed to be nonpartisan”
But did you notice the crackheads I was responding to didn’t step up to the plate take the challenge? Nor did you but you sure did make a mad rush to defend the economic voodoo priests so just who is “partisan”?????
Fiscal sanity???
The war in Iraq is likely to cost at least 3 trillion, 3 trillion would fix a lot of problems. If he wants to maintain GW’s tax cuts he’ll have to continue borrowing ie more inflation and higher interest rates which will worsen the collapse.
Yea, McCain’s a real winner.
He’ll gladly fill all the empty houses with illegal aliens and provide government loans to them. Open Border McCain from Arizona?
All the candidates think America is a conglomerate of people from everywhere, the mantra that has helped turn the country into Babylon. Until the Civil Rights Crap on Immigration in 1965, most people in this country were NATIVE BORN. Now, illegals get welfare and free education and medical care. Why is the government broke? I read all the prior rants, and you completely miss that massive welfarism is the main reason America is broke.
In the past, immigrants who couldn’t find a place in America simply packed their bags and went home.
Now, they stay….. and leach.
McCain will reward them with more stuff at government expense….just like Bobomma and Billary.
diogenes,
agreed.
diogenes, to be fair, admit that McCain has changed his tune on immigration. “Secure the borders first” is his new slogan — because he realized that Republicans other than those who employ illegals would not vote for him otherwise. McCain’s brave statements about not bailing out speculators are attractive. I’m willing to contribute several sharp veto pens.
Preach it brother!
Bull market in lightpoles anyone?
Exeter,
Although we are probably at opposite ends of the political spectrum, we most likely agree that the MSM puts “lying theives” on the air to spin the crap they’ve created for public consumption. It is my sincere belief that both major parties put on a puppet show every 4 years. In reality, it is more like professional “staged” wrestling where the crowds boo and cheer the characters they identify with or despise. A great cathartic feeling, but it doesn’t solve problems. I’m extremely disgusted by the financial irresponsibility the Republicans have shown the last 8 years. I was also extremely disgusted by the rise of “political correctness” and the liberal bias of the media and universities. Maybe if enough people get thoroughly disgusted with BOTH parties and start electing real live thinking independents, things could change. Unfortunately for the economy as most of us knew it; it is too late. Too late to stop the pulverization of society through the effects of grinding inflation and taxation; too late to reverse the decimation of the currency; too late to bring the jobs back; too late to throw the Federal Reserve private banking cartel off our backs.
“There aren’t enough lightpoles to hang these thieving liars from.”
Can’t we at least try to test that theory?
It does seem like a hypothesis that might respond to the scientific method.
/snicker
“Owning a home in Boston is about 70 percent more expensive than renting an essentially identical home. Therefore the government should stop trying to keep owners in homes and instead let more people return to renting. Those families could spend the extra money on other needs…says a new study from the National Low Income Housing Coalition.”
It’s certainly taken some people long enough to figure this one out . . .
The only reason they paid such a huge premium is for investment purposes. It’s starting to get cheaper to own than rent in some parts of Florida. In non bubble markerts, rent costs twice as much!
Isn’t the “Keep families in their homes!” rhetoric a nice way of saying, “Keep those mortgage payments flowing!”
Exactly. Nice to see some advocates for the poor catching on as to who the “bailout” is really for.
The best thing for most people is to get accelerated forgiveness on their credit rating if the recent madness is the only black market, rent and save for a while, and they buy at a real price in a few years when one is available.
Most of the people in trouble couldn’t afford a house in the first place.
It always seemed that way to me, but politicians keep insisting they’re just trying to help the poor, beleagured home”owners” stay in their homes–as if you can’t have a “home” without a mortgage.
Speaking of things that make one uncomfortable. It’s breathtaking to watch them try to keep home prices from falling. Imagine how much falls apart if they “let more people return to renting.”
Comment by watcher
2008-04-08 12:20:13
‘My inner soul didn’t feel comfortable,’ he is quoted as saying.”
1. What soul?
2. What did you expect when you sold it to the devil?
3. Uncomfortable? Wait until you get to hell.
—-
He needs those 3 mountain lion cubs to abort the antichrist implanted in his butt before Santa goes postal with a 12 guage.
(It’s a South Park reference for those who think I’ve gone completely batshiat)
Good old Fishlips Bartiromo is interviewing the old bat on CNBC at this moment. He is trying to defend himself. I suspect Kudlow is off-camera rubbing one out.
Argh! thank you for that ‘eyeworm’.
Larry Kudlow…{shudder}
“But the mortgage feast has turned into a famine because of an unwelcome American export: The credit crunch.
The UK and every other Country can point their finger at the U.S. all they want, however it takes two to Tango. They have no one to ‘blame’ but themselves, greed knows no Nationality. I have a finger for you and it ain’t the index!
It going to be alright in the UK our Dear Leader has said it’s containable
Gordon Brown says the slump in the UK housing market is “containable”, after the sharpest monthly decline in prices since the early 1990s.
http://news.bbc.co.uk/1/hi/uk_politics/7336642.stm
“If proven wrong” [Greenspan says] “I will change. I do not have a vested interest in holding wrong ideas.”
So what evidence would he accept as proving him wrong?
Have you read Fleckenstein’s book? It’s out there, and he does that with Greenie’s own words, and it doesn’t seem like that evidence is acceptable. I’m thinking that there is no evidence that would be acceptable - Greenie’s trying to rewrite the first draft of his history, and it’s not in his interest to accept any conflicting evidence.
No vested interest … Other than the paycheck I receive from an investment bank every month. I can’t imagine they are paying him to count beans, so his drivel undoubtedly is flavored to benefit his employer.
“She easily found loans, but the repayments depended on her achieving high rents - which never materialised.”
It’s interesting that people would buy “investment” property without first researching the rents and vacancies (and possible future rents and vacancies) for the area.
Is this the “hope” system of investing?
Yes, it’s a component of the “hope” system of living.
I little like the “hope” method of getting rent increases that my landlord tried on me at my last renewal. One of the arguements the chick in the rental office tried was that their costs were going up. Yeah, like I care. A new huge building with slightly nicer amenites and a shorter walk to the Metro had just opened up down the street. The new place had (and still has) tons of vacancies and was undercutting their rents. Welcome to open market capitalism boys and girls!
Watched new episodes of “Flip This House” over the weekend, and now each show begins with this ominous warning (both in large print onscreen and with a voiceover):
“This show features people taking real risks with real money. Flip at your own risk.”
One clown flipper bought a house in Phoenix AZ for $950,000 (an “uh oh” moment right at the start), then dropped in the “stainless steel appliances” and “travertine,” then tried to sell for $1.8M.
Oops.
When the show ended, the property still hadn’t sold for 3 months, because an offer that came in was “below asking.”
Still unsold.
Home renovation used to be pretty cool until the flippers came along, making watching shows like Flip This House detestable, but now watching it could come back in vogue for the schadenfreude factor.
Property porn mags, that’s funny. So the UK was doing 125% loans until recently, eh? Then I’d imagine they’ll be coming along behind us soon. We don’t export consumer goods to them any more, right? Good thing.
I’m seeing some stuck-flipper places around where I work (in Portland, OR). They seem to be the least desirable in the neighborhood (cheap when the flipper bought them, with visions of big $$$), with general cleanup, paint, and a new higher price. The ones I see have TWO problems: One is the high price, the other is the undesirablility that made them cheap when the flipper first bought them. In fact, in one Tualatin neighborhood, there are two of these, and three houses all together on a culdesac - one stuck halfway through remodel. Did I mention we’re different here?
The UK gets most of it’s consumer goods from Europe and Asia. Sounds very familiar where do the US gets there’s from? There are however many links with the US economy (apart from the obvious ones banks, car makers etc) Walmart owns the UK second biggest supermarket ASDA, we even have Costco in the UK, so a downturn in the UK will have an adverse affect on US firms in sectors you wouldn’t think where linked. We are all a global economy now and no it isn’t different here.
“Walker said the debate over whether the economy is in recession pales in comparison to potential long-term economic devastation posed by drastically underfunded entitlement programs.”
As big and important as the Housing Bubble bust turned out to be, the LARGER and GREATER story is right here. The only way to possible way for the U.S. to service its debt/entitlement load is to repudiate the same through debasing the currency (monetary inflation). Our established policy of deficit spending on State and Federal levels guarantees that no politician will ever stand up and say “We can’t afford guns and butter anymore, or for that matter, Social Security, Medicare, and subsidized housing”. Won’t happen.
What will happen is the American Dream come true. We will all be millionaires, just like Zimbabwe, and have all kinds of opportunities,
just like the Haitians. A million won’t buy very much, and the opportunities may boil down to live like a slave, zombie, or pauper; but hey, life goes on.
Yeah, but will that really matter when we are strutting around showing off a money clip full of $100 bills? I can’t wait to walk into a drug store, throw an AbbaZabba on the counter, drop a pile of bills two inches high and say, “keep the change.” The future is quite bright.
“When complete, the US property is likely to be worth less than the $240,000 (£125,000) she promised to pay in 2004. But this is a moot point as she will never find a lender to offer her a mortgage.”
“Rosemary says: ‘Nobody would give me a mortgage on the Florida property and it is unlikely I will ever be able to remortgage the Manchester flat away from Northern Rock either.’”
So much for “foreigners are going to prop up the U.S. market.” Also neat to see that the Florida property has fallen below its 2004 level.
“The former Fed chief is on the defensive and one of the biggest charges against him, WSJ’s Greg Ip tells us, ‘is his decision to slash interest rates to 1% in 2003 and wait to raise them until 2004, and then only slowly.’”
Everybody’s an I-told-you-so critic these days. Where was this chorus of voices denouncing Greenspan’s lax ways in 2003, when it might have made an impact of some kind?
It was obvious even back then that there was a housing bubble in some regions, notably Los Angeles, where I found myself priced out of the market, hell, by late 2002 despite earning over $90k per year at the time. The previous bust had bottomed only five years earlier, so it’s not as though anyone could possibly have forgotten it already, but nonetheless one heard “oh, real estate in Los Angeles can never go down, the aerospace layoffs were a one time thing, blah blah blah.”
How many of the same idiots piling on Greenspan now were part of the euphoric drumbeat five years ago?
“The former Fed chief is on the defensive and one of the biggest charges against him, WSJ’s Greg Ip tells us, ‘is his decision to slash interest rates to 1% in 2003 and wait to raise them until 2004, and then only slowly.’”
If interest rates were low AND banks continued with traditional lending standards, the damage would have been far less than it is now. Nothing wrong with a nice low rate on a mortgage that’s 3x your gross income with 20% down and 6 months reserve in the bank.
Thank you Lisa. It WAS possible to get through the “tempting credit environment” of 2003-2005 without ruining your life - MOST people did.
Just because Greenspan made it possible for you to jump off a cliff didn’t mean you had to.
I agree. My finger of blame points to the easy lending of banks.
Point past easy lending to off loading credit risk and piss poor regulation.
The gov should have
Prevented conflicts of interest at credit rating agencies.
The gov should have
Prevented preditory lending, and should not have protected lenders from states that wanted to stop the practice.
The gov should have required everyone to have some skin in the game especially if they planned on bailing out companies like Bear Sterns.
Low interest rates alone would not have created this mess, it took piss poor government influenced by those with money, and criminal intent.
Housing Bill of Ill Repute
http://article.nationalreview.com/?q=OTAxYTk1Nzg2MzYzNDkyZDEyODJlZmQ4YTZkODcwN2I=
“‘Owners’ equivalent rent is going to start to accelerate unless I misread how asset prices interact with consumer prices.”
This is an interesting comment from Greenspan. I’m surprised that much of the housing bubble debate has not appeared (to me, anyway) to focus on the possibility that house prices, rather than ‘owner equivalent rent’, should be included in CPI. Technically, if house prices go up, but average rent remains constant, it has a deflationary effect on CPI (or perhaps I am mistaken).
If house prices as an asset class were included in CPI, it is reasonable to think that Greenspan would have stopped the bubble before it became so problematic: but it is not, nor is there a “basket” of stocks in CPI, for that matter.
I’m not necessarily defending Greenspan, here. I’m just pointing out that the Fed’s focus may be on a structurally inadequate operationalization of inflation, but is that Greenspan’s fault? It is an interesting question…
IMO, rents should be included in the CPI, but home prices should not.
However, it didn’t take a brain surgeon to determine, even by 2002/2003 that there were significant problems in the mortgage market.
Greenspan could have just made statements — no regulation necessary — pointing out that what he saw was dangerous and that investors needed to be very cautious because they were likely to lose money. He needed to repeat this often, and use regular language to do so.
“The previous low was August’s reading of 85.8, recorded at the height of the credit crunch.”
Good news, fellow HBB’ers! According to NAR we are 8 months past the PEAK of the credit crunch, good times are just around the corner. ROTFLMAO. Most of the REALTOR dimwits had never even heard the term credit crunch in August.