Bits Bucket For July 23, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Woes Afflicting Mortgage Giants Raise Loan Rates…
By VIKAS BAJAJ
Published: July 23, 2008
Mortgage rates are rising because of the troubles at the loan finance giants Fannie Mae and Freddie Mac, threatening to deal another blow to the faltering housing market.
Even as policy makers rushed to support the two companies, home loan rates approached their highest levels in five years.
The average interest rate for 30-year fixed-rate mortgages rose to 6.71 percent on Tuesday, from 6.44 percent on Friday, according to HSH Associates, a publisher of consumer rates. The average rate for so-called jumbo loans, which cannot be sold to Fannie Mae and Freddie Mac, was 7.8 percent, the highest since December 2000.
http://www.nytimes.com/2008/07/23/business/23rates.html?_r=1&ref=business&oref=slogin
“I don’t see how anyone could argue that the fundamentals of mortgages are not attractive,” said Matthew J. Jozoff, an analyst at JPMorgan.
Matt, Matt. Come on buddy.
“When we get to rate levels like this, the market just shuts down,” Mr. Barnes said.
It is clear now that the subprime crisis was just the tipping point. Debt defaults -> credit crisis -> liquidity crisis -> more debt defaults …
if the bill passes today, Uncle Sam becomes de-facto mortgage broker, paid for by taxpayers.
Its a brave new world.
Uncle Sam morphed into Uncle Insolvent long ago…
Uncle Sugar; something for everyone.
Estimated cost $25 billion.. yeah sure. Its like when Cheney estimated $50 billion for Iraq. Instead of imminent WMD threats now its immininent bankruptcy threats. We can’t let our foreign creditors down now, can we. Another government ’solution’ .
6.75% only looks horrible when you’ve been betting on the 5-6% rates never changing. As HBBers have discussed again and again, home prices will need to react accordingly.
(Yawn ,to Mr. Barnes)
Pre-bubble I got a 30 year fixed at 6.5% no points and I was happy as hell. In the early 70s my parents got 7% 30 year fixed & they had to pay points. In both time frames the mortgage market was functioning just fine.
Since when were super low interest rates an inalienable right and mandatory for the mortgage market to function?
Just like in the past with high rates comes lower prices and more incentives from the seller to entice a buyer.
The savings of the artifically low rates during the bubble was more than offset by the nosebleed increases in price.
I welcome higher rates & will demand an extra helping of price cuts to arrive at the same end state in terms of overall deal, if and when I decide to buy.
It’s getting harder to argue that bailout money is helping consumers at all. This is very clearly for the banks only.
Since when were super low interest rates an inalienable right and mandatory for the mortgage market to function?
How the hell are you supposed to flip in three years and walk away with $100k when the interest rates are squeezing the life out of
Greater FoolsInvestors?Get with the program.
Sheesh.
My last loan was 8.25% with a credit score over 800. 6.7%? Yawn. Wake me when it’s back to 15%. Then I’ll look at buying - in cash.
I remember in the early 80s when ordinary folks on Long Island, working at Grumman Aerospace, were able to afford ordinary houses in Bethpage, Long Island with 20% down and no more than 3.5x income—when interest rates were 10%!
House prices simply were lower. Lower interest rates==affordability is a bunch of hooey in a normal market
Bought my first house in 1979. 10% loan, 20% down, $75,000.00 for a 3 bedroom, 2 bath on half an acre. And this was in a ritzy part of town. P&I was well under $1000, more like 5 or 6 hundred if I recall correctly.
Less than 8% for Jumbo loans is some sort of crisis?
Even the wealthy are a lot poorer than we thought.
it’s a crisis at current housing prices…which means…lower housing prices.
“The problems extend beyond well beyond housing. Delinquencies on auto, credit cards, and home equity loans have worsened across the industry. Even affluent people with sterling credit scores are falling behind on payments, as results this week from American Express showed.”
http://www.nytimes.com/2008/07/23/business/23bank.html
if you ever played SimCIty version 4, it is really illustrative of the seduction of debt. The only way to lose this game is to go bankrupt. So if you are playing the game correctly, its important to always keep your income greater than your expenses. However it is really easy to take on debt. Even if you want to be fiscally responsible, debt is often needed for some critical infrastructure like a power plant. Often if you wait the city will develope so that income catches up with expenses. So it becomes boring waiting, and I think why not take out a bond to develope a new area. When the new area is built out, I will have enough cash flow to service the new bond. Its possible to play the game for years and years with negative cash flow, but still be solvent, by taking out a bigger bond each year. Sometimes its hard to see whether you are cash flow positive or not. Often my friends will play with huge ever increasing debts with no regards for producing a balanced budget. With bonds available, it is possible to have deficits for 100 years before reaching the maximum borrowing capacity.
The most illustrative part of simcity is that at a certain point the debt load becomes unmanageable and there is no possible way to ever pay the bonds back. When the total cost of interest exceeds 50% of tax revenue, there is no way to recover. But it is still possible to continue playing for 20, 30, 50 years by taking on more debt each year; but there is no possible way to get out of the debt-interest cycle.
This is how the US government, and many americans are. Expenses exceed income, and debt interest is maybe 20% of income, but its still possible to keep paying bills by borrowing an increasing balance each year.
“Less than 8% for Jumbo loans is some sort of crisis?”
No, but it does kill the refinancing market. We had planned to refinance when the balance on our jumbo hit the conforming limit. Now we’ll just keep the same old mortgage we’ve got (old jumbo, lower rate than modern conforming).
Historically rates are still *quite* low.
http://research.stlouisfed.org/fred2/series/MORTG
The raising of rates may indeed help push along the popping of the housing bubble, but it will only be because they’re returning to normal levels after being abnormally low all during the bubble, not because they are now “high”.
Strippers jockey for pole position
By The Mogambo Guru
“”The inflation in the prices of stuff has now affected Americans to a material new degree for the first times in our lives; we are gambling less, we are driving less, we are eating in restaurants less, and we are (in general) suffering a falling standard of living because we can’t buy as much stuff, and especially can’t afford to buy as much pleasurable stuff, anymore.
One reason is made manifest when one notes that this includes, according to the AP, the Association of Club Executives, which is “a group that represents adult entertainment clubs” and whose spokesperson Angelina Spencer says she, “fields calls every day from strip-club owners feeling the pinch of a bad economy.”
An adult-club owner named Joe Redner says that although business is down 25%, “the economy does have one upside for the business - it’s bringing out more women willing to give pole dancing a try.” Hahaha!
Adrian Ash of BullionVault.com says that he believes Stephen Platt at Archer Financial Services when he says, “There really is no other place to hide. Gold’s about the only real currency out there that might hold value.”
“Might” hold value? Hahahaha! Mr Platt is this week’s winner of the Mogambo Award For Understatement (MAFU)! Hahaha!
So how high can gold go? My usual answer is to first demand an estimate of, “How low can the dollar can go?”, which is the same as asking “How low WILL the dollar go?”, which is the easiest question on the whole mid-term exam; the answer is that it can, and will, go to zero.
How do I know that the dollar will go to zero value? Because it is a fiat currency, and all of the other thousands of fiat currencies tried by different countries over the millennia have ALL gone to zero! All!
So the height to which gold can go, in dollars, is infinity! And “infinity” is the answer to another question on the mid-term exam, namely, “How much is the market price of gold in dollars if the dollar is worth zero?”
Mr Ash quoted Peter Bernstein who wrote in his classic book, The Power of Gold, “In 1959, the amount invested in gold was about one-fifth of the market value of all US common stocks. In 1980, the $1.6 trillion invested in gold exceeded the market value of $1.4 trillion in US stocks.” Wow! The fact that gold went from 20% to more than 100% of market value of financial assets is a very interesting precedent, reached when gold reached the pinnacle of its previous high of $850 per ounce!
In fact, it’s all even MORE unbalanced today, as they go on, “The sum total of gold investment lags far behind the value of stock and bond markets today. Indeed, a 2005 study from Tocqueville Asset Management noted that, if taken altogether, ‘the market cap of all above-ground gold - including central bank reserves - [now] equals about 1.4% of global financial assets.’”
Once gold held for investment was worth more than the US stock market, and now total gold in less than 1.4% of financial assets? Wow! The inescapable conclusion is that there is a lot of room for gold to go higher and higher and higher, just like history predicts it will! Whee!
The historical record of monetary policies as regards fiat money sure makes investing easy, as it does not even involve using a calculator, working, or even thinking! Buy gold, silver and oil! Whee! “”
Actually, gold will not go up to infinity.
It goes up to the point of barter.
At the end of the day, you can’t eat gold. It’s a storage medium for your wealth not an end in itself.
You can eat paper? I don’t eat paper.
Gold to infinity!
Its gravitational field is so strong that nothing can escape, not even light …
Ne Plus Ultra always rises to the occasion…
I wouldn’t expect a rational, thoughtful debate with wjk.. he lifted random paragraphs off an article. He probably owns a few ounces and hates to see the price falling, and is parroting the word..
http://www.atimes.com/atimes/Global_Economy/JG24Dj01.html
Dow/Gold Ratio (how many ounces of Gold it takes to buy the Dow Index)
The Dow/Gold the ratio still has only three peaks (when it takes more ounces of gold to buy the Dow Jones index, since gold is so relatively cheap) since 1900: the first was August 30, 1929 at a ratio of 18.47. You remember what happened next. If not, look up “Great Depression” and see if it rings any bells.
The second was January 29, 1966 at the ratio of 28.1, at the beginning of a long, grinding bear market in stocks.
And the last peak of the ratio was on July 16, 1999 at a record 43.85, as the run of “gold down and stocks up” reversed for only the third time of the century.
This brings up the important part of the whole thing, which is that soon after the peak of the ratio, it always fell, and fell, and fell until after just a few years, it took about only one ounce of gold to buy the whole Dow index!
And we are on our way there, again, right now! The Dow/Gold ratio is, again “right now”, still a lofty 12.18, even though the ratio has already fallen from 43.85 in 1999! Only eight years ago!
This, of course, reflects the fact that gold has trounced stocks since 1999.
In more practical terms for the average investor going forward, from the chart it looks to me like the Dow/Gold ratio will again hit the theoretical bottom (when the ratio is 1.00) around the year, ummm, 2018, which is, according to my watch, about 10 short years from now.
This is important stuff because it shows how great wealth can be accumulated over the years.
i recall you received a mathematical bitchslapping for posting that the otherday.. if i gave 0.00026 of a crap i’d find and repost it.
I see you.. I’m reaching for the flyswatter.. my arm is stretching out.. it’s just beyond my finger tips now…
joeyinCAlif,
I see you cannot give a concrete reply to the Dow/Gold Ratio.
Hint: When the home mortgage interest rate is 15% it will be time to sell gold and buy Dow stocks (also homes).
I’m sorry.. This stuff just doesn’t add up.
I bet some of that gold-flavored koolaid would help me see the light.. can you spare some?
Actually, gold will not go up to infinity.
True, but in places like Zimbabwe it sure creates he illusion of doing so.
Let’ see, 1 oz of gold is what? $900 US?
That would be $29,959,330,194,000 Zimbabwe
So an ounce of gold is worth about 30 trillion Zimbabwe dollars.
Cash is king, huh?
In the Guardian, on 18 July 2008, a report on Zimbabwe’s inflation, said that an egg costs ZW$50 billion (GBP 0.17, USD 0.32), and it showed adverts for prizes of Z$100 trillion in a Zimbabwean derby and ZW$1.2 quadrillion ($1,200,000,000,000,000.00: ~GBP 2,100; USD 4,200) in a lottery. It also showed a monthly war pension currently is ZW$109 billion (GBP 0.37, USD 0.74), shops can only cash cheques if the customer writes double the amount, because the cost will go up by the time the cheque has cleared, and people can only withdraw a maximum of ZW$100 billion from cashpoints.
http://en.wikipedia.org/wiki/Zimbabwe_dollar
Cash is King in Zimbabwe…
$600 Billion will score you a dozen eggs~
Good point. The conversion I made earlier is already out of date.
I agree with FPSS. Gold is only useful because it is substitutable for all currencies, and typically has buyers. Since currency exchange is a zero sum game in a stable market, you can own a deflating or an inflating currency.
There is ample evidence that the dollar is deflating on the free market, although US gov’t policy is working mightily to inflate away debt.
It’s always better to hold a deflating currency than gold, but better to hold gold than an inflating currency. Of course, all governments lie about inflation, so you have to use your own judgment.
if it goes to infinity i will only need to won 1 molecule to be wealthy beyond my wildest dreams.
I think gold bugs are often their own worst enemy when they come out with foolish hyperbole like this
“and all of the other thousands of fiat currencies tried by different countries over the millennia have ALL gone to zero! All!”
Last time i looked fiat currencies like the Euro, the Pound and the Yen were all doing fine, not even close to zero. Many fiat currencies are alive and well after many hundreds of years. I suspect most fiat currencies around today will outlive all the readers of the gold bug sites.
““In 1959, the amount invested in gold was about one-fifth of the market value of all US common stocks. In 1980, the $1.6 trillion invested in gold exceeded the market value of $1.4 trillion in US stocks.” Wow!”
And how did the two compare 2 years later, or 10 or 20? There is a good argument for investing in gold. There is no need to lie or mislead.
Every living thing that has ever existed has died, or will die someday. Since I haven’t died yet, I must be immortal. That’s the same sort of hubris displayed by fiat currency fanboys.
“The masses have never thirsted after the truth. They turn aside from evidence that is not to their taste, preferring to deify error, if error seduce them. Whoever can supply them with illusions is easily their master; whoever attempts to destroy their illusions is always their victim.”
Gustave Le Bon
“…To finance the Revolutionary War, the Continental Congress issued paper money known as continental currency. Since the Congress had no power of taxation, all that backed these notes was the “anticipation” of future tax revenues - a somewhat dubious prospect during the middle of the war. In addition, the notes were crudely printed and thus easily counterfeited. (Even the British turned to counterfeiting as a method of undermining the colonists’ resistance.) Most importantly, far too much continental currency was issued, causing it to depreciate so rapidly that by the end of the war it had become virtually worthless. As George Washington put it, “A wagonload of currency will hardly purchase a wagonload of provisions.”
from Federal Reserve Bank Boston
We have already had one fiat currency go under in the US.
General George Washington, the wealthiest person in the continental US in 1776, loaned the continental congress $50,000 in gold and was paid back in notes that the General was able to sell for 5% of what was owed. At least he got something.
Confederate paper money was used for wallpaper after Appomattox…
I suppose the inescapable parallel conclusion one must draw is if we have another Civil War in which the South wins, the dollar could very well lose all it’s value.
interesting .. but is that the best argument for the dollar’s impending doom?
Seems like higher rates are way overdue with the multi-trillions in defaults, like they would take the foot off the gas pedal when heading toward the brick wall.
Costco Sees Profit Below Estimates; Plans Buyback…
July 23 (Bloomberg) — Costco Wholesale Corp., the largest U.S. warehouse-club chain, said earnings will be “well below” analysts’ estimates after surging energy prices increased the retailer’s costs and made selling gasoline less profitable.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aeKYWVllLors&refer=news
The danger for Lilliputians is, that if box store Brobdingnagians go the way of Banquo’s ghost, as in disappear, where will the little people shop?
Corporate ‘Merica is programmed to expand, not contract.
The only thing the operators of this beast know how to do when things start to slow down, is to close down entire stores, lock stock and barrel.
And we’ve only just begun our descent from Peak Consumerism, and like mountain climbing, most accidents happen on the way down, not on the way up…
“Corporate ‘Merica is programmed to expand, not contract.”
Good observation, laddie.
Indeed. They are building a Home Depot in my neighborhood right now. I can’t believe it has any hope to turn a profit, as no-one thought it worthwhile to build a hardware superstore within 15 miles of here before now.
Tulkinghorn,
HD is in the course of construction on building in Inland Empire (Ontario, CA, within 2 miles of a current HD). Ground broke first of the year. Should open, if ever, in a couple of months.
This will not end well for HD.
lol
Once the corp’se decides it wants to build something, it’s a fate accompli…
In my area we’ve had a plague of new strip-shopping centers — ones that were meant to be upscale. Meanwhile, the older ones are becoming half-empty, or slowly turning into the lower-level tanning-bed/hair-nails/party supply/Chinese restaurant type stores. The new ones aren’t doing so well either.
A friend of mine was puzzled why they would build new centers while old ones languished. The reason, of course, is that the new ones were planned in the heady days of 2006 or so. Same as condos.
“Corporate ‘Merica is programmed to expand, not contract.”
Isn’t that the whole premise of capitalism?
Commercial loans may be a ticking time bomb. Bank of America showed a sharp increase in charge-offs related to small business loans this quarter. But bigger companies are increasingly squeezed.
“Up until this quarter, the majority of all the credit problems have been tied to one single issue: the decline of the residential housing market,” said Gerrard Cassidy, a banking analyst at RBC Capital Markets. But if unemployment and the economy worsen, “then you are talking a traditional recession and the effects it has on commercial loans.”
http://www.nytimes.com/2008/07/23/business/23bank.html
Perhaps when money is tight those 7 extra containers of toothpaste beyond the one you need today only represent tied up funds which could be used for tonight’s dinner or tomorrow’s fill-up.
Its actually far more cost effective to buy second tier brands of toothpaste at regular stores than a multipak of Crest or Colgate at the warehouse store. Even notice how the expensive brands are displayed at eye level at supermarkets? If you are willing to stretch or crouch you can save $1 or more on a tube of toothpaste.
toothpaste is not a healthy choice for cleaning your teeth.
do some research–you might ultimately agree.
“Surging energy prices increased the retailer’s costs and made selling gasoline less profitable.”
Note to SUV drivers. Retailers and refiners have taken some of the hit from higher oil prices. This will limit price declines.
Costco, I got my law degree there.
Would a Costco law degree be above or below Regent University law school standards?
“According to Regent University, more than 150 of its graduates have been hired by the federal government since George W. Bush came to office in 2001.”
http://en.wikipedia.org/wiki/Regent_University
“According to Regent University, more than 150 of its graduates have been hired by the federal government since George W. Bush came to office in 2001.”
“U.S. News & World Report ranks Regent University School of Law as a Tier 4 school,[29] the lowest ranking within the law school category.”
I’m sure they’re all doing a heckuva job. Who would’ve thought W had it in him to give the underqualified an opportunity? I guess that’s what happens when the “adults” are in charge.
“According to Regent University, more than 150 of its graduates have been hired by the federal government since George W. Bush came to office in 2001.”
As… airport security screeners?
If there’s one thing G. Dub has clearly demonstrated, it’s that we live in a Brave New World where competency is no longer needed.
It’s an accredited school. You got a problem with that?
Don’t be casuing tears for the 4th tier tyros…
Not sure if you were serious in that comment, NotInMontana. The degree to which the Bush adminisitration selected its lawyers based on religious and conservative idealogy over academic achievement was pretty scandalous. The perfect resume for consideration would include membership in the Federalist Society, NRA and list volunteering at your evangelical church as a hobby.
There always has been favoritism in hiring. I don’t think that preferences for Harvard and Yale grads years ago was necessarily fair, since it used to reflect socioeconomic status more than achievement, but favoring Regent is a perverse form of affirmative (?) action.
“Not sure if you were serious in that comment, NotInMontana. The degree to which the Bush adminisitration selected its lawyers based on religious and conservative idealogy over academic achievement was pretty scandalous.”
Almost as scandalous as selecting by race.
THE BEAR’S LAIR
The death-knell of Bernankeism
By Martin Hutchinson
The producer and consumer price indexes announced last week were significant in that they sounded the death-knell of Bernankeism. No longer will it be possible to inflate the money supply by pretending that inflation in the real economy is not a problem; other means will have to be found to perpetuate the shell-game.
In previous months, the consumer price index (CPI)in particular had benefited from some very fishy seasonal adjustments to remain close to the Fed’s targets and only a little above 4% on a year-to-year basis. Even so, the rise of the producer price index (PPI)at 7.2% in the year to May 2008 should have caused alarms. This month, all possibility of doubt was lost. The CPI rose 1.1%, putting it fully 5% above its level in June 2007
http://www.atimes.com/atimes/Global_Economy/JG23Dj05.html
Damn macroeconomic budget constraint!
A cousin of mine just came back from a trip to the West Coast (which is tough considering the Rand has devalued along with the Dollar) and even he was blown away by the for sale signs and the seemingly outright panic in the media.
All currencies are devaluing against gold. Got krugs?
Can anyone confirm an agreement reached on the GSE bailout plan last night? Heard a rumor, just wondering.
Bush Drops Veto Threat
Reuters
The White House said Bush has abandoned his opposition to the housing package. House and Senate leaders have largely hammered out a compromise deal that would permit the government to bolster Fannie Mae and Freddie Mac in an emergency, overhaul supervision of the housing-finance giants and allow the government to insure up to $300 billion in refinanced mortgages. Paulson said the legislation is key to helping the U.S. turn a corner in the housing crisis. 11:00 a.m.
thank you, PB
So the link I followed doesn’t quite say the same thing:
(the article cuts off there for some reason).
Key thing I’m wondering - what is the nature of the $300 billion? Is it a hard unchangeable limit, built into the bill, or is it a soft limit - e.g. based on the Federal debt cap? Hopefully the former, since it appears the bill is doomed to pass.
“Borrowers must agree to pay an annual premium to the FHA equal to 1.5% of their new loan balance and they must also agree to share with the government any profit they realize from selling or refinancing their home.”
http://money.cnn.com/2008/07/23/news/economy/housing_bill/index.htm?cnn=yes
This is socialism at it’s best.
I got this email from Feinstein today in response to my harsh and explicit criticism of the bailout bill. So much for representation … even her underlings failed to recognize that I was strongly anti bailout. Probably an automated response.
Dear Mr. oc-ed: (yes, I changed the name)
Thank you for contacting me regarding housing market reform and foreclosure prevention legislation. This is an important issue for Americans facing the threat of foreclosure, and I would like to share with you what Congress is doing to help.
Like you, I am very concerned about the current economic downturn and declining housing market. To address record high foreclosure rates among American homeowners, on July 11, 2008, the Senate passed a housing and foreclosure prevention bill (H.R. 3221), introduced by Senators Christopher J. Dodd (D-CT) and Richard C. Shelby (R-AL). I am hopeful that this broad housing package will help hundreds of thousands of Americans keep their homes.
Specifically, H.R. 3221 would help prevent foreclosures by reforming and expanding the Federal Housing Administration to allow homeowners to refinance their mortgages at more affordable interest rates. It establishes a new and independent regulator for Fannie Mae and Freddie Mac to ensure that they responsibly fulfill their role in the housing market. It also includes a provision sponsored by Senator Mel Martinez (R-FL) and myself known as the “S.A.F.E. Mortgage Licensing Act of 2008,” which would require all mortgage lenders and loan brokers to meet minimum national licensing standards in an effort to curb abusive lending.
The House of Representatives is currently considering its version of H.R. 3221. I hope that the Congress can quickly pass a final version of this important legislation and send it to the President for his signature. Please know that I will keep your comments in mind should further legislation to address our country’s housing crisis come before the Senate.
Once again, thank you for writing. If you have any additional questions or concerns, please do not hesitate to contact my Washington, D.C. office at (202) 224-3841. Additionally, if you are experiencing difficulty with your mortgage, please contact my San Francisco office at (415) 393-0707. Best regards.
Sincerely yours,
Dianne Feinstein
United States Senator
Further information about my position on issues of concern to California and the Nation are available at my website http://feinstein.senate.gov/public/. You can also receive electronic e-mail updates by subscribing to my e-mail list at http://feinstein.senate.gov/public/index.cfm?FuseAction=ENewsletterSignup.Signup
“Blind respect for authority is the greatest enemy of truth”
Albert Einstein
This is the heart of the problem in our society today and is heavily encouraged by the media who take any “expert” at their word without any critical thought.
Alcoholic Alchemy?
Riding home from work yesterday I noticed that a liquor store along me route had placed a brand new and very fancy window cling advertisement in one of its windows - next to the neon beer signs:
“Sell your gold and silver for cash here” (with large pictures of coins, watches, and jewelry in the background)
PMs…to…$$$….to….booze - all at one stop. I didn’t even know they could do such a thing.
There was a story the other day about pawnbrokers in L.A. turning down $15k Harleys, as in they don’t want to loan $3k on them, as they have too many, and nobody is buying them.
This is the flipside to that tale, a liquor store looking for items with liquidity…
Booze into Gold?
The ancients would be so proud…
So what drives the liquor store owner’s actions?
1. The owner’s desire to pick up PMs on the cheap from desperate booze hounds?
or
2. The owner’s preception that his customers might be broke and have no other forms of payment?
Time will tell.
“So what drives the liquor store owner’s actions?”
How about customers don’t have cash so the liquor store owner must accept alternative forms of payments?
The store owner needs to sell liquor else he goes out of business. He’d much rather accept cash but people aren’t offering cash because people are fresh out. So the owner will take what he can get - at something less than full cash value.
Thus cash is king.
So you’re saying that liquor stores don’t take credit cards?
“So you’re saying that liquor stores don’t take credit cards?”
Where in my post did I say that?
Cambo, I don’t normally get in the middle of the gold vs. cash short-term debate (I do have an opinion about fiat money long-term but that’s another conversation), but you gotta admit that this is a strike against the cash is king side.
The primary argument from the “cash is king” side is that all those little places we go to on a daily basis don’t take anything but cash. Now, at least one liquor store does.
“The primary argument from the ‘cash is king’ side is that all those little places we go to on a daily basis don’t take anything but cash. Now, at least one liquor store does.”
Maybe because he doesn’t have a choice. Either he accepts bling instead of cash for the sale or the sale never happens. If enough sales never happen then the store owner goes out of business.
But accepting bling instead of cash creates its own set of problems. The store owner, as with everyone else, has bills to pay, and payment of these bills requires cash. The only way for him to get cash is for him to find someone else that will be willing to trade their cash for his bling.
And so it goes on down the line; those long on bling and short on cash will need to find someone long on cash and short on bling. And in a cash strapped economy flooded with bling those people will become increasingly harder to find.
I see commercials on TV where they offer quick cash payment for bling with PM content. I can’t think of anything that is more liquid.
“I see commercials on TV where they offer quick cash payment for bling with PM content.”
Yeah, at a big discount from its cash value.
“I can’t think of anything that is more liquid.”
I can; It’s cash.
Yeah, at a big discount from its cash value.
So you find another buyer. Maybe a local goldsmith.
I can; It’s cash.
I always thought that liquidity was the measurement of converting a hard asset into cash. PMs are very liquid, and appreciate during times of high inflation. In most civilized countries you can walk into any bank and convert your gold coins into cash, on the spot. That is just as liquid as waking into a bank and converting Euros into USD.
“PMs are very liquid, and appreciate during times of high inflation.”
Is this what you think we are experiencing, times of high inflation? If so then ask yourself the question: Why is money so hard to get.
In times of high money inflation, such as we experienced up to about a year ago when lenders were throwing hundreds of thousands of no-questions-asked dollars at strawberry pickers, money is easy to get.
But money isn’t easy to get anymore; that’s because money borrowed into existence previous to a year ago is being destroyed via bank writedowns. Money the banks created out of thin air is reverting back into thin air. This makes any remaining money that much more valuable.
Deflation, not Inflation, is the primary force dominating our economy.
The buy/sell spread on a standard 1 oz gold coin is like $20 to $25.
When you are talking about a $1000 item, is 2% a big deal?
The buy/sell spread on a dollar is zero.
You’re the one that made mountains out of molehills…
“Deflation, not Inflation, is the primary force dominating our economy.”
The only thing that’s deflating right now are homes. Ready to buy one?
Otherwise - everything else is inflating.
What you said about money being destroyed via bank writedowns is true - however this isn’t cash money. It’s fake money in the form of unrealized investment gains.
The only true cash money being lost is bank failures - e.g. Indymac. So therefore in order to avoid this true cash loss - one shouldn’t store one’s cash in the bank. What should one do? Store it under your mattress? How feasible, and safe, is that to do in the form of 10’s or 100’s of thousands of dollars though?
“The only thing that’s deflating right now are homes.”
And wages. And automobles, boats, motorcycles - all manner of bling.
And stocks. And tax revenues. And retail sales.
“What you said about money being destroyed via bank writedowns is true - however this isn’t cash money. It’s fake money in the form of unrealized investment gains.”
That’s good to know. Maybe this credit crunch business is just a bunch of nonsense. Maybe Goldilocks is alive and well.
God bless our fiends.
“There was a story the other day about pawnbrokers in L.A. turning down $15k Harleys, as in they don’t want to loan $3k on them, as they have too many, and nobody is buying them.”
Which means one dollar of cash is worth more than five dollars worth of Harley. No?
It means that even @ 20 Cents on the Dollar, nobody cares about blingy bikes anymore.
Deflation in everything you don’t need, inflation in everything you do need.
“It means that even @ 20 cents on the Dollar, nobody cares about blingy bikes anymore.”
Or, now people care about cash more than five times what they care about bikes.
…turning down $15k Harleys, as in they don’t want to loan $3k on them, as they have too many, and nobody is buying them.”
so the pawn broker loans 3k on the 15k harley and he cant sale the harley for a profit?
then…it ain’t a 15k harley. my dad’s harley cost close to 15k and i would go out right now and by it for 4k if i could and i don’t even ride.
my coworkers “new husband” just went out and bought a 12k fat boy harley from his friend
and they do not even have livingroom furniture yet (her words)
my wife would have my hyde-
just post ads on craigslist offering cash for whatever consumer trinkets your little heart desires and i am sure you will get responses
i have sold so much stuff that ordinarily i would have just put on the curb for the garbage man
who i am i to turn down $$
but i want for nothing at this point in my life whihc is the greatest gift of all
except maybe the large nyc apartment but that is out of reach for now
The Hardly Ableson mania was no different than the housing mania. But I’m not sure whats uglier; A bloated stuccobox behemoth or an overweight tough guy wannabe with a dried up old skank riding on a grossly inflated 2 wheeled bucket of bolts.
There used to be as lot of michaels that would pick up the slack, and buy stuff they didn’t need, but they are few and far between nowadays.
“…but they are few and far between nowadays.”
Uh, maybe it’s because they are broke?
i can see myself now…cruising along on my 3K fatboy with my sawed off shotgun strapped to back mad max style when the SHTF.
seriously though…my only serious expense is my video gaming habit.
New digital storm computer: 3K.
Latest MMO age of conan collectors set: $ 75.
Monthy fee: 14.99
PWNING newbs accross the land of Hyboria: priceless.
Man…I wish I had the time to get back into gaming more.
I recently purchased Supreme Commander, it’s decent but I haven’t had time to play it more than a half dozen times in the past few weeks. I prefer more strategy-oriented turn-based games, Panzer General was one of the best IMO, but those are few and far between.
Also, while I’m loving living in the country again, the major downside is crappy internet connection. It’s good enough for most applications, but no way I could keep up with an MMO.
As soon as I graduate and take the CPA exam, estimated early-mid 2010, I just might buy a sweet gaming rig (or whatever console is hot at that time) and spend about 2 months doing nothing but work and play games. Maybe even take off a couple weeks from work just to play.
Ok, enough of that crap. Back to the salt mines…
Entirely T.M.I.
i am a cpa and you are first other accountant gamer i have ever heard from.
are there others where you come from?
A girl I was in school with recently also worked for a local CPA firm. She said some of the guys there would play Age of Empires after hours.
That alone has seriously put that firm near the top of my list when I graduate.
That alone has seriously put that firm near the top of my list when I graduate.
Ahhh..yes, the good ol’ days of Arthur Andersen…
Ahhh..yes, the good ol’ days of Arthur Andersen…
The comparison is lost on me, can you elaborate?
So are the pawnshops selling Harleys for 3K?
The reality is, pawnbrokers typically lend 1/2 of what they can blow something off for, wholesale.
It appears that there aren’t any wholesale buyers @ $6k for formerly $15k Heloc Davidsons @ this point in the game…
Too bad I’m not into motorcycles.
Well, alcohol is debauchery.
The best way to destroy the capitalist system is to debauch the currency. - Vladimir Lenin
one stop shopping
whats the address? lol
http://www.bloomberg.com/apps/news?pid=20601087&sid=aCy_Dl.5rdv0&refer=home
Congress is about to pass the bailout and housing rescue bill.
“July 23 (Bloomberg) — The House of Representatives is set to vote today on a rescue plan for Fannie Mae and Freddie Mac after U.S. lawmakers reached a deal on legislation aimed at alleviating the worst housing recession in a quarter century.
“The package we have got is fully acceptable” to the Treasury, Representative Barney Frank, a Massachusetts Democrat who chairs the House Financial Services Committee, said late yesterday. Legislators crafted the agreement nine days after Treasury Secretary Henry Paulson asked for powers to inject capital into Fannie Mae and Freddie Mac.”
Today would be a good day to get your friends and family to call your representatives.
Fedupusa put together a short video to explain things. http://www.fedupusa.org
I remember almost three years ago when the congress people were claiming there was no housing bubble. What in the world are they going to do with that raised debt limit?
This bill is totally idiotic. I notice all the fear-mongering being used to get it passed.
LOL, I wonder if it will become a federal crime to default on a mortgage.
Not to worry. They say there is only a 50% chance that it will actually be needed.
You mean only a 50% chance all the fear-mongering is needed? LMAO!
Paulsonocchio’s brown-nose is growing ever longer.
That’s not his nose.
If there were ever a classic example a self-fulfilling prophesy, this is it. “Oh don’t worry, we won’t wont’ screw up, but on the off chance we DO, Uncle Sam will catch us…well, off to go fishing…”
I remember almost three years ago when the congress people were claiming there was no housing bubble.
Exactly! Why can’t someone who has influence rub their noses in this?
President Bush has dropped his opposition to the bill. I posted a link above. So, despite Bunning’s resistance, it looks like it will be law by the end of the week.
The link didn’t post so, I’ll try again.
Bush drops opposition to housing bill
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=AP&date=20080723&id=8419655
and here i thought bush was finally going to do something right
Well, I give up .I wrote letter after letter . The course of action is chosen by the people in power . I have my opinions on who it will benefit and who it won’t ,and I have my opinions on how destructive government interference with market forces are . How can level-headed people on this issue like Bunnings be so out-numbered .So in five years from now when everyone really sees the outcome from this course of action ,than and only than will it be apparent that it wasn’t best for the Country or what everything America has stood for in the past .
Many famous politicians and thinkers have given warnings after warnings about
a situation that might arise in the course of human events that might threaten the fabric of the Constitution this Country was built on .So, good luck to you all . I hate it when the destiny of America is reduced to being lucky or not.
Sometimes all one can do is ride the wave.
It’s an election year, so politicians lose their spine. The idiots outnumber the intellectuals as usual (in both parties). Everyone gets a vote, so do the math.
I’m beginning to focus more on the constitution. More directly, the Bill of Rights and particularly the 2nd line therein. Some say buy gold….. I say buy bullets.
In the 1990’s when Citigroup almost went under, there were over 100 analysts that spent 6 weeks doing due diligence of Citigroups loan portfolio. Fannie & Freddie’s loan portfolio is 20X the size of the 1990s Citigroup’s.
Due diligence? LMAO
A doomed to failure that will cost $25B/yr ad infinitum
I remember almost three years ago when the congress people were claiming there was no housing bubble.
No one could have foreseen that the
levees would breakthat sub-prime lending would be a problem.The next leg of post-housing-bubble denial begins when this bill is signed into law and ends when the spin doctors can no longer claim that a bottom is at hand. I give this period six months to a year (i.e., until some time after the Souper Bowl).
Foreclosures set new mark
But notices of default down slightly in June in county
http://www.signonsandiego.com/news/business/20080723-9999-1b23default.html
“The fact that notices of default declined from May to June is a positive sign,” University of San Diego economist Alan Gin said. “The big question is will that trend continue or is it a seasonal factor?”
San Diego County’s shortage of homes will bring buyers back to the market sometime next year, predicted Kelly Cunningham, economist with the San Diego Institute for Policy Research.
“I think San Diego will be one of the first (regions) to hit the bottom of the housing market,” he said. “There is a lot of pent-up demand still and there are some bargains to be made as investors jump into the market. We won’t be seeing prices like this in the future.”
I guess all will be well soon in SoCal. Amazing how one month of minor improvement signals a turnaround. I wonder if the banks just can’t keep up to the amount of homes going foreclosure, so the numbers aren’t quite as bad as could be.
What is all the panic about. House prices are falling and that is good for the economy. This financial mess is fantastic for citizens of the U.S. of A. That men are forced into being honest in their dealings is sad. Look already $4.00 plus a gallon of gas is making citizens think. There is a law irrevocably established in heaven before the foundations of this earth. No man can violate this law. It is the law of cause and effect.
So there is corruption, in the hearts of men. That is not new. When we are finally through this mess it will be a greater U.S. of A.
Look what the end of WW2 did for the U.S. of A. That was an unprecidented time in the history of the world. Never before had a people focused and helped one another.
So it will happen again. 41Cadillac
I hope you are right, but I fear you may be wrong.
After 9/11 I had thought that America would experience that kind of pulling together and and and urge to get our house in order. I thought it might lead to a period of self-reflection for the country, and that this self-examination might lead to a change in some negative aspects of the country’s behavior. Instead we succumbed to fear, forfeited a large portion of our civil rights, and even re-elected the idiot in charge when the disaster went down.
At the end of WWII increasing power and profit were of course pursued, but business and government still felt some degree of civic duty to the country. A company might even turn down a chance at increasing profits if it went against the best interests of their community. Some government officials might have still thought that they had a duty to the citizens they represented. Today both business and government care only about increasing their own personal profit and power, at the expense of anyone and everyone around them. In this environment, I don’t see any way to salvage much sense of communal sacrifice or honor. Citizens have been replaced by consumers, and business doesn’t even think long-term enough to keep consumers able to continue consuming, but seeks to bleed them dry.
I don’t want to paint an overly nostalgic picture here, and I have no desire to return to the racism and restriction of that era, but you can damn well bet that a company in the 50’s wouldn’t have dared to close an American factory and move it to a sweatshop overseas just to increase the bottom line. And politicians then would have lambasted them if they even tried, because then they had to at least pay lip service to serving the interests of their constituents.
Them days is over.
Preach it my friend ,good post .
“After 9/11 I had thought that America would experience that kind of pulling together and and and urge to get our house in order. I thought it might lead to a period of self-reflection for the country, and that this self-examination might lead to a change in some negative aspects of the country’s behavior. Instead we succumbed to fear, forfeited a large portion of our civil rights, and even re-elected the idiot in charge when the disaster went down.”
I believe the failure of the group effort phenomena to take hold in the months after 9/11 speaks directly to the sense of disillusionment felt by so many, regardless of political sentiment. Remember Pres. Bush stood ontop of the tower rubble heap with cameras rolling? Scores of people I know who did not vote for him, didn’t like him conceded and got behind him for the greater good. And how did Pres. Bush rallying us? He said, “Go shopping”. No sacrifice, no national effort as individuals, just “go shopping” and “we’ll take care of the rest”. And failure of leadership since can best be described as a national tragedy no different than LBJ squared/cubed and squared again. 50 years from now kids will be in horror while studying the events of the last 7 years.
I was hiking in the French Alps when 9/11 happened…
We stayed in Europe til around the end of September, and having been to Europe many times previously, they tend to ignore Americans as much as they can get away with, without being obvious.
For a couple glorious weeks though, strangers would hear my accent and want to talk to me about how sorry they were for America’s loss. We ran into oh so many ad hoc street memorials (with candles & art) that we stopped counting.
We had the Europeans solidly with us, and look what’s happened since almost 7 years ago?
Sarkozy and the Tories?
After 9/11, we did exactly what GWB told us to do: we went shopping.
Yeah, and I bet no one would dare move the Brooklyn Dodgers to California either.
Thats a little bit of Truthiness there in your statement. I mean it sounds like it should be true, but the facts just don’t support it because outsourcing started in the 1950’s.
In the 1950s the administrations of U.S. presidents Harry S. Truman and Dwight D. Eisenhower worked vigorously to rebuild Japan’s economy, especially its textile industry. In the early 1950s Japan started supplying large quantities of textiles to the United States. As Japan continued to rebuild, the United States began importing apparel from Japan, and soon from South Korea, Hong Kong, Taiwan, and the Philippines, while these countries also built up their economies.
http://encarta.msn.com/encyclopedia_701702628/outsourcing.html
I recently watched a documentary by Aaron Russo called “From Freedom to Facism”. It provides some interesting insight into the creation of the Federal Reserve and the income tax.
Has anyone else seen this film? It really motivated me to get off my arse and learn more about how our constitutional rights have slowly been eroded away. Comments? Book recommendations? Surely, aladinsane has some suggestions?
Thanks.
got it in my cue.
Great documentary. Too bad it didn’t reach the masses. The late Aaron Russo had a message to wake up Americans. Good man with a righteous message. A few of us listened.
I was watching a documentary on Edward Bernays (6 parter) and the eye opener was how the Nazis used the 1929 stock market crash in America to brainwash the Germans. The amount of brainwashing governments due with propaganda is scary.
The political theatre of this election is more of the same.
I saw that film. Awesome. That’s why my congresscritters don’t like me much. I bug them all the time.
Russo definitely went against the grain of most of Hollywood. Too bad he has passed away.
Read “Creature from Jekyll Island” by E. Griffin. It’s a long read but a must for anyone who wants to educate themselves about the origin of the Fed, effects of inflation, why banksters love war, etc.
I donated to the making of the movie way back when. I think it encapsulates the state of affairs quite succinctly.
The Soviet Bloc fell apart rather suddenly in 1989.
If you had asked anybody in the know, whether this was a likelihood back in 1988, they would have laughed at you.
I expect the same fate to befall us, here…
But what is the catalyst?
If there is a catalyst, it will probably be huge unemployment, as, I think, Ben has been suggesting.
Populism.
I expect the same fate to befall us, here…
So do I. The end of the union will happen very quickly and suddenly, and pundits aound the globe will all be saying they didn’t see it coming.
I recall reading about an author who predicts that the US will dissolve and form 7 new republics: NE, SE, MidWest, Rockies & Plains, SW, PNW and Hawaii (not sure where Alaska ends up).
Such a move would make the creation of a North American Union an easier sell to Canadians and Mexicans, as the memebers would be closer as peers regarding economic strength.
If the union does dissolve and 7 new republics emerge, which one would you want to live in?
None of the above
The one with food, fuel and water. And guns….lotsa guns.
IMO the War on Terror will be the medium at least. This perpetual war (both foreign and domestic) against an ill-defined threat will continue to bleed us until we are an empty shell. Some future created crisis will cause a new constitutional convention to be called, with the end result being the end of the U.S. constitution, and of the USA as we know it.
You asked.
There are many potential catalyst…
1) Rapid drop in the value of the dollar (countries start to unpeg, …)
2) Domino effect of bank failures… people are already on the edge and after a few more fail they will no longer be willing to gamble that their bank won’t be next.
3) US loses its AAA credit rating… (see 1 and 2)
I think the most likely catalyst will be loss of faith in the currency. It takes a lot of economic activity to support an empire the size of the USA, which requires a trustworthy currency. Barter is too time consuming and inefficient to work in our social system as it currently exists.
I have a question for this illustrious company:
I have a house with no mortgage. Should I take out a mortgage for 6+ % for some portion of its value? If inflation continues to grow (as seems likely), I would be paying off expensive money with cheap money and also have cash if needed by myself or members of my family.
you can buy one of those cheap harleys out in la la land
If you are really concerned about inflation, how would taking out cash now help later, when the Dollar gets whacked against foreign currencies even further?
To make your plan work, it has to be non-$ denominated, to gain as the $ is falling.
Maybe I could do a currency trade for euros. Do you think that liquor store would take euros?
A country’s currency is current as long as the hoi polloi believe it to be somehow not connected to their government’s actions and accountable to the world…
Europe is having problems with it’s teenagers, which got drunk, on the house.
Some of the adults there want to kick them out of the Euro.
and some of the ‘adults’ (like Sarkozy) want to provide the adults more booze, so no one will be annoyed by drunk teenagers any longer.
‘and some of the ‘adults’ (like Sarkozy) want to provide the adults more booze, so no one will be annoyed by drunk teenagers any longer.’
Good one, nhz.
IMHO no. Even though I believe inflation is going to significantly increase, there is a substantial risk for stagnant wage growth. How secure is your job or income?
By taking out a loan on a home (not a house), you are putting debt on an existing liability. If you are treating your home as an investment, then you should probably just sell your house and rent.
Bingo! I took out a well over $500K mortgage in 2003, a jumbo for 5.25% fixed for 30 years. The poor basta*d that lent me the money is way underwater now and getting more so by the day. I plan to take on as much long term debt that I can service, shipo it overseas and let the government and fed do what it does best…inflate! They will wipe out your debts for you. Oh, bye the way, when the foreigners catch on to the long term thingie, they will only go for short term paper…then the piece del la resistance…the fed converts all the short term stuff to long term just like what happened when I was in Argentina earlier this decade. The GOOD news is that you will get all you mondy back…The BAD news is it won’t buy anything.
And that is when the US will cease to be. The states will repudiate Washington, its worthless currency and its debts, and will form new federations. The SW states might even form a union with northern Mexican states, who also have no need to remain in their confederation.
we shall see whether or not the “state” governments are still independent enough to “break off” or whether they are just regional branches of the federal government.
Think about it for a second, you are a state governer and you have a choice:
1) secede from the union and have your “power” and the state’s “wealth” destroyed by federal inflation
2) sellout to the federal government which prints enough money to fund your “mini empire”.
A smart governor/state would be working to build a stockpile of real “wealth” gold, silver, guns, food, etc. But I double many governors are doing this.
The only way to get fractionalization of this nation is for the people to overthrow government at all levels and institute a new government. Someone who is independently wealthy and takes the time to stock up and build their own private “army” would likely be in a FAR better position than local/state governments which will bear the frontal assault of an angry and hungry population.
Besides the national guard (previously state militias) have been sent all over the world making it hard for states to “fight” the fed. gov.
Ha ha.
http://www.nytimes.com/2008/07/23/nyregion/23stuyvesant.html?ref=nyregion
Tishman Speyer paid big bucks for this massive rent regulated housing development, built with tax and financial subsidies after WWII. Many of the “tenants” were paying low regulated rents, and subleasing to others at high rents. Tishman thought it could catch all these guys and make big bucks.
It has caught a lot. But guess what? The demand for “sexy” apartments for the affluent at high rents in buildings similar to public housing turns out to be more limited than had been believed.
I spent the first four years of my life in Peter Cooper Village. It was awesome. I was saddened when I heard of the Tishman Speyer deal. The harrassment of the current tenants is disgusting. Figures BlackRock is involved.
There was plenty of illegal subletting going on, and I don’t feel bad for those getting kicked out. They were gaming the system having already received a privilege most New Yorkers don’t have.
But I don’t feel sorry for Tishman either. They distabilzed a community, thinking they’d bring in a richer demographic. What they are finding is that without that community, the buildings are unattractive.
So now they want to eliminate living rooms so young people who don’t benefit from rent regulations and have few options can live eight to a two-bedroom apartment? Screw them.
My great aunt has lived in Stuyvesant for 50 years and is under rent control. My Dad has been living in Peter Cooper for 3 years. My dads rent for a 2 bedroom goes up it seems a five hundred to a thousand dollars a month every year upon renewal. My aunt still pays less than a thousand for a one bedroom.
The new company has put a lot of money into renovations but they are trying to get upper eastside rents . My dad sold his upper eastside condo because of the bubble and to save some money but with the rent he’s paying I doubt he’s saving much.
A friend of mine is about to go on a cruise in Russia. He was told last week: “Don’t bring US$. They won’t take US$ any more.” My, how 20 years changes things.
BTW, the whole thing sounds like a ripoff to me. $8K for a ride up the Volga in a crappy old boat.
One of the staples of traveling in the Soviet Bloc back in the day was, there were “official” exchange rates for Rubles, Zloty, Koruna, Mark, etc.
And then there was the black market rates, which were multiples of the official rate.
If the official rate for the Czech Koruna was 13 to the $, you could expect to get hit on in Wenceslas Square, and get offered 40 for your $, if they caught your accent.
The only catch to these black market deals, was there was nothing to spend them on.
Everybody wanted Dollars because there were hard money stores that only took western money, and actually had neat stuff for sale, as opposed to regular stores, which oftentimes had shelves of empty.
Things Change…
It would cost a Russian maybe a grand. The rest is markup.
As for Russia “not taking US$ any more”, every money changer in Russia (and they are everywhere) accepts them (along with Euros). It’s actually illegal to use anything except rubles to buy things in Russia, although this was often winked at back in the days when the ruble was unstable.
Another factor is that there are a lot of counterfeit US$ bills out there and only the people at the money changers are trained to spot them.
Virtually everything one would need to counterfeit paper money is included in your computer @ no extra charge.
They wouldn’t be the finest quality, but would fool most of the people most of the time.
25 years ago the printing equipment alone might have set you back $50k.
Ever wonder why we have such garish looking paper money, nowadays?
Printers can’t handle weird color combinations, something the Europeans figured out 15 years ago.
We only just caught on a few years ago…
well, the ECB is complaining that counterfeiting of their paper money is up strongly this year (I think it was +50% or so), especially with the most popular 50 euro notes. Some of the fake notes are so good that even a bank will probably accept them. So, I don’t think there is any problem printing convincing euro’s. Maybe $50k investment required to make something that is close enough (so maybe not for the little fish, but the real criminals have no problem with that). The only problem is spending the couterfeit money without getting caught sooner or later.
And besides, I don’t see why the ECB complains when the mob is giving them a little help in ballooning the money supply ;-(
Yeah, but the new money isn’t being directed to the preferred ECB groups.
Bank Gave Counterfeit Bills, Couple Says
“A couple has contacted the Secret Service claiming a Central Florida bank gave them 10 counterfeit bills during a transaction.”
http://www.local6.com/news/16960809/detail.html
I think that happens frequently with ATM machines in Netherlands. Some banks are allowed to recycle the cash coming in through night deposit safes etc. through their ATMs. Sometimes clever ‘businesmen’ will deposit huge amounts of fake banknotes in the safe, as a means of exchanging them for real notes (probably at another bank office …). The unsuspecting public receives fake notes from the ATM in that case …
Thanks Yogurt,
I’m not surprised about the markup. The visas are part of that.
Are you still able to use a credit card from a US bank in Russia?
Get your luxury condos on Craigslist.
The first listed is LaVista on LaVaca, the project that was in the American Statesman a few weeks ago - the street was blocked for months while construction had ground to a halt and vendors were suing the developer for payments.
http://austin.craigslist.org/rfs/764184631.html
Just an observation:
In the last quarter Washington Mutual and Wachovia bank lost over $10B. We are starting to approach real numbers, no more $3B/bank/Q
Quarterly bank writeoffs always go up.
Yeah, screw those piddly $3 billion writedowns.
That’s chickenscratch.
As Vikram Pandit of Citigroup said recently (and Wall Street seemed to agree), only losing a few billion beans a quarter is good news: “We cut our second-quarter losses in half compared to the first quarter. While there is still much to do, we are encouraged by our progress …”
We must adhere to strict Marquess of Queensberry rules when giving a standing 8 count to punch-drunk banks…
Rule # 1: The rounds to be of three billions duration
Sold SOV after the crapshoot buy-in on the 11th, and played systemic meltup based on the intervention strategy, and insolvency dis-apointment earnings circus.
hand wringers aint got nothin on me…
nice to see you posting, hozzie old boy.
Whats your take on the Wesport reverse spilt, and NASDQ listing offer?
Hey Voz,
I ‘most didn’t make it! I guess god forgot about me.
Sold westport at $5.25, sold Grupo TMM at $1.95, keeping formation. Lars made out like a thief. lol
Heh heh heh…
Bush says Wall Street ‘got drunk’
By Stephanie Kirchgaessner in Washington
Published: July 23 2008 01:19 | Last updated: July 23 2008 01:19
President George W. Bush said Wall Street had “got drunk” and was experiencing a hangover at a recent closed-door fundraiser in Houston in which he also made light of the US housing crisis.
In a video recording that emerged on Tuesday, Mr Bush questioned how long Wall Street banks would remain sober and “not try to do all these fancy financial instruments”.
As long as the Federal government is willing to ignore the excesses, cheating and outright fraud, I guess it’s “party on”.
But worse, it’s idiots like Bush and his buddy Paulson that are willing to basically rob us to pay for their (banksters) recovery.
So, since the looting is going well, and the consequences are zero…………
So what will the Hanky Panky bailout do to house prices? I am worried that this will reinflate the bubble, because as far as i understand Panky can essentially give unlimited amounts to anyone he likes (like GSE and Banks). If its not their own money, why care if the mortgages can not be repaid? Can someone clarify
Prices may go up in nominal terms, but in real terms, down.
Nominal up = real up for most of the regular people including me. Our wages are not going up in either nominal or real terms. :(.
Nominal up = real up
You are forgetting there is a third option besides up or flat, down. So to correct your equation:
nominal other prices up = real wages down
When nominal prices go up and your wages remain the same, then your wages have actually decreased in real terms.
hmm.. i didn’t see a turnip truck go by, but you talk as though you didn’t witness what happens when mortgages cannot be repaid..
why is the euro down vs. the dollar on the news of this bailout?
doesn’t make any sense …. but then, that goes for most of what is happening in the finance economy these days.
Because it’s not news - it’s been pretty much expected that this will pass for some time now.
(Unfortunately).
i guess the US banking system is now somewhat more stable, so the US economy is therefore a little stronger, and US debt is a little more likely to be repaid.. so the dollar / foreign currency balance shifts a little.
This is a move to save the banks. A form of RTC.
F&F buy the crap from the banks, the FB’s still can’t afford the stucco box(even at this magical 25% discount), F&F forclosure.
Sure the bank is recapitalized, but they are not going back to the free money days for at least 10 years.
Then, when all this is forgotten, some new financial pigman will come up with this “new financial innovation”. It will start all over again.
Inflation or not, unless they find a way to pump up wages, house prices are not going up for 10 more years (wages may catch up by then).
Then there is oopps, baby boomers dying off. Sorry they owned houses that now have to be sold to who.
The WSJ has been writing about Fannie and Freddie for years.
http://online.wsj.com/article/SB121677050160675397.html?mod=opinion_main_commentaries
“Angelo Mozilo was in one of his Napoleonic moods. It was October 2003, and the CEO of Countrywide Financial was berating me for The Wall Street Journal’s editorials raising doubts about the accounting of Fannie Mae. I had just been introduced to him by Franklin Raines, then the CEO of Fannie, whom I had run into by chance at a reception hosted by the Business Council, the CEO group that had invited me to moderate a couple of panels.
Mr. Mozilo loudly declared that I didn’t know what I was talking about, that I didn’t understand accounting or the mortgage markets, and that I was in the pocket of Fannie’s competitors, among other insults. Mr. Raines, always smoother than Mr. Mozilo, politely intervened to avoid an extended argument, and Countrywide’s bantam rooster strutted off.”
F&F was one of Mozillo’s biggest sources of placement of Countrywide’s loans in the secondary market .
F&F = really good friends of Angelo
I’m organizing an ultra-moneython $100k running of the banks, for next week.
To be a participant, runners must be in excellent fiscal shape and will wear a white shirt and a red neckerchief, as they make their run…
Location: T.B.D.
In the year 3035 ,if man is still alive
“Daddy, Daddy ,tell me again about the Great Housing Crash of 2008 .”
‘You know I don’t like to talk about it, besides the Authority Department
banned people from talking about those days after they decided to get
rid of the American History books that talked about Capitalism or the Constitution . I will say a few thing if you promise not to repeat it to anybody .”
“Ok ,Daddy .”
“After the Great Housing Crash of 2009 ,the government authority started taking over . The powers at that time would tell you they were only making temporary laws to respond to the emergency ,but than they became long standing law . But that was way long before the current government ruled “each according to it’s ability ,each according to it’s needs.”
Anyway ,Wall Street at the time ,which is now called the Governments Distribution Center ,set up a Ponzi -Scheme to make money on using real estates fake values to make commissions . When it was discovered that the values were not real ,and the loans they were making were based on
fraud for most part ,the values went down and started the wave of government intervention in business affairs . Prior to this event we lived under capitalism . Under those conditions people actually owned things .
The Constitution was set up to protect peoples pursuit of happiness ,not like today where the government tells you what your going to get and where you are going to go . You have to remember I was young at the time this happened and I remember my parents yelling at the TV screen.
Wait…I think I hear something ….I guess its gone …I thought it might be the Authority making a sweep . Ok …I guess its safe to talk.
Well anyway , the rich people at the time and this Wall Street didn’t want any losses from this business failure they had by creating a real estate mania . Many people at the time would argue about the lack of merits in giving “bail-out ” to businesses who had made grave errors in the name of greed .The corrupt Authority at the time sided with Wall Street sitting the stage for what followed .
You know son, you should be thankful that we have a apartment that the
Distribution Center issued to me because I know how to work on solar cells .I remember in 2029 when the Great Black Out occurred and the government swore they would never let that happen again . Anyway, I keep telling you if you have a skill you wont end up in the tent cities that a lot of people have to go to . Remember when they sent Grandma
there .
Anyway , I remember at the time of the housing crash there was a man named Paulson, with a crooked little finger, who wanted funds from the government to shore up a Company called Fred and Fanny or some name like that . Apparently ,at least my Dad use to say ,this was the beginning of the Great Change in the political and economic structures of America
which lead to what we have today . My Dad at the time kept bitching about “moral hazard” and something called Global markets ,and he would scream “commies” at the TV. set . I don’t know why we only have three channels today ,but back than people had 50 channels and could watch anything they wanted . People could go to where they wanted ,and they could buy what they wanted ,and they could work hard and get ahead in life and have steak and things like that . But ,the government said at the time it was in our best interest that we bail out the people that created the big housing boom that resulted in the big housing crash .
Wait….I know they are coming now …got to stop talking …Please don’t ask me again about the Great Housing Crash ….Please ”
_____________________________________________________________
That was a take-off on a post I did in humor a while back ,but now it’s not so funny to me anymore .
Oh ,excuse me the year is 2035 instead of 3035 ,sorry .
The Silent Run on the Banks…
40 Million Californians are using up all of it’s precious water deposited in reservoirs, and come xmas time, we’ll be drinking the dregs, if there is any?
______________________________________________________________
“California’s second-largest storage reservoir will end this year with the lowest amount of water in more than 30 years, Department of Water Resources Director Lester Snow said Monday.”
“The next-largest reservoir, Lake Oroville — which sits at the top of the vast system of state pumps and canals that send mountain river supplies to Southern California — is at 40% capacity now and will drop to about 20% by the end of December, he said.”
http://www.usatoday.com/weather/drought/2008-07-22-california-water-shortage_N.htm
It ain’t gonna rain no more, no more
It ain’t gonna rain no more
How in the heck can I wash my neck
If it ain’t gonna rain no more
Oh, a peanut sat on the railroad track
It’s heart was all a-flutter
Around the bend came Number Ten
Toot! Toot! Peanut butter
What’s the problem with the water reservoir, Les Snow?
Got stag?
Economy Slows Amid Inflation
[Go to beige book report]
The U.S. economy slowed in June and early July, while price pressures were elevated, with some manufacturers planning to charge more for goods, the Fed’s beige book survey of regional banks said.
i don’t think it’ll last long, but what else can business do except try to pass the effects of high energy costs and tight credit on to consumers? In the end, consumers pay for everything, without exception.
Purveyors of the essentials of life will get away with it.. got consumer staples?
“…what else can business do except try to pass the effects of high energy costs and tight credit on to consumers?”
They can either cut output or go out of business because no consumers are either willing or able to pay higher prices.
“In the end, consumers pay for everything, without exception.”
I am always skeptical of statements that end with the words ‘without exception.’ Consumers have to keep purchasing the essentials, but can often choose to consume lower quality levels at lower prices. And luxury goods, by definition, are not essential. So it looks to me like producers and purveyors of upscale consumer staples and luxury goods and services are going to pay a hefty price as their product demand shrinks.
i agree the definition of essential is not set in stone.
can often choose to consume lower quality levels at lower prices.
Another option is to choose lower quantity at higher prices.
As an example, Costco sales are down .. they sell mostly essentials but in bulk quantity.. and bulk purchasing requires more money up front.. and people are now less inclined to buy more than they need.
hey, peanuts are cheaper than peanut butter, make your own (toot toot)
LOL
i think that’s because TOOT! they use reject-peanuts in peanut TOOT! butter and mask the taste with sugar.
States Face Threefold Increase
In Budget Shortfall for 2009
By MAYA JACKSON RANDALL
July 23, 2008 2:27 p.m.
WASHINGTON — A new report is projecting that the cumulative fiscal-year 2009 budget shortfall for U.S. states will more than triple to $40.3 billion as the economic slump makes it more difficult for states to collect revenues.
“Lackluster” revenue collections already took a toll on states’ fiscal 2008 budgets, leaving states with a cumulative budget shortfall of almost $13 billion, the National Conference of State Legislatures said in a report released Wednesday. The bipartisan group serves the legislators of states, commonwealths and territories. (Read the full report.)
China’s banks told to tighten mortgages
By Jamil Anderlini in Beijing
Published: July 23 2008 19:22 | Last updated: July 23 2008 19:22
Chinese officials and government economists have warned domestic banks to tighten their mortgage lending criteria after the US government’s action to prop up Fannie Mae and Freddie Mac, the giant mortgage agencies.
Liu Mingkang, China’s top banking regulator, has in recent days urged the country’s state-owned commercial banks to beware of risks in the real estate sector and ordered them to tighten loan approval processes.
Others among China’s policy community have also begun to express concerns about the health of the country’s banks amid signs a once-booming property sector has begun to slow.
Average house prices in China’s 70 largest cities were up 10.2 per cent from a year earlier by the end of June, according to official figures. But sales volumes in important cities, including Shanghai, Beijing and Shenzhen, have fallen precipitously in recent months. Some analysts fear steep price falls ahead.
BOND REPORT
Treasurys fall as rising stocks reduce appeal of debt
Record $31 billion two-year note auction weighs on market
By Deborah Levine, MarketWatch
Last update: 3:21 p.m. EDT July 23, 2008
NEW YORK (MarketWatch) — Treasurys declined Wednesday, pushing 10-year note yields to their highest levels in a month, as fears about the economy eased in line with oil prices, reducing the appeal of the safety of government debt.
Ten-year note yields, which move the opposite direction of their prices, rose 7 basis points to 4.16%, the highest since June 23.
Here is an interesting link at the fdic.
www4.fdic.gov/dip/index.asp
Nice. The “Select a Bank” pulldown menu has only IndyMac at this point. But ti sure looks like they’re ready to add more choices at the drop of a hat (or the collapse of a bank).
July 23 (Bloomberg) — Fannie Mae, the largest U.S. mortgage finance company, couldn’t find a buyer who would pay $6,900 for the three-bedroom house at 1916 Prospect St. in Flint, Michigan. So broker Raymond Megie, who is handling the foreclosure sale, advised cutting the price to $5,000.
Megie still couldn’t sell it. “There’s oversupply,” he said. The home sold in 2005 for $110,000. …..http://www.bloomberg.com/apps/news?pid=20601009&sid=aMz0dl3IdwjU&refer=bond
When I tell people that their house could be worth $0, nobody ever believes me! Thanks for this concrete example.
(I think you’ll start seeing homes that are only 2-3 years old worth $0 soon, esp. in Sacramento suburb, Central Florida, Las Vegas)
Over the past few months, I’ve written many letters to my local Rep. Anna Eshoo.
Among the points I’ve made:
1. Why the Frank-Dodd Housing Bailout Bill is Bad for America
2. If you must support a Bailout, make sure that certain categories of people are excluded: Licensed R-E agents, insurance brokers, people with more than one mortgage, anyone who lied on a mortgage application.
3. If you must support Frank-Dodd, put in something to help “true victims” for example, savers! Eliminate income tax on dividend interest in any FDIC-insured bank account or CD.
4. …help the “true victims,” renters: Criminalize renting properties that are under foreclosure. Make it the law, punishable by jail, to notify tenants if the mortgage on a property being rented is behind.
etc.
So what legislation did Anna Eshoo introduce?
THIS:
http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.06209:
She wants to make it a crime to broadcast television advertisements too loud.