Bits Bucket For February 21, 2009
Please visit the HBB Forum. Post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
November 2024 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
Ben,
Lay it all on the hard eight!
Inquiring minds want to know the status of the housing bubble’s spankers v. spankees.
Yeah! And who’s in jail! And who has painted they’s feet blue! And who went out and set an empty subdivision on fire and then sang some cheery arson songs! And who has done a combination of those things!
* assumes an insinuating sort of sly whisper *
Was it yoooooooooo, Bennnnnnnn?!
FPSS, judging from the number of times you spanked Aladinsane, I’d wager you’re of the spanker ilk. Olympiagal? I’d say she spanks both ways.
Well, a good spanking once in a while doesn’t hurt.
LOL
‘Well, a good spanking once in a while doesn’t hurt.’
Then you must not be doing it right.
ROTFLMAO!! Oly, you’re special.
So say the spanked.
(And thanks, kirisdad.
)
Ah, my subtle joke was lost on the crowd. SIGH.
It seems all the normal posters are at the convention. Have a great time, all. Do check in with us here and let us know the details!
We are about to start the film interviews right now.
“Normal posters”? Hey, I resent that remark!
The tangential posters went in a different direction.
At least they’re not hunting for loan cosiners…
Are you guys having fun yet? Cheers, everyone! Please post pictures.
I hope those who made it are having a good time. It would be great if we could get some posts during the activities.
I was not able to make it due to a prior commitment. So sorry.
That’s prolly for the best, dude, as your giant lumpy bulging noggin* that you keep yer mutant brain in would have astonished everyone, and made them hastily spit out all the crispy chicken they got at the Circus Circus buffet line.
*I surmised that part. I actually don’t know if yer noggin is astonishing. You might even look quite regular, to the casual observer. Do yer? Go look in the mirror and then tell us.
As it happens, I just looked in the mirror. I don’t look that regular. But, if I were to take off the giant flapping sombrero with red stitching and sequins, and washed off the sexy mustachios that I drew on with black eyeliner, then I would look regular. Look, it’s a long story. I’ll tell you later.
I’ve been told my looks are astonishing in their mediocrity, and yes I do have a big head to house my over sized brain.
I’ve been on the road and out of touch for a few days, but with all the brouhaha about the Obama housing plan there are a couple of things I can’t figure out.
Will those who lied on their income be eligible for interest and principal relief? And will those who HELOCed and spent the money be eligible? I even read quickly through the White House press release, and couldn’t figure it out.
Also, the “ranting” seems to be by and on behalf of those who bought smaller houses and are making the payments. No one is talking about renters as a victim class here.
For example, did I read that the payment will be set at 31% of income? No one has asked how many renters pay more than that in rent for housing. And getting back to the HELOCs, the alternative for renters is the credit card. What do renters pay in rent plus the credit card, because they couldn’t HELOC?
Finally, I heard a discussion on public radio questioning why people are upset at this, does this mean they are unwilling to help the poor. There was no mention of the fact that income may be being redistributed in the other direction.
“There was no mention of the fact that income may be being redistributed in the other direction.”
I have called this a reverse Robin Hood policy for that very reason. Any reasonable person knows that the average renter household is less wealthy than the average home owner household, and the foreclosure bailout implicitly subsidizes homeowners by taking something from non-homeowners (either that, or the gubmint has figured out how to grow money on trees).
While I don’t disagree with your initial statement - the average renter household is less wealthy than the average home owner household - I’m not sure that more is being taken from non-homeowners.
Since, as Ben often points out, the bailouts are being paid for via deficit spending (and ultimately via inflation/debasing of the currency), we are all paying through inflation, and savers are ultimately paying the price. Based on your initial statement, would it be fair to say that the renters likely aren’t the ones paying, then, as they’re, as a group, less wealthy and less likely to have savings?
A policy which creates a bogus protected class (”homeowners”) and subsidizes them along side other programs to create barriers to entry to joining said class (i.e., propping up housing prices) offers a double-whammy to those not already in the bogus protected class (renters). There is no principled reason to either prop up housing prices or bail out underwater homeowners. From my view, it smacks of a desperation measure to keep the house of cards from collapsing. Good luck with that plan!
No but they pay taxes.
I was thinking about this today….
They’ve already made an incredible, inconcieveable amount of money disappear… We’ve gotta be approaching (or past) 2 trillion just on economic “recovery” bills right? Toss another trillion or so in there for some wars we don’t need to bother fighting…
It’s disgusting how much money has effectively vanished, just tossed to the wind. Imagine what you could do with 2 trillion dollars. Thats nearly enough money to stack hundred dollar bills back to back from coast to coast for christsakes. How is it I haven’t met anyone yet who’s seen a nickel of it?
Just some back-of-envelope calculations based on 1 minute of googling (probably remarkably inaccurate). 49,000,000 mortgages in the US, average size of mortgage: 69,000$. 3.3 trillion could pay them all off. Maybe I’m being simplistic but if they really thought housing needed fixing and were welling to throw -trillions- of borrowed dollars at it, why not just pay off the loans? Wouldn’t that have recapitalized the banks, saved the economy, and provided an incredible boost in spending power of the average american? Wouldn’t have been fair, I know, but it’s -already- not fair. I have a feeling all of this money isn’t intended to “fix” anything.
And I mean that in a sarcastic annoyed-renter/saver way.
Seriously though, trillions! New Scientist this month has an article on eliminating aids from the planet (they claim it’s possible with current treatments, the trouble is it’ll cost 3 billion a year for 40 years and nobody’s willing to fund it).
Why not fund that?
Or wipe malaria off the planet, that’s probably a trillion dollar job right?
Or maybe make the US completely energy independent (should be possible for less then 3 trillion dollars with even today’s technology).
Or hey, spend some real money on a fusion reactor. Dump a trillion into it and solve the energy needs for the planet forever.
You could change the world with trillions of dollars. I’m even ok with this, I am 100% ready to hand over my hard earned dollars for these kinds of programs. I am not ready to hand over my money to fund failed banks and greedy homedebtor’s who took the heloc, the hummer, and 4 trips to russia in the last year (for, coincidentally, more of the former).
What about people who own their houses free and clear, live on a fixed income and have seen their property taxes skyrocket as a result of the bubble? Any help for them? The crystal ball says “Unlikely.”
And will those who HELOCed and spent the money be eligible?
A particularly interesting part of this jumble. Could the Mad HELOCers really be included without raising the ire of everyone else? What if they didn’t even spend the money on the house, but on cars and boats and cruises? They still get “relief”?
My house is paid off, and I’m a retiree who WISHES he had a “fixed income”. My income varies with the whim of the Fed. I live off income from savings, and the Fed gave me a 50% pay cut last year by dropping the fed funds rate so low.
Mortgage rates are NOT tied to the fed funds rate but rather LIBOR which is NOT controlled by the Fed. Doesn’t anyone in DC understand this? They should raise the fed funds rate to 5% and flush out the deadbeats.
While many ARMs are tied to LIBOR, I thought some were based off FED funds rate as well? I’m not exactly sure what the relationship of fixed-rate mortgages is to either of the rates. I have a hard time believing they’re truly set by the free market, though?
Dennis:
Tough …..I have a ARM credit card so if the fed funds rate goes up 5% so does my interest rate and I dont have a job that pays enough to pay down the debt…
So you get no sympathy from me…sorry
I thought fixed rates followed the10 and 30 year bond rates? Dennis you have my sympathy, many senior retirees supplement SS w/ interest off CD’s, and rightfully so, there is no risk involved. I think we could use some less risky investment, in the future.
Amen, Dennis.
Those who are broke are tapped out and can’t borrow more anyway, so lowering interest rates doesn’t help the broke very much. It just screws savers like us.
My response to Bernanke-panky’s rate cuts (and my corresponding income cut) has been to zero out all discretionary spending. Let Mr. Bernanke stick that where the sun don’t shine!
Here’s a hint, Mr. Bernanke-panky. Lower interest rates are making this economy worse, because even the savers have stopped spending. That’s why luxury goods sales (usually purchased by the well-off) dropped 35% in December…
If your old enough to be “retired” then you really shouldn’t be complaining.
Why not ? Retirees are allowed to complain and have opinions just like those who are still working and have variable-rate credit cards. It cracks me up when the working think that the retired should just shut up and go and die in some corner. The point is that the “retired” worked before retiring, thus they have just as much say in our society as the still-working and the recently unemployed and the never-employed, for that matter. Duh.
I think there’s a better way to flush out the deadbeats.
Immediately disband Social Security, Medicare and prescription drugs. Make AARP illegal. End transportation giveaway programs and 10% discounts.
Sadly, this would destroy Carnival Cruise Lines and other entertainment venues for elderlies, but it’s a sacrifice I am willing to make.
How about you? Are you willing to do without despite paying in?
Yes, pictures, and maybe someone could go undercover and get some MLS prices with those pictures.
I struggle to keep up with all the statistics these days. Is not LV the “emptiest” city in the US according to somebody?
I think it passed Detroit as the city with the most people heading for the exits.
Did you guys notice the spike in volume yesterday? That is ominous. Money is flowing out. Sellers are expecting more pain. Oh, the humanity!
there is no bottom,
if the tards in DC keep banging out plans every other day..meltdown continues
Anticipating a small pop Monday morning possibly through early afternoon followed by lower lows through the remainder of the week. Hoping the folks who picked up UYG on Friday have tight stops in place.
NEW YORK (Reuters) - Renowned investor George Soros said on Friday the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis.
—
watch for the bottom collars
http://www.reuters.com/article/newsOne/idUSTRE51K0A920090221?sp=true
RE: the world financial system has effectively disintegrated
Twice this week, I’ve run across mention of an electronic bank
run that was resposible for that September emergency meeting of Hank, BB, and relevant Congressional rep’s.
From the “Fool”
Before going down the latter path, consider that on Sept. 18 we had an electronic bank run to the tune of $550 billion in just a couple of hours. According to Congressman Paul Kanjorski, Treasury estimates that had they not temporarily shut down the system and raised deposit guarantees, $5.5 trillion would likely have been withdrawn from the U.S. money market system by 2 o’clock, effectively taking down our financial system.
Anybody got any info on who and how the “run” was engineered?
Engineered by millions of individual automatic sell orders, probably. You don’t need tin foil if you have a computer.
“According to Congressman Paul Kanjorski, Treasury estimates that had they not temporarily shut down the system and raised deposit guarantees, $5.5 trillion would likely have been withdrawn from the U.S. money market system by 2 o’clock, effectively taking down our financial system.”
I do not believe this man. I think he is full of sh!t.
“…the world financial system has effectively disintegrated…”
Gloomster
The town isn’t empty, but there’s lots of empty houses and even more empty condos. There have been lots of layoffs too, but the casinos never publicize any of that bad news. A top casino executive who is a friend of mine says that every big casino operator in Vegas except for Wynn will be in Chapter 11 by year end. That won’t be good for the bulls who think “recovery is just around the corner.” NOT!
All the extra capacity from the massive City Center project should do wonders for room rates and profitability. I’m not sure how there can be much semblance of a recovery much before about 2012.
Any word on sales for City Center yet? MGM Signature, while a nice place to rent a great room cheap, was disasterous for its owners. With resale prices for MGM’s last highrise project about 50% or more off Phase I pricing, why would anyone buy these things? If I can get a luxurious penthouse with a great view and a private balcony for $100k or so in two years, I might consider it. My understanding is that no bank will finance condo-hotels in Vegas at any price, and you need to put around 40% down for most condo projects.
“If I can get a luxurious penthouse with a great view and a private balcony for $100k or so in two years, I might consider it. ”
Then again, great view of what? Half-lit neon illuminating the leftover riotous dregs running amok destroying stuff? Hey, wait, you can pretend you’re Charleton Heston in “Omega Man” LOL!!
DOC
So the global warmists were right, in a sense: California IS under water, but financially so, not physically.
I’m tellin’ ya. It’s not water we’re under.
It’s doo-doo. And we’re in it deep!
Most people haven’t considered this, but the global economic downturn (whatever you call it) is responsible for a greater reduction in worldwide fossil fuel consumption than all the Kyotos and other environmental do-goodism of the last decade, all put together.
Democratic/liberal partisans that are dutifully jumping aboard the stimulus bandwagon should at least acknowledge what an environmental disaster this stimulus legislation will be if it actually were to succeed in re-inflating bubblenomics. We just keep grossly misallocating and consuming precious resources at the government’s subsidized behest.
If the PTB would simply remove all of the real estate development stimuli in our tax code, particularly the mortgage interest deduction, an unintended consequence would be that the negative environmental repercussions of our economic activity would be deferred at least a generation, from what they would otherwise be. No further environmental legislation needed.
You get it and then you don’t.
The pols aren’t trying to save the planet.
Oh, I get it just fine.
You’re right, the pols could care less about saving the planet. My point is, how many self-professed environmentalists really care that much more.
True, meaningful environmental forward progress (I’m not talking about global warming BS) is and will continue to be completely subverted by our new overlords, due to the need to “fix housing”. And how seldom will anyone point out the incredible irony of it all.
Nothing like seeing a Seirra sticker on an SUV
I want an SUV.
The pols aren’t trying to save the planet.
Thank mighty Xenu for that! If they tried, they’d just fcuk it up like they’ve fcuked everything else they’ve ever touched up…
http://www.5sl.com/email/PresWeek.html
Toll bros. lowered the price to $395,000 for a studio, $1 for upgrades and claims 85% sold
White House denies they want to nationalize banks…for now.
I think that’s going to happen with all the banks that received TARP money. Once there, the feds will be in charge of your safe deposit box if you had it in a nationalized bank.
I’m bailing out myself and will only keep my CDs. There has been a bad track record of corporate bigwigs and government types going back on their word. I don’t believe them for an instant.
Mr. Roosevelt said at Boston on October 30 [1940]: “I have said this before, but I shall say it again and again and again: Your boys are not going to be sent into any foreign wars.”
I saw my neighbor with the Sheriff a few months ago, I figured it was for a foreclosure eviction (house is in foreclosure). An investigator came today and knocked on my door and asked me what I knew about him, turns out he’s a stalker and ran a woman over with his car.
This is my “one-foot-on-a-banana-peel-other-in-the-twilight-zone” week!
Florida SUCKS!
Quickly, go drink some beer! And then you should pack and move out of Florida. Forget about that dumb ol’ Rochester area yer all fixated on, you should come live in the best place in the world and that is, of course, the PNW.
No way, I heard they were running out of land in the PNW.
I thought they were running out of rain.
Yar. Land’s just gettin’ Raptured away right and left. I often have to leap out of a tree and run screeching away into the woods just in time to escape a Celestial Real-Estate Teleportation Event.
And as for the running out of rain thingie, it could be, it could be…
Hey, you know what, I been hearing interesting claims about some sort of giant flaming ball of gas hanging around in space and it, like, beams out hot golden rays and such?
You guys living in the rest of the world sure do come up with some fanciful nonsense.
*shakes head tolerantly at the manifest craziness of all non-PNWers*
(family joke)
“Why are there so many redheads in Seattle?”
“Rust!”
I wish we were running out snow in central NY.
Everybody wants to live there. And all those everybodies are millionares. Don’t you know that?
You’re right about PNW. I wish we had stayed there when hubby got out of the Air Force.
I’ll take Manhattan. When the economy of the 70s returns, and the city is on it’s knees, the night club scene is going to be terrific.
“night club scene is going to be terrific”
HELL YEAH.
Quit it, Oly! We’ve already got too many people showing up as it is. Don’t come here, anyone. It’s terrible, there’s nothing to do, and you’ll be miserable.
That said, I’m surprised you actually like it, Oly- coming from such a warm, sunny place. Most from those environs last a few years around here, and take off because they can’t handle the rain, clouds, etc. They get all SAD*, apparently.
* Seasonal Affective Disorder, AKA depression city. It only lasts for 9 months around here, for those blessed with it. We’ve had an abnormally dry, sunny, and cold February, but I see the rains are due back any hour now. The sun lulled these people into a false sense of security, now it’s going to rain until the 4th of July. They’re going to be begging for that fireball.
‘That said, I’m surprised you actually like it, Oly- coming from such a warm, sunny place.’
Yes, well. You haven’t met me, grizz, or you would have rapidly perceived that I’s an albino. Albinos do bad in frying pans.
“Yes, well. You haven’t met me, grizz, or you would have rapidly perceived that I’s an albino. Albinos do bad in frying pans.”
I see. I could’ve guessed, I suppose, as pretty much all of the Morman gals I’ve ever met are fair skinned, blonde haired, and blue eyed. Say, you don’t have pink eyes do you?
I’M NOT A MORMON.
And my eyes are light green. The rest is correct, however.
‘We’ve had an abnormally dry, sunny, and cold February, but I see the rains are due back any hour now.’
——————————————————————-
And I cannot wait! Tell it to hurry up! I’s gettin’ all parched. I mean, lookit me.
My nictating eyelids are getting all dried out and milky-white, and my gills are shriveling…
*grumble *
I hate that. Gotta go mist myself with a spray-bottle, quickly.
And I know what you mean about the SAD sufferers. Every summer a bunch of Californians visit relatives up here and decide they just lovvve all the green…
Sure. And then three months later they find out where all the green stuff and big trees comes from. Which is, a whole lot of wet.
Then my impatient question is; ‘Well, what? Did you think illegal immigrant Chinese gardeners hauled out the giant vegetation at nighttime, in order to please you? We call this ‘rain’. And it doesn’t go away in time for your dumb-ass garden party.’
But excuse me–I’m just grouchy this evening. Like I said, I’s all dried out and crackley.
After drought in SC for several years, I’d take the rain again
Muggy,
You should consider him to be innocent until proven guilty. It sounds as if somebody has accused you neighbor of something. That’s really all that you know.
I frequently have to let my students know from whom an accused is entitled to “the presumption of innocence.” It’s not the general public; only the players in the judiciary (jury, judge) who will make decisions in the case. So, next time you see/hear some obnoxious lawyer on TV telling you, a viewer, that you must presume his/her client is innocent, tell the lawyer to pound sand. You’re entitled to presume or believe whatever you will; and shame on you if you allow some yapping, plug-haired lawyer to mislead you to believe otherwise.
“You’re entitled to presume or believe whatever you will.”
Yes indeed.
Something we take for granted and that we should exercise.
Other nations, not so fortunate.
The presumption of innocence is really a way of stating that the DA has the burden of proof, and that if the DA can’t make his case the perp gets to walk.
“You should consider him to be innocent until proven guilty.”
Yeah, well, he nearly killed the woman, so I’d say there’s good reason to believe he ran her over.
For anyone who automatically thinks “you should consider him to be innocent until proven guilty,” read up on Marjorie Congdon Hagen and her 40-years of “antics”, including the mysterious killings of her adoptive millionaire mother, ( her 2nd husband was convicted, she was acquitted, but was most likely involved ),the deaths of her 3rd husband, her 3rd husband’s previous wife, numerous arsons which she was jailed for for over 12 years, insurance frauds, etc. Now, at the ripe old age of 76, she’s been convicted of befriending an elderly man by going into retirement and nursing homes with her rescue greyhound “Blueberry”, getting his power of attorney, and defrauding his estate of $11K which was miraculously deposited into a joint checking account, thence into her own checking account. She’s good. She’s a sociopath. She’s a little old lady with a rescue dog. She’s a liar. She lives in Tucson. She’s supposed to be sentenced this month. Read “Glensheen’s Daughter”. Fascinating story. Then don’t be so glib about “presumption of innocence.” There’s a lot of smoke from her fire.
I don’t know the technical definition of “split,” but I believe a 45 to 38 percent vote in an election would qualify as a landslide of opposition.
New York Post
AMERICA SPLIT OVER BIG RESCUE
By MAGGIE HABERMAN
Last updated: 8:57 am
February 20, 2009
Posted: 3:19 am
February 20, 2009
President Obama’s massive housing bailout plan ignited a furious national debate yesterday, with advocates calling it a godsend and critics demanding to know why homeowners who pay their mortgages on time should subsidize those who don’t.
A new Rasmussen poll reflected the divided country - 45 percent of Americans oppose the federally subsidized mortgage bailouts, while 38 percent approve. Eighteen percent are undecided. With an eye fixed on shoring up the faltering housing market, Obama this week unveiled a $75 billion plan to help as many as 4 million “at-risk” homeowners facing foreclosure, while putting another $200 billion behind the troubled government-backed mortgage firms Fannie Mae and Freddie Mac.
Obama said the plan is necessary to help out millions of Americans threatened with losing their homes after the subprime-mortgage crisis - but while many Democrats have praised the approach, Republicans and others have criticized it as a handout for people who lived beyond their means.
On CNBC, commentator Rick Santelli exploded over the plan, fuming, “The government is promoting bad behavior . . . President Obama, are you listening? Do we really want to subsidize the losers’ mortgages?” he asked.
“This is America! How many of you people want to apply for your neighbors’ mortgage?”
Good for Rick Santelli! I did not know he had strong views against housing bailouts.
My question to all erstwhile Santelli fans out there is and remains this: Has he opposed monies for the financial industry with equal fervor?
He goes on a tirade on the Chicago Merc floor and all the sh!tbird traders go crazy. That’s fine — but where’s the tirade about the 10x larger windfall for financial industry nimrods who couldn’t keep it in their pants?
I agree. I expect Santelli will next show up at the New York Stock Exchange and blow a gasket over all the bailout monies that have been dumped into Wall Street’s lap.
The enemy of my enemy is my friend. I like the fact that Rick has expressed the feelings of the other side. It has been silent, in the media, for too long.
Yes he has. He was against the bailout of Wall Street big time. Even had a couple of signs named bait and switch when Paulson used some of the TARP money for something else.
I have taken some time to read about proceeds of the Davos financial meeting.
A major point as I have read it, is, that the US is now entering the third world stage. With our printing presses rolling, spitting out trillions, our foreign freinds, have opened their eyes. I truly believe, that soon, probably by August, they will stop buying our debt. I also believe, that the US dollar will fall as the worlds economic standard.
Our debt to foreign countries was based upon corrupt ratings agencies, fraudulant bankers and our government politicians being in bed with all of them.
Everyday, a new fraud is made public. If i read the newspapers, I can assume many foreighn governments do the same. its just a matter of time before they call our bluff and walk away from buying our debt…..then look out below!
Retail anecdote: I bought a new Leatherman at my local Target the other day because I lost my last one somewhere.
For the first time I recall, all the Leatherman products and the competitors’ products are locked on to the hanger, and it requires a floor manager to unlock it. Ah well, I thought, I wanna get this thing, I’ll wait for the manager. After a short wait, the floor manager arrives and unlocks the device. He won’t let me carry the ding-dang thing — he has to walk me to the registers at the end of the store and hands the Leatherman directly to the cashier while I wait in line.
Annoying. Next time I lose one, guess I’ll get it online …
Had the same treatment at my local Ralph’s for - of all things - Mach 3 razor blades…
The salesguy explained it was because the blades had a strange way of walking off the shelves and into people’s pockets.
Didn’t stop him from making me do the Perp Walk Of Shame to the cashiers, though - even though I tried to tell him how rich I was…
This locking up of razor blades has been going on for several years at the supermarkets where I shop. I too use Mach 3.
Those Mach3 blades ARE a rip-off.
You’re fond of bold declamations today, I see.
Well, then, what do YOU use?* When you decide to shave your hairy pelt and go to Burger King and not scare the citizens.
LOL, whoaaa- I do NOT eat at BK! As for my pelt, have you been spying on me? Anyhow, IIII use the cheapest blades I can find. Sure, I lose a little skin when I shave, but that doesn’t cost me $50 per month or whatever ridiculous figure it was that I computed in my brain causing me to say eff you to Mach3 blades. Actually, I grew a beard for the winter so I don’t have to shave much at all. Maybe I should change my nickname to GrizzlyAdams.
Bearded guys RULE!
‘Actually, I grew a beard for the winter so I don’t have to shave much at all.’
That’s a good idea! I’m going to do it, next winter.
Here’s a tip: Buy your Mach 3 blades at razorsdirect.com There’s no sales tax if you buy from outside florida, and I don’t think they charge for shipping. Huge price savings compared to NYC drug store prices, but I cannot compare to other areas. The more you buy, the greater the savings. I stock up for 8-9 months at a time and save about half the retail price.
Drought Adds to Hardships in California
JESSE McKINLEY, New York Times
February 21, 2009
MENDOTA, Calif. — The country’s biggest agricultural engine, California’s sprawling Central Valley, is being battered by the recession like farmland most everywhere. But in an unlucky strike of nature, the downturn is being deepened by a severe drought that threatens to drive up joblessness, increase food prices and cripple farms and towns.
Across the valley, towns are already seeing some of the worst unemployment in the country, with rates three and four times the national average, as well as reported increases in all manner of social ills: drug use, excessive drinking and rises in hunger and domestic violence.
With fewer checks to cash, even check-cashing businesses have failed, as have thrift stores, ice cream parlors and hardware shops. The state has put the 2008 drought losses at more than $300 million, and economists predict that this year’s losses could swell past $2 billion, with as many as 80,000 jobs lost …
Cantaloupe will become a luxury item.
The big land owners are getting mucho cash from BLM (taxpayers) in Water War lawsuit results.
And the Feds are saying there won’t any irrigation water this year.
Uh oh. (BTW I can’t stand cantaloupe. Gag!)
What’s up, Hah-vahrd, I thought y’all was different. Special. Omniscient.
Endowment Director Is on Harvard’s Hot Seat
By GERALDINE FABRIKANT, New York Times
February 20, 2009
Harvard’s endowment has shrunk by at least $8 billion, forcing the university to freeze salaries and delay expansion plans.
The school relies on its endowment to generate a third of the money for its operations, and the endowment is on the verge of posting its biggest loss in 40 years. With much of its money tied up for the long term, it is scrambling to meet some obligations …
… Turning the ship around turns heavily on Jane Mendillo, who took over the Harvard endowment on July 1 — which in hindsight looks like the worst possible moment to step into a job once held by some legendary investors. The endowment, the largest of any university in the nation, has shrunk by at least $8 billion, to $29 billion, since she arrived …
Exposed.
Someone at work sent this out the other day offering up that it was a very clear explanation of how we got into this mess (it’s 11 minutes long):
http://vimeo.com/3261363
I countered that I thought this was a much better explanation (much shorter):
http://consumerist.com/consumer/clips/snl-skit-dont-buy-stuff-you-cant-afford-252491.php
The first video was decent up to the part on sub prime. It wasn’t just a matter so much of loosening credit standards so that people who should almost never buy could buy (defined in the video as sub prime), but instead that almost everyone that bought at that time paid too much and more than they could afford to repay because prices were too high (hence the value of the second video). Sub prime was but one means to push already too high prices even higher.
The subprime family’s hilarious, though. Smoking, booze, four kids in diapers, and tattoos… in stick-figure representation! I love it!
Laughing Boy
Thanks for the credit crisis explanation cartoon. So simple, even a politician could get it.
Bubble selling techniques die hard:
The follow phrases are on the banners currently hanging from the second phase of the D.R. Horton Atlas condo project in Hillcrest:
“Procrastinate at your own risk”
“Find out why waiting is no longer a good idea”
It then points you to the Horton website where they tout “3.5% Down FHA Financing”. Lowest prices are still in the “upper 300s”. Not waiting would be stupid.
There’s a dead link on the site for an “Interest List”, easily one of my most despised bubble terms.
I’d like to know when most any builder ever thought waiting was a good idea.
Just curious, is anyone else getting ads for “grantgenerator.com” on this blog? Is that even legit? It is ironic getting ads touting free money of all sorts on this blog, and the web site starts with this lofty sounding speech from Obama. I know it is not selected by Ben and may be targeted to me somehow from my browsing habits, but I imagine others browse similarly to housing/economic crash stuff and might get similar ads. Seems tacky to me not to mention suspicious… “free” except of course for the shipping and handling… and identity theft?
I’m not sure if I’ve seen that ad here or not, but I’ve seen it on a couple of other blogs, political ones. I haven’t opened it, but even from the outside it looks tacky, suspicious, creepy.
Don’t complain, click that jank and open it into a new window. Then click around the site a bit. This gets Ben $$.
speaking of getting free things from obama. I was at a pizza parlor yesterday and overheard a Hispanic woman as I was walking by, telling people at her table how obama has betrayed them by not doing what he promissed during the campaign. I am a bit curious as to what she was refering to. Anyone have any ideas as to what he might have promised people? FYI, I did not watch any political programs leading up to the election. I couldent stomach it.
A lot of “promises” were only in people’s head, FWIW. Obama was very good at campaign speeches that sounded as though they promised a lot but were very vague on actual details. “Hope and Change” is about as definite as it gets.
I honestly think it’s hilarious that some people are SHOCKED that they elected a politician.
What’s the definition of first-time buyer? Apparently, it is anyone who has not owned a home within the last 3 years.
According to irs dot gov/newsroom/article/0,,id=187935,00.html:
Taxpayers who owned a main home at any time during the three years prior to the date of purchase are not eligible for the credit. This means that first-time homebuyers and those who have not owned a home in the three years prior to a purchase can qualify for the credit.
Here, get your fresh knifecatchers, here!
It’s different here in the Ponzi State. Florida is working on an entirely new economic paradigm. In some parts, single family homes can be had for 45K!!
I think certain homes in FL, CA, AZ, and NV will be worth next to nothing. See Detroit.
From the east coast’s gambling Mecca to all the HBBers in Vegas: Atlantic City had a brutal week. The Trump properties filed for bankruptcy; Carl Ichan is circling over the down-and-out Tropicana; Resorts is trying to hold off foreclosure by desperately pleading that mortgagees can’t foreclose until they secure licenses to operate a casino. What a mess.
I don’t think there was much to this year’s so-called “Super Bowl Bounce” (You remember that, don’t you? “Thank god, people will finally pay attention and see around them all the bargains ready to be ’snapped up.’” LOL). I sense a real atmosphere of desperation surrounding the realtors and their clients. They’re holding out hope for BO’s “housing rescue plan,” the spring selling season, I don’t know what. I anticipate real capitulation come the fall of ‘09. Until then– and afterward, of course– I intend just to sit back, watch the show, and enjoy some popcorn. Have fun in Vegas, everyone.
Lifted from Yahoo story,
realestate dot yahoo dot com/promo/while-new-york-bleeds-washington-thrives dot html :
Then again, there is one resource that New York has in abundance, and that’s self-confidence. Regional Plan Assn. President Robert Yaro, whose nonprofit organization coordinates planning in a 31-county area, says New York has been declared dead over and over since the 1880s, but always springs back.
“The fundamental strength,” says Yaro, “is that every 24-year-old in America and the world wants to be here. Because every other place seems kind of sleepy.”
While the desire to live in New York may be infinite, the means to do so are decidedly not.
- FPSS
We just need to keep churning out 24 year-olds is what I got from Yaro. So, crises averted as long as younger generations are willing to do heavy lifting. Lots of it.
I’ve never been there and frankly, have no desire to.
Living in the “real” New York is admittedly and aquired taste and is decidedly different than visiting. Like other places, it is possible to live a pleasurable and relatively frugal life with good friends, good food and some amazing things to do.
We consider certain parts of town to be more or less “no go” zones that are abandoned to the tourists.
Yep, you are trading off different parts of your life.
A yard and a pool for regular tickets to the opera. The tedium of doing yardwork and shoveling snow for smaller spaces. Not having and paying for a car v. higher rents.
It’s not for everyone. But it’s just a set of tradeoffs like anything else in life. Naturally, you must like what the city has to offer to make those tradeoffs.
I did something out-of-character today. I went to a gun show. It was sort of a curious trip as I had not been to one since I was a young kid.
There was a line out the door (in 20 degree weather). It was an utter mob scene inside.
Kind of tells you something about the J6P’s current frame of mind.
I believe in the right to bear arms. I like to be able to protect myself from the people you mention.
Uh…are you saying you need to purchase/own a gun to protect yourself from other people who purchase/own a gun?
Like any trade show or specific product gathering, a gun show is a fantastic place to gather books, technical information, ammunition, reloading equipment, and anything targeting shooting specific…not just firearms.
People who attend gun shows are not automatically a subgroup just because they choose to attend a show instead of visiting a yuppie store like Cabela’s.
The only thing you need a gun for is to protect yourself from criminals and your government.
I should qualify my last statement, If you are going to use a firearm for self defense instead of sport, then…..
“The only thing you need a gun for is to protect yourself from criminals and your government.”
Not your fellow man.
One needs to have a pitch fork ready when the time comes.
Btw……can someone define J6P (”Joe Six Pack”) for me? What’s the cutoff? Can you have a college degree and still b e a J6P?
Another question? From experience I know that target shooting and firearms in general are an expensive hobby. Does anyone know what the typical socio-economic background of a gun owner is?
Besides, we all know the elite in this country (the rich, politicians, etc.) have the best arsenal around to control the rest of us. It’s called the Police, FBI, Army, Navy, Air Force, Marines. So, what’s a few pistols or long guns going to do?
I’ll put it this way - there was a heckuva lot of Carhartt in the building.
I have a sport rifle and graduated Cum Laude. I know several gun owners with high socio-economic status, they just don’t frequent gun-related events.
Also, I think the general fear right now is that crime is on the rise and the Obama administration may be able to limit gun ownership.
Call it my substandard California State University education or lack of a GPA sufficient to graduate Cum Laude, but what is Carhartt?
Carhartt is a brand-name of “workmens” clothing. It’s what real cowboys and coal miners wear.
Carhartt is a an apparel brand of sturdy work clothes.
Has also been adopted by some segments of the Pabst
Blue Ribbon drinking Brooklyn Hipster crowd and and some other urban types. Ironic iconic Americana perhaps?
Oh…thanks.
Similar to the emo hipsters here in Sacramento that run around in Ben Davis clothes with multiple piercings and tatoos.
Does anyone know what the typical socio-economic background of a gun owner is?
Nothing “typical” that I can see. Maybe military service in common. Lots of retired guys in my shooting club - military,govt, university. Gun ownership actually encompasses a wide spectrum of people.
A variety of people and backgrounds. That has been my experience as well. Actually, I’ve met interesting folks at the range.
The real pumped up guys can be a bother, but the range master usually keeps them in line. I’m slow and just enjoy a lazy round of trap or testing out my latest pistol reloads.
Shooting can be relaxing. Like golf.
“Besides, we all know the elite in this country (the rich, politicians, etc.) have the best arsenal around to control the rest of us. It’s called the Police, FBI, Army, Navy, Air Force, Marines. So, what’s a few pistols or long guns going to do?”
If you’re up against the elite, you’re fooked.
If you’re defending against some gang bangers or other ilk getting cute making house calls, you may be quite successful at getting them to move along with a nice loud gun or rifle. A good home alarm with a “panic” button is good for getting asshats to scurry as well.
DOC
so true.
http://www.larouchepub.com/other/2009/3606no_free_money.html
What the MSM won’t tell you - there is no such thing as free money.
From the BBC
About 100,000 people have taken part in protests in Dublin city centre to vent their anger at the Irish government’s handling of the country’s recession. They oppose plans to impose a pension levy on 350,000 public sector workers.
Trade union organisers of the march said workers did not cause the economic crisis but were having to pay for it. In a statement, the Irish government said it recognised that the measures it was taking were “difficult and in some cases painful”.
——————————————–
Why are not people gathering at the Washington Monument in similar protests?
The beer is still plentiful and cold.
A buddy of mine uses the metaphor “When there’s no more cold beer waiting for you in the icebox….that’s when America will protest.”
Actually, as long as people can sit in front of a TV and stuff their faces with beer, potato chips and Hostess Twinkies, there will not be any riots over economic conditions.
As Bushvilles spring up across America, local governments will use free cable TV and free junk food pantries as ways to maintain public order.
Hmm that is what I’ve always heard Welfare was for. To keep the poor from attacking the middle class.
What happens when you obliterate the middle class to the point that it no longer exists?
Then what do you do if you are the rich and elite?
btw…. What is the middle class anymore?
My dad said he grew up in a middle class family…..they lived a decent life on a single income from a post office letter carrier. Purchased a home in Walnut Creek, CA. Grandma still lives there. Raised 4 kids. Good luck doing that today.
We probably don’t realize it, but we’re probably getting close to a two class system. The ultra rich with all the power and the rest of us. Democrats and republicans have been working together for years now to accomplish this.
The grinding down of the middle class has been so gradual, that it barely gets noticed. Until it’s too late.
+1
‘The grinding down of the middle class has been so gradual, that it barely gets noticed. Until it’s too late.’
I still think until they pull the plug on the internet, we still have hope……
AB
Hopefully, you are right.
Robert
American Idol.
I was gonna go, but dancing with the stars was on…
“Why are not people gathering at the Washington Monument in similar protests?”
Because we’re not Irish? Because their trade unions are more experienced at organizing and protesting? Because it’s a much smaller nation? The protesters are a mix of the employed and unemployed. Not to mention the Republic of Ireland has the dole.
The last big labor protests I recall here, in the USA, would be Dallas in April 2006, and in Los Angeles in May 2006. 350,000 estimated protesters at each venue, and, of course, the crowds were comprised of Latino workers.
Feb 21, 2009. San Antonio woman gets prison time in mortgage scam
http://www.chron.com/disp/story.mpl/metropolitan/6274486.html
…The charges stemmed from a national crackdown by the FBI called Operation Malicious Mortgage, in which dozens of real estate agents, attorneys and others are accused of participating in housing and mortgage fraud, the Express-News reported.
FWIW, I canceled our spring break vacation plans to DC. Nothing drastic, my girls have been arguing way too much the last few weeks so I couldn’t see rewarding the bad behavior.
We’ll probably go instead to see family in Utahr and Idahole, though there is still the chance wifey and I can dump the kids and go somewhere nice for a few days. That would be a totally different trip with little or no dollar limit. Suggestions?
Vegas?
You’re in LA, right?
Big Sur?
FPSS, could you please offer comment, or at least let loose with a guffaw?
College Endowments
How Harvard’s Investing Superstars Crashed
Bernard Condon and Nathan Vardi, 02.20.09, 11:20 PM EST
When genius fails, it fails big.
Stocks were tumbling last fall as the new school year began, but at Harvard University, it was as if the boom had never ended.
Workers were digging across the river from Harvard’s Cambridge, Mass., home, the start of a grand expansion that was to eventually almost double the size of the university. Budgets were plump, and students from middle class families were getting big tuition breaks under an ambitious new financial aid program.
The lavish spending was made possible by the earnings from Harvard’s $36.9 billion endowment, the world’s largest. That pot was supposed to be good for $1.4 billion in annual earnings.
Behind the scenes, though, a different story was unfolding.
In a glassed-walled conference room overlooking downtown Boston, traders at Harvard Management Co., the subsidiary that invests the school’s money, were fielding questions from their new boss, Jane Mendillo, about exotic financial instruments that were suddenly backfiring.
Harvard had derivatives that gave it exposure to $7.2 billion in commodities and foreign stocks. With prices of both crashing, the university was getting margin calls–demands from counterparties (among them, JPMorgan Chase and Goldman Sachs) for more collateral. Another bunch of derivatives burdened Harvard with a multibillion-dollar bet on interest rates that went against it.
It would have been nice to have cash on hand to meet margin calls, but Harvard had next to none. That was because these supremely self-confident money managers were more than fully invested. As of June 30, they had, thanks to the fancy derivatives, a 105% long position in risky assets. The effect is akin to putting every last dollar of your portfolio to work and then borrowing another 5% to buy more stocks.
I can’t help but speculate on what Larry Summers thinks about the wisdom of putting a female in charge of the Harvard endowment.
Endowment Director Is on Harvard’s Hot Seat
Jodi Hilton for The New York Times
Jane Mendillo took the Harvard job as markets began to collapse.
By GERALDINE FABRIKANT
Published: February 20, 2009
Harvard may be the nation’s wealthiest university, but it is short on cash.
Harvard’s endowment has shrunk by at least $8 billion, forcing the university to freeze salaries and delay expansion plans.
The school relies on its endowment to generate a third of the money for its operations, and the endowment is on the verge of posting its biggest loss in 40 years. With much of its money tied up for the long term, it is scrambling to meet some obligations.
Harvard has frozen salaries for faculty and nonunion staff members, and offered early retirement to 1,600 employees. The divinity school has warned it may not be able to cover tuition for all its students with need, the school of arts and sciences is cutting its billion-dollar budget roughly 10 percent, and the university president said this week than the unprecedented drop in the endowment was causing it to delay its planned expansion, starting with a $1 billion science center, into the Allston neighborhood of Boston.
The school has even added to its debt by issuing $1.5 billion in new bonds, its largest such offering ever.
Turning the ship around turns heavily on Jane Mendillo, who took over the Harvard endowment on July 1 — which in hindsight looks like the worst possible moment to step into a job once held by some legendary investors. The endowment, the largest of any university in the nation, has shrunk by at least $8 billion, to $29 billion, since she arrived.
I saw this article earlier in the Times.
This is a joke. They went “all in” right at the top.
Smartest in the room.
Growing Worry on Rescue Takes a Toll on Banks
By ERIC DASH
Published: February 20, 2009
Once again, investors are losing confidence in the nation’s beleaguered banks — and, this time, experts say, in Washington’s ever-changing plans to rescue the banks as well.
Despite somber assurances from the White House that the industry is sound, shares of bank companies plunged to new lows Friday on fears that some of the nation’s largest banks, including Citigroup and Bank of America, eventually could be nationalized.
Though both companies said that was not the case, investors pointed to a seemingly offhand remark by Senator Christopher J. Dodd — to the effect that the administration might assume ownership of certain banks for a short time — as cause for concern.
The decline, which had been building for days, underscored the growing anxiety on Wall Street about what the government would do next. The Obama administration has provided few details about its plans to shore up troubled lenders, sowing confusion in the markets and inside the banks about its intentions.
With so much uncertainty, some investors are abandoning banking shares, fearing shareholders will be wiped out if the government seizes control. The worry, investors say, is that Washington is running out of time and options.
“Banks live on confidence, and there is precious little coming from the new Treasury secretary,” said Gary B. Townsend, a former federal banking regulator who runs his own investment firm, referring to Timothy F. Geithner. “We are getting only confusion.”
That’s a New York Times story. It makes me wonder whether Geithner is trying to rescue Megabank, Inc cartel members, or destroy them?
A contrarian might say banks are ready to rally, even tethered to their
feeding tubes. Then back to the ICU.
They shoulda just called the undertaker for those that needed attention.
They will either rally or head for the grave, that seems certain…
New York Times
Strategies
The Index Funds Win Again
By MARK HULBERT
Published: February 21, 2009
THERE’S yet more evidence that it makes sense to invest in simple, plain-vanilla index funds, whose low fees often lead to better net returns than hedge funds and actively managed mutual funds with more impressive performance numbers.
Basic stock market index funds generally aspire to nothing more than matching the returns of a market benchmark. So in a miserable year for stocks, index funds may not look very appealing. But it turns out that, after fees and taxes, it is the extremely rare actively managed fund or hedge fund that does better than a simple index fund.
That, at least, is the finding of a new study by Mark Kritzman, president and chief executive of Windham Capital Management of Boston. He presented his results in the Feb. 1 issue of Economics & Portfolio Strategy, a newsletter for institutional investors published by Peter L. Bernstein Inc.
That’s funny, I made money last year (and the year before that, and the year before that) in my investments, and I don’t charge myself any fees to do it!
+1
Proposed next bailout program: NO FB LEFT BEHIND
HOUSING: Bailout will have muted effect locally, analysts say
Obama’s conditions leave many homeowners behind in North County
By ZACH FOX - Staff Writer | Saturday, February 21, 2009 5:31 PM PST
Analysts said last week that North County homeowners can expect little relief from President Obama’s $275 billion housing bailout, based on details the White House made public last week.
For openers, few local homeowners will qualify for a new refinancing program in the bailout because it targets homeowners with mortgages backed by Fannie Mae or Freddie Mac, two giant government-controlled institutions.
The White House has not provided enough detail to assess the local impact of the bailout’s two other initiatives —- incentives for banks to encourage more loan modifications and an expansion of Fannie Mae and Freddie Mac. Eligibility requirements for those programs are scheduled to be announced March 4.
As for the refinancing piece of Obama’s package, homeowners must have a Fannie or Freddie mortgage and carry a “loan-to-value” of 105 percent or less, meaning the amount owed on the mortgage is no more than 5 percent greater than the value of the home.
That’s a problem in San Diego County, where prices have tumbled 38 percent since 2005 and many mortgages carried small down payments, meaning thousands of homeowners owe far more than 5 percent over the home’s market value.
“I can’t see it helping most of my clients,” said Donna Steward, a real estate agent in San Marcos who works on loan modifications. “My people are at 150 percent.”
Zillow, a real estate research company based in Seattle, reported this week that 34 percent of all San Diego County mortgages have lost too much value to qualify for the program —- more than double the national average.
Also, there are probably far fewer Fannie Mae and Freddie Mac homeowners in San Diego County than the national average. The government-sponsored agencies traditionally only backed mortgages for $417,000 or less.
One man’s voice can be heard above the cries of panic, speaking of the way forward, away from the financial practices which led the global economy down the drain in recent years.
Intelligent Investing Panel
Volcker: Ban Bank-Sponsored Hedge Funds
Camilla Webster, 02.20.09, 07:05 PM EST
On Friday, Paul Volcker broadly outlined his understanding of the global recession and his ideas about bank regulation.
Paul Volcker spoke Friday at the Center on Capitalism and Society at New York’s Columbia University. Our Camilla Webster attended and has provided this transcript of the former Federal Reserve chairman’s remarks.
Volcker, who chairs President Obama’s Economic Recovery Advisory Board, believes that the current downturn is a transformational event, especially for the financial services industry that he believes long ago left behind a “relationship” model in favor of a transaction model of lending and securitization that has helped to cause the current downturn. Volcker sees a return to older models in the future and would forbid banks from sponsoring hedge funds and would regulate bank proprietary trading desks.
Translation: Bankers will keep the loans they write rather than sell them off, thus they will once again care if the loans are ever paid back.
Back to the Good ‘Ol Days. It ain’t gonna be a lot of fun getting there for a lot of folks, but that’s where we need to go.
If your translation is correct, the housing market has a long way down from here, as we are not yet down to prices where local incomes are sufficient to pay off loans that would enable most buyers to make a purchase.
Yeah, you’re looking at the ol’ 20% down and let-me-inspect-every-orifice-to-verify-income again.
Hoo boy! That’s gonna hurt (in more ways than one.)
Suggested anti-terrorism initiative:
(1) Send the Wall Street executives who destroyed hundreds of billions of investor wealth to terrorist nations to establish banks.
(2) Get the terrorists to invest all their financial capital in these banks.
(3) Encourage the bankers to run the terrorist banks into the ground the same way they ran Wall Street into the ground.
The New York Times
Wall Street Salaries: The Brain Drain Defense
By DAVID GILLEN
Published: February 21, 2009
The big brains in banking just aren’t feeling the love.
U.S. Plans $500,000 Cap on Executive Pay in Bailouts (February 4, 2009)
You Try to Live on 500K in This Town (February 8, 2009)
Up and down Wall Street, financial types are grumbling that their industry’s highest highflyers are getting their pay capped.
Many Wall Streeters say this would be disastrous. The sharpest financial minds will up and quit, the argument goes, and take their smarts with them at the very moment they’re needed to re-engineer their companies and restart the economy.
But is this brain drain real, or merely a bit of self-justification? And would it really matter much anyway?
There are good reasons for paying any chief executive officer well. The decisions made by C.E.O.’s are so crucial to their companies that the priority should be to hire competent people rather than penny-pinch on pay.
But it’s hard to argue that Wall Street executives were on their game. After all, a lot of smart people in this business did a lot of stupid things. Traders took foolish risks with tricky mortgage investments, and, for their folly, collected seven-figure bonuses. Their bosses, hoping for big paydays themselves, turned a blind eye to the dangers. And the bosses’ bosses, the folks who actually run these companies, never quite wrapped their heads around all this. As long as the profits rolled in, everyone made money.
Until, of course, they didn’t.
Never mind that record glut of vacant, overpriced homes — the crisis at hand is all due to negative psychology. Now one, two, three — THINK POSITIVE — and we can collectively use the think method to lift ourselves out of the doldrums.
Economic View
Can Talk of a Depression Lead to One?
By ROBERT J. SHILLER
Published: February 21, 2009
PEOPLE everywhere are talking about the Great Depression, which followed the October 1929 stock market crash and lasted until the United States entered World War II. It is a vivid story of year upon year of despair.
This Depression narrative, however, is not merely a story about the past: It has started to inform our current expectations.
According to the Reuters-University of Michigan Survey of Consumers earlier this month, nearly two-thirds of consumers expected that the present downturn would last for five more years. President Obama, in his first press conference, evoked the Depression in warning of a “negative spiral” that “becomes difficult for us to get out of” and suggested the possibility of a “lost decade,” as in Japan in the 1990s.
He said Congress needed to pass an economic stimulus package — as it ultimately did — to prevent this calamity.
The attention paid to the Depression story may seem a logical consequence of our economic situation. But the retelling, in fact, is a cause of the current situation — because the Great Depression serves as a model for our expectations, damping what John Maynard Keynes called our “animal spirits,” reducing consumers’ willingness to spend and businesses’ willingness to hire and expand. The Depression narrative could easily end up as a self-fulfilling prophecy.
Robert J. Shiller is professor of economics at Yale and chief economist at MacroMarkets LLC. He and George A. Akerlof are the authors of “Animal Spirits: How Human Psychology Drives the Economy and Why It Matters for Global Capitalism” (Princeton University Press).
This is at the end of the New York Times piece by Shiller. Apparently he was talking his book — quite literally
Shiller indeed! This guy is the poster boy for the ivory tower economist who has no understanding how things work in the real world.
(picks up megaphone)
YOU HEAR THAT YOU DEPRESSED PEOPLE!!! THERE ISN”T ANY COLLAPSE HERE. DON’T WORRY, BE HAPPY, NOW MOVE ALONG!!!
Willingness to spend is just a smidge related to having a job, doncha think? Friends getting laid off cuz their multinational is no longer making 20% profits, only a measly 5 % profits– off with their heads and their dollars– to fund the froth. The Jack Welches of the world have been preaching “down-sizing” workers for years to line their pockets and those of their stockholders. Worked well, until it didn’t work well. It’s only a crisis now because its the college educated who are getting the ax.
Downsized workers in dead-end jobs also had no problem getting loans to buy houses in the multi-$100Ks range up until 2005, either, and so long as real estate was only going up, their home equity ATM withdrawals provided a second or third income source to support consumption spending. Now that the easy money home loans are gone, people have to consume based upon their labor market and investment income, which is a bit of a problem with unemployment climbing steeply, housing prices crashing and the stock market down by fifty percent from the peak.
Like most macro-oriented economists, Shiller underestimates the role of the budget constraint in consumption decisions.
It looks like Shiller is also ignoring the idea that “animal spirits” decline as an aging population becomes more risk averse.
Even though I tend a bit to the left politically, I think that this explains why the stimulus bill will fail to jump start the economy.
Hillary to the Chinese BUY our bonds or else!
http://apnews.myway.com/article/20090222/D96GHOP80.html
“Capitalism should not be condemned, since we haven’t had capitalism. A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank. It’s not capitalism when the system is plagued with incomprehensible rules regarding mergers, acquisitions, and stock sales, along with wage controls, price controls, protectionism, corporate subsidies, international management of trade, complex and punishing corporate taxes, privileged government contracts to the military-industrial complex, and a foreign policy controlled by corporate interests and overseas investments. Add to this centralized federal mismanagement of farming, education, medicine, insurance, banking and welfare. This is not capitalism!”
R.Paul