The Housing Bubble

Next year is going to be so messed up, buying stuff at 2050 prices on 1990 wages.

Name one bill that’s not going up. We’re house shopping in Fort Collins and cash is not king - cheap easy loans are and we’re being out bid on nearly every house we look at.

we’re being out bid on nearly every house ??

Bid higher

We get a news letter from a Realtor that shows the numbers every month. Prices and sales in Ft. Collins have been in a slow but steady decline. The newsletter once mentioned that there are a few neighborhoods where houses do sell quickly, but in most that is not the case.

Combotechie, I’ve been in your corner about cash for quite a while, but data seems to be changing and I’m no longer sure. Make sure you don’t cover your eyes and plug your ears. The statement “Name one thing that surpasses it when it comes to paying bills” applies to Wiemar and Zimbabwe, no? I’m pretty sure those wheelbarrows of cash to pay bills did not prove cash was king. If I don’t have the analogy right, let me know. I’m getting nervous in my cash position

I think it’s the old argument that “you can’t buy food or pay bills with gold/silver/insert hard asset here”. And yes, that’s true. But you can sell/convert your hard assets to cash as needed.

Cash is only king if the things you want/need are deflating in value vs the $US.

Cash will need to be devalued greatly for the Great Scam to work. They need to get people out there buying crud they can’t afford to keep money racing around and the fees and leverage flying.

So, destroy the crash, destroy people’s jobs, and destroy the economy. Then, everyone will have to buy on credit and be “priced out” of many things. More fees, more leverage, and an even bigger CRASH!! in a few more years, but they don’t care since that’s a few more years of looting.

Not in California, where the bad economy is leading to a milk glut and a culling of the dairy herd…

Milk glut hurts California dairy finances

By Jim Downing
jdowning@sacbee.com
Published: Thursday, Apr. 16, 2009 - 12:00 am | Page 7B

Drink up – milk prices are expected to stay low through summer as the dairy business struggles with a glut.

The price farmers get for their milk will rise nearly a dime May 1, pushing up minimum retail prices by roughly the same amount.

But milk is still selling for far less than it costs to produce. As production outpaces demand, analysts and farmers expect the market to stay weak for the next few months.

“We’ll just be prepared for an ugly financial situation,” said Case Van Steyn, who milks about 1,000 cows in the Galt area.

The dairy sector is stuck with too many cows and not enough demand. And over the past couple of years rising feed prices increased costs.

Exports of dairy products are down by a third from last year, thanks to the bad global economy, a stronger dollar and foreign competitors.

Slumping sales in the restaurant sector – which, along with food service, accounts for 60 percent of the nation’s cheese consumption – have hurt demand too, particularly for the mozzarella used on pizza.

With about $7 billion in farm sales annually, California is the nation’s largest dairy state. Behind Wisconsin, it is second in cheese output.

Supermarkets have hesitated to cut retail prices for many dairy products after wholesale prices collapsed in January. So today’s low farm prices aren’t translating into a wave of consumer demand, said Joel Karlin, a commodities analyst at Western Milling in Goshen in Tulare County.

Dairy farmers have increased the rate at which they sell their animals to slaughter, but the move hasn’t reduced the national herd of 9.2 million cows enough to cut supply appreciably. In hopes of trimming milk production more, a national dairy group is taking bids from farmers this month who want to sell off their herds, said Michael Marsh of Western United Dairymen.

That effort might eliminate as many as 200,000 more cows. But, based on the futures markets for dairy commodities, Karlin said, traders don’t think the culling alone will be enough to boost prices.

“What would give the market an additional boost would be signs that demand for milk and dairy are starting to pick up – but that hasn’t been the case,” he said.

Maybe California could house the surplus cows in all the vacant houses that dot the Central Valley?

With all these cows being slaughtered the price of hay is falling also. Some of the weaker farmers are letting their crops die because of the price drop.

And yet there was a food crisis not so long ago.

Professor Bear,

Thanks for sharing that. So what are consumers buying to substitute milk/dairy products? What are children putting on their cereal? Wow, there’s a lot of things I can and ‘have’ done without ( it’s just that milk isn’t one of them )

You have to imagine that dairy farmers were feeling pretty smug that most of this financial plague would pass by their door? Again, who IS safe?!

You’re on the right track, DinOR, it’s hedonics at work. And to the boys at the Fed, putting Hawaiian Punch in your kid’s cereal is perfectly rational consumer behavior.

BBQ time??

Alcohol doesn’t solve any problems, but if you think about it, neither does milk.

“Supermarkets have hesitated to cut retail prices for many dairy products after wholesale prices collapsed in January. So today’s low farm prices aren’t translating into a wave of consumer demand, said Joel Karlin, a commodities analyst at Western Milling in Goshen in Tulare County.”

Is there collusion among the supermarkets if none will cut their prices for milk products? Based on the prices I see in the supermarket, I had no clue demand had fallen that much as absent possible collusion one might expect a fall in prices to maintain demand.

edgewaterjohn,

Well then I suppose we can safely dismiss the tried-and-true “retirement plan” farmers have used for years of selling their land to some developer when it’s time to throw in the towel?

Unless of course they’re prepared to just “give it away”? Again, and I realize this isn’t a popular take here, but in 2004/2005 when most of us were observing this thing w/ growing alarm, how many here predicted that DAIRY FARMERS would be even -remotely- affected?

“how many here predicted that DAIRY FARMERS would be even -remotely- affected?”

My recollection is that there were a fair number who said that EVERYONE would be affected—the guilty, the innocent, and even those of us who felt relatively insulated.

Supermarkets have hesitated to cut retail prices for many dairy products after wholesale prices collapsed in January. So today’s low farm prices aren’t translating into a wave of consumer demand

I wouldn’t be surprised if supermarkets were dropping prices on their own “generic” brands of milk products while maintaining higher prices on the name brand and organic products…

“Is there collusion among the supermarkets if none will cut their prices for milk products?”

Milk Marketing Order Winners and Losers
Hayley H. Chouinard, Washington State University
David E. Davis, U. S. Economic Research Service
Jeffrey T. LaFrance, University of California, Berkeley
Jeffrey M. Perloff, University of California, Berkeley

Download the Paper (395 K, PDF file) - August 1, 2005

ABSTRACT:
Do milk marketing orders affect various demographic groups differently? To answer this question, we use supermarket scanner data to estimate an incomplete demand system for dairy products. We use these estimates to simulate substitution among dairy products and the welfare impacts of price changes resulting from changes in milk marketing orders for various consumer groups. While we find little difference in own- and cross-price substitution elasticities of demand, the welfare effects of price changes vary substantially across demographic groups, with some losing and others winning from this government program.

Think of a marketing order as a stealth regressive tax of the dairy sector on unsuspecting consumers. Stealth makes this regressive tax politically palatable, similarly to an inflation tax in that respect.

From the conclusion to the paper I cited:

When the New England Dairy Compact ended in 2001, fresh milk prices fell by about a fifth and other milk product prices were virtually unchanged (though we would have expected at
least a small increase). Under those conditions, all consumers benefit from eliminating marketing orders. In particular, poorer, less educated, families with young children tend to gain more than richer, better-educated families with no children or older children.

If eliminating the market order results in a drop in fresh milk prices that is offset by half as large an increase in processed product prices, households that consume relatively more fresh milk gain, and those that consume relatively more processed products lose. Families with young children, Asians, and Hispanics would gain, while older childless couples would lose. That is, as predicted, orphans suffer from marketing orders while yuppies benefit. Finally, marketing orders are regressive: Households with lower income levels pay a larger percentage of their income due to the regulations than do those with higher income levels.

Should have said “by the dairy sector” … oh well.

I’m confused. I thought one of the main causes for slaughtering off diary cows in CA is the predicted lack of water for this summer. No water - no cheap food to feed the cows.

Hence more profit for ID and WI diary farmers.

Around Boise you can get a gallon of milk for $1.68 or a half-gallon for $1. So far not much profit there.

Prime_Is_Contained,

Oh I wasn’t calling anyone out for not STIPulating… “Dairy Farmers” (state/region) and then identifying their DOL “occupational code” and the specific quarter it would arise?

But on one hand we’re saying “relatively well insulated” ( I’ll take that to mean hoarding cash, buying gold and RENTING! ) yet “I” recall a solid percentage that seemed to believe adherence to that more or less assured a pass on all/most of this? I mean, just look at the screen names.

have hurt demand too, particularly for the mozzarella used on pizza

Decent part-skim mozzarella is downright cheap. I bought a 2 lb. chunk for $3.93 the other day at WinCo. Get a 25 lb. bag of bread flour for $8 and a pound of yeast for $2 at Sams Club and you can make a pizza from scratch for about 80 cents.

Hint: slice your own olives with an egg-slicer to save money. Sliced olives in a can are dramatically more expensive than pitted whole olives. Use the egg-slicer for the mushrooms too.

Very interesting thread. My own take is biased by my personal food preferences, but here’s my 2 cents. DinOR asked, “What are American eating?” They’re eating junk. Milk consumption has gone way, way down over the last hundred years. Partly this is because nutrition “experts” decided to declare holy war against it. Butter is bad for you, margarine is better. Yeah, right. Whole milk is the devil, skim milk is better. In truth, the human body needs fat, lots of it. Without it, appetite regulation goes haywire. And the fat in whole milk is needed to properly absorb all the nutrients available in the milk. Low-fat milk almost always includes powdered skim milk to improve texture. Powdered milk contains harmful oxidized cholesterol. By selling skim milk, industrial dairy producers can charge you about the same amount for a product that has all the good stuff removed (good in terms of both taste and nutrition). They can then use the cream for other products. Part of the problem is that the margins in the food industry are in the processing, not in providing natural, whole, nutritious foods. But aside from the profit motive, what we as American eat is mostly the sad result of very bad nutrition advice. Take eggs, for instance. Eggs are great for you. They are a great, cheap source of choline and countless other nutrients vital to good health. There is no credible evidence that dietary cholesterol (natural, not oxidized) causes atherosclerosis. But most people think that there is, due to bad reporting by the MSM. And there is definitely money in statins, so drug companies will continue to “educate” doctors about the link between cholesterol and heart disease and about the “dangers” of wholesome, nutritious foods. I am hoping that as consumers are pinched in this downturn, another silver lining will be that they will be forced to give up some of the processed convenience foods and will discover how much better they feel eating real food, which in many cases is also cheaper. If the majority of American ate real food, I think our health care crisis would be pretty much solved. Instead, the latest crazy idea I heard in NY is a plan to incentivize bodegas in poor neighborhoods to carry only low-fat milk products. Just what the poor needs. Even worse nutrition and less chance their children’s brains will reach their full potential.

I know some of you will disagree with this, and I’ve found that people tend to have strong feelings about what they eat and don’t eat. This is just my view. If you want more info about some of the benefits of milk, check out the link on my name above.

I don’t know why my spellchecker changed all instanced of “Americans” to “American.” Oops.

It’s those Happy California Cows……..they must be renters and hoarding gold. So we have a milk glut.

Make them buy a condo.

I love milk. I love butter. Margarine? Nohow!
*makes spitty face *
Who was it who said ‘I trust cows more than I trust chemists’, ? Well, testify to that!

I’m SO very tired of stupid, misleading, deliberately sensationalist MSM reporting on food. You know it has to be a slow news week when they go for producing a ‘let’s terrify the populace, especially the soccer-moms’ blathering of nonsense.
I don’t mean the real food tainting recall stuff so much, but do you guys recall the Alar scare, for just one example? ‘Eat an apple and flop over dead’ sort of reporting? Meryl Streep, I think it was, hopped on board, denounced the evil apple-growers, yada yada…
Well, I grew up in the midst of small apple orchards, in rural Utarr, entirely run by small growers who had inherited the land from their grandpa and so forth, and I personally knew several families who could not sell their crop, couldn’t GIVE AWAY an apple because of the media scare, who went bankrupt, lost their land, lost everything. I remember a few of the kids leaving school. They were gonna have to go live with relatives in the big city.
It’s one thing if it’s a real menace. But it wasn’t. It turns out that you’d have to pretty much pour yourself a 20 pound bag of Alar and eat it with a spoon to experience any ill effects…well, that didn’t bring back their farms, now did it? And it didn’t help increase the health of all the kids who ate fewer fresh fruits, either.

Anyway, I don’t pay one bit of attention to any of that crap. I eat whatever I feel like eating, and taste whatever I feel like tasting, which is pretty much everything I encounter. And as a result of this wise policy IIIIIII friskily bound along like a merry billy-goat-gruff, I’m so bustin’ with health.

Cow flatulance is causing global warming.

I’m trying to do my part. By eating cows as fast as I can.

“But I’m only one mannnnnnnn……….” R.White

Cows. UMMMMMM ~

Whether or not 5% constitutes a high kill rate probably depends on whether or not you have contracted the swine flu.

One of the most interesting aspects is it affects young adults more than the elderly or young. I think this leads to a lot of hype.

It is not being called a pandemic flu by the WHO, is it? It was said that it could mutate into one. The one death in the US was a Mexican BABY.

Uh, the kill rate is approximately 100 times that of seasonal flu and it is killing people with healthy immune systems.

That’s what all the hubbub is about.

The 1918 epidemic had a similar kill rate, perhaps a bit lower.

The hope is that the strain doesn’t having the staying power to thread — but that is an unknown.

If I see one more report telling me how many people die from seasonal flu or toilet brushes or whatever, I’m going to scream.

I heard a radio interview during the night with a Medical School Professor, who thinks the hysteria is over the top. It was said, if car or stair accident deaths were announced like this “Pig Plaque” (hbb) media frenzy every 20 minutes, reality would sink in. One thing is for sure, the anti-viral drug firms (Tamiflu, etc) are doing well. I also heard the subway cars (NYC)empty at the next stop, when someone coughs.

PigPlague, the turrrrrrrists, wall st wealth evaporation (the poor banks!!!)….. all of it overstated.

The turrrrist hobgoblin pisses me off the most though.

The kill rate is spuriously elevated. If the epidemic hadn’t started in Mexico, the initial kill rate wouldn’t have been as bad. Their health care is atrocious, especially along the border (I worked in free clinics there, so I know my proof is anecdotal but I’m confident of that), and the population more vulnerable.

Finally, viruses can mutate in either direction, becoming more or less lethal over time. I suspect if anything, the latter is happening.

The problem with the this flu is it’s a new strain that most doctors and scientists know little about.

They are not sure how long this will last, if the fatality rate will grow, if it could mutate into something more dangerous or less dangerous. Right now the doctors and scientists don’t understand the virus and are learning as the flu continues.

Al…I agree…The shock values diminishes but the systemic potential is still there…

I agree. Kind of like spending the first $1 trillion. The next trillion is a lot easier.

Once you’ve run out of benefits, you’re not “unemployed” any more than if you weren’t eligible for benefits in the first place.

True, though emergency unemployment insurance can extend things quite a ways. I’ve run through the original 26 weeks of UI and am now transitioning over to “tier one” of extended benefits, I believe it’s called. So at least I’ll remain a statistic

Though, I have managed to pick up some part-time contract work, so we’ll see how that messes things up.

Depends on who’s counting. I’m pretty sure the BLS numbers (U3 being the headline one) include people whose benefits have run out.

U6 is the more inclusive report.

IIRC, those whose benefits have run out are not counted due to the simple reason that there is no longer any way to track them.

But Michelle will come after Sarah’s two terms.

Last big one was 1989…20 years and counting…

It’s been frequently said that a bubble can’t be reflated, at least not for 70-80 years until memories fade. Makes perfect sense, yet methinks we’re seeing proof to the contrary.

It seems that all the talk of the real estate market coming back is nothing more than a dead cat bounce.

Watch out for that next step Al, she’s a doosy!

Blue Skye,

I’m only running on 3 cyclinders today. What step?

Like yourself, I don’t see the Fed as being without fault, but for the “Dismantle NOW!” crowd, I can only ask, what do they suggest in it’s stead?

The Dismantlers have told us repeatedly that any regulation is bad regulation, markets can police themselves, John Galt may be fictional but he’s still a freakin’ awesome role model, and the gold standard is the road to salvation.

(Did I miss anything?)

People are far too quick to see “conspiracies” when it’s just elementary game theory in action.

You see it in telecom all the time. The players quickly realize that falling behind some proposal is in ALL their best interests. You don’t need them to get inside a room to collude - just arrive at the same cold-blooded logic.

Heck, you see it at “group events” all the time. How many times have you fallen behind a bad proposal (”let’s just stay here and chat”) just to eliminate a totally bogus proposal that you didn’t want to go to (”let’s drive 100 miles to some restaurant”,) and then rapidly changed that once the bogus proposal was taken off the table (”now that we’re all here anyway, why not all go get some drinks?”)

Was it conspiracy or blatant game-theoretic self-interest?

“You don’t need them to get inside a room to collude…”

The very first chapter of the book deals with exactly this - it provides ample proof that they *did* actually get inside a room together (on Jekyll Island of course) and collude.

You read the book - no?

Dude, I get that they were in the same room but the same stuff had been happening for the whole 18th and 19th century - did you forget that part?

Have you forgotten the failed Second Bank of the US? What do you think was happening?

Not sure what point you’re trying to make. Just because collusion exists doesn’t mean it’s omnipotent. The first and second banks (and the one before the first bank) didn’t have the power to overcome the public and political forces against them - Jackson et. al.

In the case of the Federal Reserve, the power was greater, and smarter, than past attempts. Thus it survived and thrived.

I think its safe to say I understand how the Fed works better than most, and I would like to see it dismantled.

I would prefer a non-federal system of some sort. I admit I haven’t given as much thought to what exactly in minute detail would be an ideal replacement. The reason I haven’t gone that far is it would be wasted time and effort, since no policy maker is going to be asking me my opinion about this any time soon.

But generally, given a situation in which our government/legal structure looked pretty much the same, I think it would be an improvement if the fed govt were allowed to coin money (meaning literally COIN, that is: form commonly accepted money, gold and/or silver, into coins of common and known measure). They shouldn’t be allowed to issue notes. Let states do what they want.

Hand in hand with this is the banking system should be denationalized (I think that’s sort of implied by “dismantling the Fed” but felt it should be explicitly stated). The centralization of that power is what has allowed the moneyed interests to take advantage. Again, let those battles of bank regulation be fought at state levels.

FPSS, to expand on your metaphor, if this is a bad solution, what is the totally bogus proposal we are avoiding? (or perhaps I misunderstand you as saying the current fed structure is the “bad” proposal)

What to put in the place of the Federal Reserve?

How about freedom? If you frame the discussion on a false premise that “we need someone to regulate the money supply” then you are already missing the point. If you claim there is a need for a “lender of last resort” then you are simply promoting the bailout philosophy and creating moral hazard. If you have not spent a couple of hours studying mises.org and the austrian explanation of money, credit, boom and bust then you do not have any credibility in a rational debate as you obviously have no love for knowledge and reason.

The Federal Reserve can only accomplish one thing through its government enforced powers… transfer wealth via the creation of money/credit from thin air. With this power, government spending is unrestrained, tax protests are not effective, and the people lose control over their economic freedom. The need for such a bank is carefully crafted propaganda built on top of carefully contrived crisis after contrived crisis.

“The Dismantlers have told us repeatedly that any regulation is bad regulation”

May I remind you that this country grew from a colonial backwater to a superpower with about 0.1% of the regulation that we have now. Most of the exponential growth in new regulations has taken place in the last 40 years or so (although some has its roots in the 1930s).

(And no, the growth in the 19th century was not “built on the backs of slaves”– many other countries had/still have slavery, and slavery is a net NEGATIVE for the economy, otherwise the South would have won the Civil war.)

IMO regulation should exist to the extent that fraud is throttled, and to guarantee equal opportunity w/regards to race and sex - that is it.

That being said - the fraud thing is not an easy thing. E.g. there’s a very gray line in that area with regard to making sure banks are well capitalized. On the one hand the banks need a certain amount of opaqueness to avoid runs, but on the other too much opaqueness can hid capitalization problems such that they become in essence Ponzi schemes (fraudulent; though again that’s gray). So there needs to be government oversight for that. But that’s it.

No backstops - implicit or explicit.
No encouragement or discouragement of lending to certain entities by any means.
No prevention of “innovative” financial products - as long as such products can be understood by regulators and applied correctly to capitalization requirements. If they cannot be easily and clearly calculated applied, then they should be disallowed for banks, but still allowed for other institutions, which are understood to be more risky.
And last but not least - the money supply should not be controlled by a banking entity. And lending rates should not be controlled by a single banking entity. Thus the need to delete the Federal Reserve.

“And no, the growth in the 19th century was not “built on the backs of slaves”"

But it was largely built on an abundance of untapped natural resources, not to mention continental isolation that sheilded it from the wars that crisscrossed Europe during the same time period. Pointing to relatively low regulation for the growth of the US as a superpower is a strawman arguement.

You do not need government to provide “equal opportunity” for sex/race…. if someone wants to discriminate in whom they associate with, do business with, or hire then that is their business. If there is a profit to be made hiring women or blacks that produce the same as white men, then a business will take the opportunity to MAKE A PROFIT. NO ONE has a right to a job or to be served by a business.

Regulation IMPLIES ownership and the power to REGULATE is the power to destroy. All that is needed is a system that ensures retribution in case of theft, fraud, etc. Regulation is used by big companies to put small companies out of business by “regulating bureaucracy”

Banks do not need “opaqueness to avoid runs” that is like saying a scam artist needs privacy to avoid being caught.

Regulation hinders growth and makes decisions POLITICAL instead of practical. I cannot tell you how many times regulations get in the way of SOUND engineering because they are written for “one size fits all” and thus greatly increase the cost of things and distorts the market.

“But it was largely built on an abundance of untapped natural resources, not to mention continental isolation”

If natural resources is the ticket, then Saudi Arabia should be a superpower, and Japan (which has only negative natural resources in the form of earthquakes) should not be the world’s 2d largest economy.

I will grant that continental isolation helped the growth of the U.S. But none of this addresses why we now need mountains of regulations that we got along fine without for ~180 years.

I’m certainly not arguing for regulation. If you’ve read my posts much you’ll know that I believe that if something is regulated you’ll get less of it. A fully regulated economy (Obama’s apparent goal) is a constantly shrinking economy (per capita) but with any luck it’s also an impossibility.

I disagree with your statement about SA and Japan. SA has one resource. Oil is such an important resource that SA is significantly powerful on the world stage. Without oil they would probably be about equal to Mongolia in influence. Japan is NOT a superpower and many would argue that without the USA in the role of protector and advocate (including the supply of resources) wouldn’t even be a fraction of what they are.

My original point was that the US, once established coast to coast was destined to be a world power regardless of the governmental form. The world is fortunate that the rights of the individual came to the fore instead of an oligarchy like the one we have today, or a socialist dictatorship like the one for which we are headed.

Ben,

Where I ‘am’ in alignment w/ the majority here is, I see no point in keeping migrant workers in $750k homes (they could -never- “afford” to begin with) at all costs!

Yet I don’t see any advantage whatsoever in allowing entire developments/communities slide into foreclosure? Local gov’s are strained to the breaking point already. From their perspective would they be better off collecting a -reduced- property tax, or none at all?

Are we better off w/ abandoned homes and squatters/dealers operating out of them? It’s not that I have total disregard for Contract Law, I don’t, but we’re in uncharted waters here?

‘uncharted waters’

Well, this global housing bubble will probably be the biggest finacial event of our lifetimes and possibly ripple out for decades. But I have mentioned, contract law is the product of centuries of cases, in many countries, detail by detail. Governments can do this or that, but if they try to violate it, they only make doing business in that country that much harder. Plus, the various courts will just throw it out later.

These internet people who went on and on about this stuff were just looking to get folks rilled up. It was always a joke and like I said, even if congress passed something, it wouldn’t matter in the long run. DC doesn’t make contract law.

“Are we better off w/ abandoned homes and squatters/dealers operating out of them?”

Your dichotomy is false. We would be better off if prices were allowed to adjust downwards to levels the market can bear — i.e., where housing supply and housing demand intersect. Perhaps lots of banks would fail and home builders would go bankrupt in the process, but we would not need to worry about a repeat of this housing bubble for the next hundred years.

Ben,

Fair enough. I’m sure at some point I’ve shared that I have no grounding in the law ( and for many that is probably painfully obvious ) Absent that, all any of us need know is “a deal is a deal”.

And I agree, -none- of this can help our credibility. HUD has made several announcements right on their own site explicitly warning people that NO ONE claiming they can get your principal reduced has their authority to make such a claim. They provide several examples of “knowing people in the industry” and other misleading claims. It took off just that fast!

Professor Bear,

No one celebrates irresponsible banks and builders going under more than me! If you’ll recall, just yesterday I was the only one hailing the dismantling of those desert cr@pshacks on Mish’s video special.

Point being, you’re taking unnecessary ( and unsafe ) homes out of the inventory, inviting the intersection between supply & demand. If people are employed, and willing to make ’some’ kind of payment ( for the interim ) then I say work with them!

As much as I’d ‘love’ to see the end of bubbles for the next hundred years ( we have to make it to Friday first! )

Governments can do this or that, but if they try to violate it, they only make doing business in that country that much harder. Plus, the various courts will just throw it out later. “Gold clauses” in US contracts were abrogated by the US government in the earlier 1930’s, and this was upheld by the US Supreme Court. I think that was against the Constitution, but it happened anyway.

I don’t see any advantage whatsoever in allowing entire developments/communities slide into foreclosure

The ‘advantage’ is in upholding respect for the rule of law, contracts, personal property, freedom, etc.

If people are employed, and willing to make ’some’ kind of payment ( for the interim ) then I say work with them!

Sure, but that’s a decision for the owners of the property (ie, the banks) to make, not an imposing government. When the government starts imposing things “for the greater good”, unintended consequences abound.

The cram-down enthusiasts forget about the free lunch factor too.

Banks are receiving funds from gov to play ball and adjust contracts willingly and without legal contract fights already in form of interest rate adjustments. How are cram downs any different? Different because it is a judge rather than a bank official adjusting the contract?

what if the *borrower* decided to abandon the house instead? does that relieve us of the (larger) losses? i guess not.

House prices are not included in inflation calculations, only those rent substitutes were used.

“No, you can have inflation without wage increases. Unfortunately, that causes extreme demand destruction which will cause asset prices to fall faster because you need to eat first and buy a house later.”

yes and thats really bad like a 3rd world country. I think the fear is the Treasury will use a dollar crash (inflation ?) to get out of paying back the full amount of debt they have borrowed from the world.

These are all BS. In a fiat system:

Total Money supply = Base Money + Sum total of all credit

Because nobody knows when you are plonking down money for that air-conditioner whether you are buying it out of real reserves, or credit. (You only need to separate out base money because you don’t want to double-count!)

There won’t be any wage spiral so long as jobs can be exported to Asia…

Precisely. That’s called a “budget constraint”.

I just hope Mexicans are nicer to us when we cross the Rio Grande looking for jobs than we were to them…

Bob, that’s true only if the exchange rate stays relatively fixed. our nominal wages can double if the dollar falls to half it value relative to the Yuan, Yen and Rupee. I’ve said before we certainly CAN make the dollar lose value more quickly than lead painted plastic tchochkies from China can fall apart. In a race to the bottom, we can win, I’m just not sure that we want to.

The 1970s!!!!! ???

Yep….Stagflation…

But COLAs WERE comon in the 70s. Of course pay DID lag prices, that’s what happens.

But COLAs WERE comon in the 70 ??

Good point…More unions then…Different today though…

I think after Mussolini was hung upside down from a post the trains stopped running on time.

The assets are the flip side of the credit equation. They are what are backing the assets.

In a non-gold backed currency, any asset that can be collateralized and turned into cash-flow becomes the “standard” - or to put it differently, we went from a gold standard to an “all-assets”-standard.

Hence, asset deflation IS deflation in a fiat regime.

“Hence, asset deflation IS deflation in a fiat regime.”

High-five to myself — I actually understand what you wrote

We basically have an H2/Nail Salon backed economy.

Muggy-We basically have an H2/Nail Salon backed economy. And THAT’S going to be a big problem IMHO. What can we export once people realize that we’re going to inflate our way out of this mess? ‘Cause at that point they’re not going to be interested in dollars anymore.

“or to put it differently, we went from a gold standard to an “all-assets”-standard.”

Interesting way to put it—I never thought about it quite that way. Thanks.

If I’m understanding that correctly, it strikes me as similar to combo’s main theme; even though in theory our fiat currency is not exchangable for anything “hard” (e.g. X amount of gold in a gold-standard currency), everyone still seems more than happy to accept our cash for just about anything else out there; in fact, cash has been gaining value relative to a great many things.

An “all-assets” standard: Nice.

Oh the currency IS exhangeable for anything “hard” including gold. It’s just that the government doesn’t guarantee any particular exchange rate.

Muir,

I give you credit for taking the jibing well.

Stores count it as a sale when redeemed

I apologize if you took offense but I was making a joke and shamelessly plugging a tool I have created - the HBB Joshua Tree Extension - an add-on for firefox that checks for properly closed tags.

I was not implying that you deserved the JT treatment, if that’s what you thought.

I LOVE Italics at 5:51 a.m. the following day. Yes. MMMMM. Almost as good as COWS.

Why is it a taboo?

Have you ever been to a dance where the hottest guy in the room asked the hottest gal in the room, and she turned him down? All the girls laughed, and then nobody would dance with that guy all night?

Well, the guy is the US Treasury, and the gal is the bond market, and everyone is watching. One failed auction, and there will be a huge price to pay.

They’re not THAT stupid, I assure you.

Er, used to be taboo. Nowadays it seems the dumber the idea, the more likely it is to happen.

I think we are still far from any failed auctions. This week I think the bid/cover ratio was 2-4x for the various notes. It is interesting that they let the 10 year get over 3.00% and let’s see for how long and how much other paper they bought this week. Locally 30 yr fixed rates today are at 5.00 where they have been for a few weeks even with the big 10yr move which have normally have brought it up closer to 5.25%….

Have you ever been to a dance where the hottest guy in the room asked the hottest gal in the room, and she turned him down? All the girls laughed, and then nobody would dance with that guy all night?

They’re not THAT stupid, I assure you.

Good analogy, but here’s a twist -

What used to be the “hottest guy in the room” is now the just-cut football player who’s recently developed a beer belly. So it’s natural for him to be rejected by the hot girls.

Problem is - he’s the principal’s son, and there’s no way the principal’s going to let his son get abused at the school dance. So he works a deal with a few of the girls - involving grades - to make sure that his son has someone to dance with.

Problem is that the principal has to sell his soul to the girls to get these favors. The girls who danced get their good grades, and the ones who didn’t get screwed (and not in a high school backseat kind of way).

“Why is it a taboo?”

Man, you guys just look at this from a financial perspective. From a moral perspective, it becomes obvious that money (wealth to some) can be created out of thin air.

Case 1: Bob’s a nitwit but inherits $100 mil from daddy and lives the life most could only dream of.

Case 2: Bill’s a nitwit, inherits nothing, works his arse off for bum pay and gets laid off fairly frequently. Worries about feeding his family all the time.

When Bill finds out about free money, why shouldn’t he demand as much as the equally incompetent Bob has?

It is probably the correct course for the Fed to take right now. But, jeeze, you can’t tell people you’re actually doing it. It’s a very slippery slope.

So you’re saying:

- Gifts are unfair, and should be distributed equally amongst all people.

- It’s OK to do bad things, as long as you don’t tell the general public

Sounds moral to me.

“One failed auction, and there will be a huge price to pay.”

But how can an auction ever fail with the Fed waiting in the wings as bidder of last resort?

I think that’s his point. The Fed isn’t going to allow the auction to fail.

Precisely.

The auctions won’t fail even if in the end all that is left is the Fed circulating money round and round with no outside buyers. At that point, we’ll be enjoying $10 a gallon gas and $15 loaves of bread, but the Dow will be up to 20,000 so all will be fine!

As long as you like your “heaven” wet and very grey (e.g. easy on the eyes) for roughly 9 months of the year

Luckily for me, I DO like it like that.
Sun, schmun…

See I don’t consider it crowded, expensive etc.. It’s my heaven, go play in your own heaven sand box Darrell

The question is why does NYC have 30 million people within a 25 mile radius? Must be because of NYC. Certainly not because of the weather.

Or LA: Why does LA have 10 million people within a radius of the Hollywood sign? Okay…weather. But also higher education, jobs, and so on.

And Chicago, Houston, and so on have lots of people?

On the opposite side, why does South Dakota lose people every year?

Large population centers beget creativity beget jobs beget wealth. It don’t matter about weather, although it helps. It don’t matter whether you are a Bible thumping backward thinker on Sundays or a crazed spread the wealth commie. It matters if you are part of the solution - a producer Monday through Friday.

To me, it’s never crowded where I can earn the big bucks.

This week I’ll be in Bakersfield so it should be interesting as I have some friends in farming and dairy.

Tell us all!

Oh, yar, what woods did you grow up in, Bluey?
I growed up in the Utarr red rocks wasteland.

And I’ll just go ahead and jog (ok, run) back to the house.

Hahahaha! Or else even, just perhaps, a wild sprint back to the house, arms flailing and gravel churned up behind you like an atom smasher?
No, no! It’s okay! We understand, and we still like you. It was a very manly wild sprint.

I wouldn’t want her thinking I was skeered. She might stop getting me beer.

Goshamighty, no! The horror….

Arkansas woods.

If I stayed home we would probably work all day (which is what we did most days). If we went out in the woods we would be left alone. Might find a nice clean stream of water for a drink and eat some berries if they happened to be in season.

I could start a fire with only things found in the woods. That came in handy for when I accidently got all wet and had to dry my clothes.

Oly, how do you do that? Will you teach me?

You Betulaceae!! (Hahahaah! That’s a tree joke, there. Family of birches. My sister Rachel came up with it. She got her degree studyin’ trees.)

You just scoot on out here for a course in ‘Navigating the Night-Time Forest: 101′, and afore you know it you’ll be skipping and slithering through the dark woods easy as the shadow of a pie. Then you’ll never want to come out again. In fact, you won’t ever come out again, except briefly, in order to earn money so you can buy beer and pay your internet service provider.

Here, give me a minute, I’ll write you up a precis…

Well, Oly, the Utah Bigfoot’s different, as I’m sure you know, being from here. These guys are very well schooled. I even saw one wearing a t-shirt once:

“Jack Mormon Seminary School”

but I think that might be redundant…seminary school…so they ain’t THAT smart…

How has banana overstepped his bounds dude. Please explain. Or did he overstep your bounds?

If he really thinks that Obama is everywhere like the Holy Spirit then I’m inclined to believe he’s over stepped the bounds of sanity.

If you are inclined to agree with bananas in this respect then I question yours as well.

What is he, Saint Barry?

BTW, mine was an attempt at humor based on the EVERYWHERE comment.

How has banana overstepped his bounds dude

Dude is a Mormon, SanFran. I betcha he contains the same righteous blood-strain that caused all MY ancestors to walk the hard plains to a parched desert-land and then get all sunburned and sing in little grey wood churches die and starve and other such unrewarding-like business.

*waves tired hand at the hovering omnipresence and general starving and praying-ness that comes with it *

And, dude knows Losty was raised in Mormon territory, so possibly he was talking about the Holey Ghost, or one a’ them other omnipresent presences that allllllll Mormons and/or Mormon associates must perforce contend with.
(Is how I interpret this, but dude, you can tell me if I’m wrong here, as I’ll gladly admit it.)

But moving on! My point is, let us be gentle with dude, SanFran. Because weeeeee don’t live there! You and me get to live in ‘Heaven’.

Holey Ghost…

:)

OG, your post must have been written before mine came through, or maybe I wasn’t clear. Let me know which.

“A” should have been “and”

I’ve been well, thanks. How about you?

I thought maybe that was meant to read “I feel really icky for weeks” and I was ready to send in the Marines. Whew. Glad you’re OK. And your English is OK, too.

You know, sometimes this blog is just too much fun for as serious as it is. Thanks, Ben.

(chuckle)