The Housing Bubble

They also teach committing suicide is always a better alternative to apologizing. Quite a few people do that each year…

Of course! Government programs are in place to protect the little guy in all phases of life.

Especially investing.

Rule No. 1 of stock market valuations in the current policy regime:

The stock market must never, ever be allowed to fully price in fundamental economic reality.

PB, since you have many posts today NOT addressing the housing issue directly, I’ve decided that top-of-the-thread is my best target location to post something addressing a previous discrepancy we have discussed about housing statistics.

A few days ago, John Mauldin’s newsletter mentioned the “2 million” vacant homes in the US. I remembered your assertion that it’s 19 million, and I googled around to find a “19 million” reference. I found one on Bloomberg from February 09, and send it to John Mauldin. He answered me personally today, saying that he is 99% sure of his “2 million” source, and that he thinks anything else is a typo.

Seems to me you had a govt source at some point, but I can’t find or remember it.

This order-of-magnitude disagreement does seem worth resolving.

Good luck az lender. Would love to see some data to pull the smirk off some folks faces (mauldin)

Table 3. Estimates of the Total Housing Inventory for the United States:

Second Quarter 2008 and 2009
(Estimates are in thousands and may not add to total, due to rounding)

All housing units 129,871 130,828

Occupied 111,228 112,119
- Owner 75,715 75,607
- Renter 35,513 36,512

Vacant 18,643 18,709
…

Details are given in the linked report, but I hope Mauldin agrees that 18,709 rounds to 19 million?

And how about all the recently-built, never occupied tract homes dotting the landscape: Are they counted in “total housing units” as “Rental” or “Homeowner” vacancies, or neither?

Regarding the data I just posted: Definitional details aside, assuming the 19 million vacant housing unit count is reasonably accurate (and I have no reason to suspect otherwise), that suggests an awful lot of surplus housing capacity in the USA.

Az,

From what I have been able to gleen off calculated risk. The 20M number included all sorts of shelter, condos, SFR and second homes. May or may not be on the market. Might include hotel rooms.

The 2M number includes just SFR/condos. There are always a substantial number of vacant homes on the market for a variety of reasons. Second homes and owners passing away are the normal reasons.

The number of excess homes was near 700K last I remember checking back in 08. There is a rate of household formation number that was something like 600K per year and had dropped substantially for some reason; and a build rate that had dropped to 350K per year, a multiyear low.

Anyhow, lots of numbers in flux about that. There wasn’t any typo. Those are just numbers from different reports that need to be interpreted in different ways.

Works out to around 1yr of standing inventory. That is a very high number from most historical references.

Believe the household formation rate was dropping. Always happens in a recession as people put off getting married. Also figure the demographics indicate an decline in population. So, less houses needed.

Plenty of rumor and inuendo that a larger number of REO are sitting in the dark. We all know its true but the banks keep walking around the elephant.

“Plenty of rumor and inuendo that a larger number of REO are sitting in the dark. We all know its true but the banks keep walking around the elephant.”

Good comments, James.

Do you have any idea about where all the future REO inventory
(e.g. supposedly owner-occupied housing where the owner is more than three months behind on their mortgage payments and the bank has not yet issued a NOD) enters the Census Bureau report? I am guessing it is still classified as owned and non-vacant, until its status formally changes?

Obviously the real estate market is in transition; thus many homes may be in a status which is hard to classify by traditional steady-state-oriented measures.

PB, I have seen empty, deserted, decrepit homes all over the place with no foreclosure type of signs. No 4sale signs either.

Ghost inventory.

“…empty, deserted, decrepit homes all over the place with no foreclosure type of signs. No 4sale signs either…”

This is the kind of housing which makes me wonder about how the Census Bureau classification system works. Would empty, deserted, decrepit homes even make it into the classification, or would they be ignored?

PB,

Yeah, the houses don’t show up on the census report till they are REO. Also as has been discussed. Lots of houses sitting with people X months behind. Banks are overwhelmed in some cases and in other cases are negligent in acting as servicers of the loans. In other cases its the finding the clear title. There tends to be a significant lag to government reporting.

Its a gosh darn mess and as you can see, we are all going to rue this mightly before it ends.

I have no idea what to do at this point. Investment-wise what are you supposed to do? Are you buying a Lehman or are you buying a GS? Do you get bailed out with your bonds this wekk or maybe not? Will their be another stimulis and tarp 3? How much will they dilute the dollar? Makes treasuries, even indexed ones dangerous. Especially when they are marked to a metric the government controls, like CPI. People talk about these treasuries but what happens if deflation accelerates and rates go up? Its entirely possible that it might be a fight to get deposits all while deflation rages, driving rates up.

Will you get whipped out by a GM bailout as a bond holder? We are in a brave new world.

Some further info -

That home vacancy rate of 18M+, while it does include “miscellaneous” residences (apartments and such), is still quite abnormally high, and thus will continue to put downwards pressure both on purchase prices and rental prices. As points of reference:

2009: 18.7M
2005: 15.5M
2000: 14.0M
1990: 12.0M
1980: 8.0M

Here is a graph graph indicating the rate over time, as a percentage of all homes. In general - we’re looking at about 4 million more vacancies (best case IMO) than what would be normal, at least per official census data.

We’ve seen the 2M vacancy number thrown around a lot recently, but I’m pretty sure that only includes homes that are for sale or rent, including the 800k REO inventory; it may include the homebuilders’ backlogs - still high(e.g. there are TOL townhomes down the street from me that are still empty after 4 years), though I’m quite sure it doesn’t include the 1 million home backlog of seriously-delinquent homes - people that are just living mortgage-free biding their time until the bank gets around to kicking them out.

Thanks PB for the reference, and thanks everybody else for your comments on this subject.

I just sent the census document to John Mauldin, I’ll see if he replies this time.

desertdweller, I don’t think of wanting to wipe the smirk off of John Mauldin’s face, because about 85% of what he writes is in perfect accord with the general HBB attitude.

Yes, I was kind of being facetious! I read him too.

Packman,

Dude! You keep outdoing yourself with the revelatory graphs!!

The home vacancy rate time series is very illuminating. Of particular interest is the way it trends steadily upwards through the parabolic phase of the housing bubble (circa 1997-2005), suggesting that even as investors were snapping up second, third, fourth, fifth or more homes, the still-more-frenetic rate of new home construction continually outpaced the real estate investment craze.

And then the Credit Crunch hit…

Long live the Rentership Society!

Foreclosure-fueled decline in home ownership rate may be lasting trend

Number of renters may rise to levels last seen in 1970s or ’80s

By Dan Voorhis McClatchy/Tribune news

August 18, 2009

Home ownership is on the decline nationally after rising to record levels in 2005, as the epidemic of foreclosures continues.

The rate of home ownership peaked at 69 percent and fell to 67.4 percent in the second quarter of this year. That may seem a slight difference, but every percentage point equals roughly 1 million people.

Those who lose their homes through foreclosure often become renters, although many will move in with friends or relatives.

Some experts say the trend isn’t temporary. The collapse of the housing bubble and the disappearance of easy credit coincides with demographic changes that will drive down the rate of home ownership, and drive up the number of renters, to levels last seen in the 1970s or ’80s.

Long term, they say, landlords will be the beneficiaries as home-ownership rates return to the levels of 20 and 30 years ago.

In a study, University of Utah professor Arthur Nelson estimated that home ownership will decline over the next two decades to perhaps 64 percent, about where it was in 1990, or lower, but not below 60 percent.
…

Dude! You keep outdoing yourself with the revelatory graphs!!

The home vacancy rate time series is very illuminating. Of particular interest is the way it trends steadily upwards through the parabolic phase of the housing bubble (circa 1997-2005), suggesting that even as investors were snapping up second, third, fourth, fifth or more homes, the still-more-frenetic rate of new home construction continually outpaced the real estate investment craze.

Thanks.

And yeah - I noticed that as well.

The amazing thing is - that pace of homebuilding actually wasn’t the fastest pace in history - the early 1970’s was.

http://research.stlouisfed.org/fred2/series/HOUST

Key thing there though is that pace was only maintained for about 2-3 years, and had huge dips only 4 years part. The trough-to-peak on this latest was 15 years!

(I can’t take credit for *that* graph)

Apparently Goldman decided today was a good time for a little blood letting?

Too Late.

“Skynet began to learn at a geometric rate. It became self-aware on August 29, 1997″

scdave,

And ‘that’ is about what I’m willing to pay! I’ve been looking in Southern OR every weekend I go down for the Guard. In order to ‘do’ the things I -want- to ‘do’, I’ll basically have to have it given to me?

For any kind of “off-grid” application and a strawbale home, I’m willing to go about a grand an acre, I’ll give you 10% down and you can take payments. Other than that, I’ll be playing the Geisha Girl machine down at the casino.

It costs quite a bit of money to prepare a lot for building.

“It costs quite a bit of money to prepare a lot for building.”

Yes, it sure does. That’s why raw land prices in WA and OR are absolutely hysterical. Who’s got $200,000 to spend on a few acres just for the ‘opportunity’ to sink a bunch more money into the parcel to build a house? Very, very few people, that’s for sure. When you consider how many can truly afford it, then factor in the number of those who would actually want to, there is little to no demand for all of this high priced land. The builders drove it up, and then disappeared. The ‘great land price crash’ coming soon.

Skip,

Right, as one of the younger guys in my squadron is finding out. To his credit, he put 1/3rd down, but now he’s finding himself strapped to be able to follow through?

Still ( and I think *Rancher would verify ) land in Southern… OR is very cheap. Just got off the phone w/ a gal that has 1 ( seemingly ) nice acre for $12,000. Power at the street, septic approved.

No doubt there’s costs. But when I look at lots up in the Salem, OR area, the 12k wouldn’t even cover the SDC fees. So, for a vacation home, it’s a more tolerable starting point.

Land in southern OR is NOT cheap as compared to it’s historical prices. I don’t know which area you’re talking about, DinOR, but I remember you talking about Klamath Falls. $12,000 for an acre in Klamath Falls is absurd.

GrizzlyBear,

Oh agreed, and actually when the gal sent me the listing it was $8k. At ‘that’ she said the owners had since moved to HI and never built nor ‘do’ they have designs -to- build on it!

Translation? ( Make us an offer )

So I hear you. Again my design was to basically get the land for next to free, as others have noted, it’s -after- acquisition where the real expense starts to come in.

But please remember, I’ve spent the last decade or so watching people impale themselves on mortgages for 2nd homes that are bigger than my PR payment.

Well, right now they’re buying pre-stripped ‘finished lots’ from the banks. I can’t imagine them needing MORE finished lots as time goes forward.

I am writing a letter to a development firm tonight about their manufacturered Craftsmans Bungalow (circa 1908-1930) porch homes, that they build for lower income areas. My idea was to have them build us one by light rail, and our home could be their entry into the TOD (transit oriented development) arena, which is perfect, since their target market is low income folks who are responsible.

They bought two lots in Santa Ana for $1, with a partnership with the city, and the homes are going into a raffle for a price tage of $150K.

One of the owners was the CEO/Founder of a cabinet and other modular products in home big box stores.

Craftsman homes were Sears kits, so a manufactured home is nothing new.
The architectural beauty of a gone by era, yet the structual integrity of the 21st century, at a reasonable cost. The cost of the land is the key.

What do I have to lose. Any feedback would be appreciated.

We’re not thinking a low income area, but a redevelopment area with a middle class, so the deal is a win/win for all. One-story Craftsman style. No financing needed. Have a lost it?

Are you saying there’s a company that makes these bungalows now? Who? And the price? Or are you saying you want an old one dismantled and shipped to you? I’m not clear on what your question is.

alpha-sloth
There are a few firms who make (new) manufactured homes. They ship the “kits” to the lots, and they go up in 30+ days, after the foundation sets. They are beautiful, but I haven’t researched owner satisfaction yet. I’m toying with the idea and my approach.

After owning a 4,000 sq ft McMansion that was a pos, we’re weighing our options. I like the older homes on some tree lined property. Just buying the dwelling is history for us. The homes are something like $60K-$85K from the mfg and they look like any other home, but with a welcoming 1930’s porch.

The homes in areas we like are in the $2M range here in So Ca. I’m willing to take a walk on the wild side. No one will know but the city, builder, and us.

Wipeout.
The cost of the land is negligible compared to the overall project. Fees, permits, licenses, engineering specs, geology and hydrology reports, EI reports, grading, access, utility easements, infrastructure, foundation….

If the site is already developed, permitted and ready to build with approved plans, then yeah, maybe go for it. If not, be sure to research VERY carefully before you buy raw land. Then there are zoning issues, finding reliable labor to help build the thing, and the potential of ending up with neighbors living in cab-over campers with mongrel dog collections that bark day and night, etc.

But I love the porch thing. I built my place as basically one giant porch surrounding a huge kitchen.

Awaiting wipeout, this sounds great to me too. Keep us (me) informed as to what you find out.
Ahansen makes good point, check and double check, then check again, just to make sure.

Nice house ahansen, “one giant porch surrounding a huge kitchen.” !

ahansen - How is the bear problem this year with the low rainfall continuing? You should go to the ‘Rondevous’ in Sept held by the Southern Sierra Flyfishers north of Kernville.

$150K house for low income? Huh? Am I missing something here? (That’s only affordable for someone making 40K+. That ain’t “low income”)

ahansen & desertdweller-
Here’s the beauty of dealing with some of the redevelopment builders who manufacture 1930 style housing. They basically deal with the city in areas that they want to keep the architectual integrity but need to replace the dwellings. They buy the land with the infustructure in place, usually at a deep discount. They build the house. I buy a move in ready home. Since we want to be near light rail, I need to sturcture the deal a certain way to get them on board. I’m working on it, interviewing the right people. I need to hit them with my best shot, to make it a win/win. My family is in commerical, all Lawyers. (don’t hold that against me.)

I love porches. I love the simplicity of the Craftsman style. Building on raw land is too involved at this time in our lives. I just want to move in and play my piano. I’m getting old.

I love that stuff too and am really interested in the outcome of what you are going to find out.

I own a 1918 Craftsman and love it. My 2×4s measure 2×4, I doubt that’s part of the new kits.

Wait a while. While the price declines have paused this summer, they will continue down this winter, and resale prices will eventually go below new-home prices.

This is an inevitable consequence of overbuild. While NoVA isn’t as bad as FL, CA, NV, it’s still bad in some areas (Manassas, etc.)

Ok Packman - I’ll wait till this winter

Can I get another 15-20% off in LoCo PLEASE ??!!!!

You might, but not sure you’ll get that. Prices were already down 40% or so (from MRIS median data), but are experiencing a pretty good-sized bounce right now. While I think there is another leg down coming, I think in general prices won’t drop as far here relative to pre-bubble levels as they will in most areas - mainly just because of the huge ramp-up in Federal government spending, which is most concentrated in this area.

It depends a lot on future military spending. If we eventually wind down in Afghanistan and nothing else comes up, and we cut back on military spending, then this area will stagnate a lot. However as it is now, the area is still growing a lot relative to everywhere else in the country. Unemployment in Loudoun, while rising like everyone else, is still only 5.0%.

Also they’re putting in a DC metro line all the way out to Ashburn now, which will make the area more attractive as well, long-term.

(I live in LoCo, BTW)

Oh Ok, what I’ve been watching in LoCO hasn’t dropped 40%

Maybe at the low end.

Most re-Sale Clowns for sale now in the 6-800K range are still looking for 2004 prices………..

You can do a new build (Brookfield @ Goose Creek, NV Homes @ Long Acres) starting in the 500’s on 1-3 LoCO acres !!

Funny - I’ve driven through that Brookfield area, and can see it from my house actually, more or less.

FWIW zillow has Loudoun values down 35%, so not quite as much as the median. At any rate - yeah prices are mostly still in the 2003-2004 range. Part of the reason is that inventory actually has come down quite a bit, e.g. see recharts. This is quite different than most other areas that had a big bubble - which again I think is explained by the fact that so much of this area is fed by government money. And that of course hasn’t so much been hurt by the economy.

LOL

Who did you vote for?

I voted for the alternative and against the neocon forced dogma that we had for 8 years

I think we are a lot further down the rabbit hole right now, than, we want to believe. All that 5 stage poop singin’ along…

Animal channel had a critter in the warren and the snake was coming down, fast.
No where to go, but the digestive tract. Can you get di a reah from stress on HBB?

LOL DINOR!!!

I twisted my ankle on these monstrous rocks here…Think it will be good for about 20% disability?

I wonder if I can buy a supplement to tricare just in case I dont want to sit in line at the VA?

Stpn2me,

Right, be safe out there! Yeah, my wife’s employer’s “plan” always sucked not quite enough to chuck it altogether and just get a catasrophic plan?

Well, that’s not true. It used to be great. We paid $5 co-pays and that was about it. Then in each passing year it got more diluted. In fact, now, to such a point, it’s like having no help at all?

A minor surgery left us w/ over $3,000 in unpaid expenses. Well, when it comes to debacles like ‘that’ I can screw up all on my own. I don’t need any ‘help’ to create a mess like that?

What line at the VA. I’ve been using the VA now for over a year. No line, great care, good people.

SFBAGal,

Oh, well that doesn’t sound too bad at all? For ‘me’ everything would be “up in Portland” and I’ve been there several times for my hearing.

It’s… basically an all-day-affair. At least an hour drive there and God knows how long back. Parking sucks and ‘we’ always seem to have a line. Even if you have an appt. there’s no assurance they’ll get to you as advertised. If I was retired, who’d care? IMHO.

My intern doctor daughter does some of her rotations at the VA hospital in Baltimore. She likes it there as it is a good facilit y and not as hectic as the main hospital in Baltimore

I don’t give a rats @ss about “poll numbers”.

Good plan. Most people would never follow it, because saving for a rainy day cuts into current consumption spending.

PB I have a friend that always quotes Scarlett when faced with a decision like that -”I can’t think about that right now. If I do, I’ll go crazy. I’ll think about that tomorrow.“

Tomorrow is another day.

A lot of people CAN’T save for a rainy because they flat out don’t make enough money and haven’t for decades.

ecofeco, why do you think that is? Do you think it is because those people made wrong choices? If they were not wrong, is it all a matter of luck for the people who did save up for a rainy day? How about those people who busted their azzes, decided to live cheaply and spend years building such savings? Luck? How about “using their own noggins?”

I claim the people who “don’t make money and haven’t for decades” were mostly too lazy to make the right choices and are entirely responsible for their lot. The exceptions are the uncommon cases of people with severe decades-long illnesses or disabilities who have incredible hurdles to climb. “Uncommon” is the key word.

My father became blind as a result of serving in WWII. A jeep he was in hit a mine. Rather than sit and whine, he started his own businesses. Did not become rich, but he could teach a lot of people about perseverence. That is why I have no respect for able bodied beggars or druggies.

Some people make mistakes, some don’t and the rest of us have either good, bad or indifferent luck.

Some try and some don’t, but trying is no guarantee of success.

But regarding my statement, J6P has been steadily losing ground over the last 30 years through the systematic destruction of jobs, wages, benefits, rights and inflation.

You can persevere all you want, but only a fool sails against the tides.

Billla, not everything is b/w,how can you tell if someone is really an able bodied beggar or druggie?
Just curious. I don’t disagree but I also know I can’t tell, which irks me, but again, not b/w. Glad your dad made it. He must have been a terrific guy.
Life can throw a grenade in someones well executed plans and savings. Life example here.

joey,

I’ve tried… to get people to even consider that for years. Head, meet wall.

Where the difficulty comes in is that the REIC prefers all consumption be “housing ATM-related”. ( That way they get a cut each and every time you go on a spending spree )

Having disposable income every payday and income ‘not’ dedicated to servicing real estate related debt just doesn’t work for them! O.K…?

As a longer term investor, I discount the idea that a few months of pulling back is really indicative of a long term trend toward financial responsibility for most Americans.

I’d love to think it is so, but I find it a little hard to believe.

Fed model of consumption:

IMHO, increased consumer lending before the labor market recovery puts the cart before the horse.

Battered consumers still need Fed support
Mon Aug 17, 2009 1:15pm EDT
By John Parry

NEW YORK (Reuters) - Consumers, the cornerstone of U.S. economic activity, are still in disarray, data and central bank measures signaled on Monday, as households struggle amid the worst recession since the Great Depression.

The U.S. Federal Reserve announced the extension of programs to boost consumer lending, while credit-card issuers showed that people are increasingly having trouble paying their bills.

Manufacturing appears to be finding a floor, but without a pronounced recovery of consumer spending, any economic recovery is likely to be feeble, since consumers fuel about 70 percent of U.S. economic activity.

The Fed’s measures suggest that while the central bank’s emergency stopgaps for many parts of credit markets seem to be working, there is still much work to be done in revitalizing lending to consumers for everything from houses to cars, analysts said.

“It is rather like triage,” said Jay Mueller, senior portfolio manager with Wells Capital Management in Milwaukee, Wisconsin. “Several of the markets that were in trouble are functioning much better. The Fed is putting resources where they are most needed,” he said.
…

Polly…i dunno

People who’ve done it know that saving money feels good. It’s surprisingly easy to do. The little money one saves is not missed. It’s not long before you have to find a larger container to store your savings. Saving can quickly become a habit.

A person realizes the saved, reserved money is more precious and useful than it’s numerical value indicates.
String is cheap, but when woven into a safety net it becomes very valuable. It’s no easy decision to chop up the safety net because you want a piece of string. Similarly, spending hard-won savings is not easy.

Since people will be somewhat insecure as the economy sits in the doldrums for perhaps a decade, I think saving might become a trend despite all the forces currently rallied against it.

Those of us who grew up saving money in the 50’s and 60’s saw it all evaporate in the inflation of the post-Vietnam 70’s. Those who had already bought houses were relatively safe, but most of us were still too young to have done so.

I think a good number of boomers learned a lesson from this and perhaps subconsciously (or consciously,) reoriented their spending accordingly. Unfortunately, the generation that followed lacked the perspective of such loss– and simply spent. Then we all forgot….

“Is it the assumption that if a person has money saved, they will spend more tomorrow than they would without the savings?”

In fact, this is one of the core assumptions of the standard model of savings and consumption that all economists pretty much take as a matter of faith.

Does this assumption seem really outlandish to you? If so, think of the richest person you can imagine. Let’s use Warren Buffett for an example.

Now suppose that Warren suddenly was overtaken by a wild urge to gamble, and he went to Las Vegas. He plays poker until all of his $50 billion in assets is gambled away, and his net worth drops down to $0.

Do you think he might spend money tomorrow than he would have without this gambling binge?

I know this example is extreme and counter-factual, but some times extreme examples can help to clear up the obvious.

I tend to find things that are incredibly obviously correct are often completely wrong. Of course, that may just be me.

I would only suggest that looking over my lifetime that the availability of credit appears to have a greater on consumption than savings in the bank. Though I certainly wouldn’t question our economists and their models.

“…the availability of credit appears to have a greater (effect) on consumption than savings in the bank.”

In the short run, yes. In the long run, people (and countries) who spend all their wealth on stuff they cannot afford end up broke, and after that point, consumption definitely drops.

“Though I certainly wouldn’t question our economists and their models.”

Models that are not initially subjected to scrutiny often times eventually prove wrong, once they are finally scrutinized.

Why would this be better for tomorrow’s economic picture? Is it the assumption that if a person has money saved, they will spend more tomorrow than they would without the savings?

Somehow in the discussion of “more” vs. “less” consumption the correct answer of good consumption gets lost.

1997-2006 we definitely had “more” consumption, in the form of houses - lots and lots and lots of houses. However this “more” was also bad, in that people were - quite simply - buying thing they:
A. Didn’t so much need, and
B. Required extra future resources to maintain.

And now what’s happening? Many of those houses are being torn down or certainly will be in the near future. A complete waste of resources - manpower, land, energy, etc.

What we need isn’t “more” consumption - what we need is good consumption. This would be things that more directly promote greater future wealth and standard of living, in an effective and efficient manner. This would be things like production-related consumption (e.g. investment in innovative business), infrastructure (e.g. broadband/internet, energy efficiency, etc.), education, and so on. It’s basic $25k sedans instead of $50-100k sports cars. Generally these are things that don’t come from your GAP store at the mall, from the movie theater, and from vacations in Bali. And it’s not in the form of trashing useful cars either.

Generally people that save more money are also more likely to spend it later on good consumption, rather than bad. People seem to like to go deep into debt for luxuries, not necessities. Don’t get me wrong - luxuries are great and I have no problem with them, but they should only ever be paid for with savings, not debt.

Even debt itself is wasteful - just think about how much of our GDP now is actually in the financial industry vs. years past - just notice the plethora of banks, both in the form of branches on every corner and in downtown high-rises; all paid for by debt interest. Think about how many resources went into all that, that could have otherwise gone into more useful things.

I am reminded of the anecdotal story of the freeway restaurant owner who’s son comes to her one day and tells her he has heard there is big recession coming and they should save money. She is afraid and takes down the freeway sign. Shortly thereafter business slows to a crawl. She tells her son it is a good thing they took the sign down when they did as it would be much too expensive without any customers.

Very good example of flawed logic. That example is based on the premise that during a recession people will cease to eat unless they are convinced otherwise - obviously that is incorrect.

That being the case, though the one (foolish) restaurant owner will suffer - others in the area will gain by the one’s stupidity, in that their business will increase. So the net is no change in the overall economy.

How about Keynes paradox of thrift to explain the issues involved?

http://en.wikipedia.org/wiki/Paradox_of_thrift

Joey, success will come, but on a much longer time frame than the stock market is prepared to accept.

The stock market wants wealth without work. The stock market is a small child with a short attention span. It doesn’t want to hear reason and logic, it just sees what it wants and say “Gimme!!” There is a place in the economy for investing and price discovery for investments, but today’s markets aren’t interested in anything to do with fundamentals.

How about Keynes paradox of thrift to explain the issues involved?

http://en.wikipedia.org/wiki/Paradox_of_thrift

That “paradox of thrift” is probably the single greatest harmful fallacy ever. Keynes was a fool, but his ideas are bandied about because they are very profitable to the PTB.

The paradox states that if everyone tries to save more money during times of recession, then aggregate demand will fall and will in turn lower total savings in the population because of the decrease in consumption and economic growth.

well, i read that about 5 times and it still makes no sense..

Lets reverse it. Assume nobody saves any money. Now what?

Well, if nobody saved money, nobody could afford to start a business. No bank could loan (saved) money to someone so they could start a business. Of course, there would be no bank in the first place..

If a business did somehow spring from the primeval ferment without any start-up money, who could buy it’s products if they already spent all their money on crack?

That alone shows that saving money is the lifeblood of business and industry, on both the production and consumption sides..

My conclusion is Keynes mighta been a drinkin’ man.. nothing serious… just the occasional binge.

joeyinCalif,

How’s the old noggin’ feeling? A little sore I’m sure.

Again, if we have ( in some of the fraudulent cases ) EIGHTY PERCENT of your pre-tax income going into a house payment, how can possibly… have any “disposable” income?!? Like, these people are kidding right?

As we fumble to find our balance, Americans will find that they have just as much income to fritter away as -ever- they did only now it happens on a payday-to-payday basis. Rather than a REIC-fueled, appreciation dependent Housing ATM Spending Orgy that needs to be paid BACK btw.

I think people are getting it. We just can’t get anyone ‘here’ to see that?

“My conclusion is Keynes mighta been a drinkin’ man.. nothing serious… just the occasional binge.”

Agreed. And further, I strongly suspect he advocated and utilized hair-of-the-dog hangover cures.

Gee and all this time I thought he only suffered from short term thinking.

But then in the long term we’re all dead.

I’m an Austrian fan but if Joey wanted an explnation for why people weren’t rejoincing it might be because they’re Keynesians.

Most people may be Keynesians.
If they could only find some way to convince economies to follow Keynes’ precepts, the circle would close.. and all would be well.

Thinking about the paradox. Its true that if we cut consumption and save that economic output falls.

Is this necessarily a bad thing for us on a personal level?

Imagine living a lit bit simpler of a life, with a smaller older car, in a modest house and wearing clothing with an occasional patch on it. That would be a big change in consumption for most of us.

How about cutting back on the red meat intake and going out to eat less. Probably means your eating less unhealthy food.

How about going to the library instead of the movies?

What about instead of taking an indulgent Disney cruise to the Bahamma’s you take a camping/hike trip in the Appalachians with family?

It might crater the GDP but I’m not sure our lives got significantly worse.

Seriously. Go from a 5/4 house to a 3/2 house, a Expedition to a Camry and skip a vacation. That drops your consumption by probably around 40%.

Just shows the metrics are not all that indicative of how are lives are going.

The other paradox is that while GDP is dropping, all of those measures are vunerable to inflation and deflation. So, your GDP might have gone down a lot but standard of living might not have changed by nearly as much.

Enjoy.

The benefits of having extra money are commonly underrated.

Not only does that reserve money provide psychological comfort and reduce mental stress, it’s there to smooth over the inevitable dips and setbacks in everyday life, allowing an uninterrupted stream of life’s necessities.
If of adequate amount, the money allows one to be unaffected by the goings on in the overall economy, and generally offers independence and widens a person’s freedoms.

And, since it takes money to make money, some part of one’s savings can be put to work and add to a person’s productivity, 24/7.. while you are busy doing other things.
It might even be said that a healthy savings account offers as much benefit as does good physical health.

An entire population blessed with some extra amount of personal wealth cannot be a bad thing under any circumstances.
—–
While the idea that we should save some money comes easily and naturally, that we might somehow benefit more by spending every penny requires convoluted logic and intellectual dishonesty, imo.

High speed electric rails from CA to Las Vegas is a public work that increases economic efficiency? Really?

How?

I’d like to see a highly redundant North American power grid that can feed renewable power into the system where ever it is best to make it. Even up the odds against solid and liquid fuels that already have a transportation network to get them from where they are mined/drilled/whatever to where they are used.

Polly,

If you improve the ability to transport goods in a lower cost way, then you get some enhancement in efficiency.

Economic cost of moving goods goes down so cost of goods goes down exc.

Like how computers have made publishing information cheaper than newspaper distribution.

High speed rail to vegas results in lower oil use by all the suckers going to vegas and results in less automobile wear. I think on a $/mile metric the electric trains are a lot cheaper. So, yeah, its a increase in efficiency/capacity that might result in a very slight benifit to the economy. Reduced traffic on LA freeways would also help business that have to pay truckers. Less polution also would result in long term lower healthcare expenditures.

Anyhow. Not a great plan but a plan. Also would blow some dollars on desalination plants in OC/LA. Like to increase the amount of water supply available to buffer against droughts.

We could also support a massive offshore wind generation station here. Believe out past Catalina island the strong winds could be harnessed to give us cost competative green power.

I’ve got ideas. Probably all bad, but I keep chucking them out there. Hopefully a good one just happens to take hold.

My other idea is a long term policy that encourages concentration. That would long term cut consumption and increase efficiency. Plus restore some natural areas.

Back to name calling with Alpo.

NS. I don’t get the ‘high speed rail’ people. It’s not like we’re having trouble getting from SF to LA or the inverse. where’s the need?

Long distance high speed rail is kinda stupid, especially to relatively economically worthless tourist traps like Las Vegas.

If long distance rail is a good idea, then N/S down the west coast, east coast, and maybe Austin to Chicago would make way more sense.

I’d just assume you’ve never been stuck in traffic from here to Vegas on most any weekend or weekday to the IE. Traffic is a mess and there is an associated cost.

Expanding the freeways is one answer.

Providing alternate routes is another.

Like I said. Not a great plan.

looks like duck… quacks like a duck..

Even if I could profit from being a landlord, I have always been disgusted with renters who trash the owner’s place. I cannot stand to see it happen to landlords, let alone, myself.

Contract law and property rights are high up on my value chain. Obviously, higher than those landlords who continue to be landlords, despite people insulting them by trashing their places.

He wants to use federal stimulus money to build subsidized rental units: low-rise apartment buildings and town homes. He also wants your tax dollars to fund the purchasing of foreclosed homes so they can be refurbished and then rented to poor people at “affordable” rates.

This is actually a Ronald Reagan idea from the 80’s. Unfortunately, the plan was strife with mismanagement, waste, fraud and theft. I think the overall idea was to move people out of the projects and break the cycle. For the most part I think it was very profitable for the landlords/property owners/construction companies.

Sometimes what is old is new again.

joey: Is it a geo-duck, by chance?

Skip
2009-08-17 09:05:26

Sometimes what is old is new again.

Again, What is New was from before. Fashion, design, gov ideas and programs. Reagan had some real lulus

I thought we had gone beyond that point Stpn.

Figured by now black people were buying up trailers in the country too.

Soon, hopefully, black people will learn to love meth too.

Hi Stpn!

A couple weeks ago a friend and I got some stuff together to put into a box for the FOB in Afgh. We know about the heat, so we settled for M&M’s, Reese’s Pieces, and Tootise Rolls. Hope they don’t melt. And some iced tea singles.

I don’t see anything wrong with an acre and a trailer. You could live decently in peace and quiet, grow your own stuff, drive the old truck to Wal*Mart every two weeks for supplies. But it is isolating.

And some iced tea singles.

Kool aide man, KOOLAIDE!!! Tea is ok too..I guess

I don’t see anything wrong with an acre and a trailer.

I dont either. At least the trailer can be paid off with welfare and get the person off the program. You cant pay off a project apt. I was just commenting on the differences between blacks and whites on welfare or the govt dole. Alot of people quote that “more whites are on welfare than blacks”. I dont see that many whites in the projects. Like I said, most poor whites will live in the country while blacks cluster together for ghetto games. I have lived near many a project and I am just commenting on what I have seen in my short life time…

Yeah…. And I’m a belly dancer.

The Koolaide packets in the supermarket don’t have any sweetener in them, Step’n.

Is it possible that the Koolaide singles you guys get are made specifically for the military? ‘Cause I just don’t see them in the regular market.

Before you all holler “racists”, I am black, I am only telling the truth…

Just leave the Irish out of this….

exeter, it must be hard to have your long-cherished world view demolished.

For another dose of reality, arrange a ride-along gig from your local P.D. for a few evenings.

“I’m in afghanistan, I’m black, I’m ______(blah blah blah).”

How convenient and you fell for it.

don’t get yourself. The nonprofits register these folk and bus them to the polls now.

err, I think I meant don’t “kid” yourself…

Uhm. I think its a good thing that “those people” vote.

They deserve representation and I’m trying not to dehumanize them.

Yup the right is typically inarticulate on this. It usually leads to tough-love approach and no individual likes that applied to himself.

and why a non-government solution is better.

Our system of govt isnt made for govt to be running everything. Govt should be doing NOTHING concerning the free market. I could give you the merits of a dictatorship, that doesnt mean it should be instituted.

So, just putting people down as “socialists” doesn’t accomplish anything.

Ben,

I dont mean to demean anyone, but if the title fits, they should wear it. But then again, if calling someone a socialist is “putting them down”, one might want to look at the term “socialist”…..

Our country isnt made to totally care for people from cradle to grave and that’s where we are headed. There will always be more poor than rich people, which is why we are NOT a democracy at the national level. We are letting in too many immigrants from socialist countries..I.E. mexico, latin american nations, cuba and such and they are just trying to make america a better version of the craphole they left. We cannot allow this, actually, our constitution wont allow it.

But then again, I dont want to get into a fight with Ben…

(runs away and cowers, wimpering in fear)

Stpn– You’re in the military–that’s a government job. When you retire and start receiving benefits–those will be paid for by the gov. Should we ban this ’socialism’?

“Govt should be doing NOTHING concerning the free market.”

Stpn2me
*Deregulation in an immoral corp society doesn’t work. I’m reformed from my Reagan icon days.
*Total govt control doesn’t work, I agee there.
*Lobbyists, special panels, etc… is an example of the free market at work.
*Free Market? - Ask Paulson and this thugs, when they got the Derivatives degregulated.
*Ask Phil Grahm when he got the Glass-Steagal Act rescinded.
*Free Markets are an illusion.
*Both corporate morality and our govt. is broken.
I left the Republican Party and became an Independent. Look, all the scare tactics about health care “death panels” under the “O” plan from the far right, yet insurance companies have “death panels” too. Our systems are broken. No one has the answer yet.

So Alpo,

You’re equate any kind of pension as socialist?

Also, are you equating any kind of government work with socialism?

Somehow, in my little universe, things are not quite that black and white.

Should we ban this ’socialism’?

Only when welfare receipients earn their “benefits” by dodging that rocket that just landed 1500 feet from me…

The only “rights” you should get just for being born an american is the right to free speech and the chance to make something of yourself unaided by the federal govt….

You dont think the military earns benefits doing jobs most people are scared to do?

Well said Stpn2me.
Few people realize that the reason for the Bennies that the military get, are due to the fact that they are doing a job that might get them killed at any given moment.
BTW, please do stay safe, and away from said rockets…

Ah! I never said you didn’t deserve them. I merely pointed out that they are paid for by the gov–just like your salary.

The one constant I find when people debate government bennies etc.–If someone else gets them–it’s wasteful socialism. If you get them–it’s a just reward for whatever you did. Or at least only fair because ‘everyone else’ is cashing in too.

BTW, please do stay safe, and away from said rockets…

I will. That last one hit a ways away, but they are so loud, it sounds like they are right next to you. If the taliban ever get accurate, it will suck here. Now let me go clean my underwear…

The only problem I have with the socialistic approach is

1. They can never account for where the money is coming from….

2. They want to assume everyone is equal. We are only equal in our ability to elect someone to represent us. Our founding father’s knew the poor would outnumber those who were truly doing the producing, and that a cradle to grave mentality would destroy the country. I dont disagree there should be some type of safety net for the insane, mental patients we have roaming the streets. The elderly and orphans and such. But for those who are clearly making life decisions that are harmful and not preparing for life’s situtations, they should bear the brunt of those decisions. And if it means they are homeless on the street and hungry…so be it…

Alpo? You sure do resort to name-calling quickly in your shades-of-grey universe. Did you see my quotes around socialism? They often ’signify’ something. Like I’m mocking how every gov bennie is ’socialism’ according to many here.

I merely pointed out that they are paid for by the gov–just like your salary.

Agreed, but, I am only being paid for something that the constitution mandates the federal govt do. What have most welfare receipients done to deserve benefits mandated by the constitution?

I’m not saying people dont need help, I just think it should be a state responsibility, not the federal govt. The federal govt should only be doing defense from the idiots of the world and saving states from natural disaster’s when they are overwhelmed.

Actually, I think Social Security is a good plan. I dont like your family doesnt get your money when you die, but oh well. SS and medicare are two plans I like, which I think medicare should be getting overhauled, not the whole system. But you have to include everyone in to pay for those who arent paying, that’s the problem….

No alph, I think what Stpn2me is saying is; earning gov’t benefits is different than having it handed to you. I agree. With that said, I don’t believe healthcare should be the battlefield for this debate. There should be a gov’t safety net for healthcare. Medicare and medicaid won’t cover the temporarily unemployed or the, newly formed group, the under-employed.

Ah! I never said you didn’t deserve them. I merely pointed out that they are paid for by the gov–just like your salary.

The one constant I find when people debate government bennies etc.–If someone else gets them–it’s wasteful socialism. If you get them–it’s a just reward for whatever you did. Or at least only fair because ‘everyone else’ is cashing in too.

Alpha - one thing the Civil War taught us is that an effective military *must* be done at a federal level, and therefore paid for by taxes. This is not true of 95% of other government spending. Socialism is the government doing things that could done as well or better in the private sector - military is not one of them.

Socialism is the government doing things that could done as well or better in the private sector - military is not one of them.

Except the military keeps privatizing functions that were traditionally done by the military, often with much higher costs for lower quality. Of course, if there was competitive bidding instead of cronyism in the outsourcing, the results might be different.

“Socialism is the government doing things that could done as well or better in the private sector - military is not one of them.”

How then is private insurance better than say Medicare and the VA? Private insurance rations care, Medicare and the VA do not.

“one thing the Civil War taught us is that an effective military *must* be done at a federal level, and therefore paid for by taxes. This is not true of 95% of other government spending. Socialism is the government doing things that could done as well or better in the private sector - military is not one of them.”

Packman,

I have a few problems with this statement.

1. The South didn’t lose the Civil War because of a lack of Southern federalism. It lost because of its inability to produce munitions on the scale the North could. The South was kicking the North’s behind up until the North revved up factory production for the war.

2. 95% of Federal spending is really the military, social security, medicaid, medicare & debt service (okay that’s not quite true but you get the gist). Which of these could the private sector do better & why isn’t it? Better yet, if it could have, why did the government feel the need to step in?

3. The USA has not been attacked by a foreign nation since 1941. Neither has New Zealand. Why have we spent trillions of $$$???

Socialism is the government doing things that could done as well or better in the private sector - military is not one of them.

It’s interesting how easily national defense, firefighting, police departments, etc. are waved away as untouchable by proponents of smaller government. Well, not all proponents of smaller government — the outsourcing of critical military functions in our current overseas conflicts stems directly from the “private sector is always the answer” philosophy, and it clearly hasn’t worked out too well.

Our military requires one of the largest bureaucracies in the world, and eats up 20-30% of our federal budget — depending on who’s doing the number-crunching. It is indeed fairly well-run, but that in itself undercuts the argument that government can’t possibly do anything right, or that the private sector is necessarily better at everything.

How then is private insurance better than say Medicare and the VA? Private insurance rations care, Medicare and the VA do not.

Not sure about the VA, but Medicare is running a deficit as of this year, and is projected to be broke by 2017. I wouldn’t call that “better”. Without going into the whole rationing thing - it’s easy to claim you’re better when the taxpayers have your back.

I shouldn’t have delved into this can of worms - unfortunately I just don’t have the time to follow up.

“Socialism is the government doing things that could done as well or better in the private sector - military is not one of them.”

So it’s not socialist for government to give money to the poor, since no one does that better than the government.

Seriously though, I like that definition from an academic standpoint. It establishes that not all the things the government does can be labelled as socialist. The weakness lies in getting people to agree whether something is better done by the govt or the private sector (shall we have another health care debate? How about education?).

@Jon,

There was this little thing called world war 2. If was after this big party called world war 1 or the great war.

After that, there was another great fun event called the cold war. This was when a nuclear armed super powers ruler stood on the podium of the UN and declared “We will bury you”.

You are saying that no one has had the bad sense to try to tackle the big kid on the block. Take a look at what happened to Kuwait. Or perhaps Georgia. Or Croatia.

I’m thinking maybe, just maybe, we might be keeping things from turning completely to shit in the world. You wouldn’t believe it but you go to places like Kosovo and they have statues commemorating Bill Clinton. Know why? Cause he sent in our military to keep them from getting whacked by the Serbs.

For what its worth, the north had industrial advantages but throughout the war, Jefferson Davis lamented the lack of a strong federal currency and army.

Mexico is not a socialist country. They are capitalists.

Hey ATE…..

Waiting on Friday’s…just a waiting….

It sort of sucks that I can only tell time is passing by what they are serving in Niagra DFAC. So I dont eat there…

I try to eat in the american DFAC in the american area they are building here. That steak will be good, I can taste it now!!!

How’s it going with you?

Glad your excited about it. I am so proud of you.

your = “Hey Oly? How do you spell gugue”?

Alpo-sloth

Giving money to poor people to buy junk goods from China has been the plan for a while. See Walmart.

I’m talking about spending the money on infastructure projects that make us more efficient as a society.

Mass transit. Nuclear power. Research. Start up companies. Education.

Though giving it to poor people is slightly less bad then giving it to the rich people.

Don’t feel like the stimuli is being handled carefully.

RE Poor people spending money fast, one time many years ago I was at a gas station/ convenience store, and the lady in front of me who was clearly in the “lower echelon” judging by her and her children’s clothes and her car (she drove up in a 70’s era datsun which was rusting out), was buying some snacks and she added a ‘carwash’ to the clerk. The clerk said the carwash is $4 but free if you pump ANY amount of gas, so you can go pump $4 of gas and get the carwash free ($4 was probably a third of the tank back then). The lady shrugged it off and said that’s okay. In today’s dollars that was probably close to 10 bucks she left on the table, I was astounded anyone would do that in Boise Idaho.

Jama$$– I agree on the need for infrastructure investment, but my point was there’s no quicker or more certain way to increase the velocity of money than to ‘dole’ it out to poor people. It’ll be in someone else’s pocket in a day or two.

Alpha.
I have seen it. Most poor people are poor because they are unable to keep their money.
They go spend it in wants, and not needs. Within my experience those wants are in order of priority:
Drugs.
Alcohol.
Entertainement. (gotta have wrestling on cable!)
food. (not any food either. “Beans and rice? Give me a break, I am not a Mexican day laborer!.. Meat and potatoes for me, and a maxi size coke!”).
It is not so much how much you make, but how much you keep. I might not make as much as a Wall Street clerk, but I live a good life, have savings, and am happy doing what I am doing.

Pinch-a-penny–You forgot scratch-off lottery tickets! The poor are the biggest ‘voluntary’ tax payers around.

“scratch-off lottery tickets”

Let’s not forget those tax rebate “advances”! One cleaning lady in an office where I worked a few years ago insisted she couldn’t wait two weeks for her federal income tax rebate check, so she happily forfeited what amounted to around 30% for a 2-3 week loan.

The thing is, she worked a local job and cleaned on days off and before/after hours. Each day she worked for us, she took home a check and she usually had two jobs lined up after ours. She did a great job; we paid her $35/hr. and 1099ed her at the end of the year. She was a hard worker, but alas, no math skills.

Hear Hear for honest Jon…Tell me Jon, how would you think your income would compare in your area to lets say;

“A car mechanic”

or

“A school Teacher”

Just wondering…

Average federal government worker (no idea if this is mean or median) starts in late 30’s and many stay in the federal workforce until retirement, often over 30 years. So when you look at those “average” numbers, remember you are talking about salaries for an “average” person who started out with plenty other experience, has been in place for 10 to 15 years or more and is over 50. If you want to compare properly, make sure they adjust the comparisons for experience, both before being hired and after.

“a school teacher” ? isn’t that a government job? or are you referring to a private school teacher?

I remember the real money was is establishing multiple identities. They caught guys traveling all along the north east corridor with multiple identities to collect multiple checks.

The reason they got caught was they were jumping turnstiles instead of paying for tickets.

At various points, the different state governments were not talking with each other about identities of people collecting welfare or how they established identification, residency or eligibility requirements. So, scammer guy would show up in your municipality and say “I’m homeless from x and need help.” Get on the welfare role and collect. Then leave to the next state on the train. Wash, rinse, repeat. So, the guys were going from Mass, to Conn, to NY, to NJ, to PA, to DC to collect. Basically quadruple dipping. 3K+ a month tax free. Plus food stamps and other benifits. Not bad for one day of work plus train tickets.

I don’t know what they did to crack down on this but it had become prevalent in the 90s.

Not trying to paint all of the people on welfare with this brush here. Seen a lot of strange stuff through ther years.

Advice from guys maintaining public housing was not to fix anything that could be stolen. Because it would be stolen as fast as you could fix it. To me the entire mindset was insane. How could someone be crazy enough to rip out their electric wiring and light fixtures, their piping to their toilet when they have to live there? You want to know why things are FUBAR in those places? Its the people and the fact that if you keep encouraging them, they will keep doing the same BS over and over.

Its why we went on that welfare reform kick back in the early 90s. I think it actually helped somewhat. Most of the people on WF are totally whacked from what I hear from my SIL, who is an ultraliberal bleeding heart. They are so messed up that nothing is going to help them. Don’t know what the right answer is. Minimal encouragement is my best guess. Make sure the situation is pretty miserable and hope they get the hint to make better choices. And yes. My plan sucks.

It is probably slightly better than throwing all of our money down the rathole and dragging everyone else down. Free healthcare for people that refuse to care for themselves is not going to be a good answer. Guess some of you will need to figure that out for yourselves.

In Montana,

And that’s been my point where “free” healthcare has been concerned all along? Why bother with jumping through hoops in the corporate world when we’re making it so easy to slide thru life?

Bottom Line is education, not the ol time religion of misguided history and bigotry, but serious education from early life on. But we do not value education here in the US.

It “started” long before that.

ADDI was bad indeed, but don’t think that’s where it started.

I believe it was nominally ended, but effectively morphed into the $8K “First-time Home Buyer Credit,” but please correct me if this is off base…

I think he’s referring to the current crash, which was in no small part triggered by the increase in rates in the 2004-2006 timeframe. The beginnings of the housing market crash go back to 2005, during the midst of that rate rise.

(Note that I use the word “triggered” not “caused”)

FF rates. He has power only in one direction - to raise them - and for various reasons that’s also ruled out. But he cannot lower more than the market, i.e. China, will bear. (of course I agree he can’t lower them anymore from where it is now) Remember China is selling long and buying short term paper (http://www.nakedcapitalism.com/2009/01/china-moves-to-shorter-maturity.html).

FF rates. He has power only in one direction - to raise them - and for various reasons that’s also ruled out. But he cannot lower more than the market, i.e. China, will bear. (of course I agree he can’t lower them anymore from where it is now) Remember China is selling long and buying short term paper (http://www.nakedcapitalism.com/2009/01/china-moves-to-shorter-maturity.html).

That’s kind of like saying that if I’m holding you up over my head that I don’t have the power to make you fall, only the power to lift you. Yeah technically if I let go it’s gravity that’ll make you fall - but the distinction is only technical.

One need only look at countless articles, and historical interest rate charts, to see the correlation *and* the causation.

Ok ok, but then folks much more knowledgeable than myself and whom I respect say this

See for instance Lee Adler at http://wallstreetexaminer.com/2008/12/16/feds-intended-consequences-professional-edition/
saying on 12/16/08:
The Fed ratified the market’s judgment on rates today, as it always does. The Fed does not set rates. It simply follows the market. This comes as no surprise to readers of this report.

I remember Russ Winter also saying the same thing.

Good to hear.

Mental imagery was just fine. Until you brought up Shelly Winters. Then, you tanked it all.

Well, she used to be quite the babe. Her roomate was Marilyn and they hung out together. I am not talking Poseiden adventure time frame!

Think way way back, Ate.! feel better?

Yeah, a liitle, I guess. Thanks for asking. I’ll take a baby aspirin, and call you in the morning, desert.

Actually guys its F**k me pumps ala Amy Winehouse

http://www.youtube.com/watch?v=pEo3GG_emk8

…(FB who bought previously, that is)

The FBs have proven to be tenacious. They refuse to lower prices and refuse to take the loss. While they have the option to walk away anytime they please, they’ll need to be forced into defaulting.

They may reach a point where they cannot pay the monthly due to personal circumstances and will default, but the price of beans (or homes) has nothing to do with it.

“…but the price of beans (or homes) has nothing to do with it.”

What about Mr. Poor Chump who took out a $600,000 100% LTV mortgage in 2005 with payments at, say, 40% of income, and whose neighbor more recently bought an identical home for $400,000. Are you telling me poor Mr. Chump is going to keep paying off that $600,000 loan, realizing that if he had to ever sell the home, he would end up having thrown away a massive amount of money on interest payments to the bank that he will never be able to recover from the sale proceeds?

“the price of beans (or homes) has nothing to do with it.”

The price of comparable homes has directly to do with availability of refinancing.

Many FBs bought with ARM instead of fixed. They cannot afford a higher monthy payment due to higher long term rates, but neither can they refinance due to plunging home prices. Thus they walk.

And of course as PB pointed out, there will be those who could countinue to pay, but choose to walk anyway as a purely economic decision (why service $600K debt when you can buy the same house for $400K?).

Hence “dropping housing prices” => “more FBs defaulting and walking away” => bad for banks. (Gotta save the banks, you know, even if the currency goes does the tubes as a result.)

bulbous–adj–large, rounded “Her bulbous buttocks excited nearby customers.”

Brilliant as usual Oly Gal! I’ll make up my own ‘word-power’ quizzes, using Self magazine. Actually, if they have a lot of bulbous buttock articles, I won’t miss Reader’s Digest at all.

Can you say, ” bulbous buttocks” ? I KNEW you could.!!!

I prefer to read how many baby aliens there are, and how you can lose 50 lbs in 2 days or something like that. The confusion and literature is mind boggling.

Ditto. My comment was mostly a commentary that we all have some beliefs that cross multiple political boundaries.

This is why I cringe when I see people screaming about socialism. It’s just another talking point with no meaning. (ie - people who will probably use Medicare one day but who go to town hall meetings calling current govt socialist)