Bits Bucket For November 22, 2009
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Recession shows shortcomings in U.S. economic data.
WASHINGTON (Reuters) - The U.S. government is having a tough time guesstimating how many small businesses failed in this recession, casting doubt on the reliability of vital data on employment and economic growth.
The formula the U.S. Labor Department designed to help it deliver timely, thorough monthly employment reports broke down in the heat of the financial crisis, miscounting the number of jobs by an estimated 824,000 in the year through March.
The most likely culprit is the so-called “birth-death” model, which the Labor Department uses to estimate how many companies were created or destroyed.
That model appears to have misjudged how many companies went out of business during the recession, meaning the labor market was even weaker than initially thought when President Barack Obama took office in January. More recent figures may still be underestimating job losses now, but it will be many months before the Labor Department is certain.
One characteristic of this recession is that it has hit small businesses especially hard, driving down demand and choking off vital sources of credit at the same time.
Obama’s administration is scrambling to try to prop up small business — it hosted a summit on that topic on Wednesday — because those companies are essential to bringing the jobless rate down from its current 10.2 percent, having accounted for the lion’s share of new job growth in recent years.
Coffee’s on!
Rancher,
I’m in your neck of the woods (Bend) picking up some
equipment for my property. An absolutely brutal drive
last night especially coming through Diamond Lake (168?).
Hope to be able to get out this morning (towing heavy)
Mike
Good Luck and watch for the black ice. All the
local stations have been warning about it.
Most of the heavy weather is north of you so you should be ok.
Rancher,
Are you any where near Lake of the Woods? Our family did a lot of camping there when we lived in Ashland.
What’s with this “birth-death” model?
Since everybody that earns money in this country is supposed to pay income taxes, how hard would it be to determine employment numbers from these tax receipts?
Since people typically pay income taxes once a year, are you proposing to only estimate the number of employed once a year?
Isn’t there some visibility at the IRS of withholding taxes every month?
Why would anyone waste IRS resources on calculating unemployment figures? Different agency. Different cabinet secretary. Imagine a company that makes those hanging car air fresheners telling Ford to just send over the taxi fleet sales numbers before they are ready for inclusion in their audited financial statements. Not the way tings are done.
How much “IRS Resources” would it take to run a monthly report on how many unique wage earners made withholding payments? It’s not like some guy with a green visor would have to stay up all night to shuffle through the ledgers. Pennies compared to a lumbersome agency calling zillions of households to ask them if they feel like reporting being employed.
“Why would anyone waste IRS resources on calculating unemployment figures?”
Once initial programming is done, computing resources are mighty cheap these days.
I don’t know about you, but my taxes are sucked out of my paycheck every payday, which is every two weeks.
Try more like once a quarter, which last I checked was 4 times a year.
“Obama’s administration is scrambling to try to prop up small business…”
A $0.5 bn giveaway from Government Sachs isn’t going to cut it.
hmm and here I thought we just fudged the numbers alittle
Obama’s administration is scrambling to try to prop up small business — it hosted a summit on that topic on Wednesday
By imposing such onerous regulatory and employee cost burdens on them that they are forced to lay off staff and even close their doors? Oh, but a summit followed by the appointment of yet another Czar should clear up the problem.
Obama supporters, you must be so proud of yourselves for this “change” you helped bring about.
Obama supporters, you must be so proud of yourselves for this “change” you helped bring about.
This admin is bucking some serious headwinds and that was started long before the past 10 months.
Last I heard, whether you have an 8, 9 or late 10 mo ‘pregnancy’, it is really hard to unwind it to the beginning-skroo up.
This admin is bucking some serious headwinds and that was started long before the past 10 months.
At what point can one fairly criticize this administration? One year? Two? Eight?
Never!
I got mine, now f**k you.
India may get $1 billion in IT outsourcing contracts: report
MUMBAI (Reuters) – Leading Indian outsourcers such as Tata Consultancy (TCS.BO), Infosys (INFY.BO) and Wipro (WIPR.BO) stand to gain contracts worth about $1 billion in the next one or two years as U.S. banks emerge from the troubled asset relief program, the Economic Times reported on Monday.
The newspaper said JPMorgan (JPM.N), Goldman Sachs (GS.N) and Morgan Stanley (MS.N) that received approval to buy back government stake worth $68 billion earlier this year are among the firms seeking operational efficiencies by outsourcing non-core IT and back-office projects to India.
American Express (AXP.N), Bank of New York Mellon (BK.N) and Capital One, which have started repaying government debt, were also considering outsourcing, it said.
(Writing by Devidutta Tripathy; Editing by Ranjit Gangadharan)
http://news.yahoo.com/s/nm/20091123/bs_nm/us_india_outsourcing_usbanks
U.S. Housing Recovery Delayed to 2010 as Market Wanes (Update3)
(Bloomberg) — A recovery in U.S. housing will have to wait at least until next year.
The outlook for the home market dimmed this week as residential construction and mortgage applications fell and loan delinquencies reached a record.
“I don’t think the housing crisis is over,” Mark Zandi, chief economist with Moody’s Economy.com, said in a telephone interview. “I think we’re going to see another leg down.”
New home sales may begin to pick up by the start of the so-called spring selling season, said Toll Brothers Inc., the largest U.S. luxury homebuilder. Existing house sales may take longer. Residential construction and property sales led the way out of the previous seven recessions going back to 1960, said David Berson, chief economist of PMI Group, the mortgage insurer in Walnut Creek, California.
Mortgage applications for home purchases fell to a 12-year low last week and foreclosures rose to record highs in the third quarter, according to reports from the Mortgage Bankers Association.
An index measuring November homebuilder confidence came in lower than the median forecast of 45 economists this week. The Commerce Department on Nov. 18 said residential building dropped 11 percent in October to the lowest level since April’s all-time bottom.
‘Challenging’ Conditions
The $8,000 federal tax credit for first-time buyers, extended by President Barack Obama on Nov. 6, drove existing home sales to a two-year high in September. At the same time, a 26-year high in unemployment is keeping many buyers out of the market and pushing existing owners into foreclosure.
“The thing that drives our business the most is job creation,” Donald Tomnitz, chief executive officer of D.R. Horton Inc., said today on an earnings call. “If we look at the macro economic environment, it’s not good for us.”
‘I don’t think the housing crisis is over,’ Mark Zandi’
It’s not a ‘crisis’ you tool. The situation was dire when people couldn’t afford houses.
Ben, You are 100% correct, but I have lost count of the people that I have talked to over the past several years that see the majority of our economic problems solely based in the housing market.
Over and over I hear we have to “fix” / stabilize the housing market. When so many people have such a poor grasp of what facilitated this situation, it would seem to me that we are in more a much worse out come.
The housing market is stabilizing, back down to where it MUST go. Why the media listens to people at Moodys (where we should be handing down indictments, IMO) is beyond me.
http://www.forbes.com/feeds/reuters/2009/11/20/2009-11-20T175831Z_01_N20226194_RTRIDST_0_OHIO-AG-LAWSUIT-UPDATE-3.html
Moodys is being sued by the Ohio Attorney General because of the $457 million losses incurred to Ohio state employee pension plans who were stupid enough to believe ratings by Moody and the other major credit-rating agencies were valid. Of course Moodys was getting big bucks from the Wall Street firms who were bundling those toxic mortgage-backed securities that the rubes in Ohio believed were AAA rated.
so many people have such a poor grasp of
Many have a poor grasp of any self evident facts, instead relying on propagandist tv radio to keep them swayed.
And that is the way the Power brokers want it.
Comment by Ben Jones
2009-11-22 05:47:36
The housing market is stabilizing, back down to where it MUST go. Why the media listens to people at Moodys (where we should be handing down indictments, IMO) is beyond me.
———————
Exactly right, Ben.
As we’ve discussed many times before, we won’t be able to solve “the crisis” until people first learn how to correctly define the crisis.
The crisis was that home prices were pushed to such heights that people who bought were **guaranteed** to end up in foreclosure if prices fell or even stagnated (eliminating their abilty to amass more money — a.k.a.: debt — via HELOCs and cash-outs).
Once again, foreclosures and lower prices are the **solution** to the crisis of high debt and high prices.
Isn’s Zandi the guy who said the crisis was over in 2007? Or was it 2006? Or 2008? I know he is one of the perpetual optimists that never met a bailout or government spending program he didn’t like.
He’s a little better-looking that most of them, so they chose him to be talking-point boy for the masses. He’s on TV more than the O-man, spouting the “current” conventional wisdom. Which, in HBB terms, is six months old.
“Isn’s Zandi the guy who said the crisis was over in 2007? Or was it 2006? Or 2008?” Yes, yes and yes.
And instead of being fired and laughed at butt-holes like Zandi get hired to be economic advisers to presidential candidates. Yep, this guy was one of McCain’s top economic advisers. This election wasn’t even about the lesser of 2 evils. It was just about 2 evils.
No kidding. Between the two administrations, you couldn’t find a single shred of credibility. People are not smart. I am embarassed to be a human, can I be a maggot or something respectable?
Be a geoduck.
“It was just about 2 evils.”
I think it’s known as the evil of two lessers. (As opposed to the lesser of two evils)
Official view of the housing ‘crisis’:
1) The ‘crisis’ will continue so long as home prices keep dropping.
2) The ‘crisis’ will end when real estate starts going up again.
Conclusion:
It is incumbent on government economic regulatory agencies to financially engineer increasing home prices, in order to end the ‘crisis.’
Here’s another official view of the housing ‘crisis’:
1) Banks’s collaterial will continue to deteriorate as long as home prices keep dropping.
2) The crisis of deteriorating bank collateral will end when home prices start going up again.
Conclusion: It’s all about saving the banks.
The housing crisis will end when serious mid-level job creation is expanding, so that people feel safe buying a house again.
I have to listen to many mothers at work who are bemoaning the fact that their children are losing house after house to foreclosure, after being laid off from their jobs.
I don’t have to worry about that, becaue my daughter had to move into a rented room ! She couldn’t afford to keep her apartment because costs of living are so high where she’s at….
And how many of those poor “victims” put any money down on their “homes”? I would guess that the number is minute. The Victim Nation is alive and well.
1) Government ratings/confidence will continue to detriorate as real estate prices fall.
2) Government will continue to come up with b/s fixes/Bailouts for all TBTF involved along with tax-credit scams for everyone.
Conclusion: Its all about saving face(votes) for the Government.
Yes, you are correct, NYCityBoy. I have to listen to it, though…..ahhh, cubeland. I hear the weirdest stuff.
The foreclosure crisis is caused by unaffordable home prices.
1) If the government keeps pumping money into real estate to buoy house prices, by making loans to people who can’t afford them, and
2) This just causes more foreclosures, then
Who is profiting here? What is driving this insanity?
That’s exactly right and not an insignificant point when you think about how politicians and the fed (and Obama) are going about how to address this “crisis”… the “crisis” was from 1998 to 2006/07 when housing mania took this country for a ride.. we’re dealing with the hangover and it’s a hell of a hangover because the real crisis was a hell of a crisis..
Economics 101.. the simple basket of goods and services model still applies… housing has pushed everything else out of our basket of goods and services and the economy won’t recover until it’s back to it’s historic proportion.. pretty fricken simple if you ask me.. all these baloney programs and all the subprime lending and lack of underwriting standards during the real crisis was to all housing to exceed it’s historic proportion in our basket of goods and services as consumers…
Spot on Matthew….
the “crisis” was from 1998 to 2006/07 when housing mania took this country for a ride.. we’re dealing with the hangover and it’s a hell of a hangover ??
Exactly…I would love to take all the 2005 articles that Ben posted above and force that fat toad R congressman from Texas that grilled Geithner to read them…
Matthew for Congress!!!
I nominate Matt for any cable news journalist position….
Matt is 100% correct. It really is fricken that simple. However the system must validate all the losers who volunteered for a 30 year stint as a bank slave.
It’s not a ‘crisis’ you tool. The situation was dire when people couldn’t afford houses.
Well you could say, Ben, that the bubble that first started building a few years and the current crash in house prices are together one giant crisis. It caused a lot of grief for a lot of people on the way up and now it’s causing grief for other people as house prices go back down to where they should be.
“New home sales may begin to pick up by the start of the so-called spring selling season, said Toll Brothers Inc., the largest U.S. luxury homebuilder.”
I thought it was known as the ‘red hot spring selling season’?
Things will pick up after the super bowl.
Did you mean to say ’souper bowl’?
We keep saying the same refrain, and yet the msm keeps spewing forth the same thing too.
” keep on saying that word, but I do not think it means what you think it means”
With repetition, they hope we will finally accept the inevitable and give up all our money.
Who’s to Blame for the Housing Bubble?
By James R. Hagerty
Many people argue about when the housing bust will end.
But some seem at least as concerned about defining when the housing bubble began.
Why should we care when it all began? It’s politics. If the housing bubble began during the Clinton administration, it can be blamed on the Democrats and their efforts to expand homeownership to people who, in some cases, may not have been quite ready for it. If it began under George W. Bush, then it can be imputed to the Republicans’ love of deregulation.
Of course, as we all know, the causes of today’s mess are far more complicated than either of those hypotheses allow. But nuance rarely figures in the debates of our age.
In the (perhaps vain) hope of gaining some calm perspective, let’s consult two people who are frequently quoted on housing and mortgage matters.
Edward Pinto, a mortgage-industry consultant who was the chief credit officer at Fannie Mae in the late 1980s, argued in a WSJ op-ed essay Friday that “most agree that the housing bubble started in 1997.”
I asked Mr. Pinto why he chose 1997. He pointed to a chart of long-term home prices patched together by Robert Shiller, a Yale economist. The chart shows inflation-adjusted house prices starting to move up sharply in the late 1990s.
Mr. Pinto believes misguided government efforts to promote homeownership were largely to blame for the bubble. He particularly points to the 1992 legislation that required the government-backed mortgage investors Fannie Mae and Freddie Mac to guarantee more loans for people with shaky credit and an inability to make substantial down payments. That legislation also created a weak regulator for Fannie and Freddie.
Tom Lawler, an independent economist who worked at Fannie Mae from 1984 to 2006, says few housing gurus think the bubble began as early as 1997. In his view, the bubble began around 2002. The collapse of the tech-stock bubble in the year 2000 prompted many people, searching for other types of investments, to focus on real estate. The Federal Reserve’s policy of keeping interest rates unusually low made property investments even more attractive. Once house prices reached levels that most ordinary people couldn’t afford, Wall Street and mortgage banks responded by relaxing lending standards further with loans that kept payments very low in the initial years and let people lie about their incomes. That helped push home prices up much higher till the bubble began to deflate in 2005 and 2006.
Yes, Mr. Lawler says, homeownership rates began rising the the 1990s, but that was mainly due to the aging of the population, which left a smaller share of Americans in the under-35 category, a group that has a smaller share of homeownership. The only age group that saw a substantial jump in the homeownership rate was those 65 and older.
So which party is to blame for the bubble?
“There is plenty of blame to go around,” Mr. Pinto says. “In particular both parties got enamored with unrealistically and quickly growing the homeownership rate. However I would give (the bigger share of the blame) to the Democrats.”
Mr. Lawler says: “Both (parties) in my mind were fully and completely culpable. Both focused on programs to promote homeownership without much thought. One (the Democrats) focused too much on housing goals (for loans to lower-income people) and government’s role, while the other (Republicans) focused on lax regulation, even of institutions where the government and taxpayers were at risk.”
’some seem at least as concerned about defining when the housing bubble began. Why should we care when it all began? It’s politics’
Well, this is progress, but it’s not surprising that the media misses the point.
I’ve said for a long time that if we will accept that there was a bubble, the first question would be, when did it start? This is important because it will guide us as to how far prices will fall.
I’ve been turning this concept over in my head for years; I think some areas may have seen a price disconnect far longer than most experts consider. There are housing cycles and then there was this bubble. Did previous cycles in California, for example, get hijacked by the mania in the mid-90’s? Was price growth in Texas sustainable even as far back as 91?
Yesterday I was working on a newly foreclosed house in Kachina outside of Flagstaff. While looking up the lot size, I saw that the owner paid over $300k in 2001. This house is not that great, and the area is certainly middle class. And I recall that the census charts show prices in Flagstaff took off in 1999. Posters here were saying that the bubble in Massachusetts began in the mid-90s.
Different areas certainly had different starting points. But the conclusion is clear; we have a long way to go. And this finger-pointing shouldn’t be the object of the matter. Rather, we could go a long way toward making better public policy if we would understand these basic economic issues. The first would be that it is insane for the government to be encouraging house buying at these price levels.
“But the conclusion is clear; we have a long way to go.”
My colleague bought a waterfront 3/2 in St. Pete Beach in 2001 for $265k. Taxes are about $10k and insurance can be $5-10k. Houses like his are asking $500-700k and still going for around $450k.
Like PB said yesterday, I wonder sometimes if I *gambled* incorrectly.
Second-guessing may or may not be productive, I can’t say. But getting an idea of what will happen in the future is worth the effort. Here’s one I ran across. I worked on a foreclosure this past month in a very rural area in N AZ. It is a vacation place only; I doubt a single person lives there year round. Lehman Brothers had loaned $250k against this house that wasn’t much better than a fancy treehouse. Given it’s location and lot size, etc, I wouldn’t pay $10k for the thing.
That tells me what kind of declines I can expect. And given the recklessness of the lending, there was no way LB could have survived. So I pay attention to who was making which loans when I go to these houses. Some of these outfits may not have been as bad as LB, but that ain’t saying much.
One more thing; I notice a pretty serious lack of quality in the construction of these houses that are under 10 YO. That’s a whole nuther mess coming at us.
“I notice a pretty serious lack of quality in the construction of these houses that are under 10 YO. That’s a whole nuther mess coming at us.”
When I first started posting on this blog back in ‘05, that was one of my major concerns. I saw developments going up around here (South Tampa Bay) like Potemkin Villages. The problem is both materials (as in Chinese drywall and other stuff) and labor. A lot of these illegal immigrant construction crews were not supervised. Builders were allowed to do their own inspections (yes, really) because local govs didn’t have the manpower to do the inspections. There was the one case of the guy up in Clermont who was electrocuted by a house while installing a dryer, even though the current was supposedly turned off.
Yes, this will unfold over the coming years. And as always, there will be people demanding compensation. They will be dropped by their insurance companies (as is happening with the Chinese drywall cases).
OTOH, teats everywhere are running dry. I envision a forced return to personal responsibility, as things like Social Security, unemployment, insurance, etc. go the way of the dodo.
I’m not concerned about health care anymore, even if it does pass, it’s a joke and will never go into effect.
“Lehman Brothers had loaned $250k against this house that wasn’t much better than a fancy treehouse. Given it’s location and lot size, etc, I wouldn’t pay $10k for the thing.”
It would be useful to know what kind of shadow inventory exists and where, thanks to crazy loans made (and in many cases now held) by the Subprime Mortgage Lending Kingpins of Wall Street. Is this information publicly available anywhere?
“One more thing; I notice a pretty serious lack of quality in the construction of these houses that are under 10 YO.”
Another great reason there to either keep renting, or if you have the means, consider buying land and building your own, rather than relying on whatever the Wall Street-funded McMansion builders puked up in their race to cash in before the bubble popped.
Sadly the govt is going to keep throwing money at this housing debacle until they get prices turned around.I just dont understand how long the govt can keep printing money.Seems like they have no problem printing as much money as needed.People keep talking about inflation but I’m not seeing it.What are the long term ramifications of all this money supply?It really seems like business as usual.What will it take for americans to lose confidence in the dollar.It is just paper backed by nothing.It really seems that we use the dollar simply because of confidence.when do we lose confidence.what event could trigger our loss of confidence.I am trying to figure this whole mess out.
One more thing; I notice a pretty serious lack of quality in the construction of these houses that are under 10 YO. That’s a whole nuther mess coming at us.
In many cases, it’s an already unfolding mess.
Not only was construction often slapdash, but municipal officials signed off on substandard work clearly not up to code. The developers and builders, of course, are long gone — some simply out of business. There are a whole lot of homeowners facing serious, endemic construction issues with little recourse except to suck it up or learn some rehabbing skills.
“What will it take for americans to lose confidence in the dollar.It is just paper backed by nothing. It really seems that we use the dollar simply because of confidence.”
This is a misconception. The value of the dollar is enforced by government fiat. This makes the dollar the monopoly currency which Americans are legally allowed to use to settle debts. If you don’t believe me, try this experiment:
1) Take a new $100 dollar bill to the nearest copy store, and make a color copy on paper of similar consistency to the $100 dollar bill, printed on both sides and trimmed around the edges to look exactly like the original.
2) Take the copy of your $100 dollar bill to the clerk and use it to pay for your copy job. Tell the clerk you want to receive change for your payment after taking out the cost of the copy job.
What do you think the clerk would say?
After conducting this thought experiment, which seems more like worthless paper: Your $100 bill, or the copy you made?
In Fed we Trust.
“It is just paper backed by nothing.”
P.S. I have made this offer to others on this board who have made similar (ludicrous) statements, and I reiterate it for you:
If had Ben send you my home address, would you consider putting all your worthless dollars into a large bag and sending them to me? I will cover the shipping costs, C.O.D.
The value of the dollar is enforced by government fiat.
Let’s analyze this logically.
First, let us define some terms. A note, in legal terms, is a promise by some legal entity (the “issuer”) to pay a specific amount of money to another legal entity or to whoever holds the note (”bearer”), by a specific date (or “on demand”). The value of a note is dependent on the elements of the promise, e.g., if the issuer is considered less credit-worthy, the note will have less value.
Now take a look at a “Federal Reserve Note” and then answer the following simple questions:
1. Who is promising to pay?
2. What are they promising to pay?
3. When are they promising to pay it?
Based on the answers to those first three questions, what is the value of a “Federal Reserve Note”?
‘Based on the answers to those first three questions, what is the value of a “Federal Reserve Note”?’
Your three questions are highly irrelevant. The only relevant questions are:
1) What can I buy with it now?
2) What will I be able to buy with it in the future?
If you don’t like your worthless pieces of green paper, my offer to pay C.O.D. in receipt of your sack of dollars is good for you, too…
The answers to your questions are:
1. Something but less than in the past;
2. Less and less, and eventually nothing.
So long as we are still able to buy anything with it, we should do so. If your other needs are met, gold is a good bet to keep more purchasing power than green paper with numbers on it, which can be created in unbounded amounts.
But I’m sure you knew that already.
For $450K you can get a 4th bedroom on the water in SPB. I’ve seen a few listed for under $500K on the water, with a pool too.
Is it really $10K for insurance? That would sting.
“Is it really $10K for insurance? That would sting.”
Yes and no, but mostly yes — depends on a few variables.
I notice a pretty serious lack of quality in the construction of these houses that are under 10 YO. That’s a whole nuther mess coming at us.
Guy across the street said he sold a sfr in 2007, built in 05 that was pieceocrap and wouldn’t touch anything built after 97ish.
Up to 97, there were few developments being built and contractors had 2 jobs oft times, one contracting, the other massage therapy or ? Seriously. Also when you saw a development underway you would see all anglo workers, then later, there weren’t enough workers at all for all the work available.
Japan and 20 yrs of price drops. Plenty of people jumped in after some substantial declines only to have things get worse.
It sounds like their real estate is still ridiculously priced. Governments can’t get the idea through their heads that policies promoting high housing costs are bad.
“I’ve said for a long time that if we will accept that there was a bubble, the first question would be, when did it start? This is important because it will guide us as to how far prices will fall.”
I’d like to see Adam Smith’s invisible hand point out the bottom of this market.
Kinda hard for this to happen with the visible hands of the Fed and the Feds constantly intervening to prop up prices…
From my viewpoint, the housing bubble in the SF bay area started around 1974. Ever since that time, regular working stiffs have been priced out of the market. Prices rose 3 fold just from 1974 to 1980, and have never returned to sane levels.
Right on the money. I remember housing
prices on Belvedere Is during the early 70’s and
it was cheap. It was old SF money and most people didn’t want to live there plus a long drive to the city, and then in 74-75 prices start to climb. One old sea captains home on the top went for $1.45 mil in ‘82, up 500k in three years. When I checked on it a couple of years ago, the price was $14.5 million and the rest of the island was priced accordingly.
Early on the hgtv, was an episode where buyer bought one of those old victorian homes right on that great block in sfo( can’t recall street across the park) in 1973 for $79,ooo. and rehabbed. 1973. Then the blast off.
HGTV wasn’t around in 1973. Do you mean This Old House?
Maybe.
The episode, they touched on when the property was purchased -1973, and it was current-ish, the past few yrs.
Perhaps a different show.
Spot on Dennis. I lived and still live in San Mateo County. Houses were still cheap in 1974. I joined the Army in 1975, came home on leave and couldn’t believe how high housing prices had climbed.
In L.A., you could buy a nice home in a great neighborhood on 1/2 acre or so for around $40K in 1972. Those same homes were selling for around $800K-$1.2MM during the bubble. Now, maybe $100K-$300K less, but still waaay too expensive for the regular, working people who live there.
Oh, and I agree that the bubble started in 1997 in Los Angeles. That’s when I started noticing all the flippers buying up all the normal houses and flipping them with the requisite “Pergraniteel” flipper upgrades. All of a sudden, prices shot up like a rocket.
“Posters here were saying that the bubble in Massachusetts began in the mid-90s.”
The germination of bubbleness and the asynchronicity of it all is fascinating. I was working in Boston in 1998 and prices were indeed stupid (and rising)anywhere near Rt128. Boston and it’s environs is a mature economy that experienced the post-industrial slow death that much of the northeast did. What made Boston “different” (I hate to say that) is the strong life sciences businesses interconnected with university research. At that same time, VT and upstate NY which had previously experienced falling prices from the late 1980’s housing cycle peak began to flatten and experience very low single digit price increases, e.g, 0.5-1.5%/yr, almost imperceptible. That very no-to-slow price growth was typical for upstate and VT *before* the de-industrialization that began in 1980.
I wouldn’t use my personal experience as a means to peg anything but I bought my place in West Pawlet, VT in 1994 and sold it in 1999 at a price 35% higher than I paid and did so 3 weeks after I listed it. Folks and including myself was amazed at the time. You must understand….. there is no place to work so there is no reason to see any price gains. I couldn’t believe I found a buyer no less one at full price. I didn’t budge a nickel on the price which is a real big risk in that jobless environment. Although I don’t trust zillow, my old shack has supposedly increased another 40% over my 1999 sale price but I’m quite confident there isn’t a buyer at that price… not now, not 5 years from now. That Zillow price requires a substantial income(as compared to local wages) to service a payment that size. My fellow natives there no longer lean on “the rich people will pay that price” lie. Besides… someone truly wealthy isn’t going to want my old shack… not today, not ever.
I got a bit off topic but I think I can speak about the historical record in New England better than say…… Larry Yun.
Boston in late 86 on, the bubble at least in the city was indeed escalating. 2/2 condo firestation walkup no parking was 393k and climbing.
“Tom Lawler, an independent economist who worked at Fannie Mae from 1984 to 2006, says few housing gurus think the bubble began as early as 1997. In his view, the bubble began around 2002.”
Is he talking about the ‘gurus’ who could not detect a ginormous bubble inflating under their noses until it spectacularly popped, circa 2006? Even my wife (good home economist, but not a ‘housing guru’ like Lawler and his Fannie Mae friends) knew housing had gone berserk as early as 2000, when our lowly condo in a marginal area of East Bay SF was going up in value by $40,000 a year or so.
One more thing…we could also differentiate between a regular (even manic) housing bubble vs. a credit bubble. IMHO, the housing market was peaking after a pretty good run around 2000/2001, and the credit bubble drove prices up from there.
Is this unpatriotic drivel…or is it a fair evaluation of the mess the United States finds itself in today?
“We’ll say what we’ve been thinking…..that our children are going to spit on our graves!
“First, Americans made a colossal mistake in the ’90s and the ’00s. They partied…they spent…they borrowed…running up huge debts in the private sector. Most kids could forget about inheriting anything from their parents; the geezers spent it years ago.
“The boomer generation also made a mess of the biggest success story in world history - the United States of America. In the ’60s and ’70s - when boomers matured and began to take over - the US was still on top of the world. It had a positive trade balance…huge savings…massive investments abroad…and the strongest companies in the world.
“They ruined it. The financial industry took over…replacing manufacturing. Instead of making things we could sell at a profit, Wall Street sold debt - mostly to us! In government, imperial ambitions pushed aside the restraints and good sense of the old republic. Overseas, military bases were set up in 120 countries. We now have un-winnable, trillion-dollar wars that could go on forever. At home, the sheep look to the government to solve every problem. Thirty-five million Americans - almost as many as the entire population of Spain - depend on the feds’ food stamp program for their daily bread.”
There you have it. It’s the Baby Boomers fault!! The Silent Generation had a good thing going…we turned it over to our kids, the Boomers…and they went crazy, taking on un-payable debt in the belief they were getting rich.
Ummm….I, personally, don’t think it’s entirely the Boomers fault. Plenty of the senior generation egged them on. But Bill Bonner may be right, the Boomer’s kids are probably going to spit on all our graves one day for leaving them such disarray. (”Spitting” may not be the only thing they’ll be inclined to do!) Bare Branches.
It was Republicans. No it was Democrats. It was Boomers. No it was Gen-X. No it was Gen-Y. No it was immigrants. No it was foreign investors. No it was the Chinese. Hold on I think it was Republicans, I mean Democrats, I mean….
Every day it’s a new villain.
“Every day it’s a new villain”.
Nope, no ‘new’ villains, the same old rehash over and over again. Everyone like’s to believe they are right, it’s human nature. Close minded party hacks are nothing new either. Meet the new boss, same as the old boss.
P.S. As one of my favorite entertainers once asked?
“Why can’t everybody, leave everybody, the hell alone”?
~Jimmy Durante
+1 wmbz….
I’ve been accused of being a party hack because I disagree with pretty much everything Obama, Harry and Nancy have done. However the true party hacks automatically assume that because I think Obama/Nan/Harry are wrong then I also think Bush was right. Intellectual midgetry (I know it’s not a word) doesn’t allow for the possibility that maybe they were both wrong.
And by intellectual midgetry I mean Exy the union thug.
I disagree with both parties, and what is so peculiar is that neither party is very far apart. Same direction, different speed. Bush as most other Presidents have done, chucked our Constitution. I know folks hate to hear it but liberty and freedom can’t be legislated from a bunch of self severing hacks in D.C.
Of course I think you are a party hack if you disagree with anything Obama has done. You know why? Because he hasn’t done a thing!
nancy peslosi when asked about the constitutionality of ObamaCare at a press conference:
“Are you kidding?”
That pesky old constitution written by a bunch of dead white dudes. Like that has any relevance today, right? And besides health care insurance is a right (just like free mortgages, free gas in the car, free cell phones and 99 weeks of unemployment insurance). To hell with what the constitution says.
Don’t care what party anyone follows, plain fact is this country was not founded on “big” government, period, and for good sound reasons.
“Are you kidding?”
Not trying to side with Nancy or anything but the Preamble does state that one of the purposes of the Constitution is “to promote the general welfare”.
Nancy could easily latch onto this phrase as justification for her agenda.
but the Preamble does state that one of the purposes of the Constitution is “to promote the general welfare”.
But do you really believe it means cradle to grave? I think it means to give you a chance to success on your own, not create success for you. Socialism hasnt created anything but dependents. I think this is what the creators felt they meant, do it yourself. They just didnt think they had to spell it out. Back then, people took care of themselves.
Combotechie. What is the difference between “promote” and “provide?”
“What’s the difference between ‘promote’ and ‘provide’?”
The framers of our Constitution used the word “provide” in the phrase “provide for the common defense” and they used “promote” in the phrase “promote the general welfare”.
These are their words, not mine. The purpose of my post was to point out a defense for Nancy’s “Are you kidding?” response, nothing more.
“But do you really believe it means cradle to grave?”
It doesn’t really matter what I believe, it only matters what the Supreme Court believes.
But, since you asked, my answer is: No.
Well we have a wise Latina on the bench now, and I’m sure she will interpret it correctly.
“…do it yourself. They just didnt think they had to spell it out. Back then, people took care of themselves.”
Ha, how many millions of Americans can remedy the “Check engine light” with a screwdriver & $8.00, O.K., I’ll throw in balin’ wire & chewing gum
Actually, the preamble is generally considered not to have any legal siginificance. It’s just some pretty words at the beginning of the constittution that state what its purpose is.
Well, Eddie, since constitutional scholar is apparently yet another field you dabble in, perhaps you can tell us — citing the appropriate legal precedents as well as the source documents, of course — why exactly this proposal would be unconstitutional?
Her quote was ‘are you serious’. Not that it makes much difference.
Her press agent responded later to the reporter saying congress’ authority over interstate commerce gave it the authority to mandate health insurance.
wise Latina on the bench now ??
Yeah…sitting right next to a lily white swinging D…
Her press agent responded later to the reporter saying congress’ authority over interstate commerce gave it the authority to mandate health insurance.
How does that work, exactly? How is mandatory health insurance related to interstate commerce? And, if it does give it the authority, then what *isn’t* within the realm of interstate commerce?
How does that work, exactly? How is mandatory health insurance related to interstate commerce? I can only point out that Medicare is mandatory health insurance, and very, very few people think it is unconstitutional & should be abolished. Making health insurance mandatory for the rest of the US is just another step.
“…what is so peculiar is that neither party is very far apart.”
Not at all peculiar, and easily explained by voter equilibrium and the Hotelling location model.
Suppose all the voters in the country were lined up along a road running from west to east, with the most rabid right wing extremists (ditto heads, Neocons, Fox News listeners, etc) at the east end of the road and the barking moonbats way out west on the left coast. In the middle you would find voters who thought both parties sucked or who for some other reason felt somewhat indifferent between voting one way or another.
Now suppose some principled candidate came along and decided to run on the basis of his principled beliefs rather than simply to try to capture as many votes as possible. If he happened to lean to the right, then suppose his positions only appealed to voters from Kentucky to the east. In that case, a less principled candidate who only cared about winning the election could beat him by positioning his campaign slightly to the west of Kentucky, and capturing all the votes further along the road to the west.
The same argument applies to any candidate who positioned his campaign much to the West of the Mississippi. Hence the two-party voter equilibrium will be found with the right-leaning candidate just to the east of the left-leaning candidate, with both squarely in the middle of the road.
How does that work, exactly? How is mandatory health insurance related to interstate commerce? And, if it does give it the authority, then what *isn’t* within the realm of interstate commerce?
That’s the 64,000 amero question, no? The supreme court is very deferential to congress on how broad they want to interpret the commerce clause- as I suspect you know, being a libertarian (?) I would assume this is one of your chief areas of disagreement. The supremes’ postion seems to be that it’s up to the democratic process to determine the extent of the clause. If the people sense over-reach, let them vote in new congressmen.
“…do it yourself. They just didnt think they had to spell it out. Back then, people took care of themselves.”
What a myth Hollywood created and sadly people believe it today. The lone cowboy doing it all by himself.
Take another look at US history. People survived working and helping each other out. Being a loner in those days could get you killed.
It don’t matter in the long term about this health insurance. It’s water over the bridge.
The socialists are ostriches who conveniently ignore the huge darker cloud of a big entitlement crises looming overhead.
Tens of trillions of dollars of debt. No wealthy income can pay for it all. It’s going to be either a huge serf-like tax on people of Muggy’s generation for a couple of decades or it’s going to be cured by simply shutting the window and saying - we ran out of money. Sorry. Turn to your relatives for social security or medicare.
There are a few bloggers here who do not see the big picture of the much bigger entitlement crisis ahead.
If the people sense over-reach, let them vote in new congressmen.
Which basically says that the gov’t isn’t limited in this regard. Yes, as a little ‘l’ libertarian I have an issue with this.
“There are a few bloggers here who do not see the big picture of the much bigger entitlement crisis ahead.”
The coming entitlement crisis was discussed a few years ago on Patrick. I bust boomer chops often, but it will be a huge issue. I can imagine a scenario in which my whole life is marked by slowly decreasing home prices — there is no other way to free up the loot to move it around for things like piss pots.
Housing must decrease as a percentage of income, unless we all plan on living in 5,500 sq.ft. McMansions with no teeth, which is not an impossible outcome.
EddieTard….. you’re allowing me to live rent free in your head.
Nope, no ‘new’ villains, the same old rehash over and over again.
Por ejemplo, James Baker etc of the 80’s still pulling strings.
I vote for Dick Cheney and his merry band of warhawks leftover from the days of Nixon.
Spending $800B on a stimulus plan that diverts money to the 99th district in SD is nothing?
Bowing to the Saudi King and Japanese Emperor is nothing?
The midgetry is expanding
Bowing to the Saudi King and Japanese Emperor is nothing?
It is nothing to me. Maybe a sign of respect to them. Do you think it is an impending sign of socialism? That Obama wants to turn America over to some consortium of Saudi & Japanese monarchists?
Does it make you feel like less of a man? That America isn’t as tough as it used to be?
OMG where is Hwy50 anyway? Off with Oly?
We need to do a round up. where are they?
Like a tv show from the 70s, where are they now.
Getting it right for once, Eddie. The amount of blame knows no limits. There are so many guilty parties, from every background.
Please tell me which one of the following people are baby boomers? Chris Dodd, Robert Rubin, Ronald Reagan, Alan Greenspan, Nancy Pelosi, Harry Reid, Barney Frank, oh, the list could go on and on.
Early boomers are about 64 these days, IIRC.
Ronald Reagan is now responsible for the housing bubble. Why only go back to 1980? I say we blame John Adams.
Who appointed Greenspan? Eddie, put down the keyboard and quit proving how big an a–hole you are.
Wow. So Reagan is to blame because he appointed Greenspan in 1987 and then about 15 years later Greenspan lowered interest rates to 1%.
I guess the fact that Clinton re-appointed Greenspan slipped your mind?
Party hackery is such an ugly thing. It really is.
Beyond moronic!
A lot of us point back to Nixon… of course it all points back to Woodrow Wilson and creation of the Fed.
Rand-Reagan-Greenspan
The fountainheads. The rest is play of the waves.
(But it’s not really their fault. They just played their roles in the cycle.)
Now I see Ayn Rand is the cause of the credit bubble! Wait…Ayn Rand stole a lot of ideas from Aristotle. So why don’t we blame Aristotle for this credit bubble?
It’s only 1:18pm. But you guys are driving me to open a bottle of wine.
Rand provided the philosophy, Reagan made it the national zeitgeist, and Greenspan implemented it. And down the rabbit hole we went. Again. (Enjoy your wine. A votre sante!)
It’s only 1:18pm. But you guys are driving me to open a bottle of wine.
You make that sound like it’s a bad thing. You should be opening the wine anyway
Well if you just look at the national debt and the message that we can live beyond our means by borrowing money then I would say Reagan is right up there as being responsible.
Zfacts.com has a nice graph of debt per GDP you’ll notice it rises very quickly under Reagan.
Yep. I believe our current crisis really got legs during Reagan’s term and due largely to the debt amassed because of deficit spending.
Nobody wanted to listen to Jimmy Carter when he suggested we tighten our belts and notch things down a bit…
” But Bill Bonner may be right, the Boomer’s kids are probably going to spit on all our graves one day for leaving them such disarray. (”Spitting” may not be the only thing they’ll be inclined to do!) Bare Branches.”
Oh Bull. Sh(bleep)t. We’re boomers. We’ve lost jobs. We’ve kept jobs. We’ve made financial mistakes. We’ve picked some winners. We haven’t spent it all. We have money in the bank. We have retirement savnigs. We have a paid-for retirment house. We have health insurance. We will be leaving our daughter with at least $ 2m when we finally croak, or better. She won’t be spitting on our graves, I assure you. Dancing on them, maybe….but certainly not spitting on them. Don’t everyone be so dramatic about the boomers. That would be about as stupiad as me saying that everyone around the age of 30 is lazy and stupid, which is totally untrue, and we all know examples of any and every group of people who are bad examples of the group as a whole. Not everyone has been drinking the Konumerist Kool-Aid. Geeze.
I don’t think Bonner was talking about what you personally are going to leave to your children. He was referencing the national (un-payable) debt we will be leaving them. Also you may be leaving 2m but be sure and check out the death taxes.
Silverback:
$1M of that will go to the IRS. Assuming you stick around for another 10-20 years, by then that $1M might be her a nice car. Unless you think that printing $1.5Y a year will NOT lead to the rapid devaluation of the dollar.
Oh, no it won’t. I very much doubt that. Besides, I’ll be dead.
If sliverback ‘invests’ the $2M in the rigged stock market I’m sure it will be worth $20 billion in ten years. You should get in Eddie. Buy now or be priced-out forever!
No, it’s not “invested” in the stock market per se. A little bit is, yes, but most of it isn’t….too cautious we is. Besides, It Hurts, It Burns, The Precious (stocks) Does.
Press:
I’ll keep my money in stocks. You keep it in a 0.25% APY checking account. We’ll talk in 10 years and see how we made out.
You do that, bigshot.
You assume that I’m entirely stupid. I’m not entirely stupid, even if I’m a little dumb sometimes. I’m smart enough to know that no-one, no-one at all, can predict what’s going to happen next. Assets go up, assets fall. We have been burned on some things and have been extremely successful in others. We, therefore, have a “mix” which suits our needs. We can sleep at night because we keep our bills low and we have some safe money, but we also have some stocks which are paying nice dividends, real estate ( GASP ) most of which was acquired before this mess, IRA’s, my 403b, bonds, old old cars which are paid for, CD’s and metals. It took a long time to build this up, though. We’ve both been through tragedies and difficulties and have learned to survive. That being said, things can still obviously go wrong. More of our assets being spread around helps mitigate the loss. We have very good rates on most of the CD’s because we took them out several years ago and we went long-term on them. Keep all of your money in stocks, and we’ll keep ours the way we want to, and we’ll talk in 10 years, or even 20, and see how we all made out
I think it’s time to give Eddie and his silly little thoughts the collective IGNORE. Don’t expect a straight discussion with that guy.
Eddie,
We all have some money in stocks around here. Who doesn’t?
Basically not looking forward to the complete havoc of a currency collapse either. Your stock portfolio will not mean much in that case.
Also, plenty of risk in the markets. Leverage is still high and the whims of the Fed and treasury can change at any time with respect to loss requirements. That could crash the market.
Plenty of book cooking going on to. Remember how they changed mark to market rules.
Lots and lots of bad risks out there. And the trade deficits are still a major problem.
“We all have some money in stocks around here. Who doesn’t?”
I even put money in the stock market, as current low (or negative) inflation could turn into rampant inflation as we climb out of this recession if things turn out similarly to how they did in the early 1970s episode.
A bear has to hold his nose while investing in a market which is so obviously manipulated, and which is likely to endure at least one more major correction before we are out of the woods on this financial crisis.
Quite wise, PB.
$1M of that will go to the IRS. ??
What tax code are you working off of ??
“stupid”. Going back to bed after taking my antibiotic. No more typing without glasses on
I’m thinking wmbz is right for the most part.
In my case I’m one of four siblings. 75% of my little group did not save a dime. 75% of my little group is going to expect entitlements (and the younger Americans) to take care of them when they are too weak to work.
So if 75% is the norm, there are only two ways to deal with the $57 trillion cost of entitlements: 1) Double or triple the tax rate of everyone earning above $75,000 - this would cause the biggest tax revolt and turn even Measton into a sworn bonafide Ayn Randian individualist; or 2) Forgive the debt and shut down social security, medicare, and stop all unconstitutional spending.
I am cheering this $57 trillion debt because either way we are going to be forced to turn to a small government society, a libertarian society of individual responsibility. It may not happen in my lifetime, but it will happen in Muggy’s lifetime.
As for me, If I’m lucky I will be in my same contract engineering lifestyle the next ten years and I will be able to retire in California. I could retire now but that would put me in, perhaps, Yuma!
Look at the bright side, no heating costs.
50% of people pay $0 income tax. Entitlements ain’t goin’ nowhere. There is absolutely no way ObamaCare can be paid for. Is that stopping them from implementing it? Hell no. Just raise taxes on “the rich” a little more and presto, everyone gets free doctor visists. See how simple that is? Now rinse and repeat with “green technology investments”, social security, never ending mortgage bailouts, etc. Each time there is a need for a trill or two, just add another surtax on “the rich”.
And the 90% that isn’t rich just baaaahhh baahhhhh baahhhhs along with it. After all working and paying for things is hard. Taxing the rich and not working is a lot easier.
Obama care equals Medicare insolvency fix,
the rest won’t work.
Eddie, things can change.
Either taxes go extremely way up or entitlements get stopped. To pay the bill for the entitlements (including interest on the federal debt) people born this year will have to be taxed on 87% of their income when they start working.
Either low income people will have to pay income taxes again and join the rest of the serfs to the State or all entitlements will be stopped.
“We will be leaving our daughter with at least $ 2m when we finally croak”
Is this a goal, or incidental?
My dad will be leaving my sisters and me some loot (not $2m), but I told him to blow it on traveling the world, but he refuses. I will save it for education and health care.
My sisters are already making plans for this money, and that disgusts me.
All this focus on blame, that generation, that political party, that bank, & etc. remeinds me of the Grief Cycle, which I contend is also the Mania Cycle. The Blame Game center stage would put us in the early second stage of the cycle: Anger. We certainly have seen several years of solid Denial, now waning. Still to come are Bargaining, Depression and Acceptance.
I doubt we will experience effective reform on a broad scale until the last stage.
I especially believe that the “Depression” state may last a particularly long time, as in the ” 2ND Great Depression”….
“I doubt we will experience effective reform on a broad scale until the last stage.”
Read this book for a pessimistic take on the prospects for ‘effective reform.’
The basic problem (and one I suspect our green-shoots-planting leaders understand well) is that with eventual recovery, the impetus for reform goes by the wayside.
Pbear…Did you see the Galbraith interview with Moyers ??
Do you mean James K. Galbraith?
The book I cited above was written by his father (John Kenneth Galbraith).
That is a fantastic interview, and points up what a tragic figure Alan Greenspan was. In deference to Greenspan, he had the good grace to acknowledge his mistakes in public, something I have seen few other public figures willing to do.
Too bad there is almost no evidence that anything has been learned to fix the problems Galbraith cites, particularly the problem of restoring trust in the banking system. Enabling banks to use accounting tricks to hide balance sheet ugliness hardly seems like a promising direction.
James Galbraith spoke optimistically about how, unlike the years after 1929, we can avoid people losing their savings and keep unemployment from hitting the 25 percent reached in the early 1930s.
With broadly measured unemployment at 17.5 percent and still climbing, and many people hundreds of thousands of dollars underwater on their mortgages, I fail to share his optimism.
frankly, I’d fire the whole lot of us and turn the keys over to the next generation.. boomers were/are the worst generation this country has seen… period.. even the youth of today are a little brashy, so we failed on the family front too IMO (and I’m a dad)..
I happen to be enjoying a Rolling Rock breakfast beer, unfortunately it was not served by a bare-breasted women…
Beer-Brewing Women, Soused Workers Built Pyramids:
Nov. 21 (Bloomberg) — “The mouth of a perfectly contented man is filled with beer,” according to the ancient Egyptians, and on that basis it was a happy society.
Bare-breasted women engaged in sudsy brewing work adorn tomb paintings and clay models from the dynastic period. To slake his thirst, each laborer on the pyramids got a daily beer allotment of 1 1/3 gallons. Everyone partied at the annual celebration of the Drunkenness of Hathor, goddess of fertility, motherhood and the Milky Way.
As a luxury associated with the divine, wine was the royals’ drink of choice. King Tutankhamen was buried with 26 ample jars, including a nice red aged by chief vintner Khaa, and a sweet white from the Estate of Aton.
Human beings have been consuming alcohol for millennia, with the earliest evidence appearing around 8000 B.C., and it has been both praised as a sacred intoxicant and condemned as a satanic drink.
Did you expect them to drink water? More likely, beer was the only thing that they could drink that didn’t cause dysentery.
Hell no, I drink very little other than beer. Our city water system is chalked full of chlorine, and god knows what else.
Chlorine keeps the bacteria from growing, another thing you don’t want in your city water….
Yep, I know, been in swimming pool business for 30 years.
That’s interesting. Are you making a go of it in this economy, wmbz ? I believe that an older, established business would have a better chance of surviving than some of the glitzy ones started up a few years ago. I’ve noticed that very few of the pool/hot but/spa, fireplace, and pool table businesses have closed around here, even though business must be way down. The ones that folded tended to be new startups or expansions of older businesses. Exercise equipment retailers and plenty of home furnishings stores have closed in droves.
“I drink very little other than beer. Our city water system is chalked full of chlorine, and god knows what else.”
…
“…been in swimming pool business for 30 years.”
Time to start adding more beer to my weekly shopping list…
Pool service should be recession proof. Algae don’t care what’s happening in the economy.
“Pool service should be recession proof. Algae don’t care what’s happening in the economy.”
Draining the pool will take care of the algae problem. It will also take care of the expense of having a pool service.
When money is tight non-essentials have to go, and that includes swimming pool concerns.
People with no money don’t give a sh-t about algae.
Sure, having a green pool is loads of fun, the extra fun part is the mosquitos that start using it as their new home.
Winter’s good for one thing, now that I think about it — kills off the mosquitoes.
“Winter’s good for one thing, now that I think about it — kills off the mosquitoes.”
I never seen a snail here in the Columbia Basin; too cold.
“Draining the pool will take care of the algae problem.”
And give birth to alternative sport.
In the 90s, in MA and NH people were filling their swimming pools in.
“Algae don’t care what’s happening in the economy.”
Not so. Anyone who has read here for very long realizes the housing bust resulted in a bull market in algae covered swimming pools.
I’d think DIY pool maintenance would be a common stepping stone on the path to the green algae pond. But they’d both (DIY and surrender) cut into the pro’s share of the market. Might be why wmbz’s got so much time to research and post ? (I salute your morning beer, though, wmbz.)
Buy an AquaRain or Berkley water filter. Mine’s about the size of a coffee urn and cost over $300, but it gives me pure, great-tasting water for pennies per pitcher.
Don’t mistake the past for today’s world. With a much smaller population to support and get polluted by, I would guess water sources 5000 years ago were a lot purer than they are today.
Nope. The whole miracle of Jesus turning water into wine wasn’t so he could through a raging party, it was so he could purify the water that was available to drink.
Remember, the population 2000 years ago might have been much smaller, but the density within cities was not only about the same as today; but the treatment systems for sewage consisted of…well, nothing.
“A central bank’s primary function in every nation is to keep large banks in the banking cartel from going bankrupt. The big banks are never allowed to go belly-up.”
~Gary North
Fla. jobless rate climbs to 11.2 percent in Oct.
TALLAHASSEE, Fla. — Florida’s unemployment rate continued its steady upward climb in October to 11.2 percent — a mark last seen in the 1970s and a tenth of a percentage point higher than September’s adjusted rate, state officials said Friday.
The number of unemployed Floridians topped 1 million in September for the first time. It remained slightly over that mark in October at just over 1 million out of a labor force of nearly 9.2 million.
Florida’s October rate was the seventh highest — tied with Kentucky — among the 50 states and District of Columbia and exceeded the national figure by a full percentage point. It was Florida’s highest since June 1975, when it also was 11.2 percent. The last time it was higher was 11.9 percent in May 1975. It’s up 4.3 percentage points from October 2008.
“This rate indicates that Florida’s families and businesses are still facing challenges, while fewer job losses reveal slight improvement in the economic climate,” said Agency for Workforce Innovation Director Cynthia R. Lorenzo.
While the state is continuing to shed jobs, the loss rate has dropped. Florida had 339,600 fewer nonagricultural jobs in October than the same month last year. That’s a decline of 4.4 percent compared to 5.4 percent for September.
Three sectors of Florida’s economy have been hardest hit: Trade, transportation and utilities; professional and business services; and construction account for more than two-thirds of the state’s job losses. Health care has been the only growth sector for most of the year.
September’s rate initially had been announced as 11 percent but later was adjusted to 11.1 percent.
If not for the state’s declining labor force — down by 25,000 in October and 142,000 over the year — the unemployment rate would have been even higher, said Agency for Workforce Innovation economist Rebecca Rust. She said those who have given up looking for work include people who have decided to retire early, go back to school or leave Florida.
Well, other states have been coming round to sharing Michigan’s point of view that things stink nationally, albeit a little bit more slowly
And as a result, Florida is going to raise the unemployment tax. This small business sees it going up TWELVE-fold. Way to go, Tallahassee! That oughta really help businesses recover.
http://www.wjhg.com/news/headlines/70647107.html
Yeah, that’s what happens when you get cockamamie stimulus policies like extension of unemployment benefits.
The article says one employer’s tax for eight employees will go from $67 to $800.
If an employer is on the margin of going out of business at $67 then he’ll be over the margin at $800.
If he is forced out of business then eight more people - his ex-employees - will be added to the unemployment ranks.
If enough employers go out of business - if enough ex-employees are added to the unemployment lines - then, by the same logic, another tax increase should be levied against employers.
And so on.
Wash, rinse, repeat.
It’s called the “Death Spiral Model”, something USPS has down to a science. I saw this happen in the ecommerce biz. USPS was going great guns as a result of the “ebay effect”. Although not just ebay, but other companies like Amazon, etc. that were shipping stuff like mad. Lots of small sellers like myself, too. Downturn comes, they raise rates, more sellers can’t afford to ship, drop out of ecommerce. Raise rates, less business, raise rates, less business. And so on.
This death spiral model brought on by tax increases encourages employers to cheat on their taxes.
Employers who are able to cheat the best get to stay in business; the less adroit are forced to close their doors.
Eventually, if carried to the extreme, the only employers left will be tax cheats and hence the tax revenue will go to zero.
Same thing in hawaii, per employee unemployment tax going up nearly $1000 per month by next April! This will kill many businesses on the edge.
I’m pretty sure those numbers are yearly, not monthly. Otherwise please provide a link.
The problem is that states underfunded their UE programs during the boom times. Same old same old. But lowering taxes excites the electorate.
We need another $800B porkulus ASAP!!
Yeah and California’s official jobless rate is above 12.5%. I don’t think it will peak for another year.
California’s official jobless rate is above 12.5% ??
And that should do wonders for the revenue stream to Sacramento…Combine the “real” unemployment rate, the contraction in working hours and pay and the underground business and its going the be a nuke bomb that goes of next spring in Sacramento…
Yup 12.5% in October. This was in the Daily Breeze a couple days ago.
http://www.dailybreeze.com/business/ci_13837160
Interesting, Torrance’s was under 7%, LA County at 12.8%, of course official unemployment rates.
It was interesting about the IOUs for CA tax refunds this year. The 2009 tax year excuses from Sacramento will be a real doozy!
On thebusinessinsider.com (google “societe generale gold”) there is a presentation “SocGen: Prepare yourself for the Worst Case Scenario”
Well they show that federal (US) tax revenue is caving in. This has been ongoing since 2007.
Methinks a lot of wealthy people are not selling stocks for fear of incurring capital gains. That’s one reason. I certainly am sitting on my stocks. My treasury gains are very miniscule, as are those of the rich people, so another reason tax revenues are rapidly declining.
And they keep pushing for more spending. This government is nuts!
The Auction
Yesterday, my husband & I were having a fun Saturday. It was a fine kind of day with more sun and warmth than was predicted by the weatherpeople, and I have been quite sick with a sinus infection, and had decided not to do some overtime, so I stayed home and rested. Later on, we got up and went out for brunch, then took a nice walk, checked on “OUR” office ( only a few more days to go until the final eviction hearing - it’s still a pigsty inside, and we have our work cut out for us, of course ), and we drove over to see my sister’s new house she & my brother-in-law are building on a nearby lake. They recently sold their long-time home at top dollar, but it’s been architect remodeled and it was in extraoridnary condition ( not just replaced kitchen vinyl, etc. ). We also noticed a an auction going on at a huge older home near our little sub, which I’ve always been curious about seeing the inside of. We said “why not” and stopped by.
The place was extremely crowded, as Michiganders are always ones to check this kind of thing out and pick up a few bargains if possible. Well, the house was quite a pile of bricks in it’s day, but was let go terribly, and was so deteriorated that they had to cut a piece of drywall to go over the crumbling brick front steps just so the crowds could get inside. When we got in there, I was quite disappointed in the design, since it was all chopped up into little rooms with horrible decor. That being said, the items being auctioned off were amazing, in the sense of ” we spent all the dough we ever made”. The auctioning was going on off the side of the house with the triple garage, and the amount of collectors’ items being brought out was amazing. We arrived when the collectors’ guns were being brought out, and I know some of the pistols went for very low prices. The piece d’ resistance was a Winchester 50th anniversary commemorative rifle all covered with gold and silver plating and other fancy things ( can you tell I’m not a shooter ) and display case, which was “guaranteed never to have been racked”, ( well, that would have ruined the finish, eh ? ) and which the owner had paid $ 6000 for originally. The crowd wasn’t exactly ugly about it, but I could tell that a lot of the old boys and some of the girls too, thought that it was kind of funny rig. It went for $ 1100. Yikes, that’s a haircut. Then they auctioned off a big motorhome ( bus-sized ) bought in 1993, with all of the special trim that could be ordered, plus ( of course ) custom counters, and such. It had 100,000 miles on it, but new Michilin wheels, a Detroit Diesel engine, and it was the only thing in the auction which had a reserve on it. The owner ( a good old “builder” who’s clearing out of the state evidently ) started her up, and it did sound nice. The steps up to it were broken, but we got up into the inside of it, and it was quite dated, but in good shape. Plus it came with a slightly rusted brass sign on the outside which said ” Private Coach”, and a train whistle. Yep. By the time the bidding started on that, the owner’s family started looking tense. They wanted that cash ! It sold for $ 55K without too much bidding ,but it was over the reserve. The house had fancy multi-level decking and a very nice inground pool, all of which had been neglected and had gone to rack and ruin. The house and grounds accoutrements can’t be over 20 years old. Just waste, waste, waste. We left before they began auctioning off the collectable guitars and mandolins…..
Wow, I didn’t realize a house could so go to pot in as little as 20 years.
By the way, are the any reports of Toll Brothers homes going to pot? They were supposed to last five years and then fall apart. We’re on that 5-year mark right about now.
Well, the architecture, decking and decor were sure mid-80’s to early 90’s, including the white-oak ( I think they called it pickled-oak ) kitchen. By the way, they were even selling the custom built-in refrig, stove ( both with white pickled oak fronts ) and the dishwasher ! They were tagged. I was amzed, since that will gut the kitchen out, and that’s the nicest room in the house. I have no idea. I’d think it would sell for more with those appliances still in place, but it isn’t my house or decision…
“extraordinary” More caffeine to the typist’s fingers, please.
Say can I get some help here.
I know alot of people here have the opinion that we shouldnt argue or fight with friends/family/co workers about real estate. I can understand the rational for that.
However I have family in bakersfield and they have witnessed the drop of homes from 300,000 to about 150,000 and I think they will fall back to pre 2000 levels.
I keep butting head over “it will come back if you wait” I told my cousin the other day “no it wont come back” he said well if you wait long enough. I told him it was a credit bubble prices were totally out of line with incomes and that if you want to see 300,000 dollar houses in bakersfield you will when the normal salary in the area is 100,000 a year.
Is there any other proof to show that it aint coming back
I don’t think it’s worth arguing with cousins about anything. I don’t even argue with my brother and sister very much. Now my Dad, he’s almost 85, and full of vim & vigor, and he likes to argue, except that he calls it ” discussion”. It makes him happy if I oppose him a little bit, so he can explain his viewpoints at length. He’s extremely sharp and reads tons of books, other publications, eats vegetables, excercises for 1 1/2 hrs. per day, including with weights, and is a delight. He still captains his two boats ( both bought used, of course ), a little one in Florida and a big one up here. Well, the big one doesn’t go out too much anymore, but he’s still the captain, so that has to count for something….
Your father is like Jack LaLanne! Congratulations! I have experimented with a mega-vegetable diet (8 or more servings a day) and I can say it gives me a lot of energy and alertness. For now I am into the 4/5 servings of fruits and vegetables per day.
Thanks ! He & my stepmother do follow a Jack LaLanne lifestyle. They eat 5-6 servings of fresh vegetables a day, swim, Dad lifts weights, and they walk at least 2 miles a day on the beach in FL when they’re there, which is considerably better exercise than walking on pavement because of the constantly shifting sand. So far, so good for him. I think he’s just naturally an optimist which also helps him. He did close an account at a big bank in Florida because they had made too many shaky housing loans, thus fueling the housing meltdown. He told them so when he was closing it. He said the customer service rep was dumbfounded….I think he believes he has 15 more years at least. I hope he gets them, too, as long as his health remains good. My mother died 5 years ago of a fall/aneurysm/Parkinson’s/Alzheimer’s and that was sad. I’d rather just conk out and never wake up than go through what my poor mother did.
mega-vegetable diet (8 or more servings a day) ??
Do hops & barley qualify ??
“Now my Dad, he’s almost 85, and full of vim & vigor, and he likes to argue, except that he calls it ‘discussion’. It makes him happy if I oppose him a little bit, so he can explain his viewpoint at length.”
Lol, according to my wife and kids this is a discription of myself.
But going to your Dad’s defense, arguing (er, discussing) a point acts to clarify the point, which leads to furthur understanding of the point.
After midlife (so I’ve been told) the drive to learn new things diminishes while the drive to understand what you have already learned increases.
Knowledge and understanding are two entirely different things.
For example, a small child learns at an early age that mixing yellow with blue produces green. This is KNOWLEDGE.
It’s only after he learns about how the eye works, how the brain works, what electro/magmagnetic waves are, etc. that he UNDERSTANDS why and how yellow and blue produces green.
To be honest, the man keeps up with more than I do. He’s extremely tuned in to current events, is an Uber-Liberal that can argue ( nicely ) points with his Uber-Conservative friends, reads several hardback books at once, and goes to about 6-8 conferences a year on such things as the Holocaust and the global overpopulation crisis.
He did tell me he’s not going to do all of the maintenance on his big boat this year to get it ready to launch this spring. He’s paying some people at the marina to wax the Awlgrip paint on it ( keeps the paint job good for a few more years since marine paint is so expensive ). I accused him of getting lazy at the age of 85. He told me he figured he’d earned a rest. Well, I guess….I do whatever I can to make him laugh since that helps keep hm young.
My dad’s still kickin’ and uber-liberal too. He told me the WWII generation fought together to kick German & Jap a$$ and then worked together to build their companies. Having each others back the whole time.
Nonsensical tripe.
My dad was a Reagan conservative and a disabled WWII vet. I miss him.
“Is there any other proof to show that it aint coming back.”
Google-up “mortgage reset chart 2009″ and you’ll get all the proof you’ll need.
The proof will dawn on them if they stare at the chart long enough and think about what they are staring at.
Of course all this staring needs to accompanied by an open mind for the dawning to occur. Getting their minds to open …well, that might be another problem.
Well some people will say real estate moves in cycles, which can be true. Though most HBBer know that the last cycle was like dumping gas on fire, home prices went to the moon.
Some people think this is good, for reason I have never been able to figure out.
The others are just bitter renters like us here
My main issue is just how to say very clearly that waiting a year or two isnt gonna have your house go up, it will most likely go down.
I have no intention of discussing real estate with most of the people I know. My middle daughter and I have touched on it a few times. She and her husband are definitely in the rent right now mode since he has 2 1/2 more years of graduate school. She isn’t sure she ever wants to own but knows she doesn’t any time soon. She’s had a few college friends end up in trouble of housing purchases. She’s smart enough to learn from other people’s mistakes.
Recent Obama approval polls:
Gallup 11/18 - 11/20 1547 A 49%
Rasmussen 11/18 - 11/20 1500 LV 47%
CBS News 11/13 - 11/16 1167 A 53%
CNN 11/13 - 11/15 1014 A 55%
Quinnipiac 11/9 - 11/16 2518 RV 48%
ABC 11/12 - 11/15 1001 A 56%
ABC, CBS and CNN…..once again proving there is no such thing as liberal bias in the MSM. I look forward to the CNN poll coming out today showing 79% of Americans think ObamaCare is super duper terrific-o.
Obama could nuke orphans and he would still have a core of about 25% that would approve of his handling of the situation. Bush thought he had that 25% but it shrunk to about 6% by the time his reign of madness was complete.
My point was that the MSM makes up their own polls to have Obama at 56% while Gallup, Quinnipac and Rasmussen all have him below 50% and falling. Thiss necessitated a response that dealt with Bush. Bush derangement syndrome still in full swing a year later I see.
You are such a douche.
Nice rebuttal to my argument. Very cogent with many valid points made. Party hackery is so very ugly.
Party hackery? WTF? Show one post where I defended the Democrats or Republicans? That’s right, facts don’t matter to a moron like you. Keep the straw men coming.
A simple “I know you are, but what am I ?” would have been the correct response Eddie. You failed miserably and quite predictably.
Eddie is a neo hack…I was not surprised one bit that he hails from Georgia…
Bush thought he had that 25% but it shrunk to about 6% by the time his reign of madness was complete.
On the contrary, look up Georgie’s final approval ratings and you’ll see a range from the low 20s into the low-mid 30s.
He had a core constituency that would gladly eat a double decker sh!t sandwich on his behalf.
“Hey, everybody, look at me. I’m Eddie. I’m going to attribute to all of you things you have never said, typed or thought. I’m the King of the Straw Men. My name is Eddie. I’m going to be obnoxious and annoying but I sure the heck am not going to be accurate because my name is Eddie. So, get ready for more false accusations and silly arguments because my name is Eddie.”
NYCityBoy, while I enjoy your regular commentary, mocking others just doesn’t seem necessary. Yes, I know you couldn’t care less what I or others think (part of what I like about your posts). But we get it. You don’t like Eddie. I doubt many here agree with him, but some of us do appreciate his posts from time to time.
Can’t you two just agree to ignore each other?
In other words, grow up.
Or better yet, do what I did to deal with the posters here who annoy the living snot out of me: write (and use) a software utility to automatically ignore their posts for you. Heck, I’ll even let you skip step #1 and use mine
http://home.avvanta.com/~drumminj/joshuatree.html
Doesn’t it seriously make you crazy to know Eddie is posting and wonder what kind of annoying things he is saying without reading them?
PB, that was certainly the case when I started using the ignore feature (no, I’m not ignoring Eddie). I kept expanding the ignored threads and getting all riled up again. I learned pretty quickly that I’m better off just not even poking my head in there.
Sometimes ignorance is in fact bliss.
Rancher, stick to coffee updates.
Awe, come on… let NYCB have his fun
Landmark Plant Cuts Workforce
November 21, 2009
For nearly 12 decades, the presence of the California Portland Cement plant in Colton has been as dependable as the rock it was built on.
For 118 years, the company mined limestone and used 3,000-degree kilns to turn it into clinker bricks, then ground the clinker into cement powder.
Mayor Kelly Chastain said the plant and its workers were part of the fabric of Colton’s civic life.
So the layoffs Friday of three-quarters of the plant’s work force rocked the area like of one of the dynamite blasts used to dislodge rocks from Mount Slover.
“It was a tough day,” said James A. Repman, president and CEO of the Glendora-based firm.
Like any business driven by the construction industry, Cal Portland has had cyclical layoffs, Repman said. But he never has had to lay off this many people in one location before.
Ninety-four workers at the Colton plant lost their jobs. The mining of limestone stopped. The kilns were shut down.
Only 37 workers remain. They will continue grinding existing clinker into powder. But Repman said he doesn’t expect mining and clinker production to resume at the Colton plant for years.
The economic slowdown has brought construction nearly to a halt. Demand for cement has dropped from 25 million tons a year to 10 million tons, he said.
But Repman said he doesn’t expect mining and clinker production to resume at the Colton plant for years ??
Maybe never… Capacity built on a Bubble…
Yeah, no cash for clinker program yet.
China produces more cement than the rest of the world combined, what’s this thing about overcapacity you say?
That’s odd. I’d been hearing stories about how China had been importing cement from all over to build dams, and that had pushed up the price of cement in the US during the recent boom years.
Art imitates life:
“Dunder Mifflin, the fictional paper company at the center of NBC’s prime-time comedy “The Office,” is facing bankruptcy. Staffers in the Scranton branch are anxious about their fate.
“The Office” is among a great many prime-time shows that have integrated recession-era themes into their plotlines this fall in an effort to reflect the changing American economic climate. Art imitating life on television can offer a sense of solidarity for the viewing public and a new type of coping mechanism for dealing with recession-related stress”
http://www.cnn.com/2009/SHOWBIZ/TV/11/19/recession.tv/index.html
I walked along 8th Street today. That runs east to west and passes by NYU. I saw more homeless people than I’ve ever seen. A lot of stores are still closed. A few new businesses have taken the spot of some of the empty storefronts. These are brave souls. There are still many vacancies.
The prices at K-Mart are getting higher but the staff the past two times has been unusually friendly. I thought I was in the wrong store. Will this bust ever bring back good customer service? Maybe!
http://hotair.com/archives/2009/11/22/video-snl-destroys-obama-over-spending/
Never thought I’d see this - SNL totally skewers Obama over his reckless fiscal policies. HILARIOUS - has one of you HBBers infiltrated the SNL comedy writer staff?
I saw that while posted on another blog. How can Washington D.C. not understand that the corruption is not secret? The anger is growing. They just don’t get it. The new term used by the D.C. and Wall Street thugs is to call the “audit the Fed” crowd “populist”. I guess that is seen as this week’s ultimate insult. Nobody trust any of them any more, regardless of what they are spewing.
Send the emails to Judd Gregg. He has vowed to filibuster any “audit the Fed” bill. He is leaving in 2 years. It’s not soon enough. Sunlight might crash the system. If that’s the case then the system must be crashed.
Is Gregg on Wall Street’s payroll?
Is there an (r) after his name?
Did you mean at the end of his name (e.g. Geithner)?
Pontiac, MI — Used stadium sale price has residents mad, baffled — $583,000 ‘is a travesty’
Amazing, isn’t it, that you can buy a stadium in Detroit for less than the price of a four bedroom home in our San Diego neigborhood? I suspect that prices of homes in our ‘hood have further to fall…
well, think about the costs to heat the stadium. Yikes!
Here’s a strip mall being razed in NE OH. Once the place for this city to shop, it had been declining for years after malls and a new expressway were put in. The city threatened to take the place by eminent domain, but settled with the owner for a measly $10.2 million. I think the razing costs extra. The city is talking about selling it to a developer for mixed retail/residential use, for 25 cents on the dollar.
I think it comes out to about $ 5800 per acre for about 100 acres, a stadium, all the high-use zoning you could want, fully-paved giant parking lot, and big water/sewer piping already in place. Eventually, the economy will pick up in some fashion, they’ll raze the stadium, and someone will sell that thing for $15m. I think it’s an excellent investment.
Raze it and they will come.
Who will? The urban farmers?
Consensus view amongst current and former Fed economists:
The Fed is above the rule of law.
Analysis: Fed under fire as public anger mounts
By TOM RAUM (AP) – 7 hours ago
WASHINGTON — Suddenly the Federal Reserve is everybody’s punching bag.
Strip the Fed of its bank regulation powers, some in Congress are demanding. Get probing audits of its behind-the-scenes operations, others say.
The chairman of the Federal Reserve Board is always fair game for criticism and second-guessing, usually over interest rate actions. But this year the criticism is much broader as Congress responds to widespread public anger that the Fed bailed out Wall Street but not ordinary Americans, and with unemployment in double digits.
Former Fed Chairman William McChesney Martin Jr. famously said that the central bank’s job was to yank away the punchbowl just when everybody is starting to party. And while Fed Chairman Ben Bernanke has signaled the Fed will keep interest rates low for now, a round of higher rates inevitably will come.
The Fed finds itself both the punchbowl keeper and the punching bag. Imagine the outcry when it does begin to crank up rates — perhaps just ahead of next year’s midterm elections.
Fireworks seem likely at Senate confirmation hearings early next month on President Barack Obama’s nomination of Bernanke to a second four-year term as chairman.
Many economists and Fed watchers say congressional efforts to rein in the Fed’s powers could interfere with the central bank’s ability to help guide the fragile economy to recovery.
The Fed’s very independence and its unique ability among U.S. institutions to create money out of thin air enabled it to act quickly to stabilize the nation’s financial system after it froze up last September after the bankruptcy of the Lehman Brothers investment house, Fed backers say.
“It might have been the Fed’s finest moment when it had to jump into the market,” said David M. Jones, a former Fed economist and president of DMJ Advisors, a Denver-based consulting firm. “We still have to wait to see how effective the Fed is in its exit strategy and whether it can keep inflation in check. But this badgering by Congress, even if there is populist sentiment, is inappropriate.”
…
The Fed’s very independence and its unique ability among U.S. institutions to create money out of thin air enabled it to act quickly to stabilize the nation’s financial system after it froze up last September after the bankruptcy of the Lehman Brothers investment house, Fed backers say.
I can’t imagine how that plan could go wrong. Surely people will always want money that was created out of thin air!
People certainly always have wanted money created out of thin air ever since fiat paper money was first printed. Why do you think it is going to change at some point in the near future — just because you don’t understand the concept? If you don’t like the dollar, by all means exercise your legal right to convert it into gold or whatever other real commodity you choose and stop complaining.
Something for you to ponder regarding the value of “worthless” paper money:
A central bank with the fiat money press could (in principle) print unlimited quantities of what you call “worthless paper” and use it to buy assets, such as stocks, bonds, houses, or just distribute said paper to its user base and let them decide on appropriate (fiat money) prices for all of the various goods and services traded in the economy.
Suppose the central bank printed money and distributed it to a very large base of other individuals who in turn used it to buy gold. Suppose the individuals settled on a spot currency unit for gold price of 1167.65. If the next day, that price seemed to gold market participants like too little “worthless paper” for an ounce of their Precious™, they could (collectively) set their reservation price a bit higher and force anyone who wanted to buy gold to pay more than 1167.65 currency units. Conversely, if those holding the fiat money believed 1167.65 was too much to pay for an ounce of gold, they could choose to forego making purchase until the Precious™ dealers dropped their asking prices below 1167.65.
Now pretend you, the man who believes fiat money is “worthless paper”, were handed a stack of “worthless paper” which added up to a total value of 10,000.00. Would you gladly trade it for an ounce of the Precious™, or (assuming you wanted to buy gold) would you only make purchase if you could find a dealer willing to sell you more than one ounce worth, even though gold has value and fiat paper money doesn’t in your own narrow corner of the planet?
Wall Street’s Congressional lackeys are taking the country down the wrong path of financial reform.
If these guys have their ways, your children and your children’s children face the prospect of paying for Wall Street bailouts unlimited right up until the day the TBTF USA itself fails.
* The Wall Street Journal
* REVIEW & OUTLOOK
* NOVEMBER 22, 2009, 6:39 P.M. ET
No Bondholder Left Behind
The Dodd-Frank bills for unlimited bailout authority.
‘We won’t have a real market-based financial system until it is safe to let a financial firm fail,” Federal Reserve Chairman Ben Bernanke said last week. He’s certainly right, though you wouldn’t know it from Mr. Bernanke’s own actions the last two years. Meanwhile, the politicians are preparing to give the Fed and Treasury more power to bail out all and sundry companies on an unprecedented scale, and so far without any objection from the Fed chairman.
Reading the pending bills to “resolve” failing financial houses from Representative Barney Frank and Senator Chris Dodd, the challenge is to conceive of someone who is not eligible for unlimited taxpayer funds. The list of potential bailout recipients under both bills runs from bank holding companies to hedge funds to auto makers, consumer retail chains and just about anyone else engaging in finance of one kind or another.
While most scholarly investigations of the too-big-to-fail phenomenon start from the premise that it’s a problem, Messrs. Dodd and Frank appear to view it as the cornerstone of our financial system. This may not be surprising given their history. Mr. Frank is famous for saying he wanted to “roll the dice” with Fannie Mae and Freddie Mac.
Less well known is how Mr. Dodd has labored to make Wall Street increasingly eligible for the taxpayer safety net. By raising expectations that bailouts will be available, he has, as much as anyone in Congress, encouraged the risk-taking that took the financial system to the brink of ruin.
During consideration of the 1991 Federal Deposit Insurance Corporation Improvement Act, the Connecticut Senator insisted on reducing the quality of collateral Wall Street would need to present when borrowing from the Federal Reserve in times of emergency. Said Mr. Dodd: “My provision allows the Fed more power to provide liquidity, by enabling it to make fully secured loans to securities firms in instances similar to the 1987 stock market crash.” He also fought every serious reform of Fannie and Freddie.
In his current bill, Mr. Dodd allows private market participants to receive emergency cash from both the Federal Reserve and the Federal Deposit Insurance Corporation, without the bailout recipient having to enter either bankruptcy or the vaunted “resolution” process we’ll describe in a moment.
Under “miscellaneous provisions,” Mr. Dodd’s bill rewrites a portion of the Federal Deposit Insurance Act and allows cash going to depository institutions—i.e., commercial banks backed by FDIC’s insurance fund—to also go to nondepositories in an emergency. We see no limit in the bill on what these nonbanks can be.
Similarly, Mr. Dodd rewrites the Federal Reserve Act’s section on “unusual and exigent circumstances.” Bailouts could now go to “any program or facility with broad-based participation.” Mr. Dodd’s “resolutions” do not require that firms be liquidated or wound down. Regulators can pump unlimited funds into failing firms and choose to rescue creditors.
Alabama Republican Richard Shelby warns that these multiple paths for large firms to avoid bankruptcy “will undermine incentives for investors and executives to effectively monitor risks. They will likely take even more risks because they know that they will reap the benefits, while taxpayers will have to cover the costs.” He adds that the moral hazard created by the bill “could set the stage for an even more severe and more expensive financial crisis in the future.” That sounds exactly right.
Over in the House, Mr. Frank gives the FDIC new power to pump cash into both banks and nonbanks that are neither bankrupt nor under government “resolution.” As for that “resolution” process, which Mr. Frank has described as “death panels” for nonbanks, shareholders and unsecured creditors could still recover money. In fact, they might recover a great deal, because the FDIC can make loans or buy equity in a failing company or guarantee its debts, among other assistance.
The FDIC may “take such action as necessary to put the covered financial company in a sound and solvent condition.” So the government can do more than just prevent a “disorderly failure.” It can pump in so much cash that the business becomes an orderly success. This sounds like a mandate to treat even more companies like Citigroup, which has been rescued despite multiple failures and with little discipline for shareholders or executives, much less for creditors.
To fund these bailouts, large financial companies will pay fees until the government has collected $150 billion. Republican Scott Garrett has been warning House colleagues that Mr. Frank’s “death panels” really add up to a “permanent bailout authority” that would expand the power of government and taxpayer rescues to historic highs.
Mr. Dodd decided against writing a bipartisan bill with Mr. Shelby, and it shows. For years, Mr. Shelby warned about Fannie and Freddie and the rise of moral hazard, not to mention government-selected credit-ratings agencies and bank capital standards. One might think these warnings would have inspired Mr. Dodd to seek the Alabamian’s counsel after the disasters of 2008. But down in the polls and facing re-election, Mr. Dodd wants to pose as a populist reformer even as his bill would entrench moral hazard (and cheaper funding costs for the likes of Goldman Sachs) even deeper into the financial system.
…
‘Alabama Republican Richard Shelby warns that these multiple paths for large firms to avoid bankruptcy “will undermine incentives for investors and executives to effectively monitor risks. They will likely take even more risks because they know that they will reap the benefits, while taxpayers will have to cover the costs.” He adds that the moral hazard created by the bill “could set the stage for an even more severe and more expensive financial crisis in the future.” That sounds exactly right.’
So are the Democrats emerging as the party of Bailouts, Unlimited? If this proves to be the case, I will vote Republican next time.
I do note, however, that the Republitards under W were the executors of the Fall 2008 Wall Street bailout binge.
All obama has to do to help small business is withdraw the health care bill and the cap and tax bill. Small business do not like his legislation and are scared to death of him. If he got out of the way small business would do just fine.
Yep. GOP supply side simpleton logic and denial of its failure got Obama elected and now you want him to employ it too?
Notice that neither cap and trade nor the health care bill have passed and small business has been decimated. Most of the small businesses created over the last year were created on the back of easy money. That’s not coming back so there is little we can do to save small business.
I guess things are hard all over
LIMA (Reuters) – Peruvian police said on Thursday they had broken up a gang that allegedly killed dozens of people and sold their fat to buyers who used it to make cosmetics.
Four Peruvians were arrested on suspicion of kidnapping, murder and trafficking in human fat.
The group stored the fat it collected in used soda and water bottles, which police showed reporters.
That is over-the-top gross. You have to admit it is not that bad in the US.
Why didn’t they just work out a deal with some US liposuction doctors?
Why is the administration opposed to breaking up TBTF banks? What do they have against a competitive banking system?
The Financial Times
Congress backs tougher bill to break up banks
By Tom Braithwaite in Washington
Published: November 19 2009 02:00 | Last updated: November 19 2009 02:00
Breaking up banks would be easier to do under draft legislation that cleared a hurdle in Congress yesterday. An amendment from Paul Kanjorski, a Democratic representative, was approved by a vote in the House financial services committee, allowing regulators to break up even healthy financial companies in a move that is worrying leading US institutions.
The amendment toughens a systemic risk bill from Barney Frank, the committee’s chairman, by instructing a council of regulators to examine whether the largest, or most interconnected, companies pose a risk to the financial system by virtue of their size or behaviour and should be pre-emptively broken apart.
The amendment would cover “insurance companies, banks, hedge funds, whoever may be causing systemic risk”, said Mr Kanjorski. “Most of us yearn for the day when the phrase ‘too big to fail’ is no longer a part of our vocabulary. Through responsible action advocated in this amendment, we can make that a reality.”
Large financial institutions had lobbied for the amendment to be withdrawn or modified, complaining that it would harm US competitiveness.
Administration officials had rejected incorporating bank break-ups into regulatory reform, deciding a return to the Depression-era Glass-Steagall Act, which forced a separation between commercial and investment banking, would not prevent a repeat of last year’s financial crisis.
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Some more jobs bite the dust.
http://news.yahoo.com/s/nm/20091123/bs_nm/us_india_outsourcing_usbanks
India may get $1 billion in IT outsourcing contracts: report
Reuters
MUMBAI (Reuters) – Leading Indian outsourcers such as Tata Consultancy (TCS.BO), Infosys (INFY.BO) and Wipro (WIPR.BO) stand to gain contracts worth about $1 billion in the next one or two years as U.S. banks emerge from the troubled asset relief program, the Economic Times reported on Monday.
The newspaper said JPMorgan (JPM.N), Goldman Sachs (GS.N) and Morgan Stanley (MS.N) that received approval to buy back government stake worth $68 billion earlier this year are among the firms seeking operational efficiencies by outsourcing non-core IT and back-office projects to India.
American Express (AXP.N), Bank of New York Mellon (BK.N) and Capital One, which have started repaying government debt, were also considering outsourcing, it said.
(Writing by Devidutta Tripathy; Editing by Ranjit Gangadharan)