Bits Bucket For February 14, 2010
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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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The Maricopa (Phoenix, AZ) County Assessor sent me a Valentine of sorts; my property valuation dropped to $94k from $150k in 1 yr. Down from $226k in 2007. 2 years ago Forbes called my ‘hood the 7th most overpriced ‘hood in America. Naturally, my property tax hasn’t declined by a like proportion.
link to Forbes article-
http://preview.tinyurl.com/yjc5ut5
“2 years ago Forbes called my ‘hood the 7th most overpriced ‘hood in America.”
Is this honor anything like being called ‘ground zero’ for the housing bubble or ‘ground zero’ for the foreclosure crisis?
There seems to be no shortage of grounds zero…
Property tax revenue declines like this makes one wonder how municipalities will survive, much less pay for services? I remember hearing though that roughly on 1/3 of state, municipal cash inflow comes from taxes - rest is from investment in the stock and bond market and some from fed government.
Just watched on Fox as a 70s-era condo building on the Miami waterfront was imploded, after years of being an “eyesore.”
Almost everything of and about the 70s was an eyesore.:lol:
Platform shoes. Super wide lapel polyester shirts. Pimp mobiles. The Mustang II. Shag carpet. Incredibly bad architecture.
I blame disco and cocaine.
The comment was made on yesterday’s bit bucket that the middle class living standards of the 50’s and 60’s cant be sustained in today’s environment. I dont know if I agree with that. I think that even with one income earner, with paid off cars and no debt, a family of four or five can have the american dream. It’s just the credit cards and interest rates do people to debt slavery. Having a house payment isnt as bad as some people think. It’s just the house payment and the car payment, credit card and such that hurts the american dream now..
Don’t forget annual 12% increases in health insurance!
You are right about health insurance. I am starting to come around to the “insure everyone” thingy that is being pushed on us. BUT. I am conflicted about how to pay for it. There are no easy answers. We have the best health care in the world, but it does come at a cost.
Well we DO have much more effective medical treatments than we did in the 50s and 60s. Since we want them, we need to figure out how to pay for them. Few would argue that we should go back to the days when the only real treatment for a heart attack was bed rest. Which is, at a deep level why healthcare reform failed. Many people are unhappy with the current system, where healthcare is rationed by both price (the uninsured get worse healthcare than the insured) and condition. (there is some administrator at the insurance company deciding what they’ll pay for and what they won’t) What people want is for us to pay less for the ability to consume more healthcare. There certainly are inefficienciei and profit takers in the current system, but not nearly enough for universal healthcare to be cheaper than what we’re currently paying. It simply isn’t possible to change the current system in a way that doesn’t charge somebody more and or give somebody less. And whoever that is will fight hard to stop the change.
How does the rest of the developed world manage to give everyone health care at cheaper rates than we pay and with equal or greater satisfaction? And longer life expectancies, which implies some success.
I just want to know why America is uniquely unable to do what the rest of the world can do. Surely that’s not what we mean by American exceptionalism?
health care for profit?
Well we drive more, eat more, exercise less, and shoot each other more than Europeans. (though we do smoke less) When you control for the number of shootings and motor vehicle accidents, our health-care costs are MUCH closer to those in Europe.
You got a link for that Jim A.? I find it very hard to believe that gunshots have that much of an effect on overall health care costs, and euro’s zip around on mopeds and motorcycles, which are far more deadly than cars. Rates of violent crime are actually as high or higher in many european countries, so it’s not like they’re living in some peaceful paradise. They just have fewer guns.
And what about countries like Canada, Australia, Brazil?
Completely wrong jim - re: life expectancy in Europe
Our highway death rates are WAY lower than just about every other European country. I’m not sure if violent homicides and trafffic deaths meaningfully skew life expectancy for a country’s population anyway.
I think lifestyle and cultural norms play a huge role in explaining life expectancy disparities between the US and Europe (they have more family, more walking, less tension from long work days/weeks). Sunday afternoon in the park in Europe is usually crazy with people. I only see it in CT the first warm day in the Spring, then it’s back to the couch.
That said, I’m for government run national healthcare. My father-in-law’s medical specialist gets 60 Euros for a consultation. He’s 81 today (no NOT the urologist)
On average roughly 80% of a person’s lifetime medical expenses are consumed in the last six months of life.
I’m guessing American life expectancy is doomed for a period of decline over the next three decades, as the pig-in-the-python experience of baby boom generation retirements stretches America’s resources to the point where we pay a collective price of reduced longevity.
This is just a hunch — I hope to survive long enough to see whether I was right…
Unfortunately, I don’t remember where I read the bit about controlling for MVAs and GSWs. It might have been in New Scientist. Keep in mind we’re not talking about the effects on life expectancy, but on medical costs. Both of those thing create emergency room visits which tend to be disproportionatly expensive. I admit to being skeptical about alpha-sloths assertion that Europeans are more frequently involved in fatal accidents. But of course he’s absoloutly right about them being just as violent. A friend living in London pointed out that you can buy baseball bats there, but not gloves or balls, ’cause baseball isn’t what they’re buying them for. Keep in mind, that “last 6 months of life,” includes both Grandma shut up in the cardiac care unit and mr drug deal gone bad who racks up a 50k bill in the emergency room before he bleeds out.
One major cost driver that has to be addressed is both lawsuits and the out-of-control profit motive. Physicians feel compelled to order expensive and usually unnecessary tests to avoid getting sued, and also as a way to bring in revenue from insured patients to recoup some of the costs of treated the uninsured. MRIs are a case in point. The pharmaceutical industry also gives doctors financial incentives - kickbacks, really - to prescribe money-making drugs even when that may not be in the patient’s best interest.
I don’t believe “insurance” is the correct way to pay for regular medical care. Small things like a visit to a doctor for a cold and prescription medications should not be covered, any more than car insurance should cover oil changes.
Insurance should only ever kick in on very major incidents involving hospitalization.
Insurance IS the problem! Insurance is why our medical costs are so high.
Insurance is not the problem. The problem
is the government rules that force hospitals to
treat an and all whether they can pay or not.
Look at the number of emergency care facilities
that have closed their doors in Socal due to the
cost of treating illegal aliens who have no money or insurance. So the remaining hospitals
raise their rates on those that can pay or have
insurance to cover their loses, thus the insurance companies have to raise their rates
to cover the increases in billing.
Then you have the tort problem. Every year
there are new advances in medicine and diagnostic techniques which the Doctors are
forced to use, whether needed or not, because if they don’t and they get sued, there
goes any defense of their case.
Your screwed if they do, they’re screwed if
they don’t.
Insurance is not the problem. The problem
is the government rules that force hospitals to
treat an and all whether they can pay or not.
You fundamentally misunderstand both the problem and the costs.
I suggest you do some research re: indigent/alien care and tort claims. Costs associated with both issues, while hardly insignificant, are a mere fraction of the needless overhead and inefficiency built into our system.
I think, as a surgeon, that too much is being made by the Republicans about tort reform. Democratic governor Jerry Brown signed California medical tort reform into law 35 years ago. Doctors can practice the way they see fit without worry about frivolous law suits, and our malpractice insurance is reasonably priced. Diane Feinstein has pushed for national medical tort reform for years, and it wasn’t touched for the entire six years that Republicans were in charge. Texas passed medical tort reform in 2005. I can’t understand why other Republican states like Florida can’t get it done. There is no need to tie health care legislation to tort reform.
How about the expensive outpatient stuff?
MRI scan?
Allergy tests?
Arteriogram?
Ultrasound?
X-rays?
Vaccinations?
Small surgical procedures performed in the doctor’s office like skin cancer excision, incision and drainage?
Biopsies?
Pathology readings for fine needle biopsies or excisional biopsies that are labor intensive and often require expensive stains?
Emergency room costs?
Eye exams?
Hearing tests - often require expensive equipment.
Nerve conduction tests.
Microbiology? (cultures are labor intensive)?
Outpatient cancer chemotherapy - costs tens of thousands per treatment.
Radiation therapy for cancer.
GH, you are stuck in the past. I remember when my whole family got the measles and our family doctor paid us a house call. He took our temperature and told my mom to give us fluids and aspirin. In other words, he did nothing. Actually he did worse than nothing - we now know that children and teenagers can develop deadly Reye’s Syndrome with multisystem organ failure if they take aspirin. Back then doctors could set bones, order plain xrays or blood counts, drain infections, do surgery, or administer antibacterials or pain medications. We can’t go back, and we need some type of medical payment plans to cover the wonderful but expensive diagnostic tests and treatments we now have available.
You mean 28 percent.
I too think there should be some basic minimum care for our population. Vary basic care. But I have a very big problem with paying for illegal aliens healthcare as is currently the case.
I think that a lot people forget that the standard of living wasn’t really that high back then. Back then middle class families did :
Not have more than 1 TV
Not have cable or satelitte TV
Not have cell phones
Not have luxury cars.
Often only had one car. If the wife had a car, it was usually a hand me down from the hubby.
Not take vacations to expensive luxury resorts in Vegas, Hawaii or Orlando.
Not eat out frequently (few if any chain restaurants back then(
Also:
Houses were smaller and less luxurious.
Vacations were road trips to grandmas house.
What I’m saying is that many things we associate with being middle class today used to be assiciated with the upper middle class. Of course that doesn’t mean that today’s middle class could ever really afford that stuff, just that they felt entitled to it.
Yes. Of course for many, their image of what it meant to be middle class in the 50s and 60s is formed by watching movies and TV from the era, which, just like today, mostly showed the upper middle class.
Ok, so whats wrong, with one tv, no cable, no cell phones and no luxury auto.
I have based my economy on prices that are basically 1967.
I have a 1800 sq ft house, that I personally built. I drive a truck, thats 12 years old, I don’t have cable, I don’t have a cell phone. That being said, its all paid for.
Living expenses are, health insurance, food, heat and light. The only luxury item is the dial up internet.
Just as an example: I built an 1800 sq ft house for $45,000.00 complete. By complete, I mean from the lot to the well and septic system. I never pay more than 1967 prices for a vehicle. i have a 1997 Dodge ram 1500 that i bought for 3,200.00. yes, it has over 200k on it now, but in the three years I’ve had it I’ve only spent $600.00 in repairs, that I did myself. Starter and u-joints.
As for health insurance, I don’t believe, that insurance was for anything more than the big ones. Therefore my deductible relates to that.
Alot of times, I’m asked if I have indoor plumbing. People just can’t fathom living qithout the gadgets and luxury items. my response is, I have all the toys I want. the only difference, is, I let you take the depreciation first.
Try it in LA.
A talented engineer worked here a few years ago. his wife a stay at home mom. They lived in a guest house behind some house about a mile from the work site. Several kids. He’d ride his bike to work. I think he was earning in the $60s or $70s at the time four years ago. Well he got tired of it and made a big issue and now works at the Arizona site. I think they have a home over there. His income should be in the $90s by now, based on his skills and political know-how.
So it depends on the area. I don’t think he will retire in his early 50s though unless his wife starts a home business after the youngest kid is in school.
I do think that dual income couples with no children who start out working in their early 20s will be able to retire wealthy at 59 as long as they invest fully in IRAs and 401ks in stock mutual funds. Or they would probably want to downsize in their 40s.
Never married singles (not divorced men, since half their assets would be given to their ex’s) could also retire with a lot of wealth if they regularly invest in stock mutual funds.
Being single and lonely is no walk in the park, but sure beats being divorced in a no fault state and common property state.
I highly recommend reading Elizabeth Warrens book “The Two-Income Trap: Why Middle-Class Parents are Going Broke”.
She has some interesting points about how families have driven up the price of homes in “good” school districts and otherwise become “trapped” into needing two incomes and being in a very precarious financial state.
Not sure I agree with all the proposed solutions, but interesting never the less.
I highly recommend reading Elizabeth Warrens book “The Two-Income Trap: Why Middle-Class Parents are Going Broke”.
Warren’s an excellent writer. She has many astute observations about middle class debt load, credit cards, and financial industry’s shenanigans — and Warren has been teaching about, speaking about, and writing about such matters for much longer than the credit bubble has been on most people’s radar.
Elizabeth Warren has lots of useful information. Too bad she doesn’t look like Sarah Palin; more folks would be willing to give her ideas fifteen minutes.
The average wage earner is also responsible to pay welfare to the 50’s and 60’s folks (the ones who enjoyed the benefits of that economic era) in the form of Social Security. In the 50’s and 60’s, workers were not obligated to pay for the lifestyle of a massive generation of ME firsters.
Sorry, but we are faced with increasingly bleak options as the Entitlement Generation demands more freebies, more advanced FREE healthcare, free medicine and, of course, they won’t sell anything or pay a dime out of their pockets.
What are the options for today’s workers? None. Their kids will see declining schools (as if they could get worse), increasing costs for higher education, non-welfare medical (those under 65 will pay draconian fees, with or without national welfare health insurance), taxes and fees will become a crushing load and in the end, the children of the Boomers will be left with a third world nightmare or a depleted America.
It is not that our parents hate their kids, it is just that they love themselves more. They don’t WANT to screw their grandkids future, but they have to do what they have to do to take care of the one thing that matters to them: Themselves.
Unless you are fortunate to have an advanced degree that allows you freedom to do what is your own best interests, without dependence on corporations or government (law seems to be that last refuge for those who don’t want to be cubicle slaves), you can count on a dramatically declining lifestyle and the elimination of options to better ones self.
Social Security is broke now. So is Medicare. Now the Boomers will simply start breaking up the furniture to heat the house. They won’t stop until the future has nothing left to burn, except their future, and that too will be sacrificed on the alter of the Most Important Generation.
i always enjoy knocking the boomer generation, but the elderly of whatever generation want to secure their government income.
The letters to the editor and people in my town that speak about their social security not keeping up with inflation are born before 1935.
(When you use a voter list before an election you get the address, party affiliation, date of birth and if they voted in the previous election)
I beg to differ. When i started working at age 14, i also started paying into social security. Social security for those who came before me. I can’t remember a year after I turned 18, that i did not pay the maximum amount in social security taxes. Also, when medicare was made law, there was a tax added, to pay for it.
During the later years, as self employed, I paid in both shares of the tax. Now, how can you call wanting that retirement benefit back, along with some interest on the paid in amount, greed.
Compare those payments of mine to a 401k. Wouldn’t you want to get the money back, with interest? The problem here is not the greed of those who paid in, its the politicians who used the money for everything else and left IOU’s in the cabinet.
You knew it was a scheme then, everyone knew. Everyone has known for decades that SS and Medicare was a scam, and those people failed to stop the fraud.
Instead the only answer is: I got scammed, so my grandchildren must suffer.
Tell you what, ask not what you can do for your Country, but what can you do to “get yours”.
We owe you nothing, just like we owe nothing to the victims of the Madoff scam.
Of course, that means nothing to the ME generation. They will “get theirs” at the expense of any one and any thing.
Keep believing you are owed so much by the future generations, there is not much left to this nation now any way, so you may as well just “get yours” too….
So, Joe Lawyer. How can you expect Terry (above) to have been able to stop the politicians. He had one vote. So don’t blame him.
I voted libertarian since I was first eligible to vote in 1978. Cannot blame me.
Joe is an angry young man. You can’t blame him - he spent a lot of money to go to law school and is probably having a hard time finding a good job. Young people have been screwed lately - high interest rate student loans that they have to pay back, overpriced houses, and the pension and health goodies that earlier generations have enjoyed are being scaled back by employers for new hires. Not to mention having to buy their own health insurance.
Don’t worry Joe, your generation will get a chance to wreak your revenge on my boomer generation in 20 years. Of course, the boomers will live to be 90 years old and will probably continue to vote. . . . . . Maybe you won’t get your chance after all!
I hope that your parents leave you a lot of money.
My personal finances are fine, thanks. You see, it is not personal when someone points out the inequity of the social wealth transfer system from the young to the old.
A good job for me does not help the 99% who will be ruined by their elders.
Not all opinions are based on personal need, perhaps you need less ME in your view of others. Not all of us are as in to ourselves as you.
Whenever I read a post that rants on about generation greed, I think about what a horrible relationship they must have with their parents.
What is generation greed(me)? Is it boomers? if it is, then what benefits have they collected? I don’t believe the first boomer has hit 65 yo.
If I make 65 it will be fifteen years from now, most of my net worth is from what I saved outside SS. I paid my honest share of taxes too.
Most boomers have paid their honest share of taxes. So have most of the younger generations. There is no need for any generational warfare.
The real crime is the Ponzi/Madoff scheme called Social Security and the politicians who tapped the fund for other uses. The descendents of those politicians should be turned into slaves.
Yes Joe, that $1000 a month SS check is really living the high life. How dare they!
Tried living on a $1000 month lately?
Every time I hear about generation greed, I wonder who they are talking about and what they expect should be done by members of that generation. Is it my parents, who are now in their 80s and have been using Medicare and Social Security for a while? Is it the boomers who have yet to retire in significant numbers?
Should the boomers just not retire and continue to pay into the system (my choice)? Doesn’t that limit the job prospects and upward mobility of my children? Or is it that they just want the old farts to die?
“We’re not going to buy junk that lasts one or two years.”
GLOBAL ECONOMY ~ Los Angles Times
Thrifty Chinese resist enticements to spend.
An official push to promote consumerism as a way of reducing dependence on exports faces cultural hurdles.
China, worried about a real estate bubble, moves to restrain To re-balance their economies, Americans need to save more and the Chinese must loosen their wallets.
But judging from homemaker Wang Fang’s grocery cart leading up to the biggest holiday of the year here it’s going to take some doing to persuade consumers here to shop til they drop.
Her annual splurge, timed to Sunday’s Chinese New Year festivities, included a sack of rice, a jug of cooking oil and a bag of beef jerky. Wang’s lone personal indulgence: a $40 foot-washing basin she bought using a gift card from her husband’s state-owned gas company.
“Chinese people like to buy practical gifts,” said Wang, 49. “So it’s mainly food and drinks. We’re not going to buy junk that lasts one or two years.”
Debt-strapped Americans would do well to mimic Wang’s self-restraint. But in macroeconomic terms Chinese frugality is not a virtue. China’s economy is overly dependent on foreigners to buy its low-cost exports, a weakness that was exposed during the recent global downturn. The government is now trying to encourage its own citizens to spend, with the goal of building reliable domestic demand for Chinese products.
The Chinese are just emerging from their version of the Great Depression. When our grandparents emerged from our Great Depression they weren’t great spenders either.
It takes a generational sea change to alter deep-seated saving/spending philosophies.
A $40 dollar foot-washing basin?
I gotta think that it’s one of those electric massaging foot basins. Even then, it sounds like the sort of thing that’s $25 at Wall Mart, so you have to blame exchange rate manipulation for it’s high price in China, where it’s made.
Ah, the massaging ones- good call. I was thinking marble? Still seems like quite an extravagance, compared to what else she was buying. But of course she had a gift card from her hubby’s company, which sounds fishy to me.
I bet her hubby told his higher-ups that his wife was going to be followed by western reporters as she shopped, and they gave him a gift card and told him to tell her to buy something nice to make it look like China has a well-paid, consuming middle class. And in a charmingly pitiful kind of way, she buys what a ‘peasant’ would think of as a great luxury- a high-tech foot washing basin! (And then she had to open her mouth about ‘cheap junk that lasts a year or two’, a classic put-down of just about everything made in China. She really blew it. I bet they take the basin back.)
“We’re not going to buy junk that lasts one or two years.”
Naw… we’re just going to over-produce it at the expense of our health and environment.
…and sell it to people stupid enough to buy it at 400% markup.
OT but I have been meaning to suggest it:
Anybody that spends time with a toddler should try this.
Get a badminton raquet (a cheapo is just fine) and a heavy gauge balloon.
Inflate the balloon and hit back and forth with the little one.
They are usually stunned to see that they can have an effect on such a large object. Good for hand eye coordiantion, fun physical interaction with a very small child.
If they are big enough to hold a raquet they can probably do it.
Enjoy!
Have you discovered the way a large empty cardboard box can stimulate a little one’s imagination? It’s really true about how the box can be more fun than the large toy that came in it.
Some refrigerators once came in heavy duty cardboard boxes.
One summer, the older boys I tagged behind once commandered an empty one from behind a warehouse.
It was a fort, a boat, a house, a spaceship and a even a sled down steep hills.
Then it rained…and eventually, we all grew up.
Large cardboard boxes also make great primary residences for real estate “investors” enjoying their new, more mobile phase of life.
Is it more prestigious to live in a box that came from Nordstrums than one that came from Walmart?
I can’t believe you’d ask that. People in Walmart boxes are losers. Nordstrom boxes are lined with faux pergraniteel.
I love all you guys. You are hilarious!
Tut tut.
Needless Markup is THE standard in lux CBBs.
My mom used to take a blanket or sheet and cover the kitchen table and legs. All of us kids would play under that for hours. Imagination is great.
They are usually stunned to see that they can have an effect on such a large object. Probably similar to their fascination with opening and closing doors as soon as they can reach the handles.
I coached little league for years, on just about every team I had there was one kid who just could not hit the ball. I would talk to his parent`s and have them meet me at a park where no one from our team or league would be. I would take a couple of 12 inch balls ( the kind you find in a bin at KMart ) and throw that for them to hit. They would have a blast smacking that ball, after about 15 minutes I would switch to a baseball telling them the center of the big ball and the small one was no different. The joy on those kids faces when they started hitting the baseball and there parent`s faces when they got hits in games was priceless.
I have a large inflated ball that my son has loved since he was just a year old. The hilarious part is how much he loves getting it bounced off his head– that’s the best thing EVER.
This made me chuckle too, Durbin.
Thanks for the visual. Nothing on the planet as delightful as a little kid’s uproarious laughter. Nothing.
Party on…Garth!
US debt will soon be unsustainable without higher taxes and spending cuts, even with recovery.
WASHINGTON (AP) — It’s bad enough that Greece’s debt problems have rattled global financial markets. In the world’s largest economic and military power, there’s a far more serious debt dilemma.
For the U.S., the crushing weight of its debt threatens to overwhelm everything the federal government does, even in the short-term, best-case financial scenario — a full recovery and a return to prerecession employment levels.
The government already has made so many promises to so many expanding “mandatory” programs. Just keeping these commitments, without major changes in taxing and spending, will lead to deficits that cannot be sustained.
Take Social Security, Medicare and other benefits. Add in interest payments on a national debt that now exceeds $12.3 trillion. It all will gobble up 80 percent of all federal revenues by 2020, government economists project.
If these debts can’t be paid then they won’t be paid. A no brainer of a statement that has serious consequences for those who just don’t get it.
One person’s debt is another person’s money. If money owed is not paid as promised then somebody is out some money. Guess which person that is?
Therefore, Combo, what is the cash that is king? Three month Treasury Bills? Federal Reserve notes? Euros? Yuan, as if the Chinese won’t nationalize U.S. assets in that country post default? Cash my be king, but the king is dead.
“…what is the cash that is king?”
The cash you can get your hands on is king; The cash that is promised but not delivered is not.
A lot of cash that is promised won’t be delivered. This will translate into a shortage of cash for a lot of people.
A shortage of cash will cause an increase in cash’s buying power.
Those who have cash will get to cash-in on this increase in buying power at the expense of those without cash.
Fed-sponsored cargo cult true believer motto:
“The cash you imagine yourself some day getting your hands on, but never do so, is king.”
Much as I’m a short term deflationist and long term hyperinflationist, I’m wondering what would happen if the government changes its rules on municipal bonds and they become taxable? Or if state governments change rules on US treasuries and make them taxable?
Unintended consequences would follow. People who squirreled away precious metal coins in hidden compartments on their property will stand to gain. Precious metals prices would go way up, as they would definitely be regarded as the last place of safety, and no longer would government securities be considered safe.
“Much as I’m a short term deflationist and long term hyperinflationist, I’m wondering what would happen if the government changes its rules on municipal bonds and they become taxable?”
I personally doubt the hyperinflation part of your prediction, though I cannot say I believe it is impossible. My guess is the Fed plans to keep the petal to the medal for long enough to create an inflationary liquidity bubble to offset the vacuum created by so many borrowers at all levels of the international banking system holding on to unrepayable debt, then attempt to take away the punchbowl before hyperinflation happens. Whether they can do this is a way which avoids the shoals of higher unemployment and the stormy seas of uncontrolled (hyper-) inflation remains to be seen.
I note that the Fed pulled it off reasonably well in the 1975-1982 period, but Americans had savings back then. Look to the next several years as a period when Americans enjoy the opportunity to rebuild their savings, and then the subsequent several years as a period when the fools who did so without adequate hedges see their wealth inflated away to pay for the gradual return to normal long term interest rates. An alternative scenario is more like the Japanese experience of the past two decades: No return to higher interest rates and no end to deflation (especially in long-term asset prices).
Yes, and even if the next Congress is radically different from the Congress of 2007 through January 2011, e.i. real spending cuts to reverse the damage of this Congress and the previous, it won’t offset the big elephant under the rug - world competition and outsourcing of work to India and China.
I’m anticipating a steadiness of today’s situation of high unemployment and 10 to 15 percent annual price cuts in real estate (including those with the worst price drops to date such as Las Vegas, Phoenix, the “San Jokin” Valley of California, and Florida). It will be a steady state of 10% official unemployment for awhile. Those who currently have jobs will probably be okay for the most part. They will continue to cut their debt and save.
I was hoping someone would address my question of whether they think it’s likely for the government levels to renege on their tax haven status of treasuries and muni bonds. Because I am buying them like crazy these days.
Reneging doesn’t seem to be as much a risk as the yield curve shifting up in response to massive QE. when will that time come? i don’t know. Everybody seems to think precious metals are the right hedge when that happens.
I suppose some munis do actually carry a default risk. i don’t see much of a risk priced into them yet. As i have mentioned , concerning greek bonds, there doesn’t seem to be a hell of a lot of risk premium in those either.
“Shame on the men who can court exemption from present trouble and expense at the price of their own posterity’s liberty.”
~Samuel Adams
Those founders of America had endless wisdom. if everyone had reading comprehension skills and would read the words of the original American heros such as Sam Adams, Thomas Jefferson, Ben Franklin, Thomas Paine, and George Washington, we would have the revolution by now that TJ predicted in the first paragraph of the D of I.
And yet when Jefferson died, he was deeply in debt. His creditors were literaly waiting for him to breathe his last breath so tha they could seize his house, his land, and his slaves.
Sounds like good timing to me.
Not really. If he wasn’t Thomas Jefferson, they would have kicked him to the curb years before. While nobody wanted to be the one that foreclosed on the writer of the constitution, they had no compunction about going after his heirs.
Yeah, TJ might have gotten some hatin’ from this board if it had been around back then. He was a bon vivant with a great house, great wine cellar, but he was always having money problems. Maybe he owned too much house. Was TJ the original FB?
Monticello = the first McMansion?
George Washington = the father of real estate specuvestment?
Founding “fathers”=slave owning land barons.
..who ended up mostly broke after the revolution.
Many of them also tried to abolish slavery.
lol funny
Jeffersonian Wisdom:
“Do as I say, not as I do.”
Apparently he tried to help out an indebted relative, and also inadvertently took on debts from his deceased FIL. Nevertheless, the existence of this blog owes a lot more to TJ than it does to Al Gore.
WISDOM
I place economy among the first and most important virtues and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt. We must make our choice between economy and liberty, or profusion and servitude. If we can prevent the government from wasting the labors of the people under the pretense of caring for them, they will be happy. The same prudence which in private life would forbid our paying our money for unexplained projects, forbids it in the disposition of public money.
– Thomas Jefferson –
Safe bet on Blackrocks part. Greece will not be allowed to “fail”. Hell, in the world today that’s the consistent cry. Failure is not an option, we’ll prop up the world, until it’s entirely bankrupt. The U.S. may have the worlds reserve currency, but it ain’t got the only printing press!
BlackRock Says Greece Is No Lehman, Buys Its Bonds.
Feb. 12 (Bloomberg) — BlackRock Inc., the world’s biggest asset manager, increased its Greek bond holdings, betting the European Union won’t allow the nation to default as Prime Minister George Papandreou cuts the bloc’s biggest deficit.
The company has a so-called overweight position on Greek debt, holding more securities than allocated in its benchmark, even after Standard & Poor’s, Fitch Ratings and Moody’s Investors Service cut the country’s credit grades in December. The fund may continue with this strategy for “some time,” said Michael Krautzberger, co-head of European fixed-income in London, after EU leaders pledged yesterday to help Greece regain control of its finances.
“They won’t allow a Lehman-type crisis,” said Krautzberger, who helps oversee BlackRock’s $3.35 trillion of assets. “The market has worried too much about an imminent government default in Europe that will not happen because of the solidarity.”
Wmbz,
Time will tell how “safe” that bet is. “The market has worried too much about an imminent government default in Europe that will not happen because of the solidarity.” Spoken like a true bankster. He forgets that the public in the rich northern European countries, especially Germany, are getting fed up at “European unity” translating into them paying out countless billions to prop up incorrigible deadbeat PIIGS. The so-called “pledge” by EU leaders contains nothing concrete, just vague assurances of “moral support” and similar non-commitments. I predict the scale of the crisis is going to overwhelm the EU’s ability to deal with it. And the Greek unions and public sector will burn the country to the ground before accepting EU austerity demands.
+1 I think in the coming weeks we’re going to find out just how solid that “solidarity” is.
“Time will tell how “safe” that bet is. “The market has worried too much about an imminent government default in Europe that will not happen because of the solidarity.”
I agree, time will tell, it always does. I think that there is no way Germany will not support Greece, no matter how annoyed it’s citizenry is.
RE: Greece
Even the French finance minister says that without a meaningful austerity budget the EU won’t bailout the Greeks.
Seems like brinksmansip, but the Germans et. al. must know that if Greece gets a pass then there won’t be any incentive for Portugal and those that follow (Britain).
I wonder how things are going at Blackrock.
I’m with Sammy. Politicians like Merkel aren’t going to get themselves re-elected by bailing out Greece. And we all know that politicians take care of themselves before they take care of their country.
“Time will tell how “safe” that bet is?”
It wouldn’t shock me if these weasels have some inside info.
Looks like the sovereign parliaments and taxpaying citizens of northern Europe are pushing back against their EU political overlords’ supposed readiness to bail out the PIIGS.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7236019/Germany-growls-as-Greece-balks-at-immolation.html
By Ambrose Evans-Pritchard
Published: 7:49PM GMT 14 Feb 2010
The EU has issued a political pledge to rescue Greece – and by precedent, all Club Med – without first securing a mandate from the parliaments of creditor nations.
Holland’s Tweede Kamer has passed a motion backed by all parties prohibiting the use of Dutch taxpayer money to bail out Greece, either through bilateral aid or EU bodies. “Not one cent for Greece,” was the headline in Trouw. The right-wing PVV proposed “chucking Greece out of EU altogether”.
Germany’s Bundestag has drafted an opinion deeming aid to Greece illegal. State bodies may not purchase the debt of another state, in whatever guise.
The EU is entering turbulent waters by defying these irascible and sovereign bodies. It had no choice, of course. Europe’s banking system was – and is – at imminent risk as Greek contagion spreads across Club Med. The danger of a “sovereign Lehman” setting off a chain reaction is very real, with Britain too in the firing line. I find myself in the odd position of backing drastic EU action, for fear of worse. We all go down together if this escalates.
The last two weeks have cruelly exposed the Original Sin of monetary union: that EMU was launched without an EU treasury or debt union. This will be tested again and again by bond vigilantes until such a mechanism is created. Europe’s hope of fending off markets with “constructive ambiguity” must fail, as will become obvious this week if EU finance ministers fail to flesh out rescue details.
German Chancellor Angela Merkel did not look happy as reporters reminded her of the Bundestag’s injunction when she announced that Greece would be saved from the wolves.
The Frankfurter Allgemeine summed up German feelings when it asked why taxpayers should bail out a country that thinks it an outrage to raise the retirement age to 63. “Should Germans have to work in the future until 69 instead of 67 so that Greeks can enjoy early retirement?”
No wonder Mrs Merkel refused to discuss details of a rescue in Brussels, let alone offer hostages to fortune. Yet if she blocks Europe’s leap to fiscal union at this fateful moment, she dooms monetary union to failure. Such is the Hobson’s Choice that has awaited Berlin ever since Maastricht.
Global bond markets are watching in fascination. They spotted the contradiction in last week’s message: that Greece will not be left to default; yet aid is conditional on full Greek compliance. So what if Greece does not – or cannot – comply?
It is a fair bet that China’s reserve fund (SAFE) will not invest a single yuan of its $2.4 trillion stash on Greek or Club Med bonds until this ambiguity is replaced by a clear guarantee. We can deduce this from events last year when SAFE liquidated holdings of Fannie Mae and other US agency bonds because they lacked explicit backing from Washington. It switched to US Treasuries. Russia did likewise, though at a more delicate moment in the crisis, and with hostile intent, according to Hank Paulson’s memoirs.
The US Federal Reserve averted a mortgage bloodbath by purchasing $1.5 trillion of housing debt. Who will do this for the Greek state, or for Italy? The European Central Bank is banned by the Treaties from buying EMU sovereign debt.
Europe’s leaders still refuse to face the awful truth: that monetary union is unworkable as constructed. That different labour markets, different sensitivities to interest rates, different economic structures, have caused the gap between North and South to grow ever wider; that a chunk of Europe is priced out of EMU by 30pc, has swung from boom to bust, and is on the cusp of a debt-deflation spiral. Spanish unions have accepted a 1pc pay deal this year, only to be undercut by reports that Germany’s IG Metall may accept zero. Must Spain slash wages to close the gap? What would that do to a country with 19pc unemployment and total debt near 300pc of GDP?
It is easier to restrict talk to Greece, to insist that Athens cuts it deficit by 4pc of GDP this year even as the slump grinds deeper – an ‘IMF-style’ austerity package, without the IMF cure of devaluation. Can such a policy can work with public debt nearing 125pc of GDP this year? It may tip Greece into a debt-compound trap and prove self-defeating. But there is a broader point. If every Club Med state – plus Britain soon, and France – squeeze fiscal policy at the same time they may bring about Phase II of our depression.
Greek premier George Papandreou is already chafing in any case. His country has become a “guinea pig”. Rival EU factions are “playing doctor” and pursuing their own agendas. Brussels was complicit from the start in Greece’s tragedy, he told his cabinet, and has since “created a psychology of looming collapse, that risked becoming self-fulfilling”.
Does this sound like a man ready to immolate his country to please Germany?
http://www.nytimes.com/2010/02/14/business/global/14debt.html?hp
“Goldman Sachs Helped Greece Mask Debt.” This is the rarest of the rare, an MSM article that examines the sleaziness of GS and is actually worth reading. Goldman is up to its usual tricks of collecting big fees for helping unscrupulous clients play “hide the debt” to postpone the inevitable day of reckoning.
“Goldman Sachs Helped Greece Mask Debt.”
Beware of geeks bearing grifts.
But Helen’s butt was worth it.
The butt that launched a thousand ships.
I’m a bit hazy on my Greek mythology, but wasn’t it Helen of Troy’s face that launched a thousand ships?
Or maybe there’s been a historical error in our understanding of Greek fleets sailing forth in search of booty….
It’s horrifying to read the article, but entirely consistent with what happened here. And the punchline was that Goldman sold the derivatives back to the Bank of Greece. They’re now out of the game, smelling like a rose, and Greece is left hold the bag. And of course, none of it was required to be disclosed.
Excellent NYT reporting. Too bad nobody but Sammy read it.
Goldman Sachs destroys the world’s economies, one at a time. How can these guys live with themselves?
Because nothing short of world war will stop them.
No, they’d find a way to make a buck off that, too.
Only if they are the winning side.
“The market has worried too much about an imminent government default in Europe that will not happen because of the solidarity.”
Solidarity: little people will support the wealthy’s bad investments.
“Heads, we the smartest guys in the room, tails, the Lilliputians lose.”
“…we, the smartest guys in the room, win…”
(Hard to type with a VD rant playing out in the background…)
“BlackRock Says Greece Is No Lehman, Buys Its Bonds.”
Professor Bear suddenly turns religious, and immediately drops to his knees to begin fervently praying that Greek goes the way of Lehman.
No one ever gave me a serious look at my question about taxes.
My question was:
What if for a trial period, the U.S. suspended giving tax deductions? Just whatever you paid in taxes was it. No refunds and no deductions.
1. How much would the U.S. raise in a year?
2. If the tax rate were low enough, say 5% for all americans without any deductions, would the masses buy it?
3. Could you abolish the I.R.S?
I think the masses have gotten too used to getting a tax refund and alot of people are counting it as income and expecting it. I say just take the taxes and be done with it.
Many other countries do just this. What I have seen in those countries is that people go out of their way to hide what would otherwise be taxable income. In other words, they make their own deductions.
More tax revenue for the government means less after-tax income for the taxpayers. The taxpayer is already struggling, a tax increase just adds to his struggles.
There’s no easy way out of this mess.
‘I say just take the taxes and be done with it.’
Stepn2me
British Redcoat Officer
1775
British Redcoat Officer
1775
Tee Hee!
It will never happen. Every one of those deductions has a vocal constituency behind it.
“I think the masses have gotten too used to getting a tax refund and alot of people are counting it as income and expecting it”.
What is truly amazing about the dumbmasses is that you will hear time and time again about how much the gubmint is ‘giving’ someone back on their tax returns.
No kidding. Like a carjacker giving you a bus ticket to get home. Am I supposed to be grateful?
Most of the complexity in the tax code is in the definition of income, NOT up front deductions and exemptions. Every time the rich come up with a loophole to say their income doesn’t exist, they get away with it for a few years, and then the IRS writes another volume.
Just the home mortgage deduction suspension would do wonders to the foreclosure rate as much of recently taken out mortgages goes for interest and 28%-35% is a big chunk of change for the middle class who still pay their mortgages.
The good news is this low life POS only has a few months left. The bad news is that whoever whips his azz may be no better. Still, I’m glad Nevada calls this douche bag theirs. Going home to porch light and some new land scams with his son.
Why Harry Reid Is Stripping Down Jobs Bill.
In paring down the jobs bill, Senate majority leader Harry Reid has an eye on voter concerns about federal spending.
WASHINGTON, Feb. 14, 2010 ~ABC News
In Washington, reaching bipartisan agreement on anything is tough these days. Yet Senate majority leader Harry Reid, D-Nev., has just scrapped a jobs bill that had both Democratic and Republican support. What’s he thinking?
Reid appears to be making a political calculation that the GOP will have a difficult time voting against his own, stripped-down version of jobs legislation. That’s because Reid has left the bill’s central job creation provisions intact, while jettisoning tax breaks and other provisions intended to win Republican support.
He is virtually daring his colleagues on the other side of the partisan aisle to oppose a measure with the word “jobs” in the title at a time when unemployment remains stubbornly high.
“He is virtually daring his colleagues on the other side of the partisan aisle to oppose a measure with the word “jobs” in the title at a time when unemployment remains stubbornly high.”
Yes, slogans, sound bites, and false flags are so important in our political process. Imagine, if a group of CONgresscritters sponsored a bill called “Equal Opportunity For All”, no one would dare oppose it, because the sound bite on TV would be: “Senator So-and-So opposes equal opportunity”.
The actual CONTENTS of proposed legislation is not what is discussed in the media ,so much as the IMAGINARY and EMOTIONAL pretext for sponsoring the bill.
Current example - “Healthcare reform”. On every page of the bills so far sponsored, you discover unbelievable power grabs and attempts to force the worst possible crap down the throats of the American public. But of course, no one dares to call the whole mess “The Pillage and Destruction of Healthcare Bill”, for then they are labelled as “being against healthcare”. Only insensitive racist redneck teaparty corporate thug types would ever “be against healthcare”, natcherly.
Not only the insensitive racist rednecks, also the progressives who are against the Healthcare Bill are called retards.
POS / douche bag / retard …
It’s hard to enjoy my coffee with so many of wmbz’s rrepeated authorial intrusions of select Southern nouns & adjectives…
My personal favorite is turd’s that need to flush themselves.
The comment was made on yesterday’s bit bucket that the middle class living standards of the 50’s and 60’s cant be sustained in today’s environment. I dont know if I agree with that. I think that even with one income earner, with paid off cars and no debt, a family of four or five can have the american dream. It’s just the credit cards and interest rates do people to debt slavery. Having a house payment isnt as bad as some people think. It’s just the house payment and the car payment, credit card and such that hurts the american dream now..
Well I was born in 1964. My Dad was a teacher and my Mom was a part-time nurse. We had a 3 br house in the burbs….probably 1800 sf max for 3 kids. We had one small TV with no cable and never knew we needed another. We never ate out and never ate packaged food. Vacations were car trips to camp grounds or to visit family. We had one car most of my childhood. We got our clothes at Sears. And I don’t think my parents had credit cards…at least I don’t remember them using them. We certainly didn’t have cell phones.
Take away the cable TV, internet, cell phones, caller-ID and other phone features, and dial back to the technology of the 1960s and most families will save $400+ per month
Learn to cook simple food from scratch and skip the takeout and most families will save another $400+ per month.
Drop the fancy vacations
Drop the fancy clothing stores, especially for the kids.
Learn to commute to work by public transit or bike and drop the second or third car. And don’t buy them for your kids.
The 1950s and 1960s middle class lifestyle is well within reach. People just don’t want to live it and wouldn’t call it middle class anymore.
Excellent comment. Those who yearn for the good ole days of the 1960s can have it, provided they just say no to the myriad opportunities to break the household budget that provided for that lifestyle.
I have personally given up on my crusade to avoid the influx to our family life of Wii system, cable television, cell phones, wireless internet access, fancy vacations, brand new Japanese automobiles, expensive gymnastic classes, air travel, and many many other ‘necessities’ my parents somehow lived without. I would rather feel cash poor than to do without all these ‘middle class’ luxuries. And we don’t have a large flat-screen teevee, an SUV or a McMansion, either!
P.S. I am about to cook some delicious breakfast (from scratch) — Happy Valentine’s Day — gotta go now.
Learn to cook simple food from scratch and skip the takeout and most families will save another $400+ per month.
Finding a “today’s” woman that knows how to cook a good meal is a challenge today..
…Stpn2me runs and ducks for cover
Wife and I are doubly-blessed in that department. If either of us checks out of the planet before the kids are fully grown, the other of us could take over KP duties, including preparation of nutritious meals that won’t turn our kids into double-wide adults.
Interesting - both of my sons know how to cook.
“The 1950s and 1960s middle class lifestyle is well within reach.”
Try to imagine 3 billion people in the developing world thinking the same thing. Maybe we Americans(and the E.U.) are really all going to be living like 1950s & 1960s, but not by free will.
FuggetAboutIt.
At any rate, it appears many of the 3 bn who aspire to the American middle class lifestyle have already arrived on our shores (including my own ancestors
).
“…skip the takeout and most families will save another $400+ per month”
And look at the money you can save if you fly often and don’t have to buy x2 seat tickets like this fella:
“Silent Bob” Thrown Off Southwest Flight For Being Too Large:
By: Matthew Keys, FOX40 News
“Wanna tell me I’m too wide for the sky?” Smith inquired on his Twitter account. “Totally cool, but fair warning folks: If you look like me, you may be ejected from Southwest Air.”
“Southwest Airlines measures whether a customers too large to fly based on the passenger’s ability to lower both armrests while sitting on the plane. If the passenger cannot lower one or both armrests, the carrier typically requires the passenger to purchase an additional seat”
OMG…you bring back a painful memory:
I once survived a very long charter bus ride in the Midwest pinned beneath the derriere of a double-wide fellow passenger who only paid for a single ticket.
Partly the cost of living has hurt too.
I was born in Palo Alto in 1953. My parents owned a modest house there - dad paid $11K IIRC back in 1947. We led a modest life but never wanted for anything of actual importance. Dad easily made the payments working for the phone company - the kind of company then that offered “lifetime employment” and a rich pension.
That same house now comps for about $1.4 million. Even a couple with two lawyers or two doctors would stretch to make the payments.
The telltale sign of the insanity of Silicon Valley was when I noticed many Ferraris parked in the carports of apartment buildings. People could afford a Ferrari but couldn’t afford a simple house.
Ugg. I just checked our old Palo Alto house on Zillow.
The next-door neighbors did a tear-down in 2007 and built a 2,600 square foot big-box house on the lot. Currrent Zestimate $2,138,000. That’s just sick.
KB
I noticed that the link mentions it’s a historic location, Spanish design and people pay more to live there. uh huh !
I am personally very tired of these RE gangsters and their use of discriptive flowery BS like, near a sewer that Sherman pee’d in, in proximatey to a certain rock that fell on Smedley Nobody or in the historic quaint village of Buggerville to describe a house.
These realtors always have a some enticing magic buzzword or crap like historic area, scenic views or close to some exciting location that would describe a POS pup-tent on a stupid ant hill here in Wisconsin.
If the shack isn’t a historic classic Frank Lloyd Wright design by a stream and rock outcropping , with a 3.1 acre Amish made with hobby farm, that Chief Blackhawk didn’t march through while he was on the run and milking Brown Swiss cows that is close to the freeway, then you DON’T deserve to overpay and live here near better people.
Hell, cheap FB, if you don’t buy this one you shouldn’t even be IN our little Historic Wisconsin.
Sorry, been reading MSL and may of had a RE BS Overload with Flashbacks this morning !
rant over
BAE Loses Army Contract Appeal
Saturday, 13 Feb 2010
The future is murky for a Sealy manufacturing plant that employs about 3,000 people.
It seems this time the answer is final: BAE Systems has lost a $3 billion contract to build military trucks.
After an appeals process, the U.S. Army upheld its original decision to award the contract to a Wisconsin company which significantly underbid BAE, but has no experience producing the same type of vehicle.
For the mayor of Sealy (population 6400) the expected layoffs could mean losing up to 20 percent of the city’s property- and sales-tax revenues.
“It’s a big hit for our city and our community and our people,” said Mayor Nick Tirey. “But especially for those workers that have been producing the best possible vehicles for our armed forces for 17 years.”
The BAE plant in Sealy has built the U.S. Army’s “Family of Medium Tactic Vehicle’s” or FMTV’s since 1992.
But last year, the Army announced it was accepting a lower bid from Oshkosh Corp., the Wisconsin firm.
Sealy is not far from Houston and those trucks are shipped out through our port or main rail yard..
The collateral damage will be significant. Sealy will become a ghost town and a lot of shipping expediters are going to lose a big contract as well as all the support vendors.
My view of the 21st century American (and global) banking system has recently taken a deep turn for the worse.
Is it just my perception, or has the ever-more-concentrated American and global financial sector recently taken on an increasing resemblance to the plantation system of America’s antebellum era, with the debtors who voluntarily owe the bankers constituting a modern incarnation of the legions of slaves who were forced to supply labor to run the plantation economy of the South?
I don’t think this is quite what the founding fathers of America had in mind when they drafted the Declaration of Independence and the Constitution, but please correct me if I am missing it.
At any rate, I believe some collective soul searching is in order for our country. We have heard plenty of rants about our Fed and our banking system, but I have heard few if any proposals for anything better, particularly from some of the leading critics (e.g., Ron Paul).
So I suggest that anyone who thinks they can come up with a better banking system than the one we live with (and under) offer up their suggestions and try to get them out into the public debate, at a level that rises above the ability of Wall Street’s PR and lobbyist forces’ abilities to quell them with the kind of First Amendment protected ‘free speech’ that changes hands behind closed doors.
Otherwise, let’s collectively prepare ourselves for the ongoing Fed-led march back to America’s antebellum feudal society, with Carpetbaggers replacing the plantation owners.
So the old bumperstickers were right: “Save yo’ confederate money, boys. The South gonna rise again!”
Break up the TBTF banks into nice failable sizes, restore the Glass Seagull
, institute public campaign financing, remove control of congressional district-making from elected officials.
Thank you for improving on my optimism that a better banking system is possible. Now if we can just figure out how to break up Wall Street’s Megabank, Inc cartel without leading our society into anarchy…
“Glass seagull”
Are glass seagulls difficult to spot?
If one crapped on your car would it make it look dirty?
“Are glass seagulls difficult to spot?”
You will know them by their cry:
Mine! Mine! Mine! Mine!
It’s my ‘Rosebud’. A symbol of something lost, perhaps never to be regained…(Hold on- maybe it’s my ‘Maltese Falcon’. Stolen by the banksters.)
“Rosebud”.
The inside joke about Rosebud (in the movie Citizen Kane) is that it wasn’t a sled at all.
It was Marion Davie’s, er, um, … magic red button.
I realized after writing this post that I may have inadvertently come across as overly optimistic. Perhaps the banking system of today is pretty much just as good as what America had in place shortly after the signatories to the Declaration of Independence and the framers of the Constitution had finished drafting and signing those timeless documents. Perhaps we already have the best of all possible banking systems, and we just need to learn to live with it and love it?
Professor Strangelove, or How I Learned to Stop Worrying and Love the Banksters
The plantation model is old style.
Corporate communism is the new reality. Some mistakenly call it cronyism, but the reality is that the banking corporations pretty much run everything and we the people have NO say in their operations.
Not everyone is that excited about the prospect of joining Megabank, Inc’s debt slave labor force.
The Financial Times
Greece to resist push for greater austerity
By Kerin Hope in Athens, Ben Hall in Paris and James,Wilson in Frankfurt
Published: February 15 2010 02:00 | Last updated: February 15 2010 02:00
Greece is expected today to resist pressure for an immediate tightening of its current austerity package as it fights to win back the confidence of international financial markets and its eurozone neighbours.
Germany and the European Central Bank have been pushing Athens to strengthen its existing fiscal stability plan by adding measures such as a 1-2 per cent increase in value added tax and further public-sector wage cuts in return for financial assistance.
On French television last night, Jean-Claude Trichet, ECB president, called on Greece “to take the extra measures that will be necessary to make credible their turnaround plan”.
Athens is fighting to postpone any decision on further measures until mid-March, when officials from the European Union, ECB and the International Monetary Fund are due to carry out a forensic inspection of Greece’s deficit-cutting programme.
“It makes no sense to rush into additional measures until they are seen to be necessary,” said a senior Greek official.
…
Filed under: “Wabbit season! Duck season! Wabbit season! Duck season!”
City: “It’s ours!”
State: “Nope…ours!”
City (grabbing it back):…”get lost dude, it’s ours!”
State (grabs it with both hands):”nix,nix,nix,…dudette, it’s ours!”
Battle lines are drawn over lucrative traffic fines:
By Rich Connell February 13, 2010 LA Times
Los Angeles City Councilman Dennis Zine called this week for the state’s largest city to pursue such a program for red light tickets and possibly other moving violations.
Tens of thousands of red light tickets are issued annually in Los Angeles via photo enforcement systems. Those fines could be cut to $250 or less under his plan, Zine said. And the city — which is grappling with a $212-million budget shortfall, the prospect of layoffs and potentially significant service cuts — could collect millions in new revenue. The city would process tickets itself, outside of traditional traffic court, and net $50 to $100 more per citation.
But Democratic State Sen. Jenny Oropeza (D-Long Beach) is moving to halt the practice before it spreads. Under a bill she introduced earlier this month, cities would be prohibited from setting up their own traffic ticket fine schedules and collection systems.
Allowing a patchwork of enforcement practices would be “confusing, unfair and robs the state of legitimate income,” said Oropeza, a member of the Senate Transportation and Housing Committee. “I view it as a raid on state resources that are for transportation.”
Issuing different kinds of tickets for the same violation, with different fines, is “moving toward a situation of chaos,” she said.
City: “It’s ours!”
State: “Nope…ours!”
City (grabbing it back):…”get lost dude, it’s ours!”
State (grabs it with both hands):”nix,nix,nix,…dudette, it’s ours!”
“Finding Nemo” seagull chant:
Mine! Mine! Mine! Mine!
If a black swan had transparency could it be mistaken for a glass seagull?
A stained glass seagull, which wouldn’t be the same, would it? Stained with the sin of unexpectedness.
“I view it as a raid on state resources that are for transportation.”
And the struggle for dwindling sources of cash intensifies.
Suggested alternate handle for Combo:
C.R.E.A.M.
Cash Rules Everything Around Me
Cream is the money,
Dolla dolla bill y’all.
[Wu Tang]
“Cash Rules Everything Around Me”
It could be worse. It used to be worse. It used to be S.R.E.A.M (Sex Rules Everything Around Me).
Old age has its merits.
Nowadays it is T.M.O.S.R.E.A.M. (The Memory of Sex Rules Everything Around Me)…
Not sure about the upside, though…
What a surprise! JP Morgan and Goldman Sachs had a direct role in setting the stage for the Greek sovereign debt tragedy!!!
Next up (a few years down the road): The story of how Big Hank’s outreach planted the seeds for a ginormous Chinese credit bubble to inflate and burst…
Wall St. Helped Greece to Mask Debt Fueling Europe’s Crisis
By LOUISE STORY, LANDON THOMAS Jr. and NELSON D. SCHWARTZ
Published: February 13, 2010
Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.
Gary D. Cohn, president of Goldman Sachs, went to Athens to pitch complex products to defer debt. Such deals let Greece continue deficit spending, like a consumer with a second mortgage.
Greek Statistician Is Caught in Limelight (February 14, 2010)
Europe Commits to Action on Greek Debt (February 12, 2010)
Greece’s Woes May Give Pause to Euro Zone Candidates (February 12, 2010)
As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.
Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning. In early November — three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting.
The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.
It had worked before. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.
Athens did not pursue the latest Goldman proposal, but with Greece groaning under the weight of its debts and with its richer neighbors vowing to come to its aid, the deals over the last decade are raising questions about Wall Street’s role in the world’s latest financial drama.
As in the American subprime crisis and the implosion of the American International Group, financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.
…
10 to one GS was also playing the crash of Greek Bonds.
The day of Dubai World debt reckoning fast approacheth. Bagholders are soon to be determined.
Professor Bear remains puzzled over how a part of the world where borrowing and lending is against the prevailing religion could have become so deeply mired in debt.
* The Wall Street Journal
* FEBRUARY 14, 2010, 8:17 A.M. ET
5thUPDATE:Dubai World Mulls 60% Debt Deal For Bks - Sources
(Adds Dubai official comment.)
By Mirna Sleiman
Of ZAWYA DOW JONES
DUBAI (Zawya Dow Jones)–Dubai World may offer creditors 60% of the money they’re owed backed by the sheikdom’s government as part of a deal to reschedule $22 billion of debt, people familiar with the matter told Zawya Dow Jones.
The offer, which pays no coupon, will come with a sovereign guarantee when eventually presented to creditors by April, the persons said, adding that the terms of the deal are still in the early stages of discussion and may change.
Under the current proposals, banks including HSBC Holding PLC (HBC), Royal Bank of Scotland Group PLC (RBS) and Standard Chartered PLC (STAN.LN), could recover 60 cents for every U.S. dollar loaned to the troubled conglomerate after seven years, the persons, who declined to be identified because of confidentiality agreements, said.
Dubai World roiled international markets in November when it unexpectedly announced that it would seek a six-month standstill on its debts. The company met in December with 90 creditors in Dubai but little detail on restructuring has emerged until now.
An alternative proposal involves creditors receiving full payment, including 40% of their Dubai World debt in the form of assets in Nakheel–the company’s property unit–with no government guarantee over the same seven-year period, the persons said.
…
Professor Bear remains puzzled over how a part of the world where borrowing and lending is against the prevailing religion could have become so deeply mired in debt.
And what, exactly, does all that financial mire and muck mean for their eternal souls’ future prospects?
Instead of 72 virgins they get 72 mother-in-laws?
Let’s hope it turns out that way for people who kill in the name of faith!
I keep staring at the cover of my copy of “This Time is Different,” trying with no avail to figure out who the guy in the suit and tie is supposed to be and what he is supposed to be doing. It looks like he jumped out of a window in a high building, taking along his open briefcase. Papers are flying out of the brief case, and his outstretched arms suggest he is trying to fly. It is impossible to tell if a safety net is available on the ground to bail him out from his unsuccessful aviation experiment.
This Time is Different: Eight Centuries of Financial Folly
Carmen M. Reinhart (Author), Kenneth Rogoff (Author)
List Price: $35.00
Price: $21.00 & eligible for FREE Super Saver Shipping on orders over $25. Details
You Save: $14.00 (40%)
Easily the most ponderous title in my library, so far the thing is virtually unreadable. Just getting through the forward was excruciating–I wanted to throw the book against the wall and scream at the authors’ verbosity.
You have my respect, Prof– if only for your patience.
Kenneth Harney has apparently figured out how to keep his newspaper column away from bloggers who might want to post his columns in order to properly pillory him. But that won’t stop a determined typist:
Nation’s Housing
Kenneth R. Harney
Home equity on the upswing
WASHINGTON — With all the bad news about underwater homeowners and strategic walkaways, you might think that American homeowners’ equity holdings are in the tank. But the least publicized recent statistic on real estate is that — despite these scary reports — home equity is again on the rise.
Is that some piece of rosy propaganda put out by housing lobbyists to stimulate more homebuying? Not unless you consider Federal Reserve economists to be shills for the real estate industry.
…
Zillow’s study found historically high rates of negative equity continuing to prevail in key cities. In metropolitan Las Vegas, for example, 81.3 percent of all homeowners — 246,000 households — were underwater on their mortgages in the fourth quarter. This number was down from 82.5 percent in early 2009, but that’s no consolation to the affected borrowers.
…
Professor Bear sees blue skies ahead for LV loanowners. There is no direction for real estate to go from here but up.
Tim Barker never thought he’d have to live in his truck. Four months ago, the plumber was in a one-bedroom apartment in California’s San Fernando Valley, with a pool and a Jacuzzi. Then, on his birthday in October, he and 199 other plumbers were laid off by their union, Local 761 in Burbank. Now Barker’s son sleeps on the sofa of his cousin’s one-bedroom Hollywood apartment, and Barker sleeps on the roof of the apartment building - or in his 2003 Ford Ranger pickup. “I’m 47, and I’ve never lived in my car,” says Barker, a husky 220-lb. single father with sandy hair and a rapid-fire voice. In January, as torrential rains pelted the streets of Southern California, father and son were sleeping in the truck in San Pedro, next to the Los Angeles Harbor. “We were able to spend four nights in the Vagabond Motel, but for two nights we slept in the car,” says Barker. “It was raining, cold, and the cat was jumping on us. We both got sick.”
For people who cannot afford rent, a car is the last rung of dignity and sanity
Time to buy big old used cars, I wonder if I can get them to qualify for the 8000 dollar tax credit?
Sooner or later this Tim Barker guy will catch on to the idea of picking out an empty house moving right on in.
Folks did this twenty-or-so years ago in Lancaster, CA. A house would sit vacant for months until one fine day a moving van would pull up and neighbors would get to watch a family move in.
The thing was, it was later discovered, the family didn’t buy the house; they just decided to move into it.
The ‘Vagabond Motel’. Sounds nice…is that near the Crazed Loner Pub?
Seriously though, at least they’re keeping their cat in the car with them. Too many people just abandon them. (Of course the cat is probably scouting for new owners with a roof.)
I wonder if cheap gyms won’t benefit from this bust. For ~$20 a month you get a place to take a shower and hang out- which is great when you’re living in your car.
My thoughts on this article are (in order):
1. Why didn’t I think of this?
2. Its not really “Heaven” if my pets aren’t there.
3. Why can’t animals go to Heaven? Its not as if their ancestor bit into the apple of doom and tainted the species with original sin forever.
4. The people subscribing to this service are probably the same people who bought houses in 2005-2006.
5. Why didn’t I think of this?
Atheists Promise to Care for Pets After Rapture
(Feb. 14) – If, as millions of fundamentalist Christians believe, the Rapture is imminent, who will take care of the pets of those who are suddenly spirited away to heaven?
Derived from an interpretation of passages of the New Testament (most notably 1 Thessalonians 4:15-17), Rapture prophecy posits that Jesus Christ will return to Earth to gather his disciples for eternal life in God’s kingdom, while leaving behind those who have not met a standard of piety to face the rule of Satan.
But 61-year-old Bart Centre has come up with a plan to look after those domestic animals not scooped up in the heavenly exodus. In July, he started Eternal Earth-Bound Pets, a pet-sitting service to care for those critters.
“Each Earth-Bound Pet representative is a confirmed atheist, and as such will still be here on Earth after you have received your reward,” the company’s Web site promises. “Our network of animal activists are committed to step in when you step up to Jesus.”
misses the point that the rapture already happened… there’s still a missing person’s report out on the one gal that disappeared that day.
I wish they had the internet in heaven.
Did we ever decide if all those disappearing honeybees had been raptured?
Poor ‘ol plugs, just last week he claimed Iraq would be a shinning success for Barry!
Biden says Iraq war wasn’t worth `horrible price’
Feb 14, 8:03 AM (ET)
WASHINGTON (AP) - Vice President Joe Biden says the Iraq war hasn’t been worth its “horrible price.”
He says the war was mishandled from the outset and that the U.S. took its eye off the ball. As a result, he says the U.S. was left in a more dangerous position in Afghanistan, where al-Qaida hatched the Sept 11 attacks.
Biden tells NBC’s “Meet the Press” that the war also has cost the United States support from other nations.
While it goes against the grain to say this, I fully agree with Biden’s comments on this issue. The invasion of Iraq will go down as the greatest strategic blunder in US history. The hubris of Bush, Cheney, and their coterie of neo-con stooges was exceeded only by their cluelessness. The thought of people growing nostalgic for the epic incompetence of the Bush Administration tells you just how stupid so much of the GOP base has become.
Debt time bomb
http://tinyurl.com/ycu3cqh
“The government already has made so many promises to so many expanding “mandatory” programs. Just keeping these commitments, without major changes in taxing and spending, will lead to deficits that cannot be sustained.
Take Social Security, Medicare and other benefits. Add in interest payments on a national debt that now exceeds $12.3 trillion. It all will gobble up 80 percent of all federal revenues by 2020, government economists project.”
So by 2020, unless taxes are increased, 80% of the revenue taken in will be used to pay off debt.
What pray tell, will this mean to people who own gold? I hope to see comments from Combo and PB.
If the government tries to print enough to cover the full cost of all these programs, it could be very good for gold (and other commodities) due to “higher than expected” future inflation.
But the Fed has announced its intentions to rein in future inflation, which suggests “less than expected” money may actually be printed in the future, which would be bad for gold and other PMs.
So the short answer is, “I have no clue how this resolves…”
Should I respond to this e-mail???
“mr.james.dimon”
Sent Saturday, February 13, 2010 1:31 am
Subject REMITTANCE COMMITTEE DEPT UN
REMITTANCE COMMITTEE DEPT UN
THIS IS OUR CONCLUTION AFTER ANNUAL SUMMIT IN NEW
YORK WE MANDATED TO PAY USD5 MILLION TO YOU AS A LEGAL LOTTERY WINNER,
THROUGH
OUR CORRESPONDENT BANK WHICH IS JP MORGAN CHASE BANK NEW YORK USA,
WHICH IS
POWERING BY USA TREASURY AND UNITED NATION,
YOU ARE ADVICE TO RE-CONFIRM YOUR
INFORMATIONS FOR US TO PROCEED IMMEDIATELY,
NAME
PHONE
ADDRESS
REGARDS
MR.JAMES
DIMON
DIRECTOR JP MORGAN CHASE BANK
NEW YORK CITY USA
I dunno. Something seems a little sketchy about that…
I couldn’t even get my wife to read the e-mail. She saw the all-caps font and shot me a look of disdain…
The sovereign debt crisis seems to be spilling over into the junk bond market. I am wondering if there might not be a good entry point for the foolish and the brave to invest in junk bonds some time soon? Financial contagion has its upside.
The Financial Times
Investors abandon junk bonds
By Nicole Bullock and Aline van Duyn in New York
Published: February 14 2010 22:31 | Last updated: February 14 2010 22:31
Investors are selling out of “junk” bonds at the fastest rate since September 2005, in the latest indication that concerns over sovereign debt are spreading to other credit markets.
In the week that ended on Wednesday, nearly $1bn was withdrawn from US funds that hold high-yield corporate bonds (junk bonds), according to Lipper FMI – the largest outflow in almost four and a half years.
As a result, the past month has seen the biggest sell-off of US junk bonds since the equity market bottomed out in March 2009, said Martin Fridson, chief executive of Fridson Investment Advisors, which specialises in high-yield bonds.
Spreads – the difference between the yields on junk bonds compared with US Treasury bonds – have widened by more than 100 basis points since January 11, and now stand at about 700 basis points, as measured by the Bank of America Merrill Lynch Index.
“Though corporate fundamentals are quickly improving, credit is not immune from sovereign risks,” noted analysts at Morgan Stanley.
“If the result of sovereign problems is fiscal tightening and higher rates, a double-dip recession becomes an increasing possibility. This outcome would dent, if not fully derail, the positive trend in corporate fundamentals.”
…
EDITOR’S CHOICE
In depth: Greece debt crisis - Feb-09
Short View: Why credit spreads matter - Feb-11
Decline in defaults by junk-rated companies - Feb-09
Editorial: The exotica of risk - Feb-05
Junk-rated companies need record refinancing - Feb-02
DJIA = 10K or bust
The Financial Times
China’s surprise monetary tightening shatters calm
By Jamie Chisholm, Global Markets Commentator, and Telis Demos in New York
Published: February 12 2010 08:33 | Last updated: February 13 2010 09:33
22:00 GMT. Hopes that the European Union’s promise to stand by Greece would deliver a period of relative market calm were shattered on Friday after further monetary tightening by China saw traders suddenly cut risky positions.
The dollar soared, and equities and commodities fell back after Beijing used the eve of the nation’s week-long Lunar New Year holiday to reveal it was raising banks’ reserve requirements by another 50 basis points in order to rein in rampant lending.
“The message coming out of China in recent weeks has been quite clear - policymakers are becoming more concerned about containing inflationary expectations and managing the risk of asset price bubbles as a result of last year’s aggressive expansion of credit,” said Jing Ulrich, managing director of China equities and commodities at JPMorgan.
The euro was again in the firing line. The rampant buck exacerbated a slide in the single currency that had begun when a string of worse than expected eurozone GDP data crossed the wires.
The Dow Jones Industrial Average relinquished, and then recaptured, the 10,000 level as a raft of US economic data painted a mixed picture, with better-than-forecast retail sales numbers somewhat cancelled out by disappointing business inventories and consumer sentiment data.
Such confusion was the theme of the week in the US. The S&P 500 moved in a narrow range between about 1060 and 1080, and the Dow traded above and below 10,000 each day of the week. Strategists say these gyrations will continue until there is further clarity on the twin macro trends of monetary tightening and economic recovery.
“The drivers of the market right now are these sources of uncertainty,” said Binky Chadha, chief US equity strategist at Deutsche Bank. “Greece, Washington and China. Greece is waiting for the next step, Washington is snowed under, and there are two camps of thought on Chinese tighening. Some believe it will actually make the Chinese recovery more sustainable.”
…