Bits Bucket For September 6, 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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Name:Ben Jones
Location:Northern Arizona, United States
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Rather an expensive bank. Population of Eire is about 4.35 million, so thats over 5,000 euro’s each and still counting the losses not to mention the other banks.
Anglo Irish Bank has cost the State more than €22 billion and could yet cripple our economy. How on earth did we get here – and is there any way out?
http://www.irishtimes.com/newspaper/weekend/2010/0904/1224278175197.html
Brings to mind the Icelandic banking sector’s recent history…
If you are Ch-erman, prepare to have your arsch reamed out!
Huh?
The Germans will be forced to bail the Irish out even though they should simply walk away from economic union.
Would they be accused of marking time?
Ich kann ein bischen Deutsch, aber ich Amerikan, nicht Deutscher.
P.S. I believe a resident of Berlin would actually have said, “Ich bin
einBerliner.”Maybe we could give the Irish a bunch of these swell Weimar Republic vintage bonds.
http://news.yahoo.com/s/ap/us_unpaid_german_bonds
The bonds were sold in the U.S. from 1924 to 1930 to help Germany invest in new projects and industries and pay war reparations. One series, known as the Dawes Bonds, raised $110 million in 1920s dollars — the equivalent of about $1.2 billion today; another series called the Young Bonds generated more than $98 million — about a billion today.
Investors were told the German bonds were guaranteed safe. Even President Calvin Coolidge urged Americans to snap them up.
“Even President Calvin Coolidge urged Americans to snap them up.”
Americans have been snapping up financial investments for a long time, then…
Bad Chile here, just checking in…
Made it to our southwestern city four months ago, having been transferred by the corporate powers-that-be due to lack of work at the old office. Well, apparently the shareholders are in trouble, because there is less work here than back at the old office. Not to mention the office is an black hole of hopelessness and dysfunctional management. So the Chile family is already trying to wrangle a transfer back to the old office. If I stick around here, I’m sure to get laid off because there really is nothing to do - already survived one layoff cycle.
So what does this have to do with housing? An in-law this weekend, whose fortunes depend upon people buying houses and condos (he has a couple, rents out the condo at a loss, wants to become a small time landlord), when asked us if we were buying a house in the new city and informed that no, given that I may have a pink slip on my desk Tuesday, responded with anger.
His reply? “You’re the problem with the economy! You need to take that risk that everything will work out fine! You just need to stop being worried about the future and take that risk!”
I just shook my head, grabbed another beer, and walked away.
So there you have it: despite my mobility being my greatest asset and a layoff or transfer to another city less than a year away, I really should buy a house to help the economy according to this “expert”.
Hey, I have had some of the same: I had a co-worker ask me if I bought this summer, and I said, “no.”
She responded, “what are you waiting for?”
Uhh…
I get that sort of inquiry a lot. One fellow in my circle, who calls me every three months or so, customarily starts every conversation with, “Did you buy a house yet?” Some in my wife’s church circle tell me they are waiting until I buy a home before they make a move (seems less and less likely over time any of us will buy, in that case).
Knowledge is power. It feels good to have been right on the housing collapse when so many “experts” who pretended to know better made utter fools of themselves.
Unbelievable.
“You’re the problem with the economy.”
A wee bit of psychological projection on his part, don’t you think?
Oh, the pain!
Someone is still in the “anger” stage…….
In the real estate section of the Sunday paper at least one lender has decided to include in its headlines “no one knows what the future will bring”. I chuckled as I read it thinking especially those that chose to deny the obvious.
Upton Sinclair - Wikiquote
“It is difficult to get a man to understand something, when his salary depends upon his not understanding it.”
“You can’t time the real estate market?”
Oh really? Then how did I manage to luck out by timing it twice already in my short life, coming out (literally) several hundred thousand dollars higher in net worth as a result? I guess I’m just lucky…
“You can’t time the real estate market?”
I agree, you can’t time the real estate market, but you sure can “time” not going broke - even if that includes renting for as long as needed until the housing fundamentals return.
I will admit in my case it was some luck when no one took my lowball offers in Colorado Springs in 2006 prior to me discovering this blog. Boy, those lowball offers sure seem high today.
I and many others did the same. Answer Common Sense!
“I just shook my head, grabbed another beer, and walked away.”
Excellent response!
No, c’mon!
Two beers would’ve been a better response.
How about two beers dumped on the guy’s head?
Three on his head, and four in your mouth?
What a waste of the three though?
What a waste of the three though
Depends on what kind.
(Uh oh - can o’ worms alert)
“Two beers would’ve been a better response” ….along with a quick exit out an inflatable shoot.
……even if it has been done before.
I think I’d have gone for the jugular. “Are you upside down on this thing?” or some such.
I’m thinking some version of this might work:
Well, since I decided not to participate on the tragedy of the commons end of the economic mess, I figured I was allowed to participate in the paradox of thrift part.
The whole buying frenzy is part of a tragedy of the commons scenario, isn’t it? I mean not as obvious as grazing sheep on common land, but the low interest rates and the easy credit are something that the whole economy has been forced to pay for, so it fits a little bit, right?
A little bit, yes. But the “tragedy of the commons” is an endemic feature in certain natural resource economics contexts, such as livestock grazing on commonly-held property, or fishermen sharing a wild ocean stock of fish.
By contrast, the housing market “tragedy of the commons” arose artificially, due to the Ownership Society doctrine that stated all American households would be better off as owner-occupants of the housing in which they reside, coupled with the relaxation of traditional mortgage loan underwriting standards which was necessary to facilitate this policy objective.
“The whole buying frenzy is part of a tragedy of the commons scenario, isn’t it?”
Interesting idea, Polly. I would say the financial system was the commons, and the massive borrowing and lending without regard to fundamentals was how people free-rode.
Of course the only way to avoid or reverse tragedies of the commons is to regulate free-riding so people pay for what they use and don’t use too much. So the idea of reinflating the bubble with buyer tax credits is preposterous.
This makes me wonder about the NYT story someone posted here yesterday, about the new 0-down lending. In response, someone said it wasn’t 0-down that causes the problem but lack of income verification, which is now required for 0-down loans… http://www.nytimes.com/2010/09/05/us/05mortgage.html?scp=2&sq=&st=nyt
I would be interested to know what folks think about that. Given that unemployment is now the bogeyman, should we not worry about the 0-down buyer losing his job? Or is the gov’t essentially playing the odds, assuming that just 1 in 10 of the 0-down loans will go bad, and thus that the market will see 9 more good loans that it would have before?
“I just shook my head, grabbed another beer, and walked away.”
That was nice of you, some may have said….
I just shook my beer, sprayed his head, and walked away.
Time to play “Beer Hunter”…….
Shoulda, but it was Harpoon IPA. Had it been his MGD64 I was drinking, sure, woulda started a game of Beer Hunter.
He just told to you he’s a greedy SOB who will throw you under the bus the first chance he gets.
Wow. Sorry to hear that.
Happy Labor Day to all.
A good day to remember that work is a blessing, and, if you have a job like mine, you get paid a day’s pay at the same time.
Life is good.
On this Labor Day, I ask that all bubble bloggers remember how much extra labor they would have to do to pay for an overpriced home. In my neck of the woods, it’s about $450,000 plus the annual extra property tax of about $500 a month–forever! How many years is that? No thanks. Sorry baby boomer, I’m not funding your retirement. Sorry California, no fat tax from me.
I am happing paying $1k a month for a condo that I could own for $350k plus HOA and taxes. Owning is cash in the trash.
Owning is throwing wealth away on price declines.
And on this coast, at least around NYC, it’s 400-500K (in modest and difficult-commute areas only) plus 800 a month “forever,” or until they raise it again next year and the year after that … also see renting as a great labor-saving device.
Great post, couldn’t have said it better myself. Our labor is part of our life, and just as we should spend our precious time wisely so we should also spend the fruits of our labor wisely.
Yes I always liked to work holidays in TV stations…double time and they would get us a deli platter or pay for the food since we could not take a break.
Happy Labor Day to you as well
These guys could use some voice and music lessons.
Labor Day in Song
http://www.opednews.com/articles/Labor-Day-in-Song-by-Kevin-Gosztola-100906-989.html
http://www.nytimes.com/2010/09/06/business/economy/06housing.html?hp
Is it possible we are coming to the end of the government’s attempts at price supports for the housing market?
“Housing needs to go back to reasonable levels,” said Anthony B. Sanders, a professor of real estate finance at George Mason University. “If we keep trying to stimulate the market, that’s the definition of insanity.”
The further the market descends, however, the more miserable one group — important both politically and economically — will be: the tens of millions of homeowners who have already seen their home values drop an average of 30 percent.
The poorer these owners feel, the less likely they will indulge in the sort of consumer spending the economy needs to recover. If they see an identical house down the street going for half what they owe, the temptation to default might be irresistible. That could make the market’s current malaise seem minor. Caught in the middle is an administration that gambled on a recovery that is not happening.
“The administration made a bet that a rising economy would solve the housing problem and now they are out of chips,” said Howard Glaser, a former Clinton administration housing official with close ties to policy makers in the administration. “They are deeply worried and don’t really know what to do.”
Is it possible we are coming to the end of the government’s attempts at price supports for the housing market?
No.
A statement by a professor at GMU does not a policy make.
To add to that - here’s my list I posted a few weeks ago of significant steps the government would have to take to meaningfully remove housing price supports:
- Significantly higher interest rates
- Remove the FHA backstop
- Kill Fannie and Freddie
- Remove the mortgage interest deduction
- Remove the cap gains exemption
- Kill the FHLB system and CDFI funding
- Change the Recourse Rule to not purposefully steer funding towards mortgages
Anything short of those is lip service.
’significant steps the government would have to take to meaningfully remove housing price supports’
Here’s a list of the steps an observer has to take to make housing prices fall:
1. Nothing. Prices have and are falling at the fastest rate in history, under their own weight. If you think the government can control a market this large, you should go out today and buy as many houses as you can.
What’s your timeline Ben? Yes prices fell very fast in in the 2006 thru early 2009 timeframe, as you say the fastest in history (by far really). But my observation, as borne out by Case/Shiller stats, is that the price declines did stop falling, for at least a year, starting in the spring of 2009.
Maybe not in your neck of the woods, but each neck is different. Some areas, especially here (DC metro) have seen a significant flattening and even a bounce. I see the same in much of Florida.
Yes I believe it’s a dead cat bounce, but it happened, and IMO it did happen primarily due to government/Fed meddling. I’m not sure how you could say otherwise.
Re: buying - I never said it was a good time to buy. I only stated that there are artificial price supports. That doesn’t mean prices can’t still go down. Sometimes the weight over the market overcomes artificial supports; this happened 2006-2009, and it looks like it’s starting again.
‘I’m not sure how you could say otherwise’
I believe what I see, not what I’m told. I drove around the DC area in June and I saw foreclosures/oversupply all over the place.
‘Sometimes the weight over the market overcomes artificial supports’
If the subject supply and demand is large enough I’d suggest the market always overcomes artificial supports. I learned this in econ 101.
“Yes I believe it’s a dead cat bounce, but it happened, and IMO it did happen primarily due to government/Fed meddling.”
I can’t say for certain that it would have been better to let the housing market go down w/o intervention, versus creating intertemporal decoupling between the timing of the labor market collapse and the housing market collapse. Might it not be relatively beneficial to let the housing market resume its correction once the jobs (and prospective buyers) are on the upswing, rather than having everything go down in mutually-reinforcing synchronization?
One thing I know for certain: It is not possible to rerun history to see how much better or worse things would have turned out under a different course of intervention (or non-intervention). This is the policy maker’s ace in the hole: They can always claim things would have been far worse had another course of action been taken.
“I believe what I see, not what I’m told.”
Can I borrow that?
But my observation, as borne out by Case/Shiller stats, is that the price declines did stop falling, for at least a year, starting in the spring of 2009.
I wonder if the price per square foot price has tracked the 2009 median price decline’s perceived arrest.
“…price per square foot price has tracked the 2009 median price decline’…”
Never saw a rigorous comparison, but Case-Shiller is much closer to a price per square foot measure than is the median. The median confounds price changes with quality changes, while Case-Shiller controls for quality by averaging the own-price changes of homes which sold more than once over the period for which data is available. By controlling for one important aspect of quality, namely home size, the price per square foot measure at least begins to eliminate the confounding effect of changes to the mix of homes selling which shows up in the median.
Plus by its same-home comparison Case/Shiller also accounts for quality changes.
(Read: the crap that came out during the boom.)
In reality of course it’s hugely complex. Older homes actually lose some value due to higher maintenance costs over time - however they gain some value due to mature landscaping (which, however, sometimes actually in turn contributes to higher maintenance costs - e.g. my brother who just had to do major repair work when a tree fell on his house).
“Older homes actually lose some value due to higher maintenance costs over time - however they gain some value due to mature landscaping…”
Right. A shortcoming of the repeat sales methodology is the implicit assumption that quality is fixed over time. Eventually, all homes crumble into desuetude.
But over short time horizons, the assumption is probably not too egregious — especially during the bubble years, when homes were selling as frequently as hot cakes, allowing for little change in quality between flips!
“Never saw a rigorous comparison, but Case-Shiller is much closer to a price per square foot measure than is the median.”
I like the RadarLogic data for PPSF comparisons. They’re actually intentionally measuring that, so you don’t have to guess as to whether CS is doing something close or not (my opinion is not really).
The historical data is free (downloadable excel spreadsheet), though is much harder to find on their website than it used to be.
“Significantly higher interest rates”
I’ll beg to differ with you on that one. Notice how slight an increase in interest rates by the Fed, post-early 2000s recession, sufficed to pop the real estate bubble. We are dealing in sensitive dependence on initial conditions here. For a physical analogue, consider what happens when a small explosive charge is applied to a massive pile of rocks at the top of a mountain.
IMO 1.0% -> 5.25% qualifies as significantly higher, not just as a slight rise.
“IMO 1.0% -> 5.25% qualifies as significantly higher, not just as a slight rise.”
Got me there! Perhaps the Fed has more room than it believes to experiment with increasing the FFR in precautious baby steps, without stifling the nascent recovery?
Doubt it. As it is now - we are having zero recovery even with rates at 0%!
The Fed has about as much wiggle room these days as Jacquelyn Kotarac.
OMG — that is a gut-wrenching tale!
Sep 3, 2010 at 11:05 AM PDT
Kotarac’s brother: ‘She was a very lovable person’
William Leatherberry talks Thursday about the death of his sister, Dr. Jacquelyn Kotarac.
BAKERSFIELD, Calif. — William Leatherberry said his family grew up in homes with large fireplaces, and he said that might explain why his sister thought she could slide down a chimney last week.
…
You just heard about it?
Apparently I only tune into the news on a highly selective basis…
Christmas came early! There’s a ho-ho-ho in your chimney!
I can’t joke about that tale. There is something tragic lurking behind the story of a 49-year-old medical doctor’s drastically bizarre attempt to get into her boyfriend’s home.
I can’t joke about that tale.
Really? I can’t not laugh about it. I have plenty of sympathy, but not for crazy b!tches that try to first get in my house with a shovel (?), and then try to come down the chimney. I probably would have lit a fire, but I’m a bbq pitmaster at heart.
One flue over the cuckoo’s nest!
One flue over the cuckoo’s nest!
She came down with the flue.
I wonder if they’ll opt for cremation…
Add dumping 1031 tax deferral for flippers and I’m in.
+1
I forgot about that one.
Though to be honest the same concept exists in other markets. E.g. stock market mutual funds are in essence the same thing - stocks are exchanged within a given fund all the time, and the capital gains don’t have to be declared until the fund is sold. Same’s true of businesseses and business equipment - they can be exchanged for like-kind and any appreciation isn’t taxed.
Nevertheless it seems more prevalent and visible at the retail real estate level.
“Add dumping 1031 tax deferral for flippers and I’m in.”
Doing away with the 1031 wouldn’t make any difference if the the rest of packman’s steps we’re taken. No one would have any remaining capital gains to avoid/defer after another 50% leg downward in valuations. It was only deemed necessary because of the cap gains that most were racking up due to all the faux stilmuli.
That much said, I wouldn’t shed any tears if it went away.
True, but stocks are not essential to one’s existence the way basic shelter is. Bad legislative move giving it the same tax dodge option as it helped lead to higher prices for the non-investment buyer just looking for a roof over his head.
It just always struck me that getting the flipper bait profits moved into a new residential investment before the taxman cometh probably provoked even more overbidding (see S. Florida condocide price movements ala 2004). Better to outbid some other jackass by 5-10% then risk a cap gains hit. Didn’t take too many desperate entrepenuers screwing the comps to jack the price on all the other shacks in the vicinity.
Always wish I had bought a Carlton Sheets infomercial product so I could really see all the devilish details on how to get-rich-quick while playing these types of angles to maximize profit. Surfing at 3 AM you couldn’t get away from him; he used to be on at least 15 channels hawking that stuff.
Question: Back in the bad Old Days, could the 1031 tactic be combined with easy credit to purchase multiple “in kind” properties or did it have to be a one-for-one deal?
Pack:
I think you’re wrong on this one…. you still had to live in the house 2 of the last 5 years….. and If this was a fluke bubble then this wont matter very much in the future.
It seems only designed for the long term owner…..So I dont think we would gain anything by eliminating it….and those older peeps would do like in the old days sell the old house then buy a condo in FL…
Now eliminating the mortgage deduction is a different matter
Remove the cap gains exemption
I can speak from personal experience that the cap gains exemption is an influence in the homebuying equation.
But if its not appreciating anymore…then its not important.
If you wanted it to be fair then if your house doubled in 10 years and the inflation rate was 75% during those years then tax only the 25%…
Or limit the exclusion to 2 times in a lifetime for up-sizing once then downsizing once
Thing is it’s still encouraging speculation. All other things aside, and taking your scenario (housing up 100% in 10 years, inflation 75%), you’re forgetting leveraging. Across that 10-year period I could buy 5 houses for $100k each - say investing $100k total (20% down on each), live in each one two years. At the end of the 10 years I’ve got $500k cap gains. If only 25% of that is taxed, I’m only paying cap gains on $125k of my actual $500k cap gains.
Now say instead I were to invest that original $100k in the stock market instead. If I then make the same 100% cap gain ($100k), I get taxed on 100% of that. Or let’s say I’m I’m able to use margin to invest my $100k in $500k worth of stocks, which at the end are worth $1000k (for $500k total gain).
So:
Housing: $500k cap gain, taxed on $125k of it.
Stocks: $500k cap gain, taxed on $500k of it.
Thus artificially pushing money towards housing.
Yes it’s supposed to be only for “primary residence”, but we all know how that works. I personally knew of several people who gamed the “two years out of five” rule, including the people who bought our house in CA.
P.S. this is not to mention just the artificial inducement of the introduction of the rule change - i.e. setting it up as a new incentive in 1997.
Not really. You have a pie in the sky recipe. But, if you just significantly raised higher interest rates the government support for higher prices would be addressed. I say that because the Mortgage Interest Deduction has existed through boom and bust, through prices rising and falling. It’s fully factored in to every price, and has virtually no real effect. Same could be said for Fannie and Freddie–the issue is not their existence, it is what they do. Recently they’ve been doing stupid things, but it wasn’t always that way. Get them to stop doing the stupid things they are doing, yes, but killing them is not a minimum for the government to stop supporting higher prices.
So, I am with you, but it is very important to not let the perfect blind us to the (currently) possible. Of that list, interest rates increasing is definitely the most possible. Fortunately, it almost by itself could solve the problem.
IAT
Is it possible we are coming to the end of the government’s attempts at price supports for the housing market?
Just to reiterate my “No” answer:
Another new program starting tomorrow, with an additional $14 Billion towards housing.
Government to Deploy Broader Mortgage Aid
By NICK TIMIRAOS
The Obama administration on Tuesday will launch its most ambitious effort at reducing mortgage balances for homeowners who owe more than their homes are worth.
Officials say between 500,000 and 1.5 million so-called underwater loans could be modified through the program, the first initiative to target homeowners who are current on their mortgage payments but are at risk of default because they have no equity in their homes. Some experts are warning, however, that the same knots that tied up prior initiatives could do so again.
Under the new “short refinance” program, banks and other creditors that write down mortgages to less than the value of the property can essentially hand off the reduced loan to the government. The process involves refinancing borrowers into loans backed by the Federal Housing Administration.
the maddening thing is having your house underwater should have no bearing on whether you default on your mortgage. if your circumstances still allow you to pay your agreed upon mortgage payments, you should not be allowed to weasel out of them. If they stay in their house and consider it a home, prices will eventually come back.
‘having your house underwater should have no bearing on whether you default on your mortgage’
Funny how it doesn’t work that way, huh?
‘If they stay in their house and consider it a home, prices will eventually come back’
Once upon a time there was this thing called a housing bubble…
If they stay in their house, why are so many houses for sale? Why would they care what the current price was? Unless they were speculating all along of course.
“Funny how it doesn’t work that way, huh?”
Which brings us back to one of the core problems of the Housing Bubble:
People were buying homes to capture the ‘benefits’ of ever-appreciating prices, rather than as places to live. Even as I type this, the PTB are trying their hardest to restart bubble-era home price appreciation, as though the bubble-era motive for buying homes as sure-thing capital-gains-producing investments was ‘normal.’
Sorry to say, folks, but we have a long way to go in order to get out of this morass.
This is an intersting article, and states plainly what the MSM has been avoiding for a long time.
The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid. …
Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.
When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve.
is likely to force the Obama administration to choose between future homeowners and current ones
67.8% is more votes than 32.2%
Until that number goes below 50% (it’s now below 67%) - my bet’s on the former.
P.S. Let this in no way be construed as my advocation of housing stimulus/support. I’m just stating what I think will happen, not what I think should happen.
P.P.S. I don’t think there’s all of the sudden going to be a “hard switch” from housing support to no housing support. If/when support is removed, it’ll be a slow grind down, and it’ll happen over time. I do however think there’s no way in Hades that all support, or even most support (see my list above) will ever be removed.
“hard switch”
No way, no how. It’s baby steps only from here, if any steps are taken whatever.
67.8% is more votes than 32.2%
Until that number goes below 50% (it’s now below 67%) - my bet’s on the former.
In general yes, but of that 100%:
(2001, HUD), “nearly 40 percent of all residential properties in the United States, owner-occupied and rental units, are not mortgaged but are owned free and clear.”
Doesn’t matter though - if I owned my house free and clear I’d still be in favor of price supports, would I not?
(Unless I’m really old and have no plans to move/sell nor inheritors)
Depends.
If you paid off your house before the bubble, you would still be looking at a profit… but paying the taxes for it as well.
If the price falls, your taxes are less but then so is your profit.
If you paid off during the bubble, you may or may not be in good shape depending on when you actually purchased. (Months before? Years before? A decade of more before?)
If you paid cash for your house during the bubble (rare) then you’re screwed.
The trick, off course, is attaining the happy median. Taxes and profit you can live with.
“The poorer these owners feel, the less likely they will indulge in the sort of consumer spending the economy needs to recover.”
The economic recovery discussion seems myopically focused on trying to get broke consumers to spend more money they don’t have. The way out of the morass is going to require more production; you can’t keep consuming more when you are broke.
Do the neo-Keynesians get this?
the Today show had a long buy, buy, buy! segment this morning…desperate times!
How do these Keynesian fools expect broke people to buy stuff?
Force them, via inflation-fed proxy spending through the government.
Works great, until it doesn’t.
(if I may use a beaten old cliche)
How do these Keynesian fools expect broke people to buy stuff?
Keynes recognized the paradox of thrift- that’s precisely why he says it’s up to governments to spend when consumers won’t.
Trying to force people to spend money they don’t have is not a Keynesian theory. (It’s up to governments to spend money they don’t have
)
Trying to force people to spend money they don’t have is not a Keynesian theory. (It’s up to governments to spend money they don’t have
)
Not sure what is the difference. Government deficit spending is forcing people to spend money they don’t have. (Specifically that they don’t yet have, assuming it does actually get paid someday)
Unless you would propose that paying taxes is optional? Not sure I could use “because alpha said so” argument with the IRS.
I wish people would stop blaming the outrageous deficits we now have, and the ridiculous debt the US now has, on Keynes. Keynes argued for counter-cyclical government spending. When times are bad, run deficits to support people. When times are good, run surpluses. The only surplus we’ve seen in 40 years was under Clinton, and even that was a mirage (it ignored various programs). Thus, no US government since Johnson has been Keynesian.
What they have been is anti-tax and pro-spend. Republicans won’t raise taxes, and Democrats won’t cut spending. So, you have increasingly unsustainable deficits. This is not Keynesian economics, it is cynical politics, and both major parties are responsible for the irresponsibility.
IAT
I wish people would stop blaming the outrageous deficits we now have, and the ridiculous debt the US now has, on Keynes.
That would require an ability to understand highly complex and dynamic systems and the constantly morphing relationships between all the parts.
Did you see this week’s Dancing with the Stars?
IAT- Yes, the common misunderstanding of Keynes is interesting- and revealing.
As anyone who can bother to spend five minutes on wikipedia knows, Bernanke, and most top economists in government , are monetarists, not Keynesians- and they freely admit it. (Not that it’s shameful, just wrong.) Flooding Wall Street with money, and super-low interest rates are, of course, monetarist responses to a depression, not Keynesian.
Keynes was well aware of, and popularized the concepts of, ‘pushing on a string’ and ‘the paradox of thrift’, so it would come as no surprise to him that most of our current bail-outs of Wall Street have come to naught for Main Street and the greater economy. Indeed, it’s precisely what he predicted.
Keynes’s theories are exactly what got the world out of the last Great Depression. Countries that adopted them earliest, like Germany, Japan, and Italy, with their greatly ramped up military spending, escaped the depression earliest. That’s precisely what led many to believe that fascism was the solution to the economic crisis, when actually it was just government spending. Except only the fascists could muster the will to do it on an adequate level- at first (and for all the wrong reasons).
And, of course, the depression ended in America precisely when our own government began ramping up its own military spending, and employing/drafting many formerly unemployed citizens. Not- as many claim- when we began rebuilding the world after the end of WW2. We had been out of the depression for years before we began rebuilding the rest of the world.
When people say Keynes’s theories didn’t end the depression, WW2 did, they’re contradicting themselves. Government spending on armaments is just like government spending on infrastructure, it’s an artificial stimulus. (Except that infrastructure is a much better investment.)
The fact that Faux news has gone out of its way to convince everyone that the current monetarism is actually Keynesian is very interesting. I think the Repubs/PTB still have an innate and existential fear of FDR, and want to do everything in their power to never have such a champion of Main Street over Wall Street in power again- they saw him win three terms with ease and die before he could win a fourth. They chafed for forty years under his regulations, which kept them from looting the economy, until finally Reagan swept in and began their unshackling. The looting has proceeded since, as Keynes’s theories were ignored, and monetarism ruled the day. (’Let bubbles inflate and pop, our job is to come in and clean up afterwords’-Greenspan.)
Their linkage of the current bail-out of Wall Street with Keynes is, as usual, brilliant propaganda on their part. An economic theory (Keynes’s) that opposes both allowing Wall Street to run rampant, and giving them money when they crash the system, is blamed for doing just that.
The economic theory that encourages bubbles, bails out the big boys when they pop, and lets Main Street scramble for crumbs- monetarism- is completely unknown to, and held blameless by, Joe6pack.
The only logical replacement presented for Keynes’s supposedly failed theories is the Ron Paul/Austrian school’s ‘let-her-crash’ philosophy, which would greatly enrich the uber-wealthy whilst screwing over the last remnants of the middle class. The drum-bangers for this cause are on every website, many with the best, but misguided, intentions, convincing the other sheep that the rich greatly fear the rise of their theories, when the opposite is true. The rich want nothing more than a massive deflation, during which they can ’snap up’ assets at a great discount, and which allows them to throw of the last of those pesky FDR-era regulations that kept them from fleecing the last of the middle class for so long.
Their day is near, and they cheer it, for they don’t realize it will be the beginning of their end. FDR, and Keynes, both realized that unfettered capitalism is its own worst enemy. Some have to relearn this the hard way. For better or for worse, it looks like the rest of us may have to relearn it with them.
The economic recovery discussion seems myopically focused on trying to get broke consumers to spend more money they don’t have.
It’s been exactly same during each recession and after each recession, J6P was poorer and poorer.
Businesses don’t want to invest in anything innovative to improve their costs or sales; thus lack of jobs. Yet they still expect the crippled horse they’ve been beating to death to win the race for them.
But they are only poorer on paper, assuming everything else equal: same salary, same mortgage payment. In for the long haul and there’s no problem.
Housing Woes Bring New Cry: Let Market Fall ~ NYT
The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.
Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live.
As the economy again sputters and potential buyers flee — July housing sales sank 26 percent from July 2009 — there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.
When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve.
“Housing needs to go back to reasonable levels,” said Anthony B. Sanders, a professor of real estate finance at George Mason University. “If we keep trying to stimulate the market, that’s the definition of insanity.”
Here’s the link.
http://www.nytimes.com/2010/09/06/business/economy/06housing.html?hp
To me the great thing about this article is the explicit statement that by keeping prices high, the government has been harming younger buyers.
“Michael L. Moskowitz, president of Equity Now, a direct mortgage lender that operates in New York and seven other states, also advocates letting the market fall. “Prices are still artificially high,” he said. “The government is discriminating against the renters who are able to buy at $200,000 but can’t at $250,000.”
Well, perhaps I won’t hate that company as much, despite its commercials. Price declines would wipe out its equity extraction business, which probably caused a lot of harm, but at least people would be willing to buy homes.
Perhaps they should change the name of the company to “A Gradual Build Up of Equity Over Time.”
“To me the great thing about this article is the explicit statement that by keeping prices high, the government has been harming younger buyers.”
Must be most other greater fools were moved out of the system w/the tax rebate. And the buyers expecting lowered prices are starting to represent the majority. I know a lot of buyers in this area are keeping realtors busy looking at overpriced homes the buyers won’t move on. At some point the sellers have to capitulate or take their home off the market. The listings grow staler by the day.
So it doesn’t surprise me there are finally calls to let the market fall to release what really is a lot of pent up demand for housing at a lower price floor. Or the sellers can wait for the state tax increases that we all know are coming when entry level buyers will once again adjust their affordability window downward. I really can’t understand how anyone who didn’t move a property through the biggest buying mania this area’s seen in several years can still stubbornly cling to their outlandish price.
Now that the gray lady has come around to the obvious, watch out below! We can hope, right?
I was about to throw that out there on FB and, for the first time, NYT asked for access to all sorts of things from my profile. I said nope, and will have to cut and paste a quote, I guess.
“The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones”
Eeny, meeny, miny, moe
Catch a tiger by the toe
If he hollers let him go,
My mother told me
To pick the very best one
And you are [not] it.
But… but… but trillions of dollars of loans backed by these expensive housing prices would then have to be marked down.
Already trillions of dollars of “wealth” has vanished because of the bust, are still more trillions destined to go poof too?
Say it ain’t so. How could anyone have possibly seen this coming?
Oh, the pain!
It’s high time to let Wall Street share in the pain they inflicted on Main Street. What goes around, comes around.
The experts conveniently not mentioning that if “buyers pour in,” then won’t the increase demand and start the flipper game once again?
The only way that prices will fall is if the government FIRST removes all the junk assistance, and THEN allows prices to fall and bottom feeders to move in. If there’s going to flipping and investment going on, it should be open only to people with real cash, not Joe FB off the street.
If you really want RE prices to fall just perform a Detroit or a Cleveland on the economy.
Yes but in the brave new world, many people still won’t qualify for a loan anyway.
And all those “smart” buyers that ran and even got involved in bidding wars…yes we saw bidding wars here….will instantly be underwater. Let the whining begin!!!!
Yeah, people are smart.
“Let Market Fall”
Potential silver lining: Real Estate Market Hydro-power
Tapping the potential energy of ’stabilized’ home prices to produce the kinetic energy of lower prices thaws the real estate market, leading to broader economic stimulus through the downstream multiplier effect. A frozen market generates no economic activity.
You would think the realturds would see this, but then again, they’ve always been a little slow on the uptake.
“Duh… real estate always goes up. Buy now, or get priced out forever. Renting is just throwing away money.”
… OR … tear them down, grind them up, and burn them in the local, formerly coal powered electric generating station.
Now that’s a solution!
Roidy
What kind of pollutants does burning Chinese drywall generate?
Greece Default Risk Is `Substantial,’ Pimco’s Bosomworth Says
Greece still faces a “substantial” default risk as insolvency prevents the nation from repaying its debt when its bailout program expires in three years, Pacific Investment Management Co. fund manager Andrew Bosomworth said.
“Greece is insolvent,” Bosomworth, Munich-based head of portfolio management at Pimco, which oversees the world’s largest bond fund, said in a telephone interview today. “I see it as being quite a substantial risk that Greece eventually defaults or restructures.”
In a best-case scenario, Greece’s government debt will swell to 150 percent of gross domestic product, Bosomworth said. The European Union-led rescue package assumes the Athens-based government will tap investors for 82 billion euros ($106 billion) during the life of the bailout program, “and that’s I think going to be very difficult,” he said.
“Debt servicing as a share of government revenue will increase substantially, particularly if current yield levels do not decline,” Bosomworth said.
Did we just take a trip in time back to early 2010? For how long can a country’s insolvent position remain newsworthy? I am guessing it could continue for a matter of years before any kind of resolution is achieved, but that is just my personal hunch, based on many years of California living.
Andrew would have more credibility with zeus if he was dating a forty-ish blond named Pamela.
Florida’s job shortfall: 918,000 jobs
FIU’s employment report shows troubled state economy
Marcia Heroux Pounds
South Florida Sun Sentinel
Florida has a shortfall of 918,000 jobs, according to Florida International University’s annual “State of Working Florida” report released this Labor Day. The state has lost 757,000 jobs since the recession began in 2007, and failed to create another 161,000 jobs to keep up with its working population.
“At the rate Florida has added jobs in the three months since unemployment peaked in March (an average of 17,300 jobs per month), it would take almost 4-1/2 years to add 918,000 jobs, not even accounting for future population growth,” the report says.
Florida’s unemployment rate reached an all-time high of 12.3 percent in March, three times what it had been before the recession began.
918,000 - wow. That’s a lot of elderly order-takers at McDonalds.
Since we have been here in Sunnyside queens, The McD went from Black to Hispanic now they are Indian…
Indians serving burgers? Holy cow! (My local Indian restaurant serves beef and pork- they’re sikhs, or so they say.)
Holy cow!
+2
The current U3 of ~10% is the new normal, the new baseline, just like selling 10 million new cars a year as opposed to 16M is the new normal.
I think u3 itself is 12 or 13% already.
“What would probably get the economy recovering fastest and most completely would be for the President of the United States and Congressional leaders to shut up and stop meddling with the economy. But it is virtually impossible that they will do that.”
~Professor Thomas Sowell
That’s true, but only for the upper classes. The rich have been saving up their cash for decades, preparing for that very moment. The moment the government stops “meddling,” ie helping the middle class to hang on, our country will turn into a free-for-all, with the rich (and their heirs) having a whale of a head start. If this were a thousand years ago, the underclass would be serfs serving the lord of the castle. If this were a hundred years ago, we’d have a new Gilded Age with the underclass working the factory until the dropped. But with the new globalization, the underclass wouldn’t be working at all, since all the jobs went to cheaper failed states. The once mighty middle class would be starving in crumbling McMansions while the rich build fortresses and hire private security forces. Straight to a third world country.
And I guess I should just add that the rich and highly paid are manipulating Congress, the “wingnut welfare” pundits, and the sheeple to make this happen. They want to be financially Raptured (and not be taxed for it, thankyouverymuch).
Ox,
Wow, you think we’re going to fall that hard?
IMO all we need is for the government to get out of the way [by dumping Obamacare and lowering taxes], to let the economy do its thing [house prices crash], and the entrepreneurial spirit of the middle class will form new companies to fill new needs.
The current group in Washington want to orchestrate everything because they think they know better than anyone [and they like the power]. Too bad they’re going to loose all of that power come this Nov.
No, sorry but I have to disagree. We might have some tough days coming but the American Dream is alive and well in the minds of many. Soon things will be much better.
Lip
PS: Excuse me for the positive rant, it just felt appropriate considering how bleak things look right now.
Truly spoken like somebody who already has a financial head start. Also spoken like somebody who has been listening to Rush again. (Maybe I ought to spend an hour listening to him on Mondays. Then I wouldn’t have to listen to any politicans for the rest of the week, because I would already know what they will say. Verbatim.)
And please tell me how the new entriprenurial class will form new companies if they don’t have Obamacare? Oh, and Obama does want to lower taxes… just not on those with the head start.
Ox,
Just trying to bring a little cheer into this morning’s reading, but - - -
Let me get this straight, you think Obama wants to lower taxes??? Thats the funniest thing I’ve ever heard.
Head start? I put myself through school, saved some $$ with every payday and I’ve lived within my means for 30 years. If you try this you’ll have the same head start and you know what, it’s easy. You just have to be patient.
“Live like no one else so someday you can live like no one else”. Dave Ramsey
This decade’s “head start” may just be someone who didn’t borrow his brains out and live like the knuckleheads who borrowed to the hilt. I started my life flat broke and worked to earn something, now all of a sudden I’m wedged in with some trust fund baby? Everyone who made money isn’t a taker, in fact we pay 50% of the taxes now that we made it. What level would make you happy?
By “head start” I mean the very rich. Is it really possible to become really rich just by working hard and living within one’s means? The American dream will get you halfway or most of the way there, easy. But, this is like climbing a sheer cliff: you can either jump all the way to the top, or you’re stuck at the bottom. Halfway is not enough. The responsible are destined to fall, even if slowly. Between outsourcing and inflation, one could say that this is what’s happening now.
“I started my life flat broke and worked to earn something, now all of a sudden I’m wedged in with some trust fund baby?”
Thank you. The most important and currently vulnerable aspect of the American economic landscape is the opportunity to pull yourself up by your own bootstraps. Lose this, and we slide into Third World economic status.
“Also spoken like somebody who has been listening to Rush again.”
Straight out of the response rolodex. Not sure if it’s my favorite progressive cliché, but it’s right up near the top.
Head start? I put myself through school, saved some $$ with every payday and I’ve lived within my means for 30 years.
All that money was made in the post-war, FDR economy that you now want to deny others. Are you so sure you would have done so well in a true, no-holds-barred free market? Why? You’ve never experienced one.
Nobody here is pointing any fingers at those who worked hard and saved their money.
There are plenty of middle class left who still think things are just peachy. Yet the facts show a steady erosion of the middle class over the last 30 years.
This erosion was not caused by those who worked hard and saved their money, but by those who run Wall St., the Fortune 500 and who can afford to buy Congress and a general bad attitude of the wealthy that those who have to work for their moeny are to be held in contempt and branded unworthy.
Yes, unless we drastically turn away from the plutocracy we have, we are going to fall that hard. A consumer driven economy cannot continue without, well, consumers. That is, not for everyone but the wealthy.
But does anyone think the PTB are going to give up their power? The insider and backroom deals? Puh-leez!
“Too bad they’re going to loose all of that power come this Nov.”
But not in the way you think. Prepare yourself.
Lip
The demise of this country has been going on a long time, and both parties contributed to it. For disclosure, I was a Repuke, now a Political Atheist. All this R&D bickering is a distraction the PTB love. Let’s stick to econ or housing on the HBB.
Happy Labor Day everyone.
I agree AwW. I believe the PTB know things that most HBBers know and most other people do not. It is their knowledge of those things that is driving their policy decisions. Even so, those policy decisions are futile–they will not work, and that’s that. It’s like the person who is trapped in a room with no air–they keep trying to breath, but nothing works.
Given this knowledge, both D’s and R’s want to be on top, while placating everyone else enough to keep things from totally falling apart (i.e., real revolution). Both D’s and R’s know people have the attention span of a gnat, so they can say anything, and it means nothing.
And so on.
People stuck up on Obamacare — wow, just really, wow. It hasn’t even kicked in yet, so it has nothing to do with current economic woes. But, to hear them tell it, it caused the 2008 housing meltdown, plus a bunch of 2007 causalties in Iraq. Just, really, clueless.
IAT
I’m not buying it. A frozen market generates no jobs, and excessive meddling has helped to create the real estate market’s currently frozen state of existence.
To reiterate my example from above, propping up housing prices is clearly meant to benefit the owners of said houses, but has the unintended consequence of freezing market liquidity, as prospective buyers are either unwilling or unable to bridge the affordability gap between their household budgets and the artificially inflated offer prices. I would have to guess would-be sellers are representative of the “upper classes” in your societal decomposition scheme. Less meddling in the housing market, accompanied by statements to clarify that no further meddling is coming, would enable the market to settle down to the point where buyers and sellers had to come to terms on what homes are worth as a place to live, not as an “investment” providing access to government subsidy schemes.
Once the uncertainty of future policy curve balls was convincingly* removed from the real estate market outlook, the market could begin to thaw out and generate normal economic activity. But this could only come at the expense of declining sale prices, as home prices remain unaffordable at the levels where they are artificially supported.
————————————————————————————–
* Given the recent track record, it might be a bit difficult to make such statements have their intended effect. For example, consider the “surprise” extension of the first-time home buyer tax credit last fall; no one (except HBB posters) could have seen it coming. Now that prospective home buyers have been conditioned to expect endless stimulus, those who were not already lured in may be holding off to see what additional stimulus might shake loose if they wait a while longer.
benefit the owners of said houses, ”
yes benefit Fannie Mae and every other government backed bank that bought the mortgages
“The once mighty middle class would be starving in crumbling McMansions while the rich build fortresses and hire private security forces.”
Wow…sounds like a rickie rodriegas movie. “McMansion!!”
The once mighty middle class would be starving in crumbling McMansions while the rich build fortresses and hire private security forces. Straight to a third world country.
Where prostitutes, drugs and lives are cheap because of the wonder’s of the “free-market”…
Sounds like Brazil, without the McMansions……
I know, the protectionist economic policies in Brazil are sure to lift everyone there out of poverty. How is that public healthcare working out for you down there?
I know, the protectionist economic policies in Brazil are sure to lift everyone there out of poverty. How is that public healthcare working out for you down there?
Not everyone but I have seen and posted cited figures of 35 million Brazilians rising into the middle-class in past 10 years or so. In 10 years! Darn. That’s more than the USA I think.
Public health-care in Brazil? It’s complicated but hey, they try. Let’s say you’re in a massive car accident in Rio. Most times they’ll take you to a public hospital because they are better at that kind of stuff. They’ll put you back together. It’s “free”.
However, after, they will transfer you to a private hospital if you have private insurance.
So, trama, massive injuries: Public System is OK and you won’t go BK.
Chronic or rehab stuff: Private is way better
The record that was set in 1929 for the biggest stock market decline in one day was broken in 1987. But Ronald Reagan did nothing– and the media clobbered him for it.
Then the economy rebounded and there were 20 years of sustained economic growth with low inflation and low unemployment.
Same Professor Dude
Tell the truth now……
Then the economy rebounded and there were 20 years of sustained economic growth at the top rung with grossly understated inflation and low wage employment as a result of multi-decade borrow and spend policies.
Creating the President’s Working Group on Financial Market’s (aka the PPT) - the single most powerful financial team (as such) that ever existed - was doing nothing?
The other one that gets me is “The Confidence Board”. An elite group of Fortune 500 bigwigs, doing some heavy propaganda work, and their press releases are news?
“The Confidence Board.”
Lol. As in a collection of confidence men?
Being the Hollywood actor he was, Ronald Reagan had a great fondness for shadowy cloak-and-dagger operations: Remember Ollie North and the Iran-Contra scandal, for instance? This is where the doctrine of plausible deniability was born, or at least was identified. The creation of the PPT seems to fit this pattern.
Central planners exercising stealth intervention to further policy goals thwart the beneficial functioning of free markets. The result is to paralyze the invisible hand which feeds the goose that lays golden eggs. Ronald Reagan, himself a C student in economics, would have had no clue about the long-term destruction to free market capitalism which his policies wrought.
“The New American”? bu..bu..but isn’t that a BIRCHER magazine?!!
My friends at the Daily Kozmmunist say anything from the BIRCHERS should be ignored. They say we don’t want to go back to that evil period of inflation and economic disaster that occurred from 1865-1913.
Zeus had a Marginal Propensity to Cram (MPC) for econ finals so he is unfamiliar with the term “Free Market Capitalism.” Sounds interesting…did it ever occur in the USA?
“BIRCHER”
I don’t give a F. I’m into content, not labels.
But they sell those cool “US out of the United Nations” bumper stickers.
They say we don’t want to go back to that evil period of inflation and economic disaster that occurred from 1865-1913.
What are you talking about?
“They say we don’t want to go back to that evil period of inflation and economic disaster that occurred from 1865-1913.
What are you talking about?”
Why, now that you mention it, it WASN’T evil. In fact, it was a prolonged period of industrial growth, financial expansion and incredible American creativity while experiencing very low inflation. The few ‘panics’ paled in comparison to the 20’s inflation, the not-so-great depression,the ‘80’s savings and loan debacle, the dot.com meltdown, the housing bubble pop, the 2008 stock market crash and the Nancy Botaxxi/Harry Ream National debt buildup.
Hello Experts,
Please advise how one should hedge against massive inflation that we may see in 2-3 years in US due to all the money was/being printed. Or oneshould not worry about inflation inthe US anymore? Does buying of houses now hedge against it if the Govt. will try to prop them up with inflation dollars? Where else money can be put? How can one keep the money in the US and make it work for the country rather than sending to it high interest paying countries or BRIC ETFs.
Martin
As long a credit is being paid off or is not in demand, then you will have deflation. It’s called deleveraging and will continue for many, many years considering the amount of leverage there is in the world.
Roidy
What he said.
As long as all of this “printed money” is going into fixing banks balance sheets, and none of it makes it to J6P or Main Street, we’ll have deflation.
Add to that the continued exodus of employment outbound, and you can make the case that demand is shrinking faster than supply.
You don’t have to look very far or very hard, to see that’s what is happening now.
We had BS underestimates of inflation and employment on the way up, and will have the same crap on the way down.
It’s called deleveraging and will continue for many, many years considering the amount of leverage there is in the world
One would think so. However one would have probably also thought so in 2000 as well.
Point being - things don’t always return to the way they once were.
Please advise how one should hedge against massive inflation that we may see in 2-3 years in US due to all the money was/being printed. Or oneshould not worry about inflation inthe US anymore? Does buying of houses now hedge against it if the Govt. will try to prop them up with inflation dollars? Where else money can be put?
Relax a bit. In a sense, if you’re able to hedge, you’re already hedged.
Be diversified. You won’t get rich, but you won’t go broke either.
Thanks Rio, is one diversified enough with the following:
–Buy 2 rental properties at 60% off the peak prices in the price range of $100K and rent them @$1000 per month.
–Pay off primary residence.
–No stocks or mutual funds. Already lost a lot in them.
–Few CDs.
–No 529 or other plans for children. Only the 2 townhouses to support their education. Not interested in any investment that ends up in wall street.
–401K is all in Money market.
–Working hard to keep the job.
Where are you finding properties for $100k that yield $1000 monthly rents? I’m sure many of us here would like to know! The concept of being cash flow positive on property disappeared many years ago, except for az lender who had some way to make the numbers work with trailers.
Thanks Rio, is one diversified enough with the following:
That’s diversified. I have no idea about what is “enough”.
I would own some gold n silver too.
Where are you finding properties for $100k that yield $1000 monthly rents?
I was thinking about that too. I didn’t know if it read $1000 total rent or $1000 for each property.
“No 529 or other plans for children. Only the 2 townhouses to support their education. Not interested in any investment that ends up in wall street.”
I have never quite understood the upside of those educational savings plans, and have avoided them like the plague. I am hoping my wife can increase her hours of paid work during the time our kids are in school, and also that my many (unpaid) hours as a tutor for our kids will pay off in terms of higher college entrance exam scores and scholarships. The beauty of human capital investment (e.g. helping your kids with math so they can do great on the SAT) is that the government can neither measure nor tax the accumulation of human capital.
Berkshire Hathaway stock would be a good inflation hedge: BRKB
Then the economy rebounded and there were 20 years of sustained economic growth with low inflation and low unemployment.”
looks like we piled on the debt to acheive this now we will have to pay it back one way or another
You mean the Savings & Loan disaster didn’t happen? The whole recession of the early 90s didn’t exist?
I want my money back!!
Obama calling for more infrastructure spending (AP)
Sep 6, 8:33 AM (ET)
By JULIE PACE
WASHINGTON (AP) - Vowing to find new ways to stimulate the sputtering economy, President Barack Obama will call for long-term investments in the nation’s roads, railways and runways that would cost at least $50 billion.
wmbz, Congrats on buying a house. It sounds like a great place to live. Lip
Dr. North Teases Tea Party,
Dr. Gary North is a prolific writer who often gets it right. But he won’t climb on board the Tea Party Bandwagon.
Lately, though, he has shown a little interest. He thinks the group is showing some signs of throwing off some of the popular shackles of communism.
Three planks of Communism are:
2. A heavy progressive or graduated income tax.
5. Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.
10. Free education for all children in public schools. Abolition of children’s factory labor in its present form. Combination of education with industrial production, etc. (From the Communist Manifesto…1848)
North writes: “When the Tea Party breaks publicly with points 2, 5, and 10 of the Communist Manifesto, I will be impressed. Until then, I remain an amused bystander.
“I have seen conservative political movements come and go: the Goldwater movement, the Reagan revolution, the Contract With America. None of them has publicly repudiated planks 2, 5, and 10.
“The Tea Party seems ready to repudiate #5. That’s a move in the right direction. It has caught my attention.”
LOL - good luck on #10. That’s a third rail no one will touch.
People have been trying to work on number 2 for years, suggesting abolition of the income tax, replaced by a national sales tax. Of course, the times that I’ve brought this up on the blog, here comes the whining about a “regressive” tax on “the poor”.
You get what you reward, you get less of what you penalize. So why tax income? Why? The wealthy do what they can to avoid this tax, re-interpreting the definition of income (for tax purposes) from income from investments to wages, so the serfs pay.
As to the whining about “regressive” taxes on “the poor”, fair enough. Keep it in place and then eliminate welfare, Medicaid, food stamps, Section 8, blah, blah, blah.
Anyway the income tax is a war tax. Perhaps if we eliminated it, we might eliminate the concept of endless war.
Of course, the times that I’ve brought this up on the blog, here comes the whining about a “regressive” tax on “the poor”.
A national sales tax is a regressive tax on the poor, however if it were used in conjunction with a “wealth” tax including a tax on every financial transaction, then the entire tax burden need not be regressive.
What will replace free education? There are sections of the country where free education doesn’t work and is a complete disaster. There are many more sections of the country - the lion’s share actually - where it does work and is of considerable merit.
Are we going back to child labor horrors like in the late 19th and early 20th centuries in this country? I want a civilized country where children are well cared for, education is worth the name, and we have a real future for America.
Sooner or later we must have these things or well will continue to decline until we are the world’s basket case. We are on the road toward the one or the other. We will not stay as we are. We haven’t the temperament for it.
Roidy
We already have gutted #10. Education through HS is OK, but doesn’t get you out of poverty in our bizarre society. In Calif. it used to be virtually free, and was extremely cheap for in-state student most everywhere. Look at it now. Where has the money gone?
Because we have allowed the ghetto language to take hold. That is the key to changing things around
What is so wrong demanding kids read, write and speak English in school?
There are sections of the country where free education doesn’t work and is a complete disaster.
I wouldn’t worry about putting the kids to work, there’s not enough work for their parents right now.
5. Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.
…in the hands of the state? … with state capital?
The Federal Reserve is a system of privately owned banks, not a state bank. The state can’t even get an audit out of them…
Heh…. #2 isn’t “a plank of communism”.
Where do you guys come up with this stuff? Furthermore, income taxes in the US have never been lower and are the lowest of the G20 nations.
Here you go Cupcake:
III. 10 point program of Communism
1. Abolition of property in land and application of all rents of land to public purposes.
2. A heavy progressive or graduated income tax.
3. Abolition of all right of inheritance.
4. Confiscation of the property of all emigrants and rebels.
5. Centralisation of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.
6. Centralisation of the means of communication and transport in the hands of the State.
7. Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.
8. Equal liability of all to labour. Establishment of industrial armies, especially for agriculture.
9. Combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country, by a more equitable distribution of the population over the country.
10. Free education for all children in public schools. Abolition of children’s factory labour in its present form. Combination of education with industrial production.[9]
linky
No mention whatsoever of universal health care, so I guess that’s okay!
I stand corrected. You sound angry today packman.
Anyways, considering US income taxes have fallen to their lowest levels in 50 years and they’re among the lowest of the G20 countries, it’s being used as another hobgoblin…. much like the rest of the corporatist agenda.
“…US income taxes have fallen to their lowest levels in 50 years and they’re among the lowest of the G20 countries…”
Isn’t this where the Fed’s printing press technology comes in handy?
You sound angry today packman.
I’m always angry. Sometimes I just let it out. You happened to be the lucky recipient, being that I had just read your comments on Holder the other day.
Anyways, considering US income taxes have fallen to their lowest levels in 50 years and they’re among the lowest of the G20 countries, it’s being used as another hobgoblin…. much like the rest of the corporatist agenda.
Agree, and it’s a main part of the reason why I’m not a “TEA partier.” (the other main one being Palin). They have the whole premise wrong - it’s not about taxes, it’s about spending. Personally I think we need some tax increases, much like we did after WWII, to pay down our debt. However that being said:
- I still don’t like progress (or regressive) taxes
- I also think spending cuts are a way higher priority than tax increases (at all levels - federal, state, and local).
- The tax increases should be temporary, until we pay down the debt.
P.S. I may have taken your Holder comments the wrong way (very Scadenfreudish); if so I apologize.
“I’m always angry.”
Not good. Do you have healthy outlets for your anger? Mine’s racquetball… unbeknownst to my hapless partners.
Not good. Do you have healthy outlets for your anger?
I generally just sit on my front porch with a shotgun and seeth.
Though let’s just say our neighborhood is quite gopher-free.
(Seriously though - bball’s it for me. Used to play a lot of rball though).
“I generally just sit on my front porch with a shotgun and seeth.”
Must confess to recurring fantasies about dining on rabbit stew…
Free stuff and equality for everyone! What could go wrong with that, comrade?
Seems to work for Wall St. and the Fortune 500.
III. 10 point program of Communism
To be Communist then would require most of those 10 points to apply?
Look and think carefully about all of those points as they apply to America and to what extent they do or don’t apply.
If one does that, is it not then in fact moronic to even imply the USA is even vaguely “Communist”? Or even “Socialist”?
Do the people who spout “We’re Commies!” have any basis of logic, fact or education that would enable them to mouth such ignorant absurdities?
Or do they do it because they have been conditioned to do it?
Personally, I’d like to see a lot more of #4…….
Marx was profoundly affected by what he witnessed in the early stages of the Industrial Revolution. He had some things right.. an end to child labor.. cure for the massive pollution.. stop people being worked to death.. etc. He was a very compassionate man and protested to several governments, but was for the most part ignored.
Then again, he seriously erred by claiming capital produces nothing, and labor everything. He compounded that error by proposing to entrust the state with the means of production, believing the state was above corruption and beyond reproach. His bitter hatred for the bourgeoisie sorta clouded his mind, imo.
Some things right.. and some things wrong.
I always was a fan of Marx.
Groucho, that is.
“Groucho, that is.”
And then I could always become cantankerous. I’m older than 50 so it’s getting more likely every year…
But you get more for your taxes in other countries. Like garbage pickup and medical — when you add up what you do get, I’ll put a bet on that tax is actually less than in the US.
In this case Marx is correct, IMO. We have a whole slew of “Crackbrained” meddlers in the D.C. cesspool. How’s that working out so far?
“Crackbrained meddling by the authorities can aggravate an existing crisis.” ~Karl Marx
Crackbrained meddling by the authorities may be the cause of the crisis to begin with.
Here’s a sample of some crackbrained meddling: Make it possible for everyone to commit to buying a house whether they can afford one or not.
Crackbrained meddling = productivity in the really new economy.
Did they really have “crack” back in Marx’s time?
Opium was the drug du juor:
“Religion is the opiate of the masses.”
- Karl Marx -
No. Perhaps just another sign of the prescience of Marx (Karl, that is). There’s a rumor that he also predicted the demise of world capitalism–looks like he’s a little late, but perhaps right on that after all (see Peak Oil).
IAT
“Anglo Irish Bank has cost the State more than €22 billion and could yet cripple our economy. How on earth did we get here – and is there any way out?”
http://www.irishtimes.com/newspaper/weekend/2010/0904/1224278175197.html
Population of Eire 4.35 million, losses E22 billion and raising.
Apologies for double post, internet seems slow today ;(
Want cheapskates to spend? Hawk gizmos that save
If you want cheapskates to pull out their wallets, tell them gadget will save them money
NEW YORK (AP) — How do you get penny pinchers to spend these days? Pitch products that promise to save them money.
Demand is rising for kitchen and bath gadgets that squeeze out that last blob of toothpaste and help get the suds out of tiny slivers of soap.
Marketers of these gizmos tout how the pennies they save by reducing waste can add up. Retailers are stocking up.
During the Great Recession, penny pinchers got even cheaper, while showing the newly frugal how it’s done. Cheapskate gadgets may be a sign of the times, but they’re also a sign of how product makers and retailers are trying to get people back in the spending habit.
Big companies like Wal-Mart Stores Inc. and The Container Store and a longtime “As Seen on TV” pitchman are stocking up on items claiming to help people save a buck, such as:
– Caps that keep the fizz in opened soda cans.
– Digital day counters: Gizmos that count the days and hours food has been in the refrigerator, to help keep track of when that milk might be in danger of going bad.
– New, stylish versions of pants extenders that let people wear their clothes even when they gain or lose weight.
A.J. Khubani, the man behind many “As Seen on TV” gadgets such as the PedEgg foot scraper, is making cheapskate gimmicks a priority at his company Telebrands, one of the nation’s top direct-response TV marketing companies.
I am guessing this guy has not been invited to the Obama White House.
Wisdom from Thomas Sowell:
White liberals: how Leftist intellectuals, politicians, celebrities, judges, and teachers have aided and abetted the perpetuation of a counterproductive and self-destructive lifestyle among blacks
http://www.nrbookservice.com/products/bookpage.asp?prod_cd=c6633 - 31k
Probably not a regular WH guest…
The Housing Boom and Bust
Thomas Sowell on how government policies made the housing crisis possible
Brian Doherty | May 20, 2009
“Probably not a regular WH guest…”
I think Eddie has a better chance of being invited.
Sowell: The presumption that Obama knows how all these industries ought to be operating better than people who have spent lives in those industries, and a general cockiness going back till before he was president, and the fact that he has no experience whatever in managing anything. Only someone who has never had the responsibility for managing anything could believe he could manage just about everything.
“I think Eddie has a better chance of being invited.”
That would be a sort of downside up version of Guess Who’s Coming to Dinner.
Wow! Thomas Sowell’s statement implies business schools are useless. Never thought I’d see such honesty! I mean, don’t business schools claim to teach people who have managed nothing how to manage anything?
So, I accept Thomas’ claim. And, that explains why the country’s economy is in the toilet–too many years being managed by too many MBAs in business. The government intrusions are just icing on the moldy cake of the US (dis-)economy.
IAT
That’s whole problem with our country; to much “map” and not enough “terrain.”
But Thomas Sowell and Walter Williams are not black because they are capitalists.
White Corporatists: how the authoritarian money elite co-opted the financial system, bought public policy and used religion to compel an entire class to vote against their own economic interests.
Franklin Raines?
Good call. I wonder if they ever found that missing $12 BILLION he managed to make disappear when he ran Fannie?
” I wonder if they ever found that missing $12 BILLION he managed to make disappear when he ran Fannie?”
It`s hidden next to the 3 million jobs that were saved.
Here is the San Diego Union-Tribune’s lead story on Labor Day. I feel for the people in this article, as I was among the ranks of a similar group during the early 1990s recession.
Pressure mounting on the jobless
Jobless benefits are elapsing for many still looking for work
By Jennifer Davies, UNION-TRIBUNE
Originally published September 5, 2010 at 10:45 p.m., updated September 5, 2010 at 10:30 p.m.
Debbie McKay, who was laid off from her job in February 2009, is packing up because the Mira Mesa home she bought in October 2008 is going through a short sale.
Photo by Charlie Neuman
Debbie McKay knows time is running out.
She was laid off from her job as a corporate travel consultant in February 2009. Last week, she lost her COBRA benefits and she figures she has just a few more months of unemployment insurance.
McKay, 49, has been diligently searching for work, e-mailing résumés every week. She’s had some interviews but no offers.
“Quite honestly, I take it day by day,” she said.
But for many of the unemployed, those days are adding up. The impact not only on them but also the overall economy is hard to overstate.
Workers unemployed for an extended period of time often lose skills, making it that much harder to land a job — driving the unemployment rate higher. There is a loss of human capital and a decline in consumer spending, prolonging the economic slump. Those without insurance put further strain on the health care system.
“It has a whole series of spillover effects,” said Dan Seiver, an economics professor at San Diego State University.
…
“Workers unemployed for an extended period of time often lose skills,…”
What tripe. The world isn’t changing THAT fast. If you’re out of work for 10 years, yeah, you’ve got a problem and even then, it’s easier for someone familiar with the history of the industry to update their skills than someone who just started.
+1
These days thanks to the web it’s often easier to get good training off the job than on the job.
I learned a heck of a lot of new stuff in the few months doing my job hunt in 2008.
Took the kids to the beach, now off to the park… life is good.
Red Beach
Enjoy the ages of “false advertising”, because one day hanging with you will be like Kryptonite to Superman. Time flies.
How do constant pessimists even get out of bed in the morning?
Willpower.
And a real bad attitude!
Coffee.
The number of boats on our nearby lake yesterday was astounding. It being the last weekend of traditional summer, everyone was taking advantage of the absolutely perfect weather.
Probably 95% of the houseboats on Lake Shasta
are still moored. People are hurting.
My parents and their friends all yanked theirs early to prep for Hurricane Earl and won’t launch again until the spring. No boating for any of them this holiday weekend.
The roads have been absolutely empty here through most of August which for me translates into this side of suburban CNYers are off spending their hard earned money in other sunny locales. No staycations here.
Now these roads are not in the blue collar towns who felt the brunt of the layoffs. I would expect there is much more caution and fear in their circles. As I noted earlier, the for sale inventory on our local MLS is heavily sub $100k. The low income groups (and slumlord out of state infestors) are the ones experiencing the severest pain. Through conversations w/bankruptcy attorneys and others in the business I know there is plenty of pain in the other income groups. But those groups are still holding their stiff upper lips through conspicious consumption….for now.
Hi old friends. Here’s an unexpected turn of events.
I might buy an apartment building.
The rental apt where my furniture lives all year is in a three-story building: restaurant on the ground floor, two large apts on the 2nd floor, one large (mine) & two small apts on the 3rd.
The landlady has had the building on and off the mkt in recent years, maybe for $850K a couple of years ago. The gross annual rents when fully occupied come to $72K, so I just assumed the bldg wouldn’t sell, and it didn’t. Just now she has put it back on the mkt at $597K (100x the gross monthly rents). One of the other tenants who is fearful of condoization is “thrilled” that I would consider having him and his wife manage the building. Today I should be able to find out how much of a rent reduction they would want for this service. I would buy the bldg for cash, so getting a loan is not part of the equation. The landlady reckons her annual expenses as $26K, but that includes only $5K for maintenance, which I think cannot include the big-ticket things that come up now and then (roof, major plumbing, like that).
Knowing virtually nothing about landladyhood, I welcome HBB slings and arrows…
1. Price sounds about right.
2. Does it cash flow from day 1? At what percent? Would you do better keeping your money in a bank/investments?
3. Get a FULL inspection of everything - use for negotiation
4. Any changes coming to the neighborhood? Any huge increases in taxes coming down the pike?
5. Any tenants going to pull out soon? Do they pay on time?
hey there az..
i got a question.
What good reason do you have to buy that place?
Not enough stress in your life? Doctor says you need the exercise?
5k/yr for maintenence? With a restaurant on the first floor? Sketchy. Does the restaurant owner provide his own maintenance services (house traps and grease trap cleaning, HVAC service, etc) How many total square foot? I’m sure there is a rough number in $$/sq ft for maintenance costs somewhere. I can tell you that construction labor costs nearly double as you go up(instead of out) so I think it would be fair to say that your maintenance costs will be higher for 3 stories as compared to an equal square footage on the ground. Presumably the current owner has resident contractors or service contracts with local vendors. They’d be the first ones I’d talk to. They’ll know the actual conditions better than the owner. Does the owner employ an actual maintenance and construction guy, part or full time?
It’s no different than buying a used car except the stake is much much higher. I’d investigate this stuff thoroughly.
az lender,
My concern has been the eventual inflation that’s going to hit us and how to convert my life long savings into something other than a few digits in a financial institution’s account.
So, your plan to buy something that “is tangible” would be a good way to convert the $$$ into something that won’t vanish in a puff of smoke.
Obviously it’s a good idea to have the roof, the HVAC and the electrical systems thoroughly inspected to make sure you don’t have any immediate problems. Depending on the age, is asbestos or lead a concern? Is the economy in that area ready to rebound [aka not in Detroit]?
So, it could be a good plan but it depends upon many variables. Personally I think the commercial property market is going to be falling some more, but depending where this property is located it might not have that far to fall.
Best of luck,
Lip
As far as inspections go, you’ll pay $$$ for a professional inspection but it will assess your risk more accurately than a local hack. The high dollar cost remedial work is always structural. Hire a structural engineer to review the primary frame condition, foundation walls and column conditions an column bearing. Mechanical and electrical is much lower cost work, hence less risk. A structural guy can do a look see at those for the obvious.
Check out quotes for insurance policies. Having a restaurant on the first floor is a fire hazard.
So will you become “az_slumlord”?
If it were me I might think of lying down for a bit and wait for this feeling to pass.
“I might buy an apartment building.”
Not a bad time to invest in rental housing, given the market-induced increase in demand we currently see. Just make sure you don’t overpay relative to fundamentals…
At a macro level - my personal opinion is that we’re in for another significant leg down - both in the housing market and the economy as a whole.*
That being the case - from that standpoint it’s probably best to hold off. However your situation may be good to pull the trigger now.
* This is barring significant new QE/stimulus (on the $2T+ scale). If such stimulus ends up happening then the short-term economy may be OK, and maybe even the medium-term.
My hunch is that the relative price of RE has further to fall, no matter what happens with inflation or the macroeconomy. On that premise, I suggest allocating savings towards inflation hedges which could provide for a downpayment, should real estate prices come back in line with economic fundamentals at some future point in time.
restaurant on the ground floor”
roaches I’d buy utilities or other divedend paying stocks even REITS before apartment buildings I was a landlord once never again
Good advice in the above posts.
I want to add that unless those people whom you’re thinking of managing the place have real experience with commercial property, you really should look into hiring professionals who will provide turnkey service.
Will it cost? Of course. Will it save you money? When the big “boo boo” happens (and it will) that’s when it more than pays for itself along with the day-to-day headaches. All you have to do is make sure they do what they say they are doing. A once a month walk-around and talk to your tenants is all it takes.
Stat of the day:
1945 U.S. population: 140M
1945 U.S. FIRE sector: 1.5M
2008 U.S. population: 304M (117% increase)
2008 U.S. FIRE sector: 8.2M (447% increase)
Noting that the vast majority of financial transactions in 1945 have since been automated via ATM and the web.
Something to chew on.
May we spit it out after we finish chewing?
When comparing 1945 to today, the real challenge would be to find the slightest similarity.
Here’s one: Check out the similarity of the rate of increase in debt-to-GDP then and now, evidenced by vertical spikes shown on the graph.
Other periods in American history with protracted periods of similarly high rates of increase include the 1860s (post-Civil War period), the late 1910s (post-WWI period) and the early-1930s (Great Depression).
I sincerely hope that that’s one similarity - being that 1945 was the beginning of the downslope of debt (relative to GDP at least - nominal debt remained flat).
However I also sincerely doubt it.
Economy-wise, right now is more like 1937, unfortunately - after the adrenaline rush of debt-fueled stimulus is slowing down and as the reality sets in that we’re not actually in a real recovery after all.
What comes next is left to the imagination.
hmm..
1945- 116.00%
1946- 121.00%
2008- 69%
2010- 94%
Obama needs to get on his horse if he wants to break the record.
The question is - who will be his Hitler, and what will be his Day of Infamy?
Count me as one who hopes that record remains unbroken.
1945 Army troop strength 8.2 million
2008 Army troop strength 0.54 million
Suggesting that we DRAFT all the FIRE people into the Army. They have the right amount of people and they aren’t doing much productive work right now.
+1
So as to not be skewed by post-WWII rampdown, perhaps we should pick 1950. The FIRE sector was 1.8M then; thus increase to 2008 would be 355% (vs popluation increase of 99.6%).
Given the existence of the internet technology, the number of REIC redundancies must be staggeringly high.
1945 # of atomic bombs 10,000
IAT
WHAT HAPPENED? I wrote:
1945 — number of atomic bombs less than 10
2008 — number of atomic bombs more than 10,000
IAT
Think substitution of expensive capital for even more politically expensive labor, and you will get the picture…
This story is a bit out of date, but I can’t help wondering if an updated version is soon going to appear somewhere on the internet.
Stock Rally Owing to Plunge Protection Team Conspiracy?
Written by Bob Adelmann
Thursday, 07 January 2010 16:25
The 60 percent gain in stocks since March was largely caused by secret government purchases of stock-index futures, the CEO of TrimTabs claims.
The Plunge Protection Team (PPT), otherwise known as the Working Group on Financial Markets, has been the target of conspiracy theorists ever since an article in the Washington Post in 1997 first shed light on the operation. The Working Group was created by Executive Order following Black Monday’s market crash on October 19, 1987, when the stock market declined more than 20 percent in a single session. Its purpose was to give recommendations for legislative and private sector solutions for “enhancing the integrity, efficiency, orderliness, and competitiveness of financial markets and maintaining investor confidence.”
The Group is made up of the Secretary of the Treasury (Timothy Geithner), the chairman of the Federal Reserve Board (Ben Bernanke), the chairwoman of the Securities and Exchange Commission (Elizabeth Murphy), and the chairman of the Commodity Futures Trading Commission (Gary Gensler). Claims are made that this committee consists of an “orchestrated mechanism that attempts to manipulate U.S. stock markets in the event of a market crash by using government funds to buy stocks, or other instruments such as stock index futures — acts which are forbidden by law.”
Some of the attacks are dated and histrionic while others deny the existence of PPT altogether.
…
It’s probably a bit tin foil hattish to assume that Bernanke is standing behind the scenes gleefully manipulating levers to make the market go up in a sort of perverse inversion of the end of The Wizard of Oz (as in “No, I’m a very bad man, I’m just a very good wizard.”) Still, it’s hard to believe that there’s not maniuplation going on, both in the futures pre-market and during the day. No matter how awful the news is, there seems to be a concrete floor under the Dow at around 9980. It’s been a very weird market lately, and one of these days something is going to let go (look at the huge volume of SPX put buying over the last couple of weeks).
“…Bernanke is standing behind the scenes gleefully manipulating levers…”
That seems a bit of a straw man miscaricature in the days of HFT. Why waste human time pulling levers when market predator drones will do?
Here’s the original article.
“We cannot identify the source of the new money that pushed stock prices up so far so fast,” Biderman said in a statement Tuesday.
The source of approximately $600 billion net new cash necessary to lift the market’s overall capitalization by $6 trillion last year could not be identified by TrimTabs, Biderman said. The money, he said, didn’t come from traditional players such as companies, retail investors, foreign investors, hedge funds or pension funds.
Noting that the same thing is true of treasuries - over the past year about $600B of new money came in from sources that are counted as “miscellaneous” (not pensions, money market, etc.).
I thought they were too busy buying bonds and keeping rates low to fool around with the stock market?
Most Americans have lived and enjoyed a charmed and protective lifestyle for as long as they can remember. They believe that they have worked hard, they have paid their taxes and left their government and businesses to provide and insure that they are left alone, happy and content. They relied on this vast nation with natural resources, industrialization, agriculture and “Yankee Ingenuity” to keep them top of the heap of humanity.
Death is well hidden, violent crime isn’t in their backyard, hunger is for the lowest unseen minorties and reality is the promise of the shinny new car, the DreamHouse, a trophy wfe or a flatscreen.
Americans are not used to any type of real suffering. Sure, had our history of the 1920-30 depression, Pearl Harbors, 9/11, sent our sons overseas to terrible world wars, police actions and had inconveniences but everybody that survived returned to the land of plenty, apple pie and the status quo of the American “high life”.
No foreign troops, war torn cities and absolute poverty or distitute women and children have plauged our shores in our current history or memory. We are used to being fat, happy or at least content, with business and government supplying that. Hell, we produce and provide the NFL and the Super Bowl each year by God !
That’s in our contract with the US Powers that Be — No Suffering or Pain Allowed.
…and NOW you tell me that this is a all held up by a bunch of stupid houses…!?!
Oh, the Pain!!
Any one seen walstreetpro2? He hasn’t posted to Youtube in a while.
Did he finally get sent to rehab?
Roidy
“The maddening thing is having your house underwater should have no bearing on whether you default on your mortgage. if your circumstances still allow you to pay your agreed upon mortgage payments, you should not be allowed to weasel out of them.”
You’re forgetting one of the biggest effects of the housing bubble was it became way more expensive to “own” the same thing versus rent it. So unless there’s the proverbial pot of gold, folks don’t want to continue to make inflated loan & property tax payments. Ergo, all the “extend & pretend” gov’t programs. Anything to lure FB’s into thinking their pot of gold is just around the corner.
I am doing my part to help the housing situation. I am going to submit a cash offer of $350,000 on a short sale house today in AZ. It was listed at $499,000 and then it was just dropped to $469,000 The house sold for $927,000 in Feb. 2006.
Gee, I hope I don’t offend the bank with such a low offer.
Good luck and I really would like to hear how it goes.
A couple months ago we bid on three short sale homes and on each bid, they came back and “said” that they had multiple bids [this is in 85083]. We told them we were happy with our bid and they all seemed to close for about $5-10k more than we offered.
In addition, I heard many people tell me that when buying a short sale, the bank will spring the old “we’re going to need another $10-20k at the closing in order to make this deal”.
So, I think the banks need to start dealing but IMO they’re still managing the supply [by keeping a large shadow inventory] and trying to get the most possible. This is not unreasonable on their part, but it’s going to bite them in the a$$ in the future.
‘…“said” that they had multiple bids…’
As CA Renter can vouch, there are ‘always’ multiple bids!
“Gee, I hope I don’t offend the bank with such a low offer.”
I’m playing the waiting game with a low cash short sale too.
I’m not worried about offending anybody. Buying a house is just a business deal. It isn’t a home until I’m kicked back burning a log in the fireplace, munching popcorn and watching Farve getting squished and fumbling. Heck, I’m comfortable renting and I don’t have to move my TV if I don’t get the headache…Oooops!…I mean..”The House.”
The way things have been going the last couple of weeks, the ONLY thing that I’m only worried about is that I may have offered them too much money. Houses are a lot of work !!
Yikes…what if the bank DOES accept my lowball offer ?
I will keep the blog up to date with how it goes. I made some cash offers here in Oregon, but was turned down.
Here is the house that I am making the offer on:
http://www.zillow.com/homedetails/6692-S-Delmar-Pl-Gilbert-AZ-85298/67761968_zpid/#image=imgId%3DX1-IAn8inw52z4s5t_fvpc4%26lightbox%3Dtrue
Sheesh…nice shack.
The dump I’m going after is only 3,578 sq ft at about $54 per sq ft. at my lowball bid but I’m single and my g/f are all skinny.
I’d put a link up but it’s in a small town in Wisconsin, we’re all cheap here in flyover country and you guys will make fun of me if I don’t get it.
So…there
Boat anchor. Not to mention the literally worthless dirt.
I love the nice green grass….just wondering how do you mow such a beautiful lawn around those big rocks???
The California budget impasse is a never-ending political clusterf… if ever there was one. Is there any prospect of systemic, perhaps even constitutional, reform, assuming the California state economy ever emerges from the ravages of the Great Recession?
Our Opinion: Time to push the state’s panic button
By IMPERIAL VALLEY PRESS STAFF
Friday, September 3, 2010 12:13 AM PDT
California is in deep economic trouble, but no one is ready to push the panic button yet — and that, as we see it, is a big part of the problem.
Our politics in the state Capitol have become so broken and splintered that inertia is the natural order, and the budget process has degenerated into an annual near-death experience. This year, though, efforts to resuscitate the body may not be enough to save the patient.
That Tuesday’s legislative deadline came and went without lawmakers making any serious attempt to pass a budget for the fiscal year that is already two months old is not surprising. The surprise would have been if Democrats and Republicans had placed their partisan rancor aside and taken care of the people’s business by making the tough decisions they were elected to make.
But that is hard work, and it involves the fine art of compromise, a concept that runs counter to the zero-sum game in which the entire process is held up to ridicule and the winning side is the one that stands to lose the least in the public’s eyes.
Closing the estimated $19 billion deficit that threatens the viability of what was once the sixth-largest economy in the world wouldn’t be easy if politics were ideal in the once Golden State, which they are not, but it is all but hopeless in the current climate.
…
Political gridlock has its benefits.
EDITORIAL: Super-majority protects budget process
Our view: Voters should reject Prop. 25, keep two-thirds threshold for state budgets
North County Times opinion staff North County Times - Californian Posted: Wednesday, September 1, 2010 12:00 am
Given the annual shame of the state Legislature’s inability to pass a budget, Proposition 25 may seem like a good idea to voters: Eliminate the two-thirds vote requirement for the Legislature to pass a budget, replacing it with a simple majority.
And given the way the state leans overwhelmingly toward the Democrats, a simple majority vote would most certainly get us a budget on time each year.
But voters should ask themselves what kind of budget we’d get if the majority Democrats no longer had to negotiate or compromise with the minority Republicans over the state budget.
The Democratic Party leadership in California has shown little willingness to rein in spending to balance the state’s budget during the economic downturn. As state revenues have plummeted, along with private sector jobs, the Democrats’ response has all too often been to propose an increase in taxes or to borrow more millions.
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Oh puhlease. Democrats don’t want to cut spending, and Republicans don’t want to raise taxes. However, reluctantly, Democrats eventually offer spending cuts. And then Republicans vote no because the deal also has tax increases. So, in the end, Republicans stop any budget from being passed. Even Schwarzenegger (sp?) has gotten angry at the Republicans in the legislature, because they refuse to deal.
IAT
And Nero fiddled…
Here’s a lovely double entendre:
Real Estate
Housing Faces the Fall
Published: Sept. 6, 2010
By Steve Cook Real Estate Economy Watch
As recently as two weeks ago, the standard sources of price data‒Case-Shiller, NAR, FHFA‒were making headlines with the news that housing prices were up over the first half of the year. But as the summer ends and the home buying season winds down, a cloak of gloom is settling over the industry and Washington policy-makers, whose efforts to reverse the decline of national wealth in home equity have largely failed.
Experts believe the indices that prompted optimism in the first half are about to reverse themselves as government props to stabilize prices either, like the $30 billion homebuyer tax credit, faded away, or bombed altogether.
After 18 months of tax credits, July housing sales sank 26 percent from July 2009 and inventories soared to their highest level in recorded history. Now that the average American home takes more than a year to sell, sellers are cutting prices in despair.
ZipRealty reported Friday that the number of price-reduced homes on the market increased 3.26 percent in August compared to July, ZipRealty’s monthly review of MLS-listed properties in 26 major markets found that 47 percent of “for sale” homes had at least one price reduction and the average seller actually slashed their list price twice to attract buyers.
The growing number of price-reduced homes outpaced newly listed homes in August, which increased less than one percent, with sellers nationally reducing their asking price by an average of $19,092.
“It appears that homebuyers are taking their time as they don’t feel a sense of urgency to make an offer, unless the price is right, and sellers are having to aggressively cut their prices to stay competitive in this market,” said Leslie Tyler, vice president of marketing for ZipRealty. “We typically find if a buyer hasn’t walked through the door in 30 to 45 days, a seller needs to lower their asking price. If a home hasn’t had an offer in six months, it’s time to rethink the sale.”
…
Putting a value on science
Former University of California President Richard Atkinson weighs the damage budget cuts have done to his beloved UCSD
By Gary Robbins, UNION-TRIBUNE
Monday, September 6, 2010 at 7:27 a.m.
Richard Atkinson
…
Atkinson, 81, expanded on his thoughts about fellowships, money and science in a wide-ranging interview.
Q: For many years, you’ve said that the UC system could be hurt by a drop in state funding. That drop has occurred. But UC San Diego pulled in a record $1 billion for research over the past year. It also granted a record number of doctorates, and the school ranked among the nation’s top 25 research schools. How is UCSD managing to prosper at a time when it has been getting less state money?
A: All universities are in trouble. The private universities have seen their endowments go down dramatically. State universities throughout the country have huge problems. The UC budget has been cut by over 50 percent in the last decade at a time when an ever increasing number of students want to attend the university. On the other hand, UCSD is a somewhat unique campus. The UCSD faculty are remarkably successful at securing research funding from federal agencies and private foundations. This is particularly true in the sciences, engineering and medicine. The federal government is still committed to supporting research. They should be doing more, but these are difficult times. We continue to receive strong support for our research programs, and that helps immensely. But there is no question that the state should be educating more collegeage students. When you look at the size of California, and what our obligation is, the number of students attending UC schools should be higher.
The state has severely cut back on funding. We are no longer able to adequately serve the needs of the young people of California.
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Yawn…snore…
Bond bubble talk spurs asset shift
Investors should buy higher yielding paper, even equity
By Douglas Appell
September 6, 2010, 12:01 AM ET
Warning: Jeremy Siegel is among those who have talked of the potential for a bubble in fixed income.
Recessionary fears have lifted U.S. Treasuries into what some observers call bubble territory, although most bond managers and investment consultants interviewed insist that skimpy yields on risk-free assets today simply reflect cold, hard — and potentially dismal — economic realities.
If the bubble debate is lively, there’s a greater degree of consensus on what investors should be doing now: shifting more of their assets into higher-yielding paper, including investment-grade corporate and high-yield bonds, as well as emerging-market debt — or even adding more equity.
Wharton School professor Jeremy Siegel and Jeremy Schwartz. director of research and Mr. Siegel’s colleague at WisdomTree Inc., came out publicly last month arguing that investors seeking refuge now in 10-year U.S. Treasury bonds — for a yield well below 3% — were setting themselves up for a loss just as investors buying tech stocks did in early 2000.
In the event of a double-dip recession, Treasury bonds will still provide an “offset,” but at current valuations, investors are “paying a stiff price for that insurance,” Mr. Siegel, a senior adviser to WisdomTree, New York, said in a telephone interview.
…
The former poster here named Hoz was recommending hedges against a bond market collapse eons ago. So far, the pessimism bubble has lasted far longer, and blown to a far more ginormous size, than either he or I could have possibly anticipated. Luckily, I completely ignored his investing advice, which is reflected in the investment recommendations of the following post, even though I respected his opinions as one of the most savvy and knowledgeable posters of his time on the HBB.
Making Money On The Treasury Bubble
Posted: Sep 06, 2010 07:42 AM by Matthew McCall
When bubbles form in the stock market, it is often caused by a trend that morphs into euphoria. The trend has been to move money out of stocks and into government bonds over the last eight months. As a matter of fact, through the first six months of 2010, inflows into bond funds totaled a massive $559 billion compared to outflows of $232 billion from equity funds. The morphing from a trend to a bubble has begun. The question that looms is this: When will it burst, and how should investors prepare for the next great bubble?
Two weeks ago, the U.S. 30-Year Treasury Bond had its best week since May as the yield fell as low as 3.66%. The fears of a weaker U.S. economy in the months and years ahead has investors locking in at historically low interest rates in lieu of stocks.
Bond Owners Hurt
My question to the Treasury bulls is this: Why would you lock in at such low rates when our government continues to print money at an alarming pace with no end in sight to stop spending? In my opinion, the bigger concern should be inflation in the years to come, not deflation. And the buyers of Treasuries now will be paying for it later - twofold!
First, they will take a hit on the Treasury purchases as the bubble bursts. A 1% increase in the 30-year yield, from 3.66% to 4.66%, will result in an 18% LOSS in the Treasuries’ value. A similar move in the 10-year yield will result in a 9% LOSS! The longer the bond is dated, the larger the risk investors take if their bet goes wrong.
Profiting From Falling Bond Prices
ETFs, which allow investors to profit from falling bond prices and rising yields, have become popular with bubble theorists like myself. Because everyone loves to take more risk than they should, the ProShares UltraShort 20+ Year Treasury ETF (NYSE: TBT) is the vehicle most use to make money on a treasury bubble. The ETF is leveraged two-to-one - the inverse of the long-dated treasury bonds. As bond prices fall and interest rates rise, TBT will increase in value and vice versa. The catch is that the daily moves it makes will be twice the underlying index, adding often-unwarranted risk.
Investors that do not need the added risk of a leveraged ETF can choose the ProShares Short 20+ Year Treasury ETF (NYSE: TBF). This ETF is identical to TBT except that it moves one-to-one with the bonds, without the built-in leverage. Both TBT and TBF concentrate on U.S. bonds with long maturities and, therefore, they will be the biggest movers in the event of a bubble bursting.
To lower the risk level slightly as well as the potential reward, investors can use the ProShares UltraShort 7-10 Treasury ETF (NYSE: PST), which moves inverse to the movement of intermediate-term U.S. bonds. When the bubble bursts, the move will not be as dramatic. However, if the trade goes against the investor, the losses will also be smaller.
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Preparations for a treasury bubble burst should most definitely include investments in commodities. Specifically food, water, and lead.
our government continues to BORROW money at an alarming pace with no end in sight to stop spending?
and we will be even more broke when we have to pay it back
unless you think the government will devalue the dollar then we will have interrest rates of 20% and be even more broke
the only way I see inflation is letting in millions of younger workers and freely loaning them money to buy things
a bunch of older Boomers like we have now ? Deflation.
I’m sick of the doom-and-gloom around here so I am going to give y’all a cure.
It’s called summer tomatoes, and it involves buying a large amount, slicing them, drizzling them with fine olive oil, some wonderful basil, and fleur de sel.
Eat it with your fingers and remember, when you start licking the juices, it’s called a “good thing”. (You might just get a few other juices flowing with this thing!)
Yeah, it’s a tad expensive but it’s cheaper than a house.
OK to grow your own, and to throw in some home-grown cukes, and maybe some feta?
(Cause that’s what I’ve been all about this summer - seriously. I do take breaks from my front-porch-brooding occasionally.)
Dump the cukes, roger on the feta.
Seriously, my good friend, think of the possibilities.
Cukes? I don’t think so!!!
PS :- I love cukes. Not in this context.
Cukes are great tomatoes! Though I usually de-peel first (why do they call it “peeling” when you’re actually removing the peel?). Also throw in some balsamic vinegar.
Cukes are with great tomatoes
Daarrrggghh!!!!
Cukes are great with tomatoes
(Gonna have to go get my shotgun agin.)
Cukes are with great tomatoes
You guys made me hungry so I just did it. But I only 1/2 way de-peeled the cukes.
Tomatoes were not bad for 1/2 a block away supermarket ones but they weren’t homegrown.
“(You might just get a few other juices flowing with this thing!)”
This is OlyGal’s cue for a rejoinder…
“fleur de sel”
Hada look that up…gonna try your recipe today to bring great cheer to me and my vegetarian daughter, who didn’t go to the Magic Kingdom today with the rest of the fam.
This is not a “hypothesis”. I will state the magic words.
I have data.
Data, not datum!
Gettin’ ready to drive over to Henry’s to obtain some data of my own. I may augment your recipe with a splash ‘o imported balsamic vinegar (also expensive, but far less so than a house). What’cha think?
Less is more.
Professor Bear’s Housing Market Gloom Dispersant Tomato Salad
- 6 large red, ripe, juicy tomatoes, thinly sliced
- 2 T imported Balsamic vinegar
- 1/4 c extra virgin olive oil
- 12 large basil leaves, finely chopped
- 1 leek, sliced thin, with slices cut in half
- Ground black pepper and sea salt to taste
* Mix all liquid ingredients in a large plastic bowl
* Add leeks, basil, salt and pepper
* Stir well
* Add tomatoes and stir
* Cover and set out on counter for 1-2 hours to allow flavors to blend
* Pour yourself a generous glass of the wine of your choice
* Cut yourself a few slices of your favorite artisan bread
* Eat, drink and be merry until you don’t care whether housing prices are gonna go up, down or sideways
And they are not making any more tomatos, ya know…
Want some? I’ll pay you to take them off my hands. They’ll be worth a lot soon I hear.
Zucchini too. It’s about to skyrocket.
The bond market crash in the spring of 1987 presaged the Black Monday stock market crash of October 1987 by just a few months. But maybe this time is different, as this article suggests, and stocks and bonds will behave as portfolio substitutes, not complements, on the downside of the slope of Hope and Change, despite their complementary behavior over most of the past thirty years?
Bloomberg
Bond-Market Bubble to Burst, Boost Stocks, Axa Framlington Says
September 03, 2010, 1:59 AM EDT
By Shani Raja
Sept. 3 (Bloomberg) — A “bubble” in fixed-income markets is set to burst and will drive funds into stocks, according to Axa Framlington, which oversees $30 billion in global assets.
The market for U.S. Treasury bonds has become inflated as banks exploit benchmark borrowing costs near zero to boost purchases, said Mark Tinker, global equity portfolio manager in London for Axa Framlington, a unit of Paris-based Axa SA.
Investors have been drawn to bonds on rising prices and as a shield against perceived risks to global growth. A sell-off may be triggered if the U.S. Federal Reserve, which has bought Treasuries and government-related debt to hold down yields, doesn’t extend those quantitative easing measures, Tinker said.
“Bonds are in a bubble through a combination of forced buyers, momentum players and a lot of leverage,” said Tinker. “If the U.S. announces a form of stimulus that doesn’t involve the Fed being both provider of liquidity and the buyer of last resort for bonds, the free-money trade disappears. To the extent leveraged players head for the door, the bond bubble will pop, and that means the equity market can bounce.”
…
To the extent leveraged players head for the door, the bond bubble will pop, and that means the equity market can bounce.”
And 401K and IRA investors in Bonds will lose even more money and won’t be able to buy $$it . buy utility stocks they pay better than bonds lots of stocks pay as well as bonds just like the old days when stocks had to pay more than bonds to compensate for risk
OTOH, short of defaulting, average investors who invest monthly through 401k or similar devices will see their return through the roof. This is only bad if you’re in long term bond funds or are old.
Whistling as one strolls past the graveyard is seldom convincing.
Published in Investing on 6 September 2010
Gilt yields are at record lows. Avoid the potential bubble and look to these high quality shares instead. In 10 years time, you’ll be glad.
Bond bubble talk is rife these days, particularly in the US. Things aren’t looking much different here in the UK either, with 10-year gilts currently yielding a very lowly 3%.
Maybe it’s because we’ve become, as one economist put it, “armageddon hypochondriacs.” Recent experience leads us to believe that markets are always on the brink of insanity and meltdown.
Others disagree. Slate magazine’s Daniel Gross, one of our favourite business writers, recently penned an article refuting the idea that US bonds are in bubble territory. It’s a good read, but most of his arguments aren’t terribly convincing.
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“On the one hand…, on the other hand…”
GIMME A ONE-ARMED ECONOMIST, DAMMIT!
Bond Bubble Watch: How Low Can Yields Go?
By Mike Taylor
September 3, 2010 | 4:10 p.m
Colin Barr at Fortune’s Street Sweep (an Observer Wall Street favorite) offers a balanced take on the where U.S. Treasuries might be headed following their meteoric rise in popularity in 2010.
Traders have flooded into the bond market at a rapid clip as concerns that the economy isn’t recovering fast enough — and may be headed for a double dip — have engendered a widespread flight from risk into the relative safety of government bonds and other high-grade debt securities. The ensuing rise in price has driven yields down. The benchmark 10-year Treasury note has gone from a high of around a 4 percent yield this spring to as low as 3.47 percent in August.
So is the bond buble ready to burst? Hard to say. On one hand, economic uncertainty makes U.S. Treasury securities seem like an attractive bet to investors, and it’s unlikely that the boom times will return any time soon. On the other hand, Barr writes:
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Classic bubble symptom Numero Uno: DENIAL IN MSM REPORTS. Gotta keep helping Wall Street market time bomb assets to greater fools.
Up and Down Wall Street
SATURDAY, AUGUST 21, 2010
Vacuous Bond-Bubble Talk
By RANDALL W. FORSYTH | MORE ARTICLES BY AUTHOR
All the hype about a bubble in Treasuries is just that.
THERE’S A REAL BUBBLE TAKING PLACE in the markets and you can scarcely miss it, so blatant and omnipresent has it become. It is, of course, the bubble in talk about a bond bubble. As for an actual bubble in bond prices, that’s quite a different story.
If you looked at financial news and commentary in any medium, from the Internet to cable television to the quaint printed page, you couldn’t avoid the most heated debate since, if not Lincoln-Douglas, then “Less Filling” versus “Tastes Great.”
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September 3, 2010
How to Profit From the “Widow-Maker” Trade – Shorting U.S. Treasury Bonds
By Keith Fitz-Gerald, Chief Investment Strategist, Money Morning
Although we’re in the midst of a U.S. Treasury bond bubble so big that pundits are calling for investors to short the government paper, resist the urge to jump in with both feet.
Doing so right now is nothing more than a “widow-maker” trade that will test both your patience and your pocket book. And yet, “shorting” the U.S. Treasury bond market is an opportunity you can’t afford to pass up - so long as you execute the trade correctly.
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Great Speculations
Buys, holds, and hopes
Aug. 24 2010 - 4:18 pm
Be Wary Of Bond Bubble Risk
Posted by Sy Harding
Money continues to pour into bonds at a ferocious pace, with investors confident they are a safe and conservative holding in the midst of all the economic and stock market uncertainty.
With last week’s further rally, the 30-year Treasury bond had its biggest weekly gain in price since May, pushing their yield down to just 3.66%. The yield on 10-year Treasury notes was pushed down to 2.61%, while the yield on two-year notes fell to 0.496%.
The newly found confidence in bonds is in several ways reminiscent of the tech stock bubble in 1999, and the ease with which new issues of tech stocks were being eagerly swept up by investors convinced they could only go higher, finding all kinds of reasons not to believe warnings that they were in a bubble.
Yields approach levels of late 2008.
Corporations are currently scrambling to issue new supplies of bonds as fast as tech companies brought new stock IPO’s to market in 1999.
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no but its “different this time”
I’d rather play 21 in a casino with decent house rules than gamble with the Wall Street Boyz.
At least there, I can see how I’m being destroyed and they’ll offer me a free drink to ease the pain.
Food and hotel stays are also much more reasonable on Vegas than anywhere in the vicinity of Wall Street…
“I don’t mind the games you play, but I don’t like your dealin’!”
- Joe Walsh
Krugman’s prediction that the Fed has run out of bubbles has proven spectacularly wrong.
* OPINION
* AUGUST 18, 2010
The Great American Bond Bubble
If 10-year interest rates, which are now 2.8%, rise to 4% as they did last spring, bondholders will suffer a capital loss more than three times the current yield.
By JEREMY SIEGEL AND JEREMY SCHWARTZ
Ten years ago we experienced the biggest bubble in U.S. stock market history—the Internet and technology mania that saw high-flying tech stocks selling at an excess of 100 times earnings. The aftermath was predictable: Most of these highfliers declined 80% or more, and the Nasdaq today sells at less than half the peak it reached a decade ago.
A similar bubble is expanding today that may have far more serious consequences for investors. It is in bonds, particularly U.S. Treasury bonds. Investors, disenchanted with the stock market, have been pouring money into bond funds, and Treasury bonds have been among their favorites. The Investment Company Institute reports that from January 2008 through June 2010, outflows from equity funds totaled $232 billion while bond funds have seen a massive $559 billion of inflows.
We believe what is happening today is the flip side of what happened in 2000. Just as investors were too enthusiastic then about the growth prospects in the economy, many investors today are far too pessimistic.
The rush into bonds has been so strong that last week the yield on 10-year Treasury Inflation-Protected Securities (TIPS) fell below 1%, where it remains today. This means that this bond, like its tech counterparts a decade ago, is currently selling at more than 100 times its projected payout.
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This means that this bond, like its tech counterparts a decade ago, is currently selling at more than 100 times its projected payout.
Couple of thoughts:
1. So now we’re comparing U.S. treasuries to tech stocks??!! I haven’t seen figures, but probably well over 80% of all tech companies went bankrupt after the tech bubble. Are S&S really giving the U.S. government that amount of chance?
2. Curious where they get their “projected payout” data for tech companies. Most of them never even showed a profit, let alone got to a level where they would project any kind of dividend payouts.
This rebuttal strikes me as flawed by a logical fallacy similar to that of, “Real estate prices will never go down because they aren’t making any more land.”
David Rosenberg Delivers Long, Must-Read Rebuttal Of The “Bond Bubble” Talk
Joe Weisenthal | Aug. 19, 2010, 11:08 AM
One of the longest, most die-hard bond bulls, David Rosenberg, is out with a long rebuttal of the new fashionable trend of calling the Treasury market a bubble.
His basic ideas:
* The US will never ever default. Your capital is guaranteed, unlike with .coms during the bubble.
* Growth is weak, and there’s no inflation pressure.
* In fact, deflation is imminent.
* As such, yields are still juicy if we get CPI in the -1% to -2% range.
* Traders are still net-short treasuries.
* Investors are actually gaining financial acumen.
* Demographics favor ongoing bond buying.
…
* As such, yields are still juicy if we get CPI in the -1% to -2% range.
So’s cash. Only it’s a lot more juicy.
(meaning liquid)
(in keeping with today’s theme)
if government debt goes up too much interest rates will go up as well just like Greece.
yes deflation is imminent just think how much worse it will be if interest rates go up. Then we will really be in trouble flat wages and high interest rates on debt. like having a payday loan.
and BTW most of my friends in High Tech travel to China now they have all the money hope they keep loaning it to our treasury.
“…if government debt goes up too much interest rates will go up as well just like Greece.”
Did you never hear of quantitative easing? Or is it just that you don’t believe in its limitless potential to ‘contain’ long-term interest rates?
Newton’s Third Law of Motion:
“For every action, there is an equal and opposite reaction.”
21st Century Financial Market Updated Version:
“For every collapsing asset class bubble, there is an equal and offsetting bubble created in some other asset class.”
I’m sure this could be stated more elegantly, but I think I have something here; witness the storm surge of liquidity from stocks into bonds for a current example.
I’m sure this could be stated more elegantly, but I think I have something here; witness the storm surge of liquidity from stocks into bonds for a current example.”
I’d be tempted to look more globally for new bubbles
Whoo hoo I just sold 8 chinese Laser discs to a guy in France for $150…..who would have thought?
I have over 100 more and i got them for free…..
I may not be book learned like Bear and Polly, but I gotz street smarts…
“…but I gotz street smarts…”
Far more important to survival…
The Real Estate Collapse
* By Jonah Lehrer
* August 25, 2010
* 4:06 pm
The news on the housing front is bleak and getting bleaker. The New York Times posts a graph that captures the trend.
Obviously, a stew of forces are at work here. There is the end of the federal tax credit, and the crappy employment news, and the shadow inventory of foreclosed homes. But I think the dismal housing data also reflects a systematic human bias: loss aversion. The phenomenon was first identified by Daniel Kahneman and Amos Tversky in the mid-70s, after they gave their students at Hebrew University a simple survey asking them whether or not they’d accept a variety of different bets. The psychologists noticed that, when people were offered a gamble on the toss of a coin in which they might lose $20, they demanded an average payoff of at least $40 if they won. The pain of a loss was approximately twice as potent as the pleasure generated by a gain. Furthermore, our decisions seemed to be determined by these feelings. As Kahneman and Tversky put it, “In human decision making, losses loom larger than gains.”
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I love this guy’s brutal honesty! No porcine lipstick will be found anywhere in this article.
Housing prices are about to plunge
by Mike Whitney | July 25, 2010 - 1:06pm
The housing depression will last for a decade or more. This is by design. The Fed has been working with the banks to withhold inventory so prices do not fall too fast or too far. That way the banks can manage their write-downs without slipping into insolvency. But what’s good for the banks is bad for the country. Capital impairment at the banks, means no credit expansion in the near-term. It means the economy will continue to contract, unemployment will remain high, and deflation will push down wages and prices. Everyone will pay for the fraudulent mortgage-backed securities the banks issued during the bubble-years.
Typically, personal consumption expenditures (PCE) and real estate lead the way out of recession. But not this time. Both PCE and RE will stay depressed and act as a drag on employment and growth. Last week, in testimony before the congress, Fed chair Ben Bernanke made it clear that the central bank has no intention of providing extra monetary stimulus to make up for the rapidly-dissipating fiscal stimulus or the winding down of government subsidies for auto, home, and appliance purchases. The economy must muddle through on its own. But without additional help, disinflation will turn to outright deflation and the economy will sink into negative territory. Bernanke knows this, but he’s washed his hands of any further responsibility. It’s just a matter of time before the economy begins to slump.
Look at housing. The facts are grim. This is from Charles Hugh Smith:
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I refer thee to the aforementioned Jacquelyn Kotarac.
Reflating High-Risk Assets
Shadow Banking Makes a Comeback
By MIKE WHITNEY
Credit conditions are improving for speculators and bubblemakers, but they continue to worsen for households, consumers and small businesses. An article in the Wall Street Journal confirms that the Fed’s efforts to revive the so-called shadow banking system is showing signs of progress. Financial intermediaries have been taking advantage of low rates and easy terms to fund corporate bonds, stocks and mortgage-backed securities. Thus, the reflating of high-risk financial assets has resumed, thanks to the Fed’s crisis-engendering monetary policy and extraordinary rescue operations.
Here’s an excerpt from the Wall Street Journal:
In contrast, bank lending and consumer loans continue to shrink at a rate of nearly 5 per cent per year. According to economist John Makin, there was a “sharp drop in credit growth, to a negative 9.7 per cent annual rate over the three months ending in May.” Bottom line; the real economy is being strangled while unregulated shadow banks are re-leveraging their portfolios and skimming profits. Here’s more from the WSJ:
As the policymaking arm of the nation’s biggest banks, the Fed’s job is to enhance the profit-generating activities of its constituents. That’s why Fed chair Ben Bernanke has worked tirelessly to restore the crisis-prone shadow banking system. As inequality grows and the depression deepens for working people, securitization and derivatives offer a viable way to increase earnings and drive up shares for financial institutions. The banks continue to post record profits even while the underlying economy is gripped by stagnation.
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The “underlying economy” is overrated.
All kinds of fiscal problems are solved, if you can just figure out how to get rid of a bunch of those bottom-feeders. And if you can work it so as to make it look like they did it to themselves, you don’t have to put up with that pesky guilty consience.
We’re a lot closer to a “Mad Max” world than we think.
The banks continue to post record profits even while the underlying economy is gripped by stagnation.
This is the usual condition of a “jobless recovery.”
Many Fortune 500 are doing just fine as well.
“A new quarterly survey of lending by the Federal Reserve found that hedge funds and private-equity funds are getting better terms from lenders and that big banks have loosened lending standards generally in recent months.”
I’m gonna take a wild-arsed guess here that some of this money loaned on better terms to hedge funds and private-equity funds is providing stiff competition to end-users who might want to just buy homes as a place to live?
I’ll be happy to rent from a hedge hog on favorable terms, if necessary…
Thought this line was pertinent:
Financial system instability is no accident. It’s Central Bank policy.
Oh, for another Jackson (minus the horrendous Indian policy).
IMHO, John Q. Public hasn’t a clue what makes real estate prices go up, down or sideways.
June 15, 2010
The Foreclosure Spiral
The Next Housing Crisis
By MIKE WHITNEY
Did the Federal Reserve collude with the big banks to hold millions of houses off the market until the Fed finished adding $1.25 trillion to the banks reserves? Did the Fed do this to make it appear that its bond purchasing plan (quantitative easing) was stabilizing prices when, in fact, it was the reduction in supply that stopped prices from plunging? It sure looks that way. This is from Bloomberg News:
Inventory steadily declined during the period the Fed was exchanging cash-for-trash (toxic assets and non performing loans for reserves) with the banks. Now inventories have begun to rise again as the banks get back to business as usual, in other words, throwing people out of their homes. The sudden uptick in repossessions and property seizures coincides perfectly with the ending of the Fed’s giant “no bankster left behind” program. Clearly, there must have been a quid pro quo.
What’s so impressive about Bernanke’s trillion dollar sleight-of-hand operation is its simplicity. We’re just talking “supply and demand” here, not rocket science. The banks agreed to cut supply (by temporarily stockpiling homes) while the Fed loaded them up with a cold trillion-plus in reserves. Meanwhile, John Q. Public assumed (incorrectly) that Bernanke’s program stabilized prices. It’s a very ingenious deception.
…
Deception? Not really. It’s been obvious for a year and a half, to anyone who was paying attention.
J6P will get to pay for his house twice.
“It’s been obvious for a year and a half, to anyone who was paying attention.”
Given the Fed is so very open about its market operations, it should be hard to miss.
“It’s a very ingenious deception.”
There’s only so much that well cap be tapped. Specifically it looks like about 37% more.
What then?
How are “Home Equity” and “Value” defined and calculated for purposes of producing that graph?
It’s in the Fed z1 data, table B.100, line 50. The table shows how it’s calculated - if you don’t have it let me know and I’ll post a link.
It says they use “market value” - however z1 doesn’t say where that data’s from. My guess would be they use some FHFA data.
“Did the Federal Reserve collude with the big banks to hold millions of houses off the market until the Fed finished adding $1.25 trillion to the banks reserves?”
I have three questions for anyone who thinks the answer is yes:
1) Can you verify your answer?
2) Is the policy unprecedented?
3) Is it legal?
I’m sure the banks just spontaneously and independently came to the same conclusion that withholding inventory was a good idea.
And when you see Santa Clause, would you give him this list for me?
“I’m sure the banks just spontaneously and independently came to the same conclusion that withholding inventory was a good idea.”
I’ve suggested all along that seemed implausible, but here is Mr. Whitney pointing the finger of blame at the Fed for top-down collusion to withhold inventory. Is he just making this up, or is there some factual basis for his accusation?
It’s the unions.
Hard times for workers on Labor Day 2010
http://www.washingtonpost.com/wp-dyn/content/article/2010/09/05/AR2010090502815.html
On Labor Day 2010, the state of America’s workers is appalling.
Millions have lost their jobs. Millions have had their lives put on hold or thrown into reverse.
pretax corporate profits increased $388 billion from the low point of the current recession, the second quarter of 2009, to the third quarter thereafter, while wages increased just $68 billion. At a comparable point in the 1981-82 recession, corporate profits came to just 10 percent of the combined uptick in profits and wages. This time around, they amount to 85 percent.
Only a purblind ideologue could miss the pattern here. American employers — more than employers in other nations and more than American employers in earlier downturns — have imposed the costs of the recession and, increasingly, the costs of doing business, on their workers, and kept for themselves damn near all the proceeds from doing business.
Through the weakness of our labor laws, the reports say, private-sector American workers can no longer form unions.
Freedom House, citing the near-impossibility of forming unions in this country, laments that the United States cannot be classed among the 41 nations that afford their workers full freedoms.
A union-free America. Growth down a little, employment down a lot. Profits and productivity up, wages flat. Health-care costs up for workers, down for employers. The return of a thriving middle class? Dream on.
And a happy Labor Day, one and all.
Good lord, Harold Meyerson even looks like Lenin…..
People can form all the unions they want. But the key word is “want”.
That’s like saying people can fly through the air if they want. True–until gravity wins as they hit the ground.
People want lots of things, but if the laws make it hard to get them, then people do without. And, if people don’t want something, but the laws make it easy to get it, people will get it. We know this with housing–all those people who would have been better off renting, but bought because the subsidies. Same logic applies to every other endeavor. Our laws make forming unions extremely difficult. So, we have declining unions. And, that’s not good for working families, who can be picked off one by one by organized business.
And, all those people who froth at the mouth against unions, yes, there are some excesses, and I am against such situations. But, before unions, there was the 7-day workweek, the 16-hour day, and so forth. All those who have ever enjoyed a Saturday or Sunday off from work should stop complaining about unions–unless you plan to work all 7-days, 16-hours a day, for the rest of your life. If so, then I applaud your integrity–and I question your wisdom.
IAT
You would do better to question their sanity. Sleep deprivation, stress and exhaustion are proven precursors to bad judgment calls and disaster.
But you can’t fix stupid.
The unions that do exist are in denial about the ability of gov’ts or employers to make good on their promises. Everyone will have to get by with less
Everyone will have to get by with less
Because of the declines of unions.
Two articles were flagged as must-reads on the Washington Post today, and they are indeed great. http://www.washingtonpost.com/wp-dyn/content/article/2010/09/05/AR2010090502779.html
One is by Rogoff and is about how long it will take for the economy to recover (a long time) and why it would be better to have a little inflation than deflation. http://www.project-syndicate.org/commentary/rogoff72/English
The other is by Bartlett and summarizes recent analysis on sovereign defaults. It’s the best piece I’ve see on this topic and makes me worry less about the bond market collapsing. http://www.thefiscaltimes.com/Issues/The-Economy/2010/09/03/Options-for-Ending-Unsustainable-Debt.aspx
Sorry to post such old news. My brain is having an increasingly difficult time keeping up with recent housing market developments.
The Financial Times
US home sales plunge to 15-year low
By Alan Rappeport in New York
Published: August 24 2010 15:46 | Last updated: August 24 2010 18:24
Purchases of previously owned homes plunged to their lowest level in 15 years last month as a weak jobs market and strict financing requirements stalled buying activity, heightening fears that the housing market will drag down the US economy.
Home resales declined by 27.2 per cent in July to an adjusted annual rate of 3.83m, according to the National Association of Realtors. That was far worse than the 13.4 per cent drop that economists were expecting and left sales down by 25.5 per cent from a year ago.
Existing home sales have fallen for three months running, as the housing market sputtered after the expiry of the government’s first-time homebuyer tax credit, which spurred demand earlier in the year.
The disappointing housing data are the latest in a raft of weak indicators that have signalled that the US recovery is losing steam. Many economists have downgraded their projections for economic growth in the second half of the year.
“If foreclosures flood the market faster than we expect, home prices could take another serious leg down, tipping the economy back into recession,” said Michelle Meyer, senior US economist at Bank of America Merrill Lynch. “The interplay between the economy and the housing market should not be underestimated.”
…
Nothing in this opinion piece convinces me any other approach would have done any better to stop an economic avalanche in its tracks. Some problems are simply too big to stop, and anybody who tries to do anything to stop them invites blame in the aftermath of inevitable policy failure.
* REVIEW & OUTLOOK
* SEPTEMBER 6, 2010, 8:09 P.M. ET
The Obama Economy
How trillions in fiscal and monetary stimulus produced a 1.6% recovery.
So two months before an election, and 19 months after the mother of all spending programs, President Obama said yesterday he’s rolling out one more plan to stimulate the economy. We’ll discuss the details when they’re released, but the effort itself is a tacit admission that his earlier proposals have flopped. As the autumn economic debate gets underway, it’s important to understand how and why we got here.
***
The recession preceded Mr. Obama’s Inaugural by 13 months, according to the National Bureau of Economic Research, and so did the President’s fiscal policy ideas. George W. Bush got there first. In February 2008, he and House Speaker Nancy Pelosi agreed on a $168 billion combination of federal spending and temporary tax rebates that were supposed to maintain growth through the housing market decline that election year.
Larry Summers, who would later become Mr. Obama’s chief economic adviser, made the case for such a stimulus to boost domestic “demand” in late 2007. Any stimulus, he told the Brookings Institution, should be “timely, targeted and temporary.” Peter Orszag, then at the Congressional Budget Office (CBO) before joining the Obama White House, made the same case.
The official GDP statistics did show a growth blip in the second quarter of 2008 to 0.6%, but third quarter GDP fell by 4%, and we all know what happened after the financial meltdown. Stimulus I failed.
Enter Stimulus II, the $814 billion plan that was also supposed to make up for lost private demand. It too was a combination of one-time tax rebates and spending, mostly on social programs like Medicaid rather than on “shovel-read projects.” Mr. Summers promised this would have a 1.5 “multiplier” effect on GDP growth, and White House economists Christina Romer and Jared Bernstein famously predicted the spending would keep the jobless rate below 8%.
All during this time, the Federal Reserve was also feeding the economy with unprecedented monetary stimulus, cutting its benchmark interest rate to near zero and expanding its balance sheet by more than $2 trillion by purchasing mortgage-backed securities and other assets.
During this time, too, Congress passed other industry-specific stimulus bills—cash-for-clunkers, the $8,000 home-buyer’s tax credit, mortgage payment relief, and jobless pay up to 99 weeks. Yet all of this has merely stolen auto and home purchases from the future, with sales falling once the tax benefits expired. The housing market in particular may be softening again, despite historically low interest rates.
The recovery seems to have begun in summer 2009, with GDP growth hitting 5% in the fourth quarter on the backs of an inventory rebound and expansion overseas. But U.S. growth has since decelerated, to a mere 1.6% in the second quarter, and the jobless rate is 9.6% after three consecutive months of job losses. The economy is growing, but far too slowly to restore broad-based prosperity.
In sum, never before has government spent so much and intervened so directly in credit allocation to spur growth, yet the results have been mediocre at best. In return for adding nearly $3 trillion in federal debt in two years, we still have 14.9 million unemployed. What happened?
…
Here is a cool graph! I have always felt an affection for order statistics since I first laid hands on a nonparametric statistics text book. Among other indications, the graph that accompanies this article suggests not many sales that closed before April 30 are still pending.
Pending Home Sales Reconfirm The Housing Market is Crashing
Michael David White | Sep. 3, 2010, 9:30 AM
Record low levels of demand continue to haunt the U.S. housing market with July pending home sales re-confirming previous crash-level readings.
Three months of data after the end of free down-payments, the inventory of purchase contracts rose just 5.25%. The inventory is still is at a record low with the exception of the two previous months – each of which were record lows in themselves (Please see the chart above showing how radically far demand has fallen.).
The index of unclosed contracts to buy a home increased from 75.5 to 79.4. In the previous two months demand had fallen a record 30% and then 2.8% more. The July 2010 reading is 19% lower than July 2009. The forecast was for a one percent fall according to 37 economists surveyed by Bloomberg News.
Freddie Mac also announced today that the 30-year fixed rate mortgage has fallen to another record low — 4.32%. Outstanding rates and a price fall of 30 percent since the peak of the bubble has failed to ignite demand in our current market. Existing home sales represent 90% of residential housing transactions. The low reading of today will carry through to actual closed sales for July and August.
The deadline for signing free down-payment purchases expired April 30th. Those sales must close by September 30. You can see the precarious nature of today’s market when you see the number in the context of readings going back to 2001 (Please see the chart above.).
Houston, we have a problem, but a glass of Tang will not solve it, nor will a walk on the moon.
…
Your posts this evening are convincing me that ten more years of renting and keeping 75% of my non-retirement funds in cash, savings bonds, T-bills, and municipal bonds may be a good idea.
Your posts this evening are convincing me that ten more years of renting and keeping 75% of my non-retirement funds in cash, savings bonds, T-bills, and municipal bonds may be a good idea.
10 more years? Hope for it. Enjoy it.
I think they should have a holiday for those of us who don’t labor.
We could call it Slacker Day.
Happy holiday, HBB friends, from the beautiful desert of SE Utah, where I find myself laborless and houseless and rich with dogs and sand, after spending the summer wandering in Montana and the Canadian Rockies.
And next year, a job, maybe. On second thought…
Losty! It is great to hear from you!
Glad to know you’re OK. Somebody was just asking about you the other day. Personally, I am dying to hear about your new trailer-ette and how it worked out on the shakedown cruise! Pleeeeze?
“And next year, a job, maybe. On second thought…”
Can’t chain you down with a job…you carry bolt cutters.
Hi Losty
“…rich with dogs and sand, after spending the summer wandering in Montana and the Canadian Rockies.”
That sounds like great adventure! And dogs are the best — you remind me of the cellist in my former string quartet, who once intimated that if he had to choose between his dog and his wife, he wasn’t sure how he would choose.
Hey everyone, good to be able to check in, not on the net much. And Jane, I traded the trailer for a cabin tent, which I’m now looking to use next spring for a season at the Hanksville-Burpee Dig. Come on out, they need volunteers. But sleeping out under the stars is the best way to go, I’ve found.
And yup. Mikey, I still carry those bolt cutters, and also a hack saw, never know when they might come in handy. Send me a text message (LOSTINUTAH) next time you get in trouble and I’ll show up.
I was almost busted for squatting the other day, though. The maid came in and asked what the H-E-double hockeysticks I was doing in the suite I was in, even though it was pretty darn obvious I was kicked back, drinking a Squatter’s Beer, and using the computer. I told her I was squatting, and she got kind of purple-faced. The suite owner (an old friend) had neglected to tell her I had permission. She ended up being pretty nice about it, though, after I told the dogs to get off the couch.
Life is but a dream. But you’ll all be happy to know I still haven’t bought a house.
I’ve been looking for an excuse to get out to that part of the world. Hanksville-Burpee, eh? Works for me. I like geology. Does it have anything to do with the Permian extinction? Where the fossil record is so radically different in Texas than up more northerly on the same rift line? Do tell. I’m gonna have to read up.
I know the instructions are to text you at lostinutah, but is that all there is to it? No dot coms or dot nets or anything? Just PLAIN ol’ lostinutah? Don’t mean to be dense, really. It’s just that I have deliberately stayed away from twitting, crackberries, and all other forms of additional work augmentation.
Thanks for the invite, hope it works out.
Losty…I’m like Jane and not used to the new technologies.
Just getting online with my lil old computer is pure Magic to this old dinosauar. I have never sent a text message in my life and all I know how to do is to open my ancient cell phone and say “Hello” when the danged thing rings.
If I DO get in trouble, please look to the East for my smoke signals…or a small Wisconsin town burning. Bring the bolt cutters …and a file.
Thanks for your updated blog, stories and great photos. I really enjoyed it.
Sorry about your buddy. They all leave little footprints on hearts but you sure went the extra mile to provide him with a great and happy life with you.
As always, have fun and take good care of yourself and the herd.
Hugs, mikey
Thanks, Mikey, you’re a gem. And Jane, if you read this, come on out, Google Hanksville-Burpee Dig for more info.
Losty, I did indeed read it. And I shall Google it! Now Googling is ONE newfangled thing I DO know how to do.
(beams with pride).
Has anyone besides me wondered all year long who the bagholders were on the Dubai debt crisis?
For some reason, the name Neil Bush just spontaneously came to mind.
Afghans Say Bank ‘Out of Danger’
Ira Mellman 06 September 2010
* Afghans Continue Withdrawing Funds from Troubled Bank
” We we know the money is there, they must not panic.”
Top finance officials in Afghanistan are trying to reassure depositors that their money is safe. This comes after reports that the nation’s biggest bank was in trouble.
Last week, Kabul Bank’s chairman and chief executive quit to comply with new rules that shareholders in a bank could not hold those positions. However, the Washington Post newspaper reported that the bank was in financial trouble due to millions of dollars in unrecorded loans made to allies of President Hamid Karzai, including the president’s brother. The newspaper reported the money was used to buy villas in Dubai.
Government officials denied that report.
Nevertheless, Kabul Bank customers began to withdraw their money.
Some 300 people began queuing up at 3 Monday morning to withdraw money from the central office of the bank in Kabul. There, they were met by security officers carrying Kalashnikov rifles. When the bank opened, they were permitted to enter when their number was called.
One of those waiting to enter the bank said “For now, I want to withdraw my money. If the bank is able to create confidence, for sure I will put my money back in Kabul Bank. I don’t want to close my account.”
Later Monday, top financial officials stressed that the bank was out of danger. Their words echoed the comments made last week by Afghanistan’s Finance Minister Omar Zakhilwal, who said “Their money is safe. The government of the Afghanistan Bank is standing behind Kabul Bank. We know the money is there, they must not panic. If they need their money on a regular basis they can withdraw it. But to panic and say their money will be lost, I guarantee to them it will not be.”
…
OMG, are we ever being endlessly played in Afghanistan.
“But this time it’s different. Americans can win the war in Afghanistan.” How long have our military been in Afghanistan? eight years?
Being the world’s cop keeps millions of Americans working. Being the world’s cop is big business.
Back in 2001 a week or so after the September 11th massacre of 3,000 innocent people, I heard George W. Bush give a speech that we will wage war against terrorism, and this war will be several decades long and take place in many countries.
Granted some of that is CIA involvement without the hundreds of troops backing up.
But at that time we were not in a very severe credit crash.
Now circumstances are different. While back in that time I thought that going after the terrorists was affordable, I do not think it’s affordable any longer. It’s a great thing to get rid of terrorists, of course, but the bubble crash really changed my opinion.
We can no longer afford to be the world cop. Aren’t our resources better spent protecting our 50 states and territories only? How about 40,000 US troops patrolling the border between the U.S. and Mexico? Isn’t that a better use of money to safeguard against illegals taking American jobs and flooding hospitals when they have mild illnesses and costing taxpayer money?
Ron Paul is right. Bring the military back within our borders.
Abolish all victimless crime laws. Forgive all felons who were ever charged with only victimless crimes. Cut government jobs. Cut spending across the board and this includes military.
Bill:
What we cant afford is the US Taxpayer paying for the USA to be the world cop any longer.
Now if Germany Italy Japan Korea etc, all want to reimburse us for the cost….
We can no longer afford to be the world cop
Bill, IMHO that’s a sensible plan IF the legislative branch can summon up the backbone to actually order the military to patrol the border. Personally, I would want any civilians out of the area - there are just too many troublemakers. How many times would you imagine some well trained Ranger would tolerate being pelted with stones or such by some punk or La Raza skank before taking pre-emptive action?
The secular progressives of the world - of whom we have reasonable representation here - would play it as the military state turning against civilians and call for an immediate increase in nanny state protections and other government involvement that might engender an increase in civilian employment. This failure of critical thinking would propagate across the air waves to a legislative branch all to eager to buy votes with additional rubber stamping jobs. Yes, I know the proximate instance has nothing to do with the desired increase in ‘oversight’ jobs. However, the general stupidity of the population guarantees their failure to discern histrionics from cause and effect.
Personally, I believe that when we bring half a million (?) physically fit, well nourished, arms-savvy warriors back to home base, we’d better darn well make sure that we have something meaningful for them to do. And we’d better darn well make sure that that civilians rise above their fog of cud-chewing idiocy enough to show them some respect.
Frankly, I’m with Bill on this. Our soldiers might well be better placed patrolling our own borders. But I witness the general idiocy of our fellow citizens daily. Whose ability to reason is so debased that their understanding of “truth” stops with “whatever works for me at the moment”. And whose universal panacea is “poor me - look what they done to me now”.
Meanwhile, a planned September 11 commemorative event down in the U.S. Bible Belt has captured attention halfway around the world. At least this may take some attention away from the bank run.
Petraeus: Burn a Quran Day Could ‘Endanger Troops’
‘Burn a Quran Day’ Sparks Protests in Afghanistan
By MARTHA RADDATZ
KABUL, Afghanistan, Sept. 6, 2010
A Florida pastor’s plan to burn Qurans at his church on Sept. 11 ignited a protest today by hundreds of Afghans, who burned American flags and shouted “Death to America,” and drew a comment from the top U.S. commander in Afghanistan that the preacher could be increasing the threat to his troops.
The crowd in downtown Kabul reached nearly 500 today, with Afghan protesters chanting “Long live Islam ” and “Long live the Quran,” and burning an effigy of Terry Jones, senior pastor from the Dove World Outreach Center in Florida who is planning the event.
…
Either how canst thou say to thy brother, Brother, let me pull out the mote that is in thine eye, when thou thyself beholdest not the beam that is in thine own eye? Thou hypocrite, cast out first the beam out of thine own eye, and then shalt thou see clearly to pull out the mote that is in thy brother’s eye.
Luke 6:42
* WORLD NEWS
* SEPTEMBER 7, 2010
U.S. Presses for Kabul Bank Probe
By MATTHEW ROSENBERG And MARIA ABI-HABIB
A soldier stands guard before a crowd on Monday at Kabul Bank, the largest bank in Afghanistan, which has been hit by customer withdrawals.
KABUL—The U.S. is pressing Afghan authorities to investigate allegations of financial improprieties at Afghanistan’s largest bank, fearing that anything short of a thorough inquiry will further undermine President Hamid Karzai’s credibility.
The Karzai administration has deep ties to Kabul Bank, which depositors have thronged since last week, after news leaked that its two top executives—who are also its two largest shareholders—had resigned and been replaced by a central-bank official. The president’s brother is Kabul Bank’s third-largest shareholder.
Central Bank Governor Abdul Qadir Fitrat said Monday that the situation at the lender was returning to normal, despite long lines and heavy security at many of its branches for a fifth day.
Mr. Fitrat declined to say how much money has left the bank—or how much remains. He blamed the bank’s problems on “propaganda” carried in Western news reports.
…
By staff reporter Xu Ming 09.03.2010 19:01
Census Widens to Include Vacant Housing
But to date, little information has been compiled about the huge stock of empty flats, many apparently held by speculators
(Beijing) — The Chinese government will collect information about vacant housing in connection with a population census now under way, according to the National Statistics Bureau (NBS).
…
Andy Xie, a financial analyst with Rosetta Stone Advisors, said the huge quantity of empty flats nationwide underscores a high degree of speculation in the real estate market. He estimated the vacancy rate for China’s private, commercial housing stock is between 25 and 30 percent – at least twice normal market levels.
Xie said the value of the inventory controlled by speculators probably accounts for around 15 percent of the nation’s GDP.
Eating your own young may work just fine for insects and fish, but apparently not as well for banksters.
I SEE FRAUD ALL OVER THE PLACE, BUT SO FAR NO PERP WALKS!
Banks’ self-dealing super-charged financial crisis
By Jake Bernstein and Jesse Eisinger
ProPublica
Posted: Sunday, Aug. 29, 2010
Being stuck with the risky portions of collateralized debt obligations (collections of mortgage-backed securities) would lower profits, so the banks, notably Merrill Lynch and Citibank, greatly expanded the practice of CDOs buying pieces of other CDOs. 2006 BLOOMBERG FILE PHOTO
Over the last two years of the housing bubble, Wall Street bankers perpetrated one of the greatest episodes of self-dealing in financial history.
Faced with increasing difficulty in selling the mortgage-backed securities that had been among their most lucrative products, the banks hit on a solution that preserved their quarterly earnings and huge bonuses:
They created fake demand.
A ProPublica analysis shows for the first time the extent to which banks — primarily Merrill Lynch, but also Citigroup, UBS and others — bought their own products and cranked up an assembly line that otherwise should have flagged.
The products they were buying and selling were at the heart of the 2008 meltdown — collections of mortgage bonds known as collateralized debt obligations, or CDOs.
As the housing boom began to slow in mid-2006, investors became skittish about the riskier parts of those investments. So the banks created — and ultimately provided most of the money for — new CDOs. Those new CDOs bought the hard-to-sell pieces of the original CDOs. The result was a daisy chain that solved one problem but created another: Each new CDO had its own risky pieces. Banks created yet other CDOs to buy those.
Individual instances of these questionable trades have been reported before, but ProPublica’s investigation, done in partnership with NPR’s Planet Money, shows that by late 2006 they became a common industry practice.
…
WSJ Blogs
Deal Journal
An up-to-the-minute take on deals and deal makers.
* August 27, 2010, 2:50 PM ET
Pass the Malaise:Wall Street’s Lame Summer
By Michael Corkery
Remember that classic surfer movie “Endless Summer” about a couple of surfers who travel the world searching for the perfect wave?
Well, on Wall Street, it has been an endless summer of bad news that shows few signs of letting up.
Take the Financial Times article this morning, quoting senior Securities Exchange Commission officials. The SEC still has “a significant number of potential enforcement actions against banks and insurers still in the pipeline,’’ the FT reports.
This isn’t exactly breaking news. The SEC said back when it settled the Abacus case with Goldman Sachs Group in June that its investigations into Wall Street’s role in bringing about the financial crisis was continuing. But the FT article suggests the SEC is seeking to remind Wall Street that it wasn’t kidding when it said its investigation wasn’t over.
This comes as ProPublica, the online news website, last night published its latest chronicle of Wall Street’s CDO adventures.
As the housing market began to crater in late 2006 and investors became skittish about real-estate-related investments, ProPublica says investment banks–led by Citigroup and Merrill Lynch–were backing new CDOs that purchased the riskiest slices of other CDOs. In other words, banks were creating new CDOs to buy CDOs they couldn’t sell in order to keep the fee machine alive.
ProPublica reports that in the last two years of the boom, “nearly half of all CDOs sponsored by market leader Merrill Lynch bought significant portions of other Merrill CDOs.”
“The self-dealing super-charged the market for CDOs, enticing some less-savvy investors to try their luck. Crucially, such deals maintained the value of mortgage bonds at a time when the lack of buyers should have driven their prices down.”
[On the lighter side, ProPublica, in collaboration with NPR's Planet Money, also commissioned a humorous song about Wall Street's failure to see the crisis coming. Check it out over at Planet Money here.]
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WIDESPREAD FRAUD SANS RETRIBUTION
SOWS THE SEEDS OF REVOLUTION.
fraud /frɔd/
–noun
1. deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage.
2. a particular instance of such deceit or trickery: mail fraud; election frauds.
3. any deception, trickery, or humbug: That diet book is a fraud and a waste of time.
4. a person who makes deceitful pretenses; sham; poseur.
+1000
Auto-Tune The Bankers: ‘We Didn’t See It Comin’
07:37 am
August 27, 2010
* FEDERATION FEATURE
* AUGUST 26, 2010
The Failure of the Liberal Economic Experiment?
A majority of Americans believe that President Obama’s economic policies have run up a record federal deficit while failing to end the recession or slow job losses.
By JAMES K. GLASSMAN
From Commentary Magazine
The plunge in the U.S. economy in 2008 and 2009 became an irresistible opportunity to pronounce the failure of the form of capitalism that emerged at the end of the 20th century. “One had expected competition and abundance for everyone, but instead one got scarcity, the triumph of profit-oriented thinking, speculation and dumping,” said Nicolas Sarkozy, the president of France. The current crisis, he noted with a certain pleasure, signaled the end of the “illusion of public impotence” and the “return of the state.”
There was ample reason for such grave-dancing. Between July 1, 2008, and June 30, 2009, total U.S. economic output, adjusted for inflation, dropped at an annual rate of 3.8 percent—the worst 12-month decline since 1946. The unemployment rate, which started 2008 at 5 percent, had doubled by the fall of 2010. The number of jobs fell for 21 months in a row, and by May 2010 the median unemployed worker had been out of work for 23 weeks—compared with 10 weeks in the depths of the 1973-75 recession.
The quarter-century that began shortly after Ronald Reagan’s election had been widely viewed as a period in which a free-market approach had proved its superiority to state direction of economies. In the United States, cutting top income tax rates in half, reducing regulatory burdens, and spreading free trade seemed to have produced significant prosperity and remarkable stability. Between 1983 and 2008, gross domestic product grew at an average of 3.2 percent annually. Only once did output fall in a calendar year, and that was by just two-tenths of a percentage point. Inflation, interest rates, and unemployment were tame.
Then, suddenly, an asset bubble in real estate exploded, the growth and stability vanished, and the United States suffered its worst economic misery in (take your pick) 34, 53, or 71 years. So you would expect that the American public, following President Sarkozy, would see the recession as a severe setback—or even a death blow—to conservative economic policies that were aimed at limiting the power of government and liberating the private sector.
You would have expected that, and you would have been right—but only briefly. Since the beginning of 2010, a surprising reversal has occurred. Rather than supporting and encouraging government intervention to mitigate an economic calamity caused by “profit-oriented thinking,” Americans have come to believe that government has failed to fix the problem and may, in fact, have made it worse. Now it is liberal, not conservative, economic policies that are suddenly in jeopardy.
…
Go to Google and try your hand at blowing bubbles…