The Housing Bubble

I assumed that the “promises” were government help to the little guy… because believe me there is plenty of money for the government to help out the likes of AIG…

It’s not about current money, combo, but future earnings and values.

We’ve been sold down the river for AT LEAST the next 50 years.

How much of this can be traced higher energy/fuel prices?

My grocery store has a salad bar. On Sunday I saw a new printed sheet pasted over the old sign. The new sheet said “Salad Bar $4.99 a pound.” I carefully lifted the sheet to see the old sign: “Salad Bar $3.99 a pound.”

It would have been fun to carefully remove the new sheet to reveal the old sign. Then watch all Hades break loose at the checkouts…

Slim Fast is 11 ounces instead of 12. Capri-Sun juice bags are 6.75 ounces instead of 8. I don’t know if they’re saving money on product or the packaging.

They’re helping the government with lowering the CPI numbers.

Slim Fast is 11 ounces instead of 12.

Since this is a “diet product”, wouldn’t this move make the product more effective?

Hedonic improvement!

“How much of this can be traced higher energy/fuel prices?”

A lot. We’re back over $90 per barrel, but this time in the midst of a depression. The Wall St. pigs are having another grand ol’ time at the expense of the economy, the greater population, and the greater good of the people. Banker bailout = epic FAIL. It’s goodnight sweetheart.

“It would have been fun to carefully remove the new sheet to reveal the old sign. Then watch all Hades break loose at the checkouts…”

I was buying jeans a few weeks ago. Sign near them said 60% off. Took them to the cashier who said, “These are supposed to be 40% off. Someone put the wrong sign out and now I have to sell them for $24?” (another guy before me had actually taken the sign to her, since she didn’t believe him)

In the back of my head I’m thinking there’s no way I’m paying $36 for these if she wants to hold firm. So, I tested the negotiation tactic of shutting up after presenting my offer. Got new jeans for $24.

Changing the amount of product does not change the CPI, “FB Wants a Do Over.” The CPI controls for that by looking at price per unit, like $/fluid oz.

Or so they say…….i just don’t believe it……not with the big inflation in items you use daily

Slim Fast is 11 ounces instead of 12.

That just proves that it works.

Peeling price labels is a crime in some states.

“Plus, the researchers do not weight certain items’ prices, even if they tend to make up a bigger proportion of household spending.”

Is the Loosey-Goosie Ad Hoc Price Index more credible than the CPI?

“Is the Loosey-Goosie Ad Hoc Price Index more credible than the CPI?”

Not necessarily, but the more measures you have, the more accurately you can measure something. I thought it was interesting these three different indices tended to agree.

Can you buy gas on Amazon.com? Or “real” food that actually goes bad? Or kWh of e-? No wonder BPP and Google track CPI.

Families are spending more and more of each dollar on food and energy. Taken to its logical conclusion, a person could spend almost ALL of his money on food and energy, of all he does is drive to work and the grocery store and watch TV (a one-time purchase) or read library books when he gets home at night. In that case CPI would be irrelevant.

“Some things, like books are most often bought online. Some items, like cats, are not”

Like cats. And gasoline. And milk. And bread. And fruits and vegetables. And meat, unless you buy your stuff at Omaha Steaks all the time.

Using online prices to calculate inflation is about as useful as using the Nordstrom’s or Neiman-Marcus catalog to calculate inflation.

“Using online prices to calculate inflation”..

Is about as useful as removing house prices from inflation, because, as we all know, housing isn’t really something that we need.

Riddle me this batman. Housing makes up 20-30% of most average household’s budgets. Housing prices were going up 10-40% YOY (depending on the specific area) during the bubble. Other things, of course, were also going up in price (electricity, gasoline.. You know, other non-essentials)..

So, we have house prices going up 20% YOY and inflation of 2%? How, on earth, can that inflation measure be considered useful. The biggest expense in almost everyone’s budget was skyrocketing, and yet, inflation was tame?

That showed me how useless our current CPI calculation is. It should have been flashing “bright red” during the housing bubble.. Instead it was indicating that inflation was tame when; as we all know, that was NOT at all the case. It’s beyond useless, it’s actually dangerous (see Greenie’s reliance on CPI to produce interest rate changes, directly exacerbating the situation in the housing sector).

But then there’s this…
(from Ozark natural foods coop)

“Here’s a quote from a USDA report: “In 1929, the first year data of this type were recorded, 23.9% of disposable income was spent for food. This percentage has since tapered off fractionally almost every year. By 1970, the percentage had dropped to 13.8 percent. During the 1970s, the percentage held fairly constant because of high food-price inflation. By 1980, food spending was still 13.4 percent of disposable income, but has since declined steadily to reach a low of 10.7 percent in 1997.”

That’s pretty impressive, but that was more than 10 years ago, and newer figures have dropped the percentage of income Americans spend on food even lower. The most recent USDA Economic Research Service study I could find lowered that figure to 5.7% of disposable income; a Euromonitor market research company estimate put the figure a little higher at 6.9%. Even with the organic premium added in, that is really inexpensive compared to food prices in other nations.

In fact, we have the least expensive food in the world. At 8.2% and 8.3% of income spent, Ireland and Singapore have the next cheapest food. Canadians, right next door, spend 9.2% of disposable income on food. Even in industrialized European countries who share our high standard of living, people pay a lot more than we do. And in developing countries, those percentages jump drastically to more than 20%, more than 30%, even more than 40%.

As of 2007, it cost families in Azerbaijan more than half of their income for food alone.”

Here’s an chart showing we’re currently paying, in inflation-adjusted dollars, about the same per gallon of gas now as we were in the early and mid-eighties. Gas was cheaper through the late eighties and early nineties, though- about a third less than we’re paying now. So maybe we got spoiled?

http://www.randomuseless.info/gasprice/gasprice.html

So maybe we got spoiled?

Or our wages didn’t go up with inflation this time.

We may be paying about the same for gas in “adjusted inflated dollar” but we’re making a lot less in those same adjusted dollar, so in reality, we really are paying more.

Oh, and housing costs are more like +/-50% of income.

20-30% was 20 years ago.

So, you might ask: If there is such a shortage of money in the U.S. how is it that the Chineese can buy up all this stuff?

One answer is: BECAUSE WE SENT THE MONEY TO THEM!

because the chinese have an asston of dollars?

dollars that don’t exist?

So I ask again, what necessary goods to Americans have gone down in price over the past 2 years in your deflationary economy?

Well gas prices ARE cheaper than they were in 2008. And RE prices.

mariner,

Deflation pressures are not measured by the items that you want to buy. There is deflationary pressure in this economy. People have been promised payments in the form of bond interest and salaries (largely state and local government) and pensions and there isn’t enough money to pay for all of it. How that plays out with a particular basket of items over the next few months is irrelevant.

Polly -

Most people care about the price of things they need. Chicken, beef, eggs, milk, sugar, gasoline, etc is more expensive. Salaries are not going up/unemployment is high. People who ate beef now eat chicken. People who ate chicken now eat more cereal and ramen (I haven’t noticed an increase in the price of Top Ramen which can be purchased at Safeway on sale at 10 cents a pack).

And then there is health care - the government wants to regulate increases above 10% a year, as if price increases less than 10% are not inflationary.

I say going from Beef to ramen is inflation, the government says this is an example of deflation.

I know the deflationists look at asset price destruction to prove their case. The fact that houses sell for $500 in Detroit is not important to someone living in their car with less and less ability to buy gasoline due to rising prices.

Again, the fact that it is not important to you doesn’t mean that there isn’t a deflationary pressure. I agree with your assessment of what people care about. My dad was saying that just last night when he pointed out that the despite the 0% COLA for Medicare, the basket of goods that senior actually buy - energy, prescription drugs and food - is going up. And microeconomic pressures of supply and demand still have a significant impact on prices of the goods you are buying. But there is deflationary pressure long term. When retirees in Illinois, Califonia, Rhode Island, etc. get their pensions cut (however long that takes) there will be an impact on prices. Same thing with the businesses that won’t have work because of street repairs that won’t happen. That doesn’t mean that prices will go down. But if they go up, they will go up less than they otherwise would have. Not very comforting. Not very helpful. But still true.

Over the long term, we’re all dead.

Over the long term, I’ve seen nothing but prices going up for 40 years while wages have not kept up.

I, like most people, cannot give credit to a theory that is not consistent with daily reality.

Especially after having lived through stagflation in 1970s, which negated any wishful thinking that prices can’t go up if people don’t have money.

“…every dollar going to food and fuel is one less dollar for them.”

Some are making the case that folks should buy housing now due to inflation concerns, as a hedge. I’m making your argument, that if it comes to that, end-users won’t be making that purchase. Investors might, but lending restrictions being what they are…

If health care costs rise.

I’m of the mind that health care costs are going to get a major smackdown. Why? Because there’s a lot of waste in the system that’s easy to spot. And squash like a bug.

I’m guessing construction equipment and tools

I frequent the pawn shops and like to dicker
if a nice rifle or some good tools show up.

All the “good” construction tools were pawned
well over a year ago and snapped up at good
prices. All you see now is junk. Now I’m seeing the better rifles coming in, people
are getting rid of their prized toys.

IF health care costs rise?

What do you mean “if?”

That’s like saying” if the sun doesn’t rise.

Again, it appears many of you didn’t live through the stagflation of the 1970s and seem to think it isn’t happening right now despite the evidence right in front of you.

It has been years since I bought motor oil, mostly because it’s been a long time since I had a motor that burned a lot of oil and because I got tired of climbing under cars any time it wasn’t absolutely necessary so I paid other people to do oil changes. Stopped in at Checker the other day for an extra quart for the trunk/storage area of the wife’s Mercedes. Synthetic was $8.50 a quart!?!?!?! When did that happen? Last I looked it was between 4 and 5.

Motor oil has quadrupled over the last 10 years.

Anyone care to figure the percent of inflation that would be?

Yeah. That’s reality.

But isn’t the quintessence of QE to ensure there is enough cash on hand to fulfill as many promises as possible?

i think combo’s point is that the Fed is not really “printing” money. they are creating it with debt…debt that will never be paid back…and when that debt gets written down…Poof!

maybe.

“…and when that debt gets written down…Poof!”

Why would there ever be a need to write down debt if there was enough money on hand to repay it (at least in nominal terms)?

Why must we default on our debt?

The US dollar is the world’s reserve currency, well, with the possible exception of gold. So what if we pay off our 13 trillion dollar debt with dollars worth a fraction of current value - who is going to stop us?

Ben Bernanke will stop at nothing to fight deflation. He will buy every Treasury, Mortgage Bond, and eventually Muni bond to make sure that does not happen. Furthermore, in his latest pronouncement he has said he will QE to insure the stock market does not crash.

Assuming there is any rationality left in the stock market (which is fair to question), stock prices should be based on corporate profits which might have a bit of a problem going forward - higher commodity prices, broke consumers.

Will precious metals become the world’s reserve currency. I believe they will, but only time will tell…

“i think combo’s point is that the Fed is not really “printing” money. they are creating it with debt”

Isn’t that how ALL central banks create money? “Print it”. then “loan it” to the gov’t.

I once had a full size Ford Bronco. It cost about $30 to fill it up back in the day, which seemed like a lot back then. It would cost close to $90 to fill up today.

As regards waterfalls, couldn’t the QE process help make sure that enough deep-pocketed investors have enough cash to keep Mr Market afloat through thick and thin?

It’s God’s work, ya know…

Having grown up by the Niagra River, I do wonder at times if pissing a big firehose upstream really will alter the course of events in the overall. Good distraction though.

“I think the prices are represent a decrease in our standard of living.”

That’s a normal and predictable consequence of currency devaluation.

It’s just like how the Medical Monopoly started taking a greater share of the monthly nut because they could .

It’s just like how the Medical Monopoly started taking a greater share of the monthly nut because they could .

And didn’t In Colorado just report a visit to the doctor’s office in which the waiting room census was way down? Sounds like “because they could” is properly written in the past tense.

Agreed, oxide.

And you can see the results by looking at which retail companies are seeing greater profits as of late.

Those retailers peddling higher-end, luxury goods are seeing much greater profits these days than the Wal-Marts of the world. Could it be that deflation now is helping the high-enders? Could it be that inflation is hurting those selling what are seen as necessities?

Yeah, it could be.

Of course, this cycle won’t last forever, either.

Taking your thought another step Oxide; food is an embodiment of energy, as are houses. As we bid up houses, and built too many of them, we also bid up energy. The house building has turned down all over, yet the energy continues to climb, and with it food slingshots up as well.

“That’s a normal and predictable consequence of currency devaluation.”

I experienced that first hand in Mexico. It was sobering to see formerly middle class folks suddenly adjust their lifestyles to being poor.

“And didn’t In Colorado just report a visit to the doctor’s office in which the waiting room census was way down? Sounds like “because they could” is properly written in the past tense.”

Like I’ve said, just 5 years ago if I called to make an appt I might have had to wait a week or more to get in, now I can often get in the same day. I guess that’s what happens when it goes from a $10-$20 copay to a $1500 deductible. Plus I’m sure that the number of uninsured has gone up as well (we have a lot of very small employers in our burg, and I’ve heard through the grapvine that few are providing insurance as a subsidized bennie.

I guess that’s what happens when it goes from a $10-$20 copay to a $1500 deductible.

And, if I were in the doctoring or dentisting business, I’d start cutting my costs like crazy. I’ve seen way too much overstaffing in these offices. And don’t tell me that they’re all nonstop busy, because I just don’t see that.

And the waiting rooms? Well, they don’t *have* to look like something out of Architectural Digest. Really, they don’t.

I can recall going to one doctor’s office in my childhood, and that place looked like a bus station. His rates were really reasonable too.

That’s just two examples of where costs can be cut. I’m sure that others can name additional examples.

I think oil is entering another bubble. That’s what happens when wealth concentrates in the hands of a few wealthy. Their needs — basic and luxury — were met millions of dollars ago; now they’re looking for someplace to put their extra monies, including those tax cuts that they supposedly “spend” and “trickle down.” Meanwhile, millions go without their basic needs being met.

It’s ironic that the tax cut money, paid for by future taxpayers, is being used to bid up the price of oil and commodities, raising prices for…future taxpayers.

When the formerly middle class starts spending most of their pay check on food and fuel there will be less for manufactured goods and services.”

So if a poorer America can’t pay for it non-essential manufactured goods and services will go away.

Be like Mexico work all day for peso’s which can’t buy much.

This could be the price we all pay for a bubble collaspe and a government that spends too much ?

important people will get made whole though with big pay raises.

Or, more generally, people who bring kids to inappropriate places, period.

Like one of my former bosses. Who brought her toddler son to an office party. Not the proper venue for a whiny kid.

Or couples who insist on taking their kids to restaurants. Where they proceed to ruin everyone else’s meal.

Parents, it’s called discretion. Which means that you don’t take your kids places that they’re not mature enough to handle.

There are parties that are acceptable to take kids to, and generally the invitation will mention it specifically. And there are plenty of ‘family’ restaurants to go to with your kids. I can’t imagine my annoyance if I had booked a table and Chez Pretentious and hired a sitter only to be sitting next to yelling kids.

IMO, families should never buy a stroller. If the kid needs a stroller, then he’s at exactly the wrong age to be in public; that is, too young or too old. Kids don’t like strollers anyway. In the end, the parents use the stoller as a pushcart while Mommy carries the kid anyway.

I remember taking my kids to a diner when my youngest was in pre-school. By the time I finished helping him eat (and hadn’t had a more than a couple of bites myself), he was ready to get up and run around. It was expensive and I didn’t get to enjoy it. After that, we just did take out. If every family has to learn from a similar experience, there will be a small percentage of littleuns in every restaurant.

I am not big on movies. I saw Teenage Mutant Ninja Turtles with my then 5 yo (1989) and didn’t see another until my teenager insisted I see Episode 1 of Star Wars.

We got lucky with my son. For whatever reason he’s acted like a little adult pretty much since he was an infant (touch of Aspergers perhaps?). We could go all the places we always went before and everybody marveled at him and thought we were great parents. I knew better, but there was no arguing with them :-).

IMO, families should never buy a stroller.

I don’t recall that my family ever did.

Speaking of strolling, one of my favorite childhood memories involves the paving of the street we lived on. This would have been in the late 1950s/early 1960s.

Any-hoo, since no one would be able to drive in or out, the families on this street had to park in a strip shopping center’s lot. Mom told me that we’d have to take a little walk in order to get in our venerable old 1950 Ford and get anywhere.

What she didn’t say was that it was almost a mile to the car.

So, we took our time and allowed for plenty of stops for me to admire this, that, or the other thing. Didn’t matter if it was a twig or a bug. We stopped. I checked it out. And commented on it.

These days, if I were a little kid, Mom would probably be accused of child abuse if she didn’t strap me into a stroller and power-walk us over to that parking lot.

“Which means that you don’t take your kids places that they’re not mature enough to handle.”

This brings to mind my former boss. Neighboring patrons at a fine dining establishment had a wandering child come near us.

As another colleague smiled at the kid, my boss called over the waiter and says, and I quote, “Is this a f@cking Denny’s? I don’t want somebody’s kid crawling under our table, got it?” (I’ll always remember that line)

As another colleague smiled at the kid, my boss called over the waiter and says, and I quote, “Is this a f@cking Denny’s? I don’t want somebody’s kid crawling under our table, got it?” (I’ll always remember that line)

Not only that, but this is true genius, and probably why the guy was a “boss” - smart move to put the waiter in the middle!

Well, he DID do his fair share of glaring at the shocked parents, too. And as an admirer of social train wrecks, I was a little disappointed at how well the waiter handled it. I was hoping for some fireworks.

While I thought his delivery was a little rash, it was an important meeting and I wholeheartedly agreed with what his point was, which is that many parents just assume that society will just love their darlings as much as they do and have the expectation that others adjust THEIR behavior.

Strollers seem to have become mini-SUVs. Last trip to Disneyland was stroller hell, many parents pushing around 7 year olds who should have been walking. If they’re tired, it’s time to head home. That was my parent’s philosophy…

Strollers do provide convenient snoozing locations for wee ones. We have a stroller that fits our car-seat. That way we can go to the zoo/etc and have the 3 month old napping while I chase the toddler around.

My son was very colicky as a baby and the only time he would sleep was when he was being pushed around in a stroller. That stroller was a life saver for me … and for him! I’m sure it was instrumental in preserving my sanity!

Oh, but I’m sure the call was very important!

Doug I have the opposite problem in NYC

stupid moron mothers walking and taking on their phones against a don’t walk sign…..what is so important that you put your kid in harms way to get killed?

Couldn’t agree more.

Most financial pros say that you shouldn’t spend more than 1/3rd of your yearly income on a car. So a 33K RAV4 requires a salary of ~100K to purchase. About 10% of the population. Not a very big slice!

Now look at median household income; ~40-50K/yr (which is 2 incomes in many cases, but we’ll let that slide). That means the median car price should be ~15K (to be affordable to the median income earner)?

Yeah, huge credit bubble in cars too. People like their cars more than houses though; and it’s not nearly as easy to get into “disaster” situations with cars. Even an expensive car at the worst point in the financing, you’re probably no more than 20% underwater. And that equates to 1000s or 10s of thousands of dollars (for a really expensive car). Not 100s of thousands like many a J6P is under their house!

So a 33K RAV4 requires a salary of ~100K to purchase. About 10% of the population.

Interesting that you’d mention the RAV4. Originally I was sitting out the bubble in a rented townhome but when the owner decided to sell and it appeared this was going to take a while we decided to get even cheaper and just pay cash for a double-wide within walking distance of work. One thing I’ve noticed is that in our Boulder trailer park the RAV4 is probably the most popular vehicle. Perhaps most were purchased used? I’m pretty confident that the median income (even in Boulder) is under 100k. Everybody here seems to see them (and the CRV) as a cheap, disposable AWD/SUV but they’re not that cheap IMO.

Stagflation.

I’ve lived through it. Prices DO NOT HAVE to go down just because most people don’t have money.

Apparently, some of you are going to have to see it to believe it.

“Either cars will get cheaper or the working class will stop buying new cars.”

My money is on the latter. Or I should say “NICE new cars”. The middle class is going to learn to love 4 cylinder Korean (and later Chinese) hatchbacks.

“I’ve lived through it. Prices DO NOT HAVE to go down just because most people don’t have money.”

Heck, new car prices have skyrocketed as demand collapsed. Just go to any new car dealer and anything that is decent costs close to 30K. I’m talking Fords and Chevys here, not fancy imports. Even compacts are running around 20K these days. We bought a MINI Cooper 2 years ago. New ones are already 3 K more expensive.

The middle class is going to learn to love 4 cylinder Korean (and later Chinese) hatchbacks.

Base models I guess. I was checking out the new Hyundai/Kia turbo 4 models for next year and they won’t be cheap. Maybe Tata will come here…

Make sure you’re near a hospital. I had to use one Monday. I came down with a horrible bug Sunday night and they had to put 5 liters in me to replace the lost fluids.

You need a minimum of 25k population for
decent medical.

“I don’t mean the actual Oil City.”

Got it, but many rural areas have been environmentally brutalized one way or another.

And depending on numbers like my income, emergency fund and nest egg, it may be better for me to lock that low 15 year rate and depend on the credit card for emergencies, even at a high rate.

Also, if I score a low price, the mortgage payment would be low enough that I could pay either the 15 or the 30 with ease. Then it would make sense to lock the 15. It will be a gametime decision.

Juggle all you like. Debt is slavery. Mileage may vary.

When I was growing up, my mother and the next-door neighbor were big on hanging clothes out to dry. Which involved a great deal of visiting with each other as the clothes were put on the line.

When I go back to that nabe nowadays, there are no clotheslines. People are too, ahem, upscale around there. Which never ceases to amuse my folks, who think that a lot of their current neighbors have more money than sense.

IIRC any place with covenants or HOAs probably doesn’t allow them.

My grandmother and mother also used the outdoor clotheslines, and my mom got over 40 years out of her original GE dryer due to its light use.

Only problem with outdoor clothes drying was the occasional bird droppings, as the birds didn’t seem to mind perching right on top of the white sheets!

True, true but
1. self-selection: those who left will certainly present their side of the story which will portray the situation in the country in a poor light.
2. change: ideologies change even if regimes don’t. The China of the cultural revolution is diametrically opposite to the China of today. Vietnam has also come a long way from the 60s/70s

One acquaintance who has worked both in Vietnam and China felt that the Vietnamese were even more enterprising and driven than the Chinese. Part of their “can do” attitude came from the feeling that since they took on the Americans and drove them out, they can take on anything.

Not to say that Vietnam is suddenly the land of milk and honey, but the truth is probably somewhere in between Hell and Utopia.

Which is what is so sad about the Korean and Vietnam Wars

During WWII, we were helping Ho Chi Minh and Mao….of course, by fighting the Japanese, they were helping us out.

After the war, all kinds of State Department and DOD observers on scene could see that backing the corrupt/stupid Nationalist Chinese government, and French re-Colonization was a losing proposition. But we ended up backing the wrong/losing side anyway, because we were worried about falling dominos. No thought was ever given to the possibility that Ho and Mao might have enough issues to keep them busy running their own countries after they gained power.

So, instead of just sitting back to see what developed, we end up sticking our noses into other people’s business.

If nothing else, it has the effect of pi$$ing off half your potential customers.

Yeah, and the “reds” fought the Japanese with more zeal than the nationalists. There are documented reports from U.S. officers that verify this.

Ho Chi Minh’s story is interesting in that it stretches back to Versailles! It seems all that “fighting for democracy” jingoism of WW I gave many colonial peoples the idea that they too were to be liberated. They were quite disillusioned when told that they weren’t included - only their masters were.

After WWII Ho Chi Minh approached the US to use our leverage to tell the French to FO. After all, the French owed us big time. But we didn’t do that - one of the biggest blunders in US foreign policy of all time. Instead we blindly backed the French and even got them a permanent membership on the UN security council.

Since we wouldn’t help, Ho then turned to the Russians.

agreed

BoA appears to have the worst track record with wrongful foreclosures. But that could be because they have a massive number of foreclosures to process.

In the real world, people that fook up and crap on their customers as bad as BoA go out of business.

Not in the Bizarro States of America. Here, your customers pay you to beat them like a broke-down mule.

I suspect it has more to do with that red-headed stepchild formerly known as Countrywide they were “forced” to adopt.

It’s pretty exciting on a snowmobile, too.

I did that with a deer and a motorcycle around 2 a.m. in Idaho heading towards Bozeman. Didn’t hit the deer, but needed a new pair of leather pants.

Only after I stopped did he half-heartedly look over at me, as if to say, “meh…” I backed up slowly and it was at least another 5 minutes before he and his friends behind him decided they’d move across the road and let me pass. Was wide awake doing 35 the rest of the way…

Bison gangbangers — I love it!

Rachel Pendergraft is on facebook. Go figure.