Bits Bucket for June 12, 2011
Post off-topic ideas, links, and Craigslist finds here.
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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It seems like only yesterday that the demand for sheetrock was so extreme that we were forced to import large quantities from China - with disasterous results. Now the demand for sheetrock has fallen off so dramatically that the company town that produces it, Empire, Nevada, is being shut down.
http://www.csmonitor.com/USA/Society/2011/0611/Slump-in-construction-industry-creates-a-Sheetrock-ghost-town
USG, known for its Sheetrock-brand products, has posted losses of about $1.5 billion over the past three years. The red ink is a result of “weak market conditions and extraordinarily low shipping volumes,” former chief executive William C. Foote told investors in October. Beneath the jargon is a simpler story: What Empire makes is not in high demand anymore. The housing construction slump has continued too long for the plant to hold on. By the end of 2010, wallboard sales had dropped more than 50 percent since 2006, when the industry peaked and USG had $297 million in profits.
This is what’s wrong with their dragging the recession out they way they have.
Companies (and families) can make it through a couple of years of hardship. They cannot make it through ten years of hardship.
By spending all this money on bailing out bankers and FBs, we’ve wasted precious time that was needed to wash out the excesses from the bubble. We are going to pay for the idiocy of the lenders/borrowers for years and years due the bailouts.
The duration of the downturn is what will end up hurting the most, and the long duration was caused by the Fed/govt who refused to correctly define the problem (too much debt, and too-high asset prices resulting from that debt), and insisted on saving those who caused all the problems in the first place. Now, we will ALL suffer for their foolishness.
Frankly, given the size of the excesses built up before the bubble collapsed, I’m not sure if any remedy was available to quickly resolve it. A faster collapse might have left behind a larger crater.
And a larger crater you will get - just one painful step at a time. I personally would rather they brought on the crater, and let the rebuilding begin, but that’s just me. We should accept the crater, not deny it.
I agree with you, Liz. Extend-and-pretend just serves to transfer the burden of rebuilding onto our children’s backs — those who have not left the country, that is.
The crater style correction would have most likely reshuffled the power deck. The slow mo is their attempt to maintain power through the changes.
“…attempt to maintain power…”
Good explanation. We saw what came of the quick cratering in Iceland.
“Now the demand for sheetrock has fallen off so dramatically that the company town that produces it, Empire, Nevada, is being shut down.”
“This is what’s wrong with their dragging the recession out they way they have.”
This is what’s wrong with blowing massive housing bubbles, and building more than 20 years worth of houses in less than 10 years time. The level of overbuilding is absolutely staggering.
Almost everything that comes from China is trashy , inferior in every way one can imagine . They are about the only source for the curly lightbulbs , and who knows what is in them ?
Mercury. I’d hate to live downstream from the factory that makes them.
There are none of these stupid things in my dwelling.
What I find very distrubing is that there is NO talk of protectionism. NONE. Nothing about bringing jobs back, nothing about “hire American” for jobs that kids used to do in summer. Nothing about how public option health care would erase that eeeevil “regulatory uncertainty” overnight.
Where are the jobs programs, Dems? Initiate some bill, let the Republicans shoot it down, and then raise a big stink about it. If they want to attract media attention, have Anthony Weenie propose the bill half-nekkid.
Ox:
Why not allow Companies to repatriate all their overseas earnings tax free if the spend it in America on Americans? Not H1b’s or people with visas Just us Americans.
I would like to ask Steve Jobs why cant an Ipad be made in Kansas?
I would like to ask Steve Jobs why cant an Ipad be made in Kansas?
They could be made anywhere a society protecting its jobs chose to make them. Wake up America, our false “free-market”/globalization religion is killing us.
Brazilian Tech Minister: iPads will be made in Brazil
April 12, 2011
It’s official, Apple and Foxconn will make iPads in Brazil from November. So says Brazilian minister of Science and Technology….they could employ a whopping 100,000 workers – 20,000 of which would be engineers.
http://www.9to5mac.com/61081/brazilian-science-and-technology-minister-ipads-will-be-made-in-brazil/
Protectionism, extended great depression, war. All work together very well.
Tell that to Brazil, Bill. But I gotta warn you that they’d look at you funny.
I wonder how long until the standard of living in Brazil passes the US (a combination of their rising and our falling). It could be as early as 2020 I think.
And as soon as the standard of living in Brazil goes up, those workers will become too expensive, and Apple will move its jobs on down to the next country.
why cant an Ipad be made in Kansas?
The issue is what the cost of the Ipad would be if t was assmbled in Kansas. Right now, you have these Chinese workers working themselves nearly to death for what?, maybe $1 per hour. If that work was done by Kansans getting $8 and no health insurance, I wonder what an Ipad would cost. Maybe it would two or three times as much. If Apple did that with all of their products, it would certainly cut down on the number of consumers swarming the Apple stores every time they come out with a new gizmo.
Also, we’ve got a lot of people on this blog who worry about inflation and this sort of thing would push up prices on a lot of things.
On the other hand, this trade deficit can’t go on forever. If our appetite for stuff made outside the country is somuch greater than foreigners interest in buying stuff made in the USA, something has to change somehow.
And as soon as the standard of living in Brazil goes up, those workers will become too expensive, and Apple will move its jobs on down to the next country.
Not if Brazil keeps up its current policy of protectionism because Apple is not setting up a factory in Brazil for cheaper labor. Brazilian labor is not cheap at all when compared to China.
The reason why Apple is setting that factory up in Brazil is because Brazil charges very high duties on imports. Brazil does this to protect Brazilian jobs. The main reason for that factory is to sell Brazilian made ipads to Brazilians who have the money to buy Brazilian made ipads because they still have jobs making stuff like Brazilian made ipads.
The poor and middle-class in Brazil have standards of living approaching the USA (not counting cheap “stuff”). The poor have a very long way to go but they have come a long way too the past 20 years.
Brazilian labor is not cheap at all when compared to China.
My brother used to work in procurement for a manufacturer of apparel. They did most of their work in places like Haiti and the Dominiucan Republic (and later in China). He told me that Mexico was WAY too expensive for that.
Anyway, it’s refreshimg to see that some countries are rejecting the race to the bottom.
The issue is what the cost of the Ipad would be if t was assmbled in Kansas. …Maybe it would two or three times as much.
If an ipad were made in Kansas it would not be that much more expensive. That it would be is a common misperception promoted by the corporatists. Manufactured goods would not be that much more expensive if manufactured in the USA. I’ve seen studies saying about 10-15%. That’s all. We’ve sold our souls so the rich can make 10% more on our backs and on the ruination of America. Lovely.
After adjustments are made to account for American workers’ relatively higher productivity, wage rates in Chinese cities such as Shanghai and Tianjin are expected to be about only 30 percent cheaper than rates in low-cost U.S. states. And since wage rates account for 20 to 30 percent of a product’s total cost, manufacturing in China will be only 10 to 15 percent cheaper than in the U.S.—even before inventory and shipping costs are considered. After those costs are factored in, the total cost advantage will drop to single digits or be erased entirely,
http://www.bcg.com/media/PressReleaseDetails.aspx?id=tcm:12-75973
Ds and Rs collaborating to remove the footwear tariffs. It is interesting that they are calling it a tax. And that it was not sufficient to keep American shoe manufacturers in business.
http://seattletimes.nwsource.com/html/businesstechnology/2015297006_shoetax12m.html
“U.S. consumers would see a sharp drop in the price of imported shoes — and that’s almost all shoes sold in the United States — if a bipartisan group of senators succeeds in stamping out the nation’s “shoe tax.”
…
While the bill has yet to arouse any opposition, it’s a hit with the shoe industry. Last year it would have eliminated about $800 million of the $2 billion collected on imported children’s and low-cost shoes.
“It would be fantastic. … It would allow (consumers) to buy a second pair or buy a pair that they normally would have to put off another month,” said Bill Snowden, a shoe distributor from Bellevue and the senior vice president of Topline Corp., which employs 100 people.
The shoe tax, which dates to the 1930s, originally was aimed at protecting a manufacturing sector that now has all but disappeared in the United States, according to the American Apparel & Footwear Association, a national trade organization. During the past two decades, almost all shoe production has moved overseas.”
The shoe tax, which dates to the 1930s, originally was aimed at protecting a manufacturing sector that now has all but disappeared in the United States,
Shoes. For god’s sake. We refuse to protect the American manufacturing of a staple such as shoes. So we can buy a pair for $8 cheaper.
Pathetic.
“it’s a hit with the shoe industry”
Well, that’s just ironic. We have no shoe industry in the US. We have shoe sellers, shoe importers, but no shoe industry. I guess this is the age of financiers being the real industry, not manufacturers.
20 or more years ago, I was shocked to learn that we didn’t make shoes here anymore. Ya know, for the greatest military power on the planet (and I am not at all for wars of aggression) we have a fricken Army that can’t get shoes from home. How stupid can we be?
Protectionism, extended great depression, war. All work together very well.
That is not the only possible conclusion regarding the Great Depression. Another is that only affluent countries can afford to import more than they export. The GD was worse in the US because we were used to exporting a lot of stuff, and then others couldn’t afford it. Bubbles lead to busts. Overexpansion of credit leads to collapse. Collapse leads to pain which leads to blame which leads to hostilities. Rinse and repeat. Tariffs may not be the causitive factor in this cycle, debt and mania might be.
One could take the view that Germany got out of debt by conquering its creditors in WWII. Turned out to be a short term solution. Debt is slavery, until Sparticus happens.
Folks,
The message is this; NEVER protect yourself. EVER. Protectionism is bad.
Protectionism is simply unfair. If someone has something they are willing to share with you, it is only polite to accept. Trojan Horse interpretation.
Really Bill the Nomad?
Well guess what: we had 30 years of free trade and globalization and we STILL have a depression.
Maybe protectionism didn’t cause the first depression. Might have been something else.
Well maybe the depression of the last 30 years was your own depression Oxide. Many people with gumption started businesses from their garage 30 years ago and are now multi billionaires.
I’m happy with my humble situation, going from $1,000 in 1985 to over $1.2 million and did not do the 14 hour work days that many of the self-made millionaires of $10 million net worth did.
As Stanley and Danko wrote in “The Millionaire Next Door,” most millionaires are small businessmen who grew their businesses. Then there are the drooling envy people who conveniently ignore that fact and want to “soak the rich,” thus to steal from the Can Do’s and give to the Will Nots.
Well maybe the depression of the last 30 years was your own depression…Then there are the drooling envy people who conveniently ignore that fact and want to “soak the rich,” thus to steal from the Can Do’s and give to the Will Nots.
how thoughtfully original…
“Many people with gumption started businesses from their garage 30 years ago and are now multi billionaires. “
As someone who has started more than one business, and know MANY other business owners, I have to ask what flavor is that kool aid you’re drinking.
9 out of 10 business fail the first year. 50% of the remainder fail within the next 5 years. The only ones making millions or billions have very wealthy connections.
“going from $1,000 in 1985 to over $1.2 million”
Would you be able to go to college and do it now in America? Would you have been able to do it with children to support?
I hope you understand that good luck plays as much of a role as hard work. Did you have to recover from catastrophic medical expenses? Did you choose the correct career path? Did those you love also manage to avoid catastrophe and not become dependent on you?
A guy I graduated with has had MS for more than 10 years. Good planning, hard work, and frugality cannot protect you from that kind of catastrophe.
That’s the spirit. Come up with all the possible ways you might fail.
And yes, there’s an old expression that goes, “The harder I work the luckier I get.”
I do not discount the impact of hard work. It takes both hard work and good luck. Some of the hardest working people I have known have been poor.
I also have personally worked 16 hour days for several years in a failed startup that left me poorer than when I started. There are indeed many ways to fail and very few to be successful.
“Would you have been able to do it with children to support?”
Nope. But it’s not the taxpayer job to subsidize raising families.
I checked in the Constitution, just to be sure. Nope. Not there.
As for being able to strike it rich right now out of college - look at the Facebook and Twitter guys. They started this in college not too long ago.
Catastrophic medical expenses: strawman. If bad health was the norm, our species would not have survived before the invention if fire. General good health is the norm and buys us time to develop wonder drugs to enhance health even more.
I chose computer science in the early 80s because I had the idea that hardware was getting cheaper and faster. Memories getting bigger. That only meant software could get more sophisticated. Nearly 30 years later I could still say the same. Someone in college should get a good mathematics background and throw in cognitive psychology, linguistics, and mostly computer science, and come up with some really nice Artificial intelligence applications. I have an iPad APP in mind that would be a boon to a twenty-something international traveler / consultant. I just got off of a project at work where I had to learn four different software tools and systems at once. The App will take at least four - all off the shelf and free. But I am working overtime on a new project and am focused after hours on exercise (and blogging).
Those I love had to adjust. One sister has two adult children living with her - both older than 26. That sister chose her situation. She is obese and does a lot of physical work with patients. She does not make much money. She was the most likely of us children to succeed - back in the day. Choice. Another sister majored in business but is a manager in web development, doing okay but not making the big bucks. Another sister spends every penny she gets and earns over $100k. Catastrophe? Personal choice.
No one makes perfect choices - just less painful and then adjusts to turn them around and make lemonade.
Again. If 80% of all humans get MS, we’d not be able to progress much out of the savannahs. You are pulling extreme examples out of the air. Tragedy is not the norm. I had a nephew who was struck and hit by a car at age 12 and died ten years later to the day. $hit happens. Life has to go on. Get over it.
“going from $1,000 in 1985 to over $1.2 million”
We know, we know. You’ve told us.
But Bill…you need to write perceptively less self-absorbed and with more original ideas than worn cliches such as “moochers and producers”- that is if you want to influence opinion that matters.
Not all of our brains have been formed by a life of code writing.
Certainly a few will be able to “strike it rich” in any economic climate. There are many fewer of these than people who get MS or suffer some other catastrophic circumstance.
A lot of small business people who became millionares had their fortunes tied to housing. They rode the bubble up and back down.
You are not a small business person in my book. Contract consulting work carries far less risk. And you lucked out that your abilities and inclinations fit well into an industry on its way up.
Did you earn your fortune? Yes. But you also got lucky.
Did you make good choices? From what you say, yes. (I wouldn’t have passed up having a family, so for me that would have been a bad choice. I am not saying that it is bad for you.
). I also chose software and it has provided a good living most of the time. But I don’t discount luck. I lucked into a short term contract that has now lasted years.
My point, which I have obviously not communicated very well, is that many people who are financially successful believe that the credit is due solely to their own efforts. And that if others are not doing well, then it is their fault.
This is what the prosperity gospel teaches - if you are righteous, then God will bless you. I don’t buy it. Sometimes, the righteous, the frugal, the hard-working simply get unlucky.
Why is it important to recognize the impact of luck? So you can understand and not blame the unlucky. So you do not have your self-worth connected to your material worth. So you can get over it when your luck turns.
Bill,
You are a wage slave. You will always be a wage slave.
“Catastrophic medical expenses: strawman. If bad health was the norm, our species would not have survived before the invention if fire. General good health is the norm and buys us time to develop wonder drugs to enhance health even more. “
Why is this a straw man? I am talking about the effect of luck on outcomes. Good health is good luck. Bad health is bad luck.
Bad health and short lives were the norm before the invention of fire. In those days you would have been old at 30. Eat, drink. and be merry, for tomorrow you die.
“a wage slave”
The best slave is one who thinks he’s free.
There’s free trade, and there’s fair trade. I’m glad there’s starting to be a discussion about the distinction.
If the thing that Americans are good at is taking out debt and buying value-added goods, that’s not sustainable for the long term. That’s how colonies behaved for their controlling countries. The term is called “Mercantilism”:
http://en.wikipedia.org/wiki/Mercantilism
Much of the rest of the world are “Mercantilists”. Because it enriches US corporations, and thus politicians, the US has turned into the “colony” in the Mercantilist system.
You don’t sound like a good NeoLiberal.
“…have Anthony Weenie propose the bill half-nekkid.”
Too late for that.
“Where are the jobs programs, Dems? Initiate some bill, let the Republicans shoot it down, and then raise a big stink about it.”
Done. Did. Forgotten and not even noticed.
Republicans block ending offshore jobs tax breaks | Reuters
http://www.reuters.com/article/idUSTRE68R40I20100928
In fact, the Repubs went on 2 months later to regain a majority in the House.
You can’t fix that kind of stupid.
“Done. Did. Forgotten and not even noticed.”
Now that Republicans have the public’s ear on the issue, re-introduce the bill. Rename it too. Re-work so that the main thrust (at least public perception-wise) is the off-shoring element. There is a reason protectionist ideas are called “populist”. Of course, presentation is everything.
I have to say that the Republicans have been very good at pushing their agenda, even when in the minority.
Yep, they did a great job stopping Obamacare, their #1 objective in 2008, from becoming law when they were in the minority.
They killed the public option.
And they killed single payer, which would have significantly reduced epxenses for providers.
Whut’s in thet computur yur usin’? Whut’s in thet thar gas-o-moline yuh put in yer car? Be skeered of thet new tech-know-logy (if it’s convenient to your idelogy, that is).
4 milligrams of Hg. Now compare that to the Hg that is emanated from the coal plants used to create the extra electricity needed to light the more wasteful lights. It’s a pretty easy calculation. True, it’s more dangerous if one breaks in your home, but it’s fairly straightforward to clean and they don’t off-gas unless broken.
USG = U S Gyps’em
Nice summary of the situation Ca Renter .
Federal Reserve… Who’s afraid of the big bad banks.
This is a good one.
http://www.youtube.com/watch?v=_M_Rh_fgKEQ
JUNE 5, 2011 1:52PM
Who’s Afraid of the Big Bad Bank?
An Uncensored Investigation of the U.S. Federal Reserve
Watch now:
http://www.youtube.com/baitandswitchtv#p/u/0/_M_Rh_fgKEQ
Bait and Switch TV: Investigative Satire [STANION STUDIOS] Presents Part 1 of 8 segments about the controversial saga of the Federal Reserve Banking system. Firmly rooted at the center of the current financial crisis, the Federal Reserve holds the purse strings for the U.S. monetary system. So it is hardly conspiracy theory to wonder about why this private and mega-powerful “federal” reserve system has been so controversial since its inception, why President Jackson was so opposed to a cartel as our central bank, what are the Fed’s actual factual successes and failures over the last 100 years, and how does currency, and control of that currency, determine the balance of power in a nation, and the world. Can you answer the question “What is the Federal Reserve?” Few truly can. We interviewed leading economists, authors, Wall Street bankers, politicians (and other entertainers) about one of the most critical controversies (and controversial institutions) of our time: The US Federal Reserve.
Bait and Switch TV makes the financial collapse fun, and easy enough for a child to understand. But fun bedtime stories aside, we also propose real, obtainable, non-extreme alternatives to Federal Reserve Banking in this BSTV episode, including an in-depth look at the promising prospects of public, state-owned banks. Public banking can circumvent the federal reserve system without upsetting necessary capitalist apple carts, like the credit system, essential to a healthy and innovating economy.
UPCOMING SEGMENTS in this comedic documentary “Who’s Afraid of the Big Bad Bank?” –with Bait and Switch TV’s Expert Interviews & Comedian Correspondents:
o History of the Federal Reserve & Fractional Lending
o The Fed, Shadow Banking & Leveraged Buyouts (LBOs)
o Federal Reserve, BIS, IMF & Global Investment Banks
o Government Sachs, Futures, Front-Running & the Fed
o The Fed, Discounts, Derivatives & Re-emerging Cap&Trade
o End the Fed? Meh! It’s Never Gonna Happen
o WHAT TO DO: TAKING BACK THE MONETARY SYSTEM — The Fed VERSUS State-Owned Public Banks
But fun bedtime stories aside, we also propose real, obtainable, non-extreme alternatives to Federal Reserve Banking in this BSTV episode, including an in-depth look at the promising prospects of public, state-owned banks. Public banking can circumvent the federal reserve system without upsetting necessary capitalist apple carts, like the credit system, essential to a healthy and innovating economy.
———————
This is exactly what we need!
Warren sez…People are stupid, but gubmint can save then from their stupidity…
Warren Says Consumer Protection Bureau Will Help Rebuild Middle Class
(Bloomberg)
Elizabeth Warren, the adviser appointed by President Barack Obama to set up the Consumer Financial Protection Bureau, said the agency will help rebuild the middle class while allowing markets to work.
“This is not about regulating shoes so there are no shoe stores,” Warren, 61, said yesterday in a discussion at the Roosevelt House Public Policy Institute at Hunter College in New York. “I actually believe in competitive markets.”
The goal of the CFPB is to make prices clearer and comparisons easier for consumers, which will help Americans determine what they can afford, said Warren. The agency also will reduce the “regulatory tangle” and apply “rules that give the middle class a chance,” Warren said.
The consumer bureau, created by last year’s Dodd-Frank regulatory overhaul, was designed to address what proponents said was the failure of existing regulators to protect consumers from risky financial products. It is scheduled to begin operations on July 21.
The CFPB’s duties will include writing and enforcing rules for financial products, including mortgages, credit cards and payday loans. In May, the bureau began testing redesigned mortgage disclosure forms to simplify the information customers receive when applying for a mortgage.
I LOVE Elizabeth Warren!
Hate to break it to the libertarians here, but it’s beyond obvious by now that businesses cannot regulate themselves, and by the time “the market” does it for them, the damage can be so tremendous, that we can never (or, at least, not for a long time) recover from it.
I’m amazed Warren’s made it this far; she has so many entrenced opponents. Hopefully, she will have enough power to overcome them, and she will be able to enact many of the reforms she’s been talking about. IMHO, she’s the best thing to hit D.C. (other than Bernie Sanders) in our lifetime.
“Hate to break it to the libertarians here, but it’s beyond obvious by now that businesses cannot regulate themselves”
I know let’s have more regulations! That will fix it, I am sure. Seriously if you believe layer upon layer of regulation can “fix” any business problems, then why hasn’t it worked?
If a person enters a contract willingly and does not understand what they have done, who’s fault its that?
It’s not really about “having more regulations,” so much as having a rule of law.
Or would you prefer that all the convicted felons in your state penitentiary be released, on libertarian principles?
The financial system simply cannot function properly without law enforcement, which is where too much deregulation brought us.
That sounds nice buddy, but I don’t see the rule of law being applied or even admired anywhere in this mess. Rather I see a proliferation of bureaucracy, power, favoritism and arbitrary controls. New bureaus to make new and more complex rules, when simple old ones are not enforced.
Let’s form a committee! Let’s have a concensus! We’ll all get along if we can just agree! There aren’t bad people, just bad circumstances! People won’t cheat or be cheated if this form is filled out! Blech!
“Rather I see a proliferation of bureaucracy, power, favoritism and arbitrary controls.”
Agreed, and definitely not what I have in mind.
when simple old ones are not enforced
Which ones?
“Which ones?”
There’s a great suggestion for a lively weekend topic!
Blue Skye,
There is no doubt that we have too many regulations that are a hinderance to business and an efficient economy.
OTOH, we have had some fabulous rules that **if enforced** could have stopped much of the fraud that brought this country to its knees.
The problem isn’t the regulations; the problem is that the *regulators* get corrupted by those they are supposed to regulate.
“If a person enters a contract willingly and does not understand what they have done, who’s fault its that?”
If a person enters a contract willingly and understands what they have done, but it doesn’t work out the way they had hoped so they later claim that they did not understand what they had done, who’s fault its that?
If a person enters a contract willingly and understands what they have done, but it doesn’t work out the way they had hoped so they later claim that they did not understand what they had done or they later find out that the contract they entered into that they either did or did not understand was sold without the signatures to create a proper chain of title so the contract that they willingly entered into that they either did or did not understand was no longer valid, who’s fault its that?
OK let`s have a look.
There is a Pig bubble. The price of Pigs are skyrocketing! People are camping out over night and lined up and entering into bidding wars to buy Pigs. People are making $150k overnight flipping Pigs. They are refinancing existing Pigs. The median price of a Pig is over $400k in the U.S.
Joe 6pack and his wife Martha 6pack want in. They fly down to Miami, camp out and buy 3 Pigs at $400k each in 2005. They get 3 loans from Countrywide at 120% LTV and walk away with $60k in their pocket from the closing table and are the proud loaners of three $400k Pigs. Are they worried? No,they will just sell the Pigs for $500k each in a couple of years.
The Pig bubble bursts. The 6packs can`t sell their Pigs, Joe loses his lucrative job selling Pig feed and they can`t make the monthly Pig payment. The 6packs cry foul! They never should have loaned us the money to buy those Pigs! Why they can`t even prove who owns the loan for the Pigs!
Who’s fault its that?
Pigs get fed, but the hogs get slaughtered.
It’s a balance. Either extreme doesn’t work. No regulation leads to oligarchy and the ruin of the society at large. Somalia has no regulation. Excessive regulation leads to central planning and corruption as the state gets too much power and spends its time inefficiently allocating resources and handing out favors. Ref: Soviet Russia.
We need to hit the sweet spot, a balanced regulatory regime, for maximum societal benefit.
It’s relatively apparent what happens when corporations are allowed to operate without serious regulation - they externalize costs, internalize profits, and buy politicians.
Sometimes big corporations love regulations. Regulations favor the large established players. The large established players get the write the regulations (just helpful lobyists) to make it even more onerous on wouldbe competitors.
Another word for regulation is throttle.
Regulation that guards the populace from grave harm is great! Keep it simple. I am against the ponderous type of complex regulation that makes entry by small business nearly impossible.
Regulations favor the large established players.
Yep, look at the regulations put forth by the USDA. Small farmers can’t afford to slaughter their own cows and such because any slaughter facility must have an office available for the FDA inspector.
More regulations = higher cost of compliance = only the “big boys” can afford to comply.
You’re arguing against large corporations while pushing policies that will entrench them further.
You’re arguing against large corporations while pushing policies that will entrench them further.
This is how people with an agenda argue. They take a small point and paint large issues within the context of their cherry-picked point and thereby try to discredit the basis of the larger issue.
They try to throw the baby out with the bathwater.
Sometimes the small point is a personal experience that led to a broader realization.
People with an agenda argue by dismissing the thoughts, motives and experiences of those who have a different perspective.
See examples of both directly above.
Sometimes the small point is a personal experience that led to a broader realization.
Yea right, almost every point he argues. See your example.
Regulation that guards the populace from grave harm is great! Keep it simple. I am against the ponderous type of complex regulation that makes entry by small business nearly impossible.
————
Agreed.
Seriously if you believe layer upon layer of regulation can “fix” any business problems, then why hasn’t it worked?
Regulation has and does work.
Strict regulation worked in the financial industry from the 1930’s until about 2000. The regulations were weakened starting in the 1980’s and 1999-2000 saw an orgy of deregulation cumulating in the Financial Services Modernization Act of 1999, and the The Commodity Futures Modernization Act of 2000.
The regulations worked and proper regulation works.
This is the answer to your erroneous-premise based question.
Thank you, Rio.
This post and your sentiment in your previous post are in opposition.
“Warren sez … People are stupid…”
Only stupid? She’s rating them too high.
“… but gubmint can save them from their stupidity…”
I believe this to be true because of gubmint’s excellent track record in this area.
To help save people from themselves I think the gubmint should require people who sign contracts to sign a document stating that they have actually read and understood the contents of the contract that they had signed.
Next the gubmint should require these people to sign another document stating they had read and understood the document they signed stating that they read and undestood the contract they signed.
Doesn’t H&R block do this for taxes? (something about how the refund is really a loan.)
Meanwhile, if this Consumer Protection Agency is so stupid and ineffective, then why is the bought-off half of Congress (you know the half I mean) fighting so hard to hard to stop Warren? Why not let Warren have her pet project?
I’m not against Warren having her pet project, I’m just saying her pet project will not overcome the stupidity of the people she is trying to save.
Warren and others can legislate all they want but stupid is stupid.
Warren can’t change this, she - or anyone else - cannot legislate out of existenence gross stupidity.
LOL! Only half of CONgress is bought off? Oxide, I didn’t realize you were that partisan.
Blind you are to who financed our current CIF’s run for office. Blind.
Protection ain’t cheap.
Are you saying that consumers shouldn’t have rights? That they need to be experts in literally 10,000 different specialties to keep from be robbed?
Seriously??
I’m starting to see a few “cash only” deals. Is this because the homes are so screwed up they have no chance of getting a mortgage?
Seems like I should know the answer to this after all theses years. Lol…
Cash rules. Cash will settle a deal.
The promise of perhaps maybe borrowing (or maybe not being able to borrow) cash leaves the settlement of the deal in question.
There is a premium that is charged for this uncertainty.
Borrowers have to pay this premium, cash buyers don’t.
Again, cash rules.
“Borrowers have to pay this premium, cash buyers don’t.”
Here is something I heard said long ago by a speaker at an LDS Church conference talk:
P.S. At ultra-low rates like those which currently prevail, a would-be borrower’s largest problem may be qualifying for a loan to begin with. There are just not enough lenders willing to risk loosing their money without high enough risk premiums priced into interest rates to make taking the risk a rational course of action. (Maybe that’s where those federal guarantees come in!)
Hence payday loan stores are popping up like mushrooms.
They popped up here in the Centennial State like mushrooms, then many vanished. Apprarently laws were passed here limiting their loan shark abilities and many simply closed.
When payday loan stores vanish during times like these, one has to suspect that the number of loans with kneecap collateral is commensurately increasing.
We work for Freddie and Fannie and the news from them is that in Florida most real estate sales are cash buyers. You might want to keep an eye on their website. This is what I hear from our franchises.
http://www.wilmothgroup.com/properties/homes-for-sale-tampa-bay-florida.htm
“We work for Freddie and Fannie and the news from them is that in Florida most real estate sales are cash buyers.”
Must not be many sales then. Because, cash buyers cannot carry such a large market. Cash buyers cannot even carry high end areas.
Believe it or not, there are a lot of cash buyers in San Diego, too.
Haven’t we seen reports of 30-40% of sales in many cities being to cash buyers?
Perhaps it’s because no title insurance company will touch the property due to various foreclosure-related clouds, so therefore no mortgage company will lend money on it.
Possibly. But even a cash buyer expects title insurance.
Title insurance may not be enough these days. There have already been cases where it wasn’t and the title ended up in litigation limbo forcing even the insurance to be unable to pay.
to see a few “cash only” deals ??
Well, more than a few…The big boys are involved and have been for awhile…Google the article below…
TODAY’S TOP STORIES
Real estate scavengers flip foreclosed homes in Sacramento area
By Phillip Reese and Robert Lewis
As more Sacramento homes slip into foreclosure, scores of house “flippers” have swooped in to buy properties at rock-bottom prices and sell them for quick profits. - Read More
I’m trying to get my brain around the “flopping” scam. If a bank is selling a home short, don’t they have to offer the home to anyone who wants it? Or can they (legally) set up a private, “off-market” short-sale arrangement with the owner in foreclosure, as described below.
Who is the bagholder in these scams? I’m guessing that if the loan is federally guaranteed, it is the U.S. taxpayer.
Doesn’t it raise just a tiny bit of suspicion if the guy who short-sold the home one year ago steps up as a new buyer? It would seem to be pretty easy to detect and prosecute this type of fraud, assuming it is prevalent enough to worry about it.
I suppose the part of the story which makes me the most skeptical is the notion that a home is “undervalued” relative to appraisals. When prices are declining, you can see homes sitting on the market for months on end, never selling, at appraised “market value.” Appraisals have a hard time catching up with market reality when sellers take the appraisal at face value and refuse to lower the price to a level where a buyer is forthcoming, perhaps because the true market value is underwater compared to the loan balance.
June 10, 2011, 12:01 a.m. EDT
Real-estate scam that’s devastating prices
Plus, one reader’s complaint about ‘offensive’ Bank of America ads
By Lew Sichelman
Realty Q&A is a weekly column in which Lew Sichelman, a nationally syndicated columnist who has been covering the housing market for more than 40 years, responds to readers’ questions on real estate.
WASHINGTON (MarketWatch) — Question: My neighbor in Palm Springs, Calif., who claims to have millions or more in the bank, let his home with a $1 million mortgage go into foreclosure. A real-estate friend of his bought it from the bank and is renting it back to him. After one year, my neighbor plans to buy it back. It affects me as a homeowner because now we have a home in our community that shows a sale price for $600,000, instead of the current market of $725,000. How do I report such activities? —J. McK.
Answer: This type of thing is more prevalent than most people realize. According to CoreLogic, a real-estate and mortgage data firm headquartered in Santa Ana, Calif., lenders will lose more than $375 million this year alone when they sell undervalued houses based on the price opinions funneled to them by unscrupulous real-estate agents.
The scam is called “flopping,” and you are correct, it can have a devastating impact on property values because now, the “sale” becomes a comparable for all future appraisals of matching neighborhood properties.
Like flipping, flopping is the intentional misrepresentation of house prices. But whereas flipping usually takes place when housing prices are rising, flopping occurs when values are depressed.
When a house is flipped illegally, it is “sold” for a greatly inflated value in order to obtain a mortgage that is far greater than the place is really worth. When the seller, who is often in on the scheme, is paid at closing, the difference between the actual selling price and the loan amount is split between the perps, who are usually industry insiders who know how to scam the system.
When a house is flopped, it is usually owned by a underwater borrower who has asked the lender to approve a short-sale at a price that’s less what is owed. Unbeknownst to the owner or the lender, the real-estate agent supplies one or more opinions of valuation that show the house to be worth one amount when it is really worth much more on the open market.
When the lender agrees to take the lower price, the agent purchases the property in his name or that of a straw buyer and immediately flips the property to an honest-to-goodness buyer-in-waiting at a higher price than the one negotiated with the lender, with the difference split between the participants.
…
How many involved in this round of fraud were involved in the rampant fraud during the bubble expansion? If there had been significantly more prosecution of that fraud, would there be much less fraud now (and not just by those that might have been convicted)?
The FBI reported and was subsequently order to ignore the accelerated increase in mortgage fraud in the last decade.
You will have to google it and search deep. That information is old and being hidden as well. Not impossible to find, I just don’t feel like spending all afternoon looking for it.
Many whistle blowers at the lenders were also ordered to ignore the fraud they were seeing. This has been documented on this very blog and is easier to google as well.
I tried to report some short sale fraud to the FBI, and was told that they didn’t think these deals were happening often enough to redirect resources to this type of fraud.
I seen some of this around here Pbear…
I fail to see how this would work, unless the lender colludes with the buyer to sell at a below-market price (i.e., lower than the sucker buyer who ends up paying the higher price a year down the road).
But given that there is a paper trail left behind, wouldn’t it be fairly easy for motivated bank regulators to put those who perpetrate this kind of fraud behind bars, and quickly drum this kind of fraud out of the system?
I think they’re inside jobs by bankers who don’t have the institution’s best interests in mind, but rather their own greed.
Inside jobs by agents.
We’ve seen plenty of them here, too.
“When the lender agrees to take the lower price, the agent purchases the property in his name or that of a straw buyer and immediately flips the property to an honest-to-goodness buyer-in-waiting at a higher price than the one negotiated with the lender, with the difference split between the participants.”
This sounds like first degree price discrimination, except I don’t really see how the lender gains from this arrangement unless, say, the principle balance is federally guaranteed. Otherwise the lender’s loss on the short sale would offset any potential gain from reselling to a waiting buyer at a higher price.
What is missing in this story seems to be information about who the real bagholder is on these transactions.
More from the MW flopping article:
Some real-estate agents are “clever, even more so than criminals,”
says Michael Richardson of BrokerPriceOpinion dot com, a firm which assists lenders in obtaining accurate valuations. “I’ve seen them change [comparables] to fit the scenarios they are trying to get away with. I’ve seen it where they enter fictitious listings and then remove them later. And I’ve seen it where they’ve recruited other agents” to participate in their schemes.
Flopping costs lenders tens or sometimes hundreds of thousands of dollars per transaction because the house could have been sold for more than they accepted. But it costs sellers big money, too. How? Because if you are a seller and your state allows your lender to pursue a deficiency judgement against you, you could end up owing more than had the realty agent not taken advantage of the lender’s ignorance — or trust — of your home’s actual value on the open market.
To avoid becoming a flopping victim, sellers would do well to pay $95 to $100 for a separate broker price opinion from a disinterested party to make sure the value set by their agent is at least in the ballpark.
What I am missing here is, if the seller’s and lender’s interest is to sell at market value, why wouldn’t they list the home on the MLS, or otherwise expose the home to the open market, rather than accepting the Realtor™’s below-market purchase bid or an appraiser’s opinion of the home’s value? It seems like selling below market is entirely avoidable, by simply selling the home on the market.
What obvious element in this story is eluding me?
PB,
You have no idea how many times I’ve gone back and forth on this issue with realtors on certain other blogs. ALL of them claim that this is entirely legal, that they do not have to advertise it on the MLS, and that listing a house as “contingent…no more showings,” is a perfectly legitimate way to get the best deal for their sellers.
When I challenge them on the issue of the LENDER being the one who should authorize the sale, not the “seller” (as they have nothing to lose), the agents get all pissy, claiming that they know RE, and that they are doing nothing illegal or unethical.
Yes, it’s very frustrating, especially when it’s likely to be the taxpayers who are on the hook for a lot of these losses (IMHO).
Desperate times. Wife is away this weekend helping a relative move to Florida for a “fresh start”. Another relative took a slightly different tact this week , jumped in front of a train….
OMG — good luck! We have seen many struggling with the financial crisis, but no suicides in our immediate circle thus far.
I’ve seen 2. It’s given me a REAL bad attitude toward Social Darwinistas.
That’s terrible HR. My Condolences.
I did a google search on that. Amazed at the numbers of people who do that.
It’s sad enough when someone chooses to commit suicide, but to do it in a way that traumatizes others (in this case the train engineer) is unforgivable. There may have been others, perhaps even children, who witnessed it as well.
I saw something about that on TV a few years ago. It was about freight train engineers who drive their trains long distances. Apparently, an engineer who does that for twenty or thrity years will see quite a few suicides. It’s part of the job.
People who commit suicide don’t really a FF what others think. No one cared about them, why should they cared about others?
Seems fair to me. The whole point IS to hurt those who hurt them.
Many, MANY people are the victims of wrong doing and have NO resources to pursue justice. (if you think law enforcement is there to help after the fact, you have a very brutal lesson coming) Be glad you never find yourself in that position. Be very glad.
Case in point: I regularly go on business trips which meet a couple of miles away from where this incident occurred last week.
Second death on Caltrain tracks in as many days
By: Ari Burack 06/09/11 10:18 PM
Examiner Staff Writer
A man was struck and killed on the Caltrain tracks in San Mateo in what authorities are ruling a likely suicide. (Examiner file photo)
Caltrain struck and killed a man on the tracks Thursday afternoon in what officials said was a likely suicide, the second such death for the transit agency in as many days.
The man was hit by a southbound train near Bellevue Avenue in San Mateo at about 4:30 p.m., according to Caltrain. The train came to a stop at the San Mateo station, where passengers were able to disembark.
…
Hard Rain,
Sorry to hear about your relative’s suicide. There are no words that can help during this time of grieving, but you and your family are in my thoughts and prayers.
US Is Nearing Even Worse Financial Crisis: Jim Rogers
Published: Wednesday, 8 Jun 2011 | 5:16 PM ET
By: Margo D. Beller
The U.S. is approaching a financial crisis worse than 2008, Jim Rogers, chief executive, Rogers Holdings, warned CNBC Wednesday.
“The debts that are in this country are skyrocketing,” he said. “In the last three years the government has spent staggering amounts of money and the Federal Reserve is taking on staggering amounts of debt.
“When the problems arise next time…what are they going to do? They can’t quadruple the debt again. They cannot print that much more money. It’s gonna be worse the next time around.”
The well-known investor believes the government won’t shut down in August if agreement isn’t reached on raising the debt ceiling, but he did say “draconian cuts” are needed in taxes and spending, especially military spending.
“We’ve got troops in 150 countries around the world. They’re not doing us any good, they’re making enemies. They’re costing us a fortune,” he said.
…
In the last three years the government has spent staggering amounts of money
BS. In the last three years, Obama actually wrote down what the military was spending in Iraq. Bush was spending just as much; only he didn’t write even a post-it about it.
And the government is spending staggering amounts of money because the more and more baby boomers are transitioning from “producer” status to “leech” status.
Jim Rogers, always talking his book.
Oxide, we didn’t want Mr. Obama to write down what he was spending, like that makes it all good. We wanted him to stop it. Stop the killing. Stop the spending.
I’m not sure you are spot on about the boomer-leeches causing the explosion in government spending. It makes a nice generational hate slogan, but is there any truth in it? The boomers I know are not joining the leech crowd as soon as they had hoped, unless it is the unemployment line. Maybe you are talking about retiring public/public-union types?
“…And the government is spending staggering amounts of money because the more and more baby boomers are transitioning from “producer” status to “leech” status.”
Woo-hoo, oxide has had an epiphany and now wants to abolish Social Security! No more leeches, make ‘em work ’til they drop, or else fund their own d@mn retirement.
“We’ve got troops in 150 countries around the world ??
Biggest job factory that we have….
Being a military grunt is the new “blue collar” job that pays more than $500/week. It’s one of the reasons (along with misguided patriotism and wanting to “kick butt”) that so many youngsters want to sign up.
Being a military grunt is the new “blue collar” job that pays more than $500/week.
If you career in it and get promoted in a timely manner (necessary in order to career). Very few are making much over $500/week their first enlistment. Not sure which you meant…I tend to focus on first enlistment since it only took me that long to figure out it was a horrible idea for my personality type :-).
If you career in it and get promoted in a timely manner (necessary in order to career).
That’s what I meant. I know guys who made Sergeant and they seemed to do pretty well between their base pay and all of their non taxable allowances.
I generally disagree with the notion that authorities (presumably in DC) have to choose the “right balance” between loans and home purchase prices in a private, decentralized housing market, or that “architects” have to “design” a market. The government’s role should be limited to enforcing a rule of law, and otherwise as hands-off as possible.
The most troubling aspect of this is the notion that top-down, centralized management (which got us into the mess we are in) is the best way forward. This is America, not the former Soviet Union.
ALL REAL ESTATE IS LOCAL. GET THE GUBMINT OFF THE BACK OF LOCAL REAL ESTATE MARKETS!
P.S. If the article’s quoted figures are accurate, it sounds like America is collectively underwater on the mortgage part of its household balance sheets by $5 trillion or so — nothing to sneeze at. I note that $5 trillion equals $5,000 billion, which is 25 times larger than $200 billion (the amount to which Bernanke said “subprime will be contained”).
Reuters Breakingviews
Mortgage Market Must Be Balanced
By AGNES T. CRANE and RICHARD BEALES
Published: June 8, 2011
Regulators and financiers could be focused on the wrong mortgage market. They are right that healthy American home lending hinges on the private sector’s ability to finance all or most of it, rather than relying on government-run Fannie Mae and Freddie Mac or their equivalents. But architects of the postcrisis home loan market may be assuming it needs to be larger than it really does. It could be scarcely half as big as the current $10.5 trillion and therefore much easier to finance.
Size matters because important constituencies are sweating the details of mandated reforms, including setting a new gold standard for mortgages. Making home lending less risky and housing boom-and-bust cycles less severe would probably reduce the supply of loans. If authorities and investors choose the wrong market size, they could strike the wrong balance.
Outstanding mortgages are still only 6 percent below the precrisis peak, while home prices are down a third. That’s one hint the market hasn’t bled out the excesses. Once foreclosures, sharply lower home values and the swelling ranks of renters are baked in, the market should shrink. Today’s mortgage market is more than twice as big as in less-frothy 2000. If home prices had appreciated in lock step with inflation since 1996 and loan-to-value ratios stayed the same, there would now be roughly $5.3 trillion in outstanding home loans, just over half the current level.
…
I vaguely remember one story in 2006 (maybe in montana or somewhere similar) where a fellow was bitterly complaining that all the bidding (mostly CA & NY people) on property made it uneconomical for him to live even though he owned the land and the house free & clear. With the reduction in the price of land and the house - going on to foreclosure - wonder if there were some old folks that got the better of the deal. If they had sold in 2006 and IF they held on to the money, it should be good pickings for them to buy back their homes/ land! No?
“If they had sold in 2006 and IF they held on to the money, it should be good pickings for them to buy back their homes/ land! No?”
If the properties have been allowed to decay, will prices yet be low enough to justify buying them back?
A look at Montana’s foreclosures
9:00 PM, Jun. 11, 2011
PETER JOHNSON
The rate of foreclosure activity on Montana homes has nearly quadrupled since March 2008, the spring before the recession began.
It climbed from 0.45 percent of all homes with mortgages to 1.62 percent in March 2011, according to CoreLogic, an online real estate site.
But the nation’s current foreclosure rate, 3.57 percent, is more than double that of Montana, according to CoreLogic.
Similarly, the percentage of Montana homeowners whose mortgages are delinquent by 90 days or more tripled during those three years, from 1.04 percent to 3.33 percent. It’s less than one-half the current national average of 7.54 percent, according to CoreLogic figures.
…
Try not to catch yourself a falling knife.
Home Equity Sinks to Nearly Lowest Point Since World War II
PHOTO: A Bank of America foreclosure notice is seen in the front window of a home.
Housing Market Still Not Looking Up
June 12, 2011
Falling home prices have shrunk the equity Americans have in their homes to nearly the lowest percentage since World War II.
Average home equity plunged from more than 61% at the start of 2001 to 38% in the January-March quarter this year, the Federal Reserve said in a report Thursday. That drop comes as home prices in big metro areas have reached their lowest level since 2002.
Prices fell 33% in 20 cities through March from their 2006 peak, reaching their lowest level since 2003, according to the Standard & Poor’s/Case-Shiller index of U.S. home prices on May 31. The decline signaled a “double dip” as the index fell below its previous post-housing-bubble low set in April 2009. Prices more than doubled from 2000 to July 2006.
Further declines in home prices are likely.
Robert Shiller, the economist who co-founded the S&P/Case-Shiller index, said a further decline in property values of 10% to 25% in the next five years “wouldn’t surprise me at all.”
“There’s no precedent for this statistically, so no way to predict,” Shiller said Thursday at a Standard & Poor’s conference in New York.
…
Falling home prices have shrunk the equity Americans have in their homes to nearly the lowest percentage since World War II.
—————
Again, they are trying to blame the wrong side of the bubble.
The shrinking equity is not due to falling prices as much as it’s due to lower down payment requirements, HELOC’s, cash-out refis, etc.
The reason for shrinking equity is TOO MUCH DAMN DEBT!
On-line lotteries to solve state budget shortfalls?
Edwin McGuinn, chief executive officer of eLottery of Stamford, Conn., projects that a state with online lottery sales would increase revenue 15% within five years and attract “a demographic who doesn’t traditionally go into a convenience store to buy a ticket,” at a time when many states are grappling with budget deficits. He said that, in Britain and Finland, the online portions of government lottery sales are 15% and 25%, respectively.
Story: State-run Gambling
← Some 43 states run lotteries of one kind or another. Now, the lure of gambling via the Internet has state legislatures abuzz over the possibilities of tapping another pot of money.
Thomas Jefferson called gambling “taxation for the willing,” and that’s a good assessment of the human tendency to lay one’s money down on a slender chance to win a big jackpot.
I’ve often wondered why South Carolina, true southern “horse country”, has avoided establishing profitable pari-mutuel race tracks. It’s a classier way to gamble than merely betting on the order of numbered ping balls balls selected at random by a vacuum device.
Sometimes, sometimes selected at random.
Huh? Can you clarify what you’re saying, Blue Skye? Are you suggesting that the lottery selections are fixed in some way?
Impossible to prove, and yet you can’t help but wonder. I guess it comes from living a country where systemic corruption has taken over.
You are obviously not from Pittsburgh!
The Tripple Six Fix.
http://en.wikipedia.org/wiki/1980_Pennsylvania_Lottery_scandal
We were shocked!
Nick Perry link to follow. If not, google it.
ALL gambling has organized crime ties. To think otherwise is to be hopelessly naive.
This article suggests American households collectively owe $5.8t in “negative equity.” Where is that money supposed to come from?
Chart of the Day: Home Mortgage Debt Declines Below 2007 Level
By Daniel Indiviglio
Jun 10 2011, 6:17 PM ET
The mortgage bubble continued to deflate in the first quarter of this year. On Thursday, the Federal Reserve released its latest Flow of Funds data, which provides a heap of statistics about the status of the U.S. economy. One interesting stat included is mortgage debt held by households. It has been declining since 2008 and has now fallen below 2007 levels.
Here’s the chart:
The green line represents the value of $9.97 trillion in the first quarter, and the blue line attempts to show it near, but slightly below, the level in the first quarter of 2007.
The amount of mortgages debt has been declining for two main reasons: some borrowers are paying down their loans and others are defaulting. Since mortgage debt peaked in the first quarter of 2008, it has declined 6.0%.
From this chart you can see how aggressively mortgage debt grew when the bubble began inflating in the mid-1990s. If mortgage growth had followed the historical trend, we’d probably have somewhere around $6 trillion outstanding at this time. Even with the recent decline, we’re way above that at nearly $10 trillion.
When you take into account the huge decline of home prices since the bubble burst, this chart looks pretty disturbing. According to the S&P/Case-Shiller National Home Price Index, prices fell to their mid-2002 levels in the first quarter. For mortgages to decline to that level, they’d have to drop another 44% to $5.8 trillion. This begins to show just how little equity — or even negative equity in many cases — American homeowners have today.
“Where is that money suppose to come from?”
The Tooth Fairy.
If the Tooth Fairy doesn’t come across with the bucks then whoever it is that is owed the bucks is going to have to somehow learn to do without.
In this case the Fed is the tooth fairy. It is furiously pumping out new money to counteract the money that’s going “poof.”
Did you miss the memo that QE2 is scheduled to end later this month?
The memo that another crisis is brewing was not missed. We’ll be informed soon enough that more heroic measures are needed to save “us”.
“…more heroic measures are needed…”
To be delivered just in time for 2012 election season…
“Where is that money suppose to come from?”
From their under $500 a week paycheck?
You don’t understand Color. Poor people are good for the economy. Honestly.
Exactly. Just ask Marie Antoinette!
Oh wait…
I did a little back-of-the-envelope calculation to gauge just how deeply the household balance sheets are for those with underwater mortgages.
According to the Census Bureau’s Statistical Abstract of the United States, as of Fall 2009, there were 76,428m owner-occupied housing units in the U.S., of which 46,703m had “regular mortgages” with outstanding principle balances. Based on often-cited figures, let’s assume roughly 23% of these are underwater. At a total of $5.8t in negative equity, that would imply a total water depth of
$5,800,000,000,000/(23%*46,703,000) = $540,000 per underwater mortgage.
Please point out the error in my calculation, as $540,000 per underwater home sounds outlandishly high.
Let’s use a sliderule. What was the peak average house price, $250K? Probably 100 M houses, not all are owner occupied principle residences. $25Tr total house inventory. Half with mortgages? $12Tr. Market down 30%? $5 Tr equity gone on those $12Tr. Doubtful that is all “underwater”. I don’t believe the $5.8Tr number is underwater, might be the total lost on mortgaged properties.
“According to the S&P/Case-Shiller National Home Price Index, prices fell to their mid-2002 levels in the first quarter. For mortgages to decline to that level, they’d have to drop another 44% to $5.8 trillion.”
My reading of that passage is that the $5.8 trillion is the underwater amount, if the combined outstanding principle balances on existing mortgages were written down to reflect the value of the underlying collateral.
Kindly explain your disagreement with this interpretation, if the figures in the article are taken at face value.
Well, I wasn’t disagreeing with your interpretation until you just stated it so. Just looking at it from the angle that the average house cannot be underwater by more than it was worth at the peak.
If something is to drop 44% TO $5.8Tr to equal value of the asset, then the drop (the amount currently underwater) would be the 44%, not the 56% remaining. $5.8 is the 56%. Just a detail. Still not a clearly believable number.
Thanks for the correction on my arithmetic error. (I really don’t make them that often, but I still make them!)
$4,200,000,000,000/(23%*46,703,000) = $391,000.
That figure seems much more plausible. For instance, if a home with 100% LTV on $1m in principle dropped in value from $1m to $609,000, the above figure would be the negative equity. This seems roughly in line with the losses on (former) $1m homes in our area.
Is the current mortgage based on actual reality or some fudge principle, like mark to fantasy? If the accounting is sham then there is no way you can take 4.2T as the underwater value for the currently assessed population of 23%. On the books it is more likely that the currently acknowledged total underwater mortgage is around 1T. So the average underwater value would be $93k.
Your calculation is right if you take the projected Case shiller values. The question to ask here is: If the home prices drop to their historic growth levels, how many mortgages would be underwater?
Further correction to my earlier post:
$4.2t ($4,200,000,000,000) = 21 X $200 bn ($200,000,000,000).
That is, the current degree of underwaterness is twenty-one times larger than the $200 bn amount to which Bernanke claimed “subprime will be contained.”
In fairness to BB, he only said that subprime would be contained to $200 bn, not agency, prime, alt-A, option or unsecuritized ARMs.
That reset chart goes on for 48 months. Roughly guesstimating $25bn a month in resets, that will get you up to $1.2t in ARM resets over the period (January 2010 - December 2013).
Not sure how much of that will go into default.
I think some of the ARM resets are saving FBs because of the low interest rates? The ones who aren’t set up for balloon payments.
Yes.
Perhaps the 23% is underestimated. If it were really 46%, then the average house is underwater by $270K. Still seems high to me.
I don’t know about how good an estimate 23% is. Many mortgages are presumably so far along to being fully paid off that even after generationally-large price declines, they are still above water.
It is the interaction between the distribution of “percent of paid down principle” and price declines which determines the “percent of mortgages underwater” statistic. Unfortunately, I suspect high loan-to-value ratios (i.e. low percent of principle paid down) were highly correlated with large price declines, as the same local market forces which led people to pay little or no down payment were the ones which led to the largest bubble price gains and subsequent largest declines.
A relatively small percentage of all mortgages being hundreds of thousands of dollars under water (on average) also is very consistent with the failure of HAMP and other mortgage modification programs to gain much traction. By contrast, if the underwater problem was evenly distributed across the pool of mortgages with outstanding balances, the average amount underwater would be smaller, and the number of homeowners who could be “helped” by household-level bailouts would be much larger.
You really can’t spread the loss evenly. The large number of WAY overpriced tract and luxury homes distorts the picture.
The easiest way to look at it to find the peak average ($200somethingK? I think) and then find the average percentage drop (23%?) and just stick with that, keeping in mind regional differences.
“…spread the loss evenly.”
Not what I did; I calculated the average loss, which is what each underwater borrower’s loss would be if losses were spread evenly.
Note the subtle difference!
P.S. My 23% number is consistent with the 11m underwater borrower figure reported elsewhere in the MSM:
23% * 46,703,000 = 10,741,690 (11m rounded).
Cape Cod Housing Agency Lays Off 15
Lack Of State Funding Closes Falmouth Shelter
BARNSTABLE, Mass.(AP) — A Cape Cod agency that helps provide housing for those in need said it’s being forced to lay off 15 employees due to a decrease in state funding.
The Housing Assistance Corporation announced Friday that as a result of the layoffs, the Carriage House family shelter in Falmouth will be closed. Residents there will be placed at a family shelter in Bourne.
The Barnstable agency’s chief executive, Rick Presbrey, told the Cape Cod Times the recent funding cuts have had a more dramatic impact than any in the last 37 years.
The Housing Assistance Corporation operates homeless shelters and offers services in education, transportation and job training.
High housing costs, lots of minimum wage employment. They wonder why there’s so much violence there. For a while Hyannis was the domestic violence capitol of MA. High incidence of drug use/dealing there too. Neighbors whispered rumors of organized activity on the harbor. It wasn’t long after we realized there was a SWAT team there that we moved on.
For some reason, the PTB and their sycophants seem to think that starving people with nothing to lose are just going to go quietly die in some corner somewhere out of sight instead of creating messy problems with crime and violence and stuff.
Marie Antoinette didn’t get it either.
Or maybe they think the mayhem will happen in someone else’s neighborhood and so they just don’t care.
Worker and service cuts continue in S.C.
By GINA SMITH - gnsmith@thestate.com
At age 62, Connie Jenkins did not expect to be looking for a job.
But she is.
In October, Jenkins lost her job as an investigator with the Human Affairs Commission, as that state agency shed workers to cope with the financial ravages of the Great Recession.
Jenkins isn’t alone. While economists say the recession is over, state agencies continue to pare back their employees and services.
Consider:
• About 4,700 state jobs have been eliminated in the past two years — either through layoffs or not filling vacancies, according to state data. That leaves about 60,000 state workers, 7,100 fewer full-time workers than the state had four years ago.
Particularly hard hit have been some of the state’s smallest agencies, including Human Affairs, where Jenkins formerly worked. This year, that agency has laid off 10 employees, according to State Budget and Control Board data. The agency, charged with eliminating and preventing discrimination in employment, housing and public accommodations, now has 17 employees.
• Bigger picture, the state has lost 14,800 government jobs, mainly in education, over the past year, according to recent data by the S.C. Department of Employment and Workforce. Those jobs include teachers who work for school districts as well as police officers, trash collectors and other who work for S.C. cities, towns and counties.
That takes the number of government jobs in the state back to 2006 levels, according to data from the U.S. Bureau of Labor and Statistics.
• Even those state agencies that have not been hard hit by layoffs say that they are looking for ways to save nickels and dimes.
Some agencies, including the Department of Public Safety, have avoided layoffs by furloughing employees and requiring employee to do more with less. For example, Highway Patrol troopers must now wash their patrol cars and launder their uniforms on their own dime.
“We’ve told them that protecting their jobs and their paychecks is our top priority,” said Mark Keel, director of the Public Safety.
Services for poor hard hit
Perhaps the largest cuts have come in state services designed to help the poor:
• The state Department of Social Services has cut average welfare-to-work payments for a mother of two to $216 a month from $270. (Recipients must work or be in a training program to qualify for the payments, some of the lowest in the nation.)
• Vouchers to help poor parents pay for transportation, so they can get to work, or vouchers for child care have been reduced. Only about 20 percent of state residents eligible for child-care vouchers are receiving them.
• The Department of Health and Human Services has eliminated or reduced a variety of services for Medicaid recipients, including adult dental and vision services, and the number of shoes diabetics can receive. Reimbursements rates to doctors and hospitals for treating the poor also have been reduced, leading to fears that some health-care providers will quit treating the poor or treat fewer.
“People living on the edge, paycheck to paycheck, or those looking for work, they’re getting double-whammied,” said Sue Berkowitz, director of the Appleseed Legal Justice Center, an advocacy group for the state’s low-income families.
“It’s not just their doctor may stop accepting Medicaid. They have no way of getting to the doctor, no child-care help. We’ve cut the (welfare) payments and the support services, too.”
“While economists say the recession is over…”
Economists are liars!
By the official definition of recession, it is over.
That is far from a clean bill of health for the economy.
Granted that the economists were told that the recession ended by the Ministry of Truth. So they just repeat what they were told. To be a LIAR, there must be some original thought rather than parroting. In my twisted view, if you were to subtract deficit government spending from that precious GDP number, it would be evident that the freefall never stopped. That’s just me and I’m stubbornly difficult sometimes.
Hey, I’ll bet you that by Christmas they’ll tell us that we went back into recession this spring. Takers?
“So they just repeat what they were told.”
Are you saying GDP numbers are simply made up out of thin air? I don’t believe that is true, but if you have evidence to back up your point, please post.
“…if you were to subtract deficit government spending from that precious GDP number…”
Your point is taken.
However, GDP measures the value of production; it is not meant as a measure of net national income.
OK, the recession is officially over when the NBER says it was over, based on a complex and flexible analysis of many factors, with emphasis on GDP. I wasn’t under the impression that economists in general took issue with the NBER’s proclamations. So, yes, econoists are reporting what the NBER has proclaimed. Am I missing the mark there?
I agree that GDP does not mean to measure national income. The connection is that GDP as a measure of health of the economy is bogus when there is no caveat regarding debt funding. When the FedGov borrows and spends to order additional production, that gooses the GDP. It doesn’t matter if the government spending is in hiring employees, giving contracts to build highways or dropping bombs, it adds to the production of goods and services. If you hold all of that production up and claim that the economy is growing, it is as bogus as the Boomer with the Beamer who pretends to be prosperous but has funded his lifestyle with debt. I don’t accept the notion that debt is wealth, nor that consumption based on it is prosperity. That notion is what got this generation into such a dark place and it is hard to shake. If the horse was on steroids, he didn’t actually win the race, that sort of thing. Our GDP number isn’t “honest” because we are faking our prosperity. It is a coverup and a fraud and there will be hell to pay sooner or later. Economist who point to the sideways GDP during a period of massive borrowing and claim that the worst is behind us are part of the fraud. That’s what I meant.
“Am I missing the mark there?”
Now that I better understand your point, no. I generally agree with you.
I totally agree with you, Blue Skye.
So much for the myth of government worker job security. I’ve recently posted similar articles regarding layoffs from the State of California workforce.
“• The state Department of Social Services has cut average welfare-to-work payments for a mother of two to $216 a month from $270. (Recipients must work or be in a training program to qualify for the payments, some of the lowest in the nation.)
• Vouchers to help poor parents pay for transportation, so they can get to work, or vouchers for child care have been reduced. Only about 20 percent of state residents eligible for child-care vouchers are receiving them.”
Are they also cutting welfare rolls? Have welfare-to-work programs been successful in breaking the cycle of welfare dependency?
What will the future look like for financially challenged parents and their children? Will they move to states with better programs for the poor? Will they give up parental rights and turn their children over to the care of the state? Will they have fewer children?
”I have been assured by a very knowing American of my acquaintance in London, that a young healthy child well nursed is at a year old a most delicious, nourishing, and wholesome food, whether stewed, roasted, baked, or boiled …”
http://art-bin.com/art/omodest.html
“Have welfare-to-work programs been successful in breaking the cycle of welfare dependency?”
Complicated answer. I’d guess in some cases “yes” and in others, “no”. But the real intention of welfare-to-work programs is to make the taxpaying citizens (on whose largess such programs’ funding ultimately depends) feel Uncle Sam and Co. isn’t throwing it away on “welfare queens”.
Unless they work on Wall St.
She should get out the way and die already so the younger generation can have her job!
Damn Generation Greed!
/sarcasm
I’m wondering if, somewhere down the road a bit (when the time is convienent for the banks), if the banks will somehow “discover” all of those falsified loan documents the FBs signed in those long-long-ago and far-far-away days when stars and dollar signs were brightly shining in the soon-to-be-FB’s eyes.
You know the loan documents I am talking about, don’t you, the ones the loan guy modified so as to get the future FB to qualify for the loan?
Just whose signature was it that ended up on that falsified loan document, hmmmmm?
How much leverage is offered to the holders of such documents that can be used against the stupid FBs who signed those falsified loan documents so as to get them to come across with the big bucks?
Stop drooling, you aren’t going to get that piece of meat. Lizzy tells us that the FBs were victimized by not having the situation splained to them simply enough. People are honest, ya know, they just need more regulatin. Give em a break.
I should let this go but I can`t seem to. Myself and many others have made rent payments for all of these last 60 months and longer. My rent payments total 102,000.00 after tax $ over the last 60 months which should have been at least $30k less if not for an artificially inflated rental market due to people like Lynn from St. Petersburg, Fla., has been living without paying for three years, Charles and Jill Segal who have not made a mortgage payment in nearly five years, the actor from Thousand Oaks, Calif. who feels lucky because he hasn’t had to pay any ‘rent’ for 30 months and some other 4.2+ million mortgage borrowers with sob stories.
I`M PISSED! SOMEBODY MAKE IT STOP!
Squatter Nation: 5 years with no mortgage payment
By Les Christie June 9, 2011: 9:45 AM ET
NEW YORK (CNNMoney) — Charles and Jill Segal have not made a mortgage payment in nearly five years — but they continue to live in their five-bedroom West Palm Beach, Fla. home.
Lynn, from St. Petersburg, Fla., has been living without paying for three years.
In Thousand Oaks, Calif., an actor has missed 30 payments, and still, he has not lost his home.
They’re not alone.
Some 4.2 million mortgage borrowers are either seriously delinquent or have had their cases referred to lawyers to pursue foreclosure auctions
Lynn, who didn’t want her last name used, purchased a two-bedroom on Tampa Bay in 1998 for $135,000.
As the waterfront property’s value skyrocketed, eventually reaching $750,000, she refinanced twice (once to expand a business), and took out a second mortgage. She now owes more than $600,000 on the home, which is worth only $235,000.
Living in this foreclosure limbo is “Hell,” Lynn said. “I feel like I’m locked in a box. I work for a financial organization and if this came out, it could cost me my job.”
His ideal outcome is get the loan modified and get all his late fees waived. He feels entitled to that because the bank advised him to stopped paying in the first place to qualify for one of the government’s foreclosure programs. Before that, he had missed only one payment.
Meanwhile, he has cobbled together some income streams — small acting parts, teaching acting classes and even handyman work.
“In a way, I feel like I’m lucky because I haven’t had to pay any ‘rent’ for 30 months,” he said.
http://money.cnn.com/2011/06/09/real_estate/foreclosure_squatter/index.htm - 66k -
Those people are too disgusting to be Americans.
Those people are prime examples of Americans.
My dog! Thinking again, I take back what I said. I agree with you. I return to my idea 95% of Americans are dishonest and will cheat when no one is looking.
I return to my idea 95% of Americans are dishonest and will cheat when no one is looking.
Sad.
Uh … isn’t this the bank’s fault for not foreclosing and selling the house at a fair market price? But why should they do that and be foreced to realize the loss? They get free money from the FedRes so there are no carrying costs.
“Uh … isn’t this the bank’s fault for not foreclosing and selling the house at a fair market price?”
Last week I would have said yes. But then I read what Ben said about the banks not owning the loans but only servicing them. So is it the pension fund that owns the loans fault? I don`t know, you tell me.
+1 Jeff
Someone is sitting on their hands, having made the decision to not foreclose and put the houses on the market.
If they’re not going to foreclose, then why pay?
“Someone is sitting on their hands, having made the decision to not foreclose and put the houses on the market.”
Well who is it? Maybe Bush knew, but he ain’t got the keys no more. Maybe Obama knows and that`s why he is doing everything in his power to keep the deadbeat homeloaners in “their” homes. Maybe it`s bigger than both of them. I don`t know but 7+ years of this is enough for me, I am sick of it! “If they’re not going to foreclose, then why pay?” Well I pay, everyone else here pays, most of the people I know pay and the ones that don`t laugh about it like it`s their right to live free because they were wronged. BS to the banks, the robo signed victims, the first time home loaners, serial refinancers, the pensions, Wall Street, the unions and everything and everyone else that is too big to fail. FAIL! FOR GODS SAKE LET THE ONES THAT ARE GOING TO FAIL, FAIL!
“Myself and many others have made rent payments for all of these last 60 months and longer.”
We faithful renters are among the suckers in this stealth bailout. And anyone who pays federal taxes stands behind federal guarantees on Fannie Mae and Freddie Mac mortgages, which indemnify lenders against exposure to the consequences of their foolish lending decisions.
I suspect the federal guarantees result in the kind of short sale fraud scheme described above, with the U.S. taxpayer as bagholder, as a lender who owns the collateral with no guarantee of principle is fully exposed to the loss on a short sale.
which indemnify lenders against exposure to the consequences of their foolish lending decisions.
which indemnify lenders against exposure to the consequences of their foolish lending decisions.
which indemnify lenders against exposure to the consequences of their foolish lending decisions.
“We’re sorry, We didn’t mean to hurt anybody, don’t punish us, we won’t do it again, we promise!” from the “Inside Job”
OK let`s have a look.
There is a Pig bubble. The price of Pigs are skyrocketing! People are camping out over night and lined up and entering into bidding wars to buy Pigs. People are making $150k overnight flipping Pigs. They are refinancing existing Pigs. The median price of a Pig is over $400k in the U.S.
Joe 6pack and his wife Martha 6pack want in. They fly down to Miami, camp out and buy 3 Pigs at $400k each in 2005. They get 3 loans from Countrywide at 120% LTV and walk away with $60k in their pocket from the closing table and are the proud loaners of three $400k Pigs. Are they worried? No, they will just sell the Pigs for $500k each in a couple of years.
The Pig bubble bursts. The 6packs can`t sell their Pigs, Joe loses his lucrative job selling Pig feed and they can`t make the monthly Pig payment. The 6packs cry foul! They never should have loaned us the money to buy those Pigs! Why they can`t even prove who owns the loan for the Pigs!
“We’re sorry, We didn’t mean to hurt anybody, don’t punish us, we won’t do it again, we promise!”
They get 3 loans from Countrywide at 120% LTV and walk away with $60k in their pocket from the closing table and are the proud loaners of three $400k Pigs.
But these loans and this behavior could not have happened without:
1. The deregulation of the financial industry cumulating in The Gramm-Leach-Bliley Act of 1999 and The Commodity Futures Modernization Act of 2000.
and
2. The patterns of human behavior that are well known.
Which of the two have we most control over? Therefore which of the two are most to blame?
“Which of the two have we most control over? Therefore which of the two are most to blame?”
I am not concerned over who or what to blame. There is obviously plenty of blame for what happened to go around on all sides.
My question is who can stop it now? Who can stop HAMP? Who can put the shadow inventory on the market? Who can tell people you have to pay for a house if you want to live in it or get out and let someone who will pay for it move in. Who or what is it that will let the housing market find its own level without being artificially propped up? It`s not what happened, it`s what is STILL happening and who do you blame for that?
I am tired of paying $1,700 a month to rent a $900 a month house while people who paid $400k for a $150k house haven`t paid anything for years.
I turned on the news at 6 AM this morning and the first thing I saw was a HUD commercial on who to call if you are in foreclosure. SOMEBODY MAKE IT STOP!
which indemnify lenders against exposure to the consequences of their foolish lending decisions.
Hwy agrees!
SOMEBODY MAKE IT STOP!
Root cause analy$i$ =
revoke their Corporate Inc. Charter… arrest the pimp$ 1stBut these loans and this behavior could not have happened without:
1. The deregulation of the financial industry cumulating in The Gramm-Leach-Bliley Act of 1999 and The Commodity Futures Modernization Act of 2000.
Hello?! Is this thing on?! Check, one, two. Check, check.
Jeff, you would not feel better if you were to have played on that team. It is not these squatters that have robbed all of us in similar circumstances to yours. It is the thieves and traitors in DC who have systematically looted the entire country to funnel money to their elite backers.
And no Oxide, they are not all Republicans.
This really makes me sick and should make ALL Americans sick! (Well, those who aren’t living rent free)
So me being wise and thrifty, who rents and saves up - I need 20 percent down in order to qualify for a mortgage, yet if I put 3 percent down I could live rent free for five years in a nice place!
It just really makes me sad, and Im not even a Granite counter top kinda guy - all I want is a nice three bedroom house for my family. I can’t provide that because people like this muck everything up. Im not gonna flip it, not gonna HELOC it, I just want to pay it off and live comfortably.
Like the lady in last weeks article said “The evidence shows we were defrauded”. People like this should be arrested and sentenced. You want free housing? I’ve got a great studio in Attica with your name all over it!
I am tired of paying $1,700 a month to rent a $900 a month house while people who paid $400k for a $150k house haven`t paid anything for years.
I turned on the news at 6 AM this morning and the first thing I saw was a HUD commercial on who to call if you are in foreclosure. SOMEBODY MAKE IT STOP!
———————
Lordy, can we hear an Amen!
You’ve hit on something there, Jeff. There must be **somebody** who can help us out here. Those of us who have been trying to be responsible; those of us who try to budget for things like lay-offs, unexpected emergencies, etc. when calculating what we can afford to pay; those of us who have been waiting patiently for the housing market to get back to “normal” (which means PRE-2001 levels, or less!!!)…have been totally screwed.
Just noticed a house up for sale in a very quiet part of my Phoenix neighborhood. It is estimated $200,000 but priced at $250,000. has a small pool. I would pay no more than $190,000 for it. It sold for $170,000 in 1998. engineering layoffs are starting up in Phoenix, so I think the estimate should be $180,000 by November. So I would consider offering $170,000. Looks like original 1998 owner still has it. No sale since 1998. I would get an umbrella insurance policy to cover my liability while I am away for work.
Bill or Slim…In Phoenix, is there a certain time of year that the real estate market is typically the strongest ?? Around here, the strong months are from March through September…I assume it would be November through April but not quite sure…
I don’t know which months are seller months in Phoenix. But with layoffs beginning, I think Phoenix house sales will continue being at 2000 price levels a couple years.
I think I saw somether that Case/Schiller says that Phoenix is currently at 2001 prices. Of course, that’s an index which is some sort of average of the whole county. If you’re looking at a nice section of Ahwatukee, the houses may not have fallen as much from peak as the cheaper areas.
Spring to Fall is typical nationwide.
School year-to-school year.
Solar storm delivers a glancing blow to Earth – and a warning
The solar storm caused by a massive eruption two days ago arrived at Earth Wednesday, but it was only a taste of what scientists say might come – and the world is not prepared. NASA/REUTERS
By Mark Clayton ~ csmonitor
Charged particles from a huge solar eruption two days ago delivered only a glancing blow to Earth Thursday.
But it still represented a warning. Solar activity is approaching the 2013 peak of its 11-year cycle, called the “solar maximum,” and the developed world finds itself ever more dependent on systems vulnerable to massive solar storms.
Perhaps most important, the power grid is 10 times larger than it was in 1921, when the last solar superstorm hit, effectively making it a giant new antenna for geomagnetic current. A far stronger solar outburst could overload and wreck hundreds of critical high-voltage transformers nationwide, blacking out 130 million people for months and costing as much as $2 trillion, according to an Oak Ridge National Laboratory study.
“When we look back through history, we can see the thumbprint of these extreme events that were a lot worse in their intensity than anything seen in the modern space era,” says Daniel Baker, director of the Laboratory for Atmospheric and Space Physics at the University of Colorado at Boulder, who chaired a seminal 2008 National Research Council study on solar weather’s impact on the North American power grid.
As “society is becoming more and more dependent on vulnerable systems like the power grid,” he adds, it is “dramatically increasing its vulnerability every few years.”
The first confirmed “solar tsunami” occurred in 1859. British astronomer Richard Carrington was busily sketching sunspots through his telescope when he observed a brilliant, oval-shaped light erupting from the sun that lasted several minutes.
Days later, telegraph systems worldwide went haywire. There was so much geomagnetically induced current on the lines that some telegraph operators reported being able to use the systems without batteries. In other cases, telegraph offices caught fire and wires melted. The northern lights could be seen as far south as Cuba.
More than 150 years later, the US and most other nations are not well prepared to weather a truly massive solar storm like the “Carrington event,” many experts say.
Cue up Nicholas Cage and his movie “Knowing”
Wow, so that’s why it was 94 degrees here in Chicagoland! I follow the NOAA web site and didn’t see anything mentioned. I must have totally missed it.
These “we’re not prepared” stories are getting old.
I’d worry more if most of these stories weren’t generated by people whose jobs depend on the business of “preparedness”.
Nobody is prepared for jack-squat.
To modify the military axion: “Those who try to prepare for everything, are prepared for nothing”.
Reince Preibus, head of the Republican party, said on Meet The Press this morning, that Obama had added more to the national debt that all previous presidents combined.
Can this possibly be true?
If so - it’s huge.
Its good to see the GOP up to its disinformation campaign.
One of the things got me to quit the GOP was how they inherited a balanced budget and ended up with a cummulative deficit of 4 trillion. And SS was still running a surplus then so the real deficit was even bigger as the Fed Gov doesn’t count the money it borrows from SS as deficit spending.
“GOP was how they inherited a balanced budget”
That myth will never die! No matter how many times it has been shown to be completely false. Got to love the gubmint believers.
Good news! We have been getting an astonishingly increasing debt. So who’s to blame?
I know, I know it sure as hell is not Barry’s fault,since he’s not being responsible for anything negative. Now, let’s play some golf.
It will work itself out no matter how much more the D.C. cesspool screws up!
http://factcheck.org/2008/02/the-budget-and-deficit-under-clinton/
Yep. Completely false!
Oh wait…
Links?
The largest cause of the current deficit is from the catering economy - the loss of revenue and the increased needs of people who were managing on their own when they had jobs. Since the economy had to crater somewhat from bubble levels no matter what, blaming Obama for that part of the accumulated debt is absurd. The nest largest cause is the extention of the Bush tax cuts. This was first done as part of the stimulus package (at the insistance of the rebublicans, the administration would have limited the extension somewhat) and then because we really needed to do a few things in the lame duck session like extend the nuclear treaty with Russia.
The next largest chunk is from the wars. Both sides can take blame for that, though I doubt anyone but GWB or someone equally controlled by the neocons would have decided that getting attacked by Saudi religious extremists holed up in Afghanistan was a good excuse to invade Iraq.
A lot of the rest is attributable to the spending part of the stimulus, but most of that went to things the state and local governments wanted to do but couldn’t afford as their revenue plummeted. I think this money could have been well spent if the states and locals had used the time it bought to adjust to the new reveue reality over a few years, rather than all of a sudden when it ran out. As a general rule they didn’t do that, but it doesn’t mean it wasn’t worth a try.
And there is a lot of expense in baby boomers reaching 65 (SS and Medicare costs) but that is largely ahead of us. It isn’t kicking in that much yet, though there are probably a lot of 62 year olds taking SS early because of unemployment and no prospects which is bringing some of the expenses forward. If the stats jockeys did their jobs properly, taking SS early (at a reduced payout) isn’t supposed to cost the program more than taking it at one of the later dates.
eenie…“TrueFiscalConservative™”
meenie…“TruePathtoProsperity!™”
miney…“TrueReduceTheDeficitNow!!!!™”
mo…“TrueAnger!™”
“Silly Wabbit, GOP tricks are for kids!”
“Since the economy had to crater somewhat from bubble levels no matter what, blaming Obama for that part of the accumulated debt is absurd.”
Case in point: Reported $5+ trillion in negative home equity (see articles posted above). That problem clearly stems from foolish lending decisions made long before Obama was CIC.
Another case in point: Entitlements meet baby boom retirements; again, the problem predates Obama’s tenure by decades.
The biggest mistake the MSM consistently makes is to blame problems which were decades in the making on the incumbent CIC (the same goes for Republican presidencies).
Wars tend to be expensive. Apparently there are many Americans who are not aware of that fact.
Hmmm. Hard to say. Depends how you measure?
In dollars? Are the dollars constant? (Adjusted for inflation? WW II was costly.)
As a % of GDP?
Realtors Are Liars
Too Big to Fail, or Too Trifling for Oversight?
Sunday, 12 Jun 2011
By: Eric Dash and Julie Creswell ~ The New York Times
It is not very often that business people head to Washington to explain how unimportant they are.
But over the last several months, executives from more than two dozen financial companies and their trade groups have paraded into the Treasury Department, the Federal Reserve and other government agencies to try to persuade top regulators that they are not large or risky enough to threaten the financial system if they should ever collapse.
Big insurers like the Mass Mutual Financial Group and Zurich Financial Services hedge funds like Citadel and Paulson & Company; and mutual-fund companies like BlackRock Fidelity Investments and Pacific Investment Management Company have all been making the rounds, according to documents filed by the regulatory agencies.
What they are all hoping to avoid is being designated “systemically important” by a council of financial regulators. That would require them to face stricter federal oversight and keep more cash on hand, which they fear would erode profits.
Jeffrey A. Goldstein, the Treasury undersecretary for domestic finance, finds the arguments so familiar that he has opened some meetings by asking the firms if they would like to designate themselves as systemically important. “I can’t recall a firm that came in and said yes,” he said.
Hedge fund managers, for example, normally pride themselves on being Masters of the Universe. But armed with PowerPoint presentations and financial studies, representatives from some of Wall Street’s most powerful funds, including D.E. Shaw and Company, Elliott Management and Caxton Associates, met with Federal Reserve staff members earlier this year to make one point: We’re too small to matter.
Too small to matter? Good. Then pay back everything you got in the AIG bailout to start with. And we don’t care if it bankrupts you. You are too small to matter.
We’ll get back to you with some more stuff you can pay back in a bit.
Psychopathic hypocrites.
But I repeat myself.
ALBANY, N.Y. (AP) — A court says pay up if you want dancers to take it off in New York’s strip clubs.
A ruling from a midlevel state court says lap dances and strip club admissions are taxable.
The four Appellate Division justices agree with a Tax Appeals Tribunal decision that says dances onstage or in private rooms at a suburban Albany juice bar don’t qualify for a tax exemption as “dramatic or musical arts performances.”
The case involves 677 New Loudon Corp., doing business as Nite Moves, and a tax bill of $124,921.94 plus interest.
Tax officials say the sales taxes, now 8 percent in Albany County, were paid on drinks. House fees that dancers pay to the club are not taxable.
A call to the club’s attorney Friday was not immediately returned.
http://www.syracuse.com/news/index.ssf/2011/06/ny_court_says_strip_club_lap_d.html
Legalize and tax. They were a little late on the decision to tax.
Mission Impossible? American treasure hunter launches search for Bin Laden’s body in depths of North Arabian Sea. By Mark Duell
Treasure-hunter: Bill Warren is reportedly launching an underwater search to find Osama Bin Laden’s body
Some may have thought we would never discover the Titanic, but this is an even more ambitious search.
Treasure-hunter Bill Warren, of California, is reportedly launching an underwater search to find the body of former Al Qaeda leader Osama Bin Laden.
U.S. forces say they buried the former Al Qaeda leader at sea last month from the USS Carl Vinson warship in the North Arabian Sea.
But that is the only detail of the location that has been released.
The veteran explorer launched the hunt as he does not believe President Obama gave enough proof of the terrorist’s death.
He told TMZ he is using hi-tech equipment and several boats in the search, which he says will cost hundreds of thousands of dollars.
Read more: http://www.dailymail.co.uk/news/article-2002491/Bill-Warren-launches-underwater-search-Osama-Bin-Ladens-body.html#ixzz1P5L0pkRS
It’s crazy. Is he catching sharks and analyzing their stomach contents?
Hagfish, baby. Eaten from the inside-out by a slimy eel.
A BLT shoved in the mouth would have been perfect.
Some people REALLY need to get a life.
It`s a shame Anthony Weiner didn’t send a picture of Bin Laden’s body to those girls, then there would be no need for this. It would be all over the Internet.
Retail Sales Probably Decreased in May ~ (Bloomberg)
Sales at retailers probably fell in May as Americans bought fewer cars and elevated gasoline costs restrained consumers, reports may show this week.
The 0.5 percent drop in purchases, the first decline in 11 months, would follow a 0.5 percent gain in April, according to the median forecast of 62 economists surveyed by Bloomberg News ahead of Commerce Department data June 14. Other reports may show inflation eased and manufacturing expanded.
Chains including Limited Brands Inc. missed analysts’ estimates for May as gasoline prices climbed to the highest level in almost three years and unemployment topped 9 percent. A decline in fuel costs at the end of the month and a factory rebound from the temporary effects of the disaster in Japan signal economic growth may pick up in the last six months of 2011.
“The second half should certainly look better,” said Jim O’Sullivan, chief economist at MF Global Inc. in New York. “The drag from gasoline prices will start to fade,” he said. “Much of the weakening in May retail sales is the plunge in autos, and there are reasons not to extrapolate from the numbers.”
“The second half should certainly look better,”
And I’m sure housing will bottom out by next year, too, right?
The listener apparently was not a HBB poster, as he had not heard of the Nyerges family’s successful effort to foreclose on BoA, and guessed wrong on which story was true.
Bluff The Listener
Wait Wait…Don’t Tell Me!
[6 min 35 sec]
June 11, 2011
Our panelists tell us three stories of the little guy winning.
CARL KASELL, host:
From NPR and WBEZ-Chicago, this is WAIT WAIT…DON’T TELL ME!, the NPR News quiz. I’m Carl Kasell. We’re playing this week with Charlie Pierce, Roxanne Roberts and PJ O’Rourke. And here again is your host, at the Chase Bank Auditorium in downtown Chicago, Peter Sagal.
PETER SAGAL, host:
Thank you, Carl.
(Soundbite of applause)
…
SAGAL: All right, well Nick, welcome to the show. You’re going to play our game in which you must try to tell truth from fiction. Carl, what is Nick’s topic?
KASELL: That’ll learn ya.
SAGAL: This week, we heard a story about the little guy finally scoring some points. Yep, David whipped Goliath’s butt. This week, our panelists are going to read you three stories of people fighting back and winning. Choose that true story; you’ll win Carl’s voice on your home answering machine. Ready to go?
Mr. DOOLITTLE: I am ready.
SAGAL: First, let’s hear from Charlie Pierce.
Mr. CHARLIE PIERCE (Author, “Idiot America”): The Nyerges of Collier County, Florida have taken revenge for all of us who look at the modern banking system and yearn nostalgically for the pillory and the dunking stool. Five months ago, Bank of American began foreclosure proceedings on the Nyerges, despite the fact that the couple didn’t owe one dime on their home. They had paid cash. The Nyerges beat the bank in court and the judge ordered Bank of America to recoup the Nyerges’ legal fees. When the bank neglected to pay the bill, the Nyerges foreclosed on the bank.
(Soundbite of laughter)
Mr. PIERCE: Sheriff’s deputies, moves and the Nyerges’ attorney showed up at a Bank of America branch and began to seize computers, desks and whatever cash they could find in the tellers’ cages.
(Soundbite of applause)
Mr. PIERCE: Within an hour, the bank paid the judgment in full.
(Soundbite of laughter)
Mr. PIERCE: As a foreclosure attorney, said Todd Allen, who represents the Nyerges, this is sweet justice. Sales of tar and feathers in Collier County remain brisk.
(Soundbite of laughter)
(Soundbite of applause)
SAGAL: A pair of homeowners foreclose on a bank for once.
…
I heard that. I couldn’t believe he missed it.
Massive lay offs planned for teachers in Texas
NewsChannel 10
Texas - Districts across the state are laying off thousands of teachers after the Texas House approves slashing $4 billion from public schools.
Officials say more than 80% of education costs are personnel-related.
The lay offs will likely result in larger class sizes.
Lawmakers say the school finance bill will also cut pre-kindergarten funding for a full day to only a half day.
Would it not be better for the teachers and students to keep all teachers but at pay cut?
Better yet… keep the (good) teachers and chop the admin.
OK to be fair, I don’t know Texas’s educational system well. But around here we have entire 2 and 3-story buildings just for the district’s admin staff. I’d like to try a little experiment: take a classroom (or two) and stuff it with cubicles. Not only might that narrow things down to the bare necessities, but would save the expenses of supporting separate 3-story buildings.
Yet it was found that HISD (Houston school distract) has 10 of millions in saved funds.
Google “HISD rainy day funds”
More Than 600 Sickened By Lead Poisoning in China
June 12, 2011 | Associated Press
BEIJING – More than 600 people, including 103 children, have been sickened in China’s latest case of mass lead poisoning, state media reported Sunday.
China has suffered widespread problems in recent years from heavy metal contamination, with thousands of children affected by lead poisoning in several provinces in 2009 and 2010 because they lived near metal smelters or battery factories.
The victims in the latest case were workers and their children in 25 family-run tinfoil processing workshops in Yangxunqiao town in Zhejiang province in eastern China, the official Xinhua News Agency reported.
Xinhua said tests showed that 26 adults and all 103 children have severe lead poisoning, while 494 others have moderate poisoning.
Lead is used in tinfoil processing and Xinhua said the workers and their families were constantly exposed to lead materials.
It said the workshops have suspended their operations.
Last month, 74 people were detained and production was suspended at hundreds of battery factories in the same province after dozens of people were sickened by lead and cadmium poisoning.
Local authorities are belatedly moving to curb pollution after Beijing announced plans for tighter oversight in response to reports of widespread contamination from heavy metals.
Lead poisoning can damage the nervous, muscular and reproductive systems. Children are particularly at risk.
Builders, workers face slow recovery
A rebound in the construction industry could be years off; many job-seekers now face retraining, and building sector has become a drag on the local economy. Posted: Sunday, Jun. 12, 2011
Construction, once one of the Charlotte region’s most promising sectors, is now stifling the area’s economic recovery, with jobs and wages down by more than a third since the pre-recession peak and little improvement in sight.
Pockets of the sector are starting to rebound, but economists say a full recovery could take years - and that thousands of employees laid off when the real estate bubble burst will be forced to master new skills to earn a place in the post-recession workforce.
“If you’re looking for sources of growth in the recovery, I don’t think construction can be counted on to be a major contributor,” said Rick Kaglic, an economist with the Federal Reserve in Charlotte. “It’s going to be a drag on overall employment growth.”
It’s a dramatic decline for a sector that, in years past, offered steady jobs and lucrative pay for the workers who built sprawling homes, glittering office towers and other hallmarks of the boom. The availability of those jobs helped fuel the region’s population surge over the last decade, drawing transplants who in turn created more demand for homes, offices and shopping centers.
Construction firms in the Charlotte area shed 36 percent of their workers from 2007 to 2010, by far the largest decline of any sector, new data from the U.S. Bureau of Labor Statistics and N.C. Employment Security Commission show. About 35,000 workers were employed in construction last year, the lowest level since 1995.
Those employees’ paychecks - an important driver of the local economy - have taken a hit, too. Construction wages fell 36 percent, or $894 million, from 2007 to 2010. Those wages make up 5.3 percent of the region’s total private-sector pay, down from 7.6 percent in 2007, the BLS data show.
Construction jobs from builders to electricians to flooring specialists have dried up largely because of the housing market’s continued woes. Home sales have plummeted and foreclosures have surged since the market peaked in 2006 and 2007, leaving a glut of homes. Unemployment and lower wages persist throughout the economy, too, meaning there’s little demand from buyers for new projects.
Read more: http://www.charlotteobserver.com/2011/06/12/2372194/builders-workers-face-slow-recovery.html#ixzz1P5SwETD6
Slow recovery? More like “no” recovery.
Spin baby, spin! (spin is slang for slanted news)
Frack,Baby,Frack!
South Texas enjoys major boom from oil fracking
Desolate South Texas towns enjoy first major oil boom in rush to frack Eagle Ford shale Associated Press, On Sunday June 12, 2011
COTULLA, Texas (AP) — Bill Cotulla’s hand rests on the handle of his great-grandfather’s cane, his gravelly voice recounting the changes in the small town his ancestor founded and named for himself some 130 years ago. Almost overnight, it has transformed from a South Texas backwater to the hub of a major oil boom.
“You can’t be choosy,” the 75-year-old muses, considering the expanse of new RV parks, hotels and restaurants. “The oil companies that are putting up buildings are keeping nice yards.”
For generations, Cotulla has been a town where even the paved roads had the aura of the dusty, saloon-lined paths from old Western movies. Cowboys, ranchers and shop owners tied their livelihood to the hunting season. Young people left to escape double-digit unemployment and poverty rates.
Now, the challenge is all the people pouring in. Cotulla, about 90 miles south of San Antonio, and nearby towns are rushing to house hundreds of workers and approve plans for apartment complexes and industrial parks to keep up with the development of the Eagle Ford shale formation, one of the most plentiful new oil fields in the country. After several years of preliminary work, the project is fully under way and sales tax revenues are soaring. Municipalities are paving roads, laying water lines and creating parks while trying to avoid being overextended when the boom tapers off.
“There’s still more people coming,” said Jerry Cox, owner of JJ’s Country Store, a restaurant and convenience store on the main highway that runs through the town. “It’s like Davy Crockett at the Alamo. You gotta think, are they ever going to stop coming?” he added, referring to the onslaught of Mexican soldiers who overwhelmed the fort.
The economic transformation is the result of a new drilling method, hydraulic fracturing, combined with horizontal drilling, that allows companies to extract oil and gas from impermeable layers of shale. Major industry players have joined the Eagle Ford project, including Anadarko, Range Resources and Shell. Chesapeake Energy of Oklahoma City signed a multi-billion dollar deal with the Chinese state-owned oil company to raise cash to drill in the shale.
More spin. While there is a boom going on, unless you are a rig hand, and those jobs are hard to come by, the jobs being created are low paying.
For instance, truck driver with some experience, HAZMAT being in high demand. $12hr.
Ye…ah. Big boom there, bubba.
Are Banks Evil?
20 May 2011
I think banks are a necessary evil, but banks do not necessarily have to BE evil. There is a school of thought developing that banks should be more like public utilities and simply serve the public.
There is a move underfoot that is doing just that in a few states across the country. Ellen Brown has been covering this story extensively. Please enjoy this article. It is both well done and enlightening.
–Greg Hunter–
—————————————–
FEDS TO STATES: “DROP DEAD.”
By Ellen Brown, Guest Writer for USAWatchdog dot com
“Ford to New York: Drop Dead,” said a famous headline in 1975. President Ford had declared flatly that he would veto any bill calling for “a federal bail-out of New York City.” What he proposed instead was legislation that would make it easier for the city to go bankrupt.
Now the Federal Treasury and Federal Reserve seem to be saying this to the states, which are slated to be the first ritual victims in the battle over the budget ceiling. On May 2, Treasury Secretary Timothy Geithner said that the Treasury would stop issuing special securities that help state and local governments pay for their debt. This was to be the first in a series of “extraordinary measures” taken by the Treasury to avoid default in the event that Congress failed to raise the debt ceiling on May 16. On May 13, the Secretary said these extraordinary measures had been set in motion.
…
Banks, are by definition, evil.
The upside is that because of all the years they have spent trying to squash the competition from credit unions, they have made credit unions very attractive because of their mandated conservative policies.
Are all credit unions perfect. No. But most are and compared to banks, they are angels.
Realtor told me earlier today that the market has hit it’s bottom…just an FYI.
I agree.
Stocks are up, people are getting work, wages are rising, and food costs have gone way down. Also, nobody has that much debt anymore.
The geopolitical situation is great, too.
How did you respond?
Their personal “market” or “the” market?
Does this mean we need to stop flopping and start flipping again?
Article that would have been nice to read a few years ago:
http://www.news-journalonline.com/news/local/east-volusia/2011/06/12/financial-planners-home-no-longer-reliable-tool-to-build-personal-wealth.html
I swear I did read that somewhere a few years ago. Oh yeah…
I am hitting the road with my realtor this Wednesday, mostly just to see what things look like a year after our near-purchase. My realtor likes to preview homes and bullshit, so it doesn’t totally drive him crazy when we’re window shopping.
I don’t foresee buying a home for 2-3 more years.
I’m thinking it may actually make sense to buy in three years, at least from a pricing standpoint, and provided you have lots of wealth or a very steady, high-income job. The thing that I expect will give many of us pause is that the economic picture may look hopelessly grim three years out. When everyone thinks you would be crazy to buy a home will be a good sign that a bottom is nearing, but because you are likely to share in the visceral fear that accompanies housing bottoms, it may be very hard to carry through with a purchase.
provided you have lots of wealth or a very steady, high-income job.
How many of those people will need more houses?
That is one of the biggest obstacles to housing recovery: The few truly qualified and would-be willing buyers are already comfortably housed, and any of these who are not already owners have no need to rush in and buy now, when they can reasonably expect to be able to purchase in a year from now at 15% lower prices.
The Economist
Barack Obama and the Republicans
A beatable president
But only if a Republican candidate starts laying out a sensible plan for the American economy
Jun 9th 2011 | from the print edition
NEXT week a collection of largely unknown Republicans will hold the first proper TV debate of the 2012 presidential campaign. Whoever eventually wins their party’s nomination then has to take on Barack Obama, the giant of American politics. The president has a huge war-chest, his own party firmly behind him and a rare capacity to inspire. Yet he is vulnerable. This week a poll showed him in a dead heat with Mitt Romney, the Republican front-runner. America’s sluggish recovery will give any challenger a chance. The question is whether any Republican has the personality and especially the ideas to take him on. For the best way to make this race competitive—and the best thing for America—is to force voters to confront the hard choices their country has to make.
This time, Mr President, you are playing Goliath
…
Fireman, yes, but is Timothy Geithner really an economist?
Austan Goolsbee
And another one gone
A popular economist leaves the president’s side
Jun 9th 2011 | WASHINGTON, DC | from the print edition
AS THE economic outlook darkens again, one of Barack Obama’s longest-serving advisers is bidding the administration farewell. Austan Goolsbee, the chairman of Mr Obama’s Council of Economic Advisers (CEA), will step down this autumn. Mr Goolsbee advised the president during his 2004 Senate run and 2008 presidential campaign, before serving as a CEA member during the tumultuous early part of the Obama presidency. He replaced Christina Romer as CEA chairman last September. Mr Goolsbee cited a desire to return to his Chicago home and to avoid losing his tenured professorship at the University of Chicago as the main reason for his departure. Others have speculated that the political logjam on Capitol Hill and the stubborn refusal of the economy to recover speedily will have been contributory factors. Mr Goolsbee’s tenure as chairman has been a thankless one.
He will leave a big hole. One of the administration’s better communicators, Mr Goolsbee deployed charm, humour and lucid economic argument in support of the administration’s policies. He commanded the respect of left- and right-leaning economists alike. Mr Goolsbee’s departure is yet another loss from a once star-studded economic brains trust. In joining eminences like Larry Summers (former head of the National Economic Council), Mrs Romer, and Peter Orszag (former budget director) on the outside, he leaves Tim Geithner, the treasury secretary, as the administration’s sole economics heavyweight.
…
“He will leave a big hole… he leaves Tim Geithner”
Can’t disagree.
June 6, 2011, 10:57 AM ET
Most Americans Haven’t Planned for Retirement and Other Areas of Concern
By Mary Pilon
The financial status of American households may be even darker than we thought.
The “troubling picture of the state of financial capability in the United States” comes from a new working paper published by the National Bureau of Economic Research, authored by Professor Annamaria Lusardi of the George Washington School of Business. “Americans’ Financial Capability” surveyed nearly 1,500 Americans in the summer 2009 and found that not only is the household financial hole deep, but people might not be able to dig themselves out of it as easily as they thought.
…
June 8, 2011, 9:01 AM ET
Average Job Seeker Gives Up After 5 Months
Real Time Economics HOME PAGE
by Sara Murray
Jobless Americans who dropped out of the work force typically searched for work for five months before ultimately giving up last year.
The amount of time the unemployed spent hunting for jobs rose sharply last year. Those out of work tended to search for about 20 weeks before quitting in 2010, compared to 8.5 weeks in 2007, according to a recent Labor Department report. The report studied how long unemployed workers took to either find a new job or quit looking.
Labor-force participation, the share of Americans who are working or looking for jobs, has fallen to its lowest percentage since the mid-1980s. That’s partly because people have grown discouraged about their ability to find jobs and have given up looking. With those workers on the sidelines, the unemployment rate has been lower than it otherwise would be.
The official unemployment rate hit 9.1% in May. Including all of those who had part-time jobs but wanted to work full-time as well as those who want to work but had given up searching, the rate was 15.8%.
…
I don’t get this giving up looking for work business.
How can a person live if he doesn’t have income? How can a peson have income if he doesn’t have a job?
If a guy doesn’t has a stash of dough then him not working - not having some sort of income - is really not a choice, is it? But these articles suggest that they do have a choice and that they are exercising this choice of deciding not to have a job by stopping to look for one.
Lost my job in August 1993, started new full time job in December 1994, after 16 months of looking, taking graduate coursework,
and working enough part-time hours to help my wife keep paying our mortgage.
So I don’t get it, either.
The Financial Times
US banks to cut Treasuries use
By Michael Mackenzie and Aline van Duyn in New York
Published: June 12 2011 22:30 | Last updated: June 12 2011 22:30
Some of Wall Street’s biggest banks are preparing to cut their use of US Treasuries in August as a precaution against any turbulence that could follow if warring Republicans and Democrats fail to increase soon the US debt ceiling, a senior bank chief said.
One strategy, which bank executives only agreed to discuss without attribution due to the political sensitivities related to discussing Treasury debt, is to have more cash on hand to put up as collateral against derivatives and other transactions, decreasing the financial system’s reliance on Treasuries.
“We’re planning to lower our reliance on the use of Treasuries in early August and have more cash on hand as a contingency measure,” said a US bank chief.
…
President’s Corner
Home clearance sale coming ‘desperate’ sellers expected this summer
Posted: Saturday, June 11, 2011 7:27 am | Updated: 7:28 am, Sat Jun 11, 2011.
Home prices are already a third off their highs, but this summer could bring the real discounts. Buyers are still cautious, and anxious sellers will have to price aggressively to get them off the fence. That could result in a “summer clearance sale,” predicts Pete Flint, CEO of Trulia, the real estate web site.
“We don’t imagine a stampede of buyers, like outside of Macy’s on Black Friday,” he said. “We see this more akin to January sales where retailers are trying to get rid of stock before it gets stale.”
Several factors, he said, will lead to blow-out prices. Accelerating price drops could be the result as home prices have already reached their lowest level since the housing bubble burst, and are now at 2002 levels.
Sellers may feel the pressure to make deals before their homes potentially lose even more value. There is a bloated inventory of homes on the market with more than eight months worth at the current rate of sales. Many are distressed properties — short sales and bank repossessions. Such homes are often selling at substantial discounts.
Credit is still very tight and many potential homebuyers still can’t obtain a mortgage which is limiting the demand. Unemployment is still a major concern and while the job picture has supposedly brightened, unemployment is still hovering around 9 percent nationally and is higher here in California.
People without jobs don’t buy homes, obviously, but high unemployment also rattles working people. Lacking the confidence that their jobs are secure, they may not look to buy. These forces could all come to a head this summer, according to Flint, because of the cyclical nature of home buying.
Buying usually takes off in spring as many young families hope to make their moves before the new school year. “By the end of the home buying season, sellers will become increasingly desperate,” said Flint.
…
Many are distressed properties — short sales and bank repossessions. Such homes are often selling at substantial discounts.
———————
Nope, not selling at discounts. Just “selling,” which is more than what most “non-distressed” sellers can say.
Funny how they never tried to suss out the zero-down/NINJA buyers from those who had 20% down payments and fixed-rate mortgages when prices were heading up!
HOUSING INVENTORY FLOOD WARNING!
Home clearance sale coming from ‘desperate’ sellers
By Les Christie June 1, 2011: 8:31 AM ET
…
Adding to already swollen inventories will be a flood of new distressed properties poised to hit the market.
“By the summer, most of the ‘robo-signing’ delays will be over and more distressed properties will be on the market,” said Celia Chen of Moody’s analytics.
Many banks had slowed foreclosure proceedings until they made sure that paperwork was in order. That put hundreds of thousands of homes into foreclosure limbo: Borrowers were no longer making payments in many cases, but were allowed to remain living in the homes.
There’s little urgency for buyers to act in this stagnant market because no one expects prices to turnaround, according to Ken Johnson, a real estate professor at Florida International University and co-author of a new study on whether it’s better to buy or rent. Realizing that home prices will likely get even better, buyers can wait for even better deals.
“If people think we’re at the bottom of the market, they’ll act,” he said.
…
Commentary: Uncertainty is suffocating the U.S. economy
E. Thomas McClanahan
The Kansas City Star
The economic recovery is two years old this month. Isn’t that reassuring? I didn’t think so. As recoveries go, this one is as blah as it gets. Judging by the most recent indicators, we may be headed for a double dip, or perhaps a period of flatlining that feels just as bad.
Job growth is sluggish and unemployment is again on the rise. In the first three months of this year, the economy slowed substantially, from a 3.1 percent pace at the end of 2010 to a growth rate of only 1.8 percent.
Consumer spending is lackluster, thanks to stagnant wages and high fuel prices. Confidence remains low — and it took another hit last week: Americans learned that the value of their homes — for many, their largest investment — once again sagged.
Why is this economy taking so long to get moving? I can point to two reasons. One, this recovery is getting no help from housing, which is typically the sector that perks up first as interest rates fall when the economy slows.
But the bigger factor is an extraordinarily high level of economic uncertainty, for which the Obama administration deserves the major share of blame.
…
Tweeted 2 hours ago
Business
Home Sales Decline in Imperial Beach, San Diego and Nationwide
The real estate market has seen a decline in IB and elsewhere, but local prices and short sales continued to rise.
By Khari Johnson and Robert Moreno | 5:00pm
Median home prices and the number of houses and condominiums sold in May countywide dropped sharply compared to the same month last year, according to data compiled by the San Diego Association of Realtors.
Single-family homes sales dropped 13.8 percent and condos or attached homes fell 19.5 percent compared to the same month last year, the SDAR said.
The median price of a detached home last month was $380,000, compared to $391,000 in May 2010. For condos, the median price was $214,500, down from $237,000 one year earlier.
Declines in year-to-date sales of houses compared to last year took place in the Eastlake section of Chula Vista, Lemon Grove, northern El Cajon, Encinitas, northern Escondido, northeastern Oceanside and northern San Marcos.
Within the city of San Diego, major declines were seen in College Grove, East San Diego, Otay Mesa, Pacific Beach, Paradise Hills, Rancho Bernardo, Scripps Ranch and Serra Mesa.
…
Published: June 12, 2011 7:46 a.m.
Fullerton home sales fall 22%
By JONATHAN LANSNER
For the 22 business days ending May 27 — latest DataQuick stats — 111 residences sold in Fullerton vs. 142 a year ago — a 22% decline over the past year.
ZIP 92831 — median selling price of $336,250 that was down 11.3% vs. a year ago. Homes sold were 26 — that was down 7.1% vs. a year ago.
ZIP 92832 — median selling price of $313,250 that was up 15.0% vs. a year ago. Homes sold were 22 — that was up 10.0% vs. a year ago.
ZIP 92833 — median selling price of $380,000 that was up 1.3% vs. a year ago. Homes sold were 39 — that was down 44.3% vs. a year ago.
ZIP 92835 — median selling price of $490,000 that was down 2.1% vs. a year ago. Homes sold were 24 — that was flat vs. a year ago.
Compare those trends with countywide data for the same period: median selling price of $430,000 that was down 3.4% vs. a year ago. Homes sold were 2,877 — that was down 18.4% vs. a year ago.
…
Hong Kong’s property bubble puts the U.S. bubble to shame.
Hong Kong Home Sales Tumble After HKMA Raises Down Payments
By Kelvin Wong and Stephanie Tong - Jun 12, 2011 7:21 PM PT
Sales at 10 of Hong Kong’s biggest private residential developments fell 58 percent at the weekend from a week earlier after the government raised minimum down payments and deposits for foreign buyers.
Seventeen transactions took place, according to Centaline Property Agency Ltd., the city’s biggest privately held realtor, after the Hong Kong Monetary Authority on June 10 said buyers of homes costing more than HK$6 million ($770,000) will have to increase up-front payments. Foreign buyers must deposit an additional 10 percent.
The measures to curb property prices that have surged about 70 percent since the beginning of 2009 may further dent buyer sentiment that is already showing signs of weakening following a recent drop in home deals and as banks accelerated mortgage interest rate increases this year. It was the government’s fourth attempt since October 2009 to curb inflating residential values, rated by Savills Plc as the world’s most expensive.
…
This article says there are 11m U.S. homeowners who are underwater on their mortgages. Going back to that $4.2t collective negative equity figure cited above, that would pencil out to an average underwater balance of $4,200,000,000,000/11,000,000 = $382K, which seems like a plausible, though high, figure.
On Helens Pouroff Ave., escaping falling home prices
By Julie Schmit, USA TODAY
Updated 1h 6m ago
NORTH LAS VEGAS — Dayna and Scott Merritt ask themselves almost every day if they should keep paying their mortgage.
Tamara Lemmon, in front of the home she lives in now, considers her strategic default on her former Las Vegas home to be the best financial decision she ever made, and the hardest.
Many other residents on their street, Helens Pouroff Avenue, stopped long ago. Since the 69 new homes on this street were sold in 2006, almost half the owners have defaulted on their mortgages. Most of the houses went into foreclosure, which helped drive prices down for others on the street.
The Merritts’ house has suffered a typical fate. The couple paid $385,000 for it in 2006. It’s now worth about $180,000, recent sales indicate, and Las Vegas prices are still falling.
The Merritts are torn between continuing to sink money into a house that may never regain its value or finding a way out. They have plenty of company. About 11 million U.S. homeowners are underwater on their mortgages, meaning they owe more on them than their homes are worth. Of those, 2 million are so deeply underwater that market researcher CoreLogic predicts their homes will go into foreclosure or distressed sales.
…
Hasn’t the worrying over this debt crisis festered for well over a year already? I have frankly lost track and interest in the story. And my hand lotion supply is holding up just fine these days, thank you.
The Financial Times
Greek debt crisis stirs bank fears
By Brooke Masters in London
Published: June 12 2011 18:22 | Last updated: June 12 2011 18:22
Concern is growing among regulators that efforts to minimise the knock-on effects of a Greek government default would undercut the global drive to make banks safer by forcing them to hold more capital.
The German government and the European Central Bank are at loggerheads over how to involve private-sector holders of Greek bonds in a second bail-out of Greece.
…
News Analysis
In Greece, Some See a New Lehman
By LANDON THOMAS Jr.
Published: June 12, 2011
LONDON — Bond traders and officials at the European Central Bank have been unified in their warnings that a restructuring of Greece’s debt would set off an investor panic similar to the one that followed the bankruptcy of Lehman Brothers.
Others, however, have argued that Greece’s debt of 330 billion euros, or $473 billion, while too large for the country to bear, is small enough to allow banks and other institutions to take a loss without bringing the world financial system to its knees.
But the comparisons between Greece and Lehman grew more frequent last week as global markets reeled, spurred in part by the view that Germany’s insistence that private investors participate in a second rescue package for Athens would overcome the objections of the European Central Bank.
“It is a valid concern,” said David Riley, head of sovereign ratings at Fitch. “The Rubicon would be crossed — we would have a sovereign default event and that can be quite a shock, not just for the peripheral countries but for Spain and beyond.”
…
Polly, in case you are reading, I stand by my view that we are on the brink of another Fall 2008-style financial panic. If it plays out, the epicenter will be the Eurozone rather than Wall Street.
Agree very much with your assessment, PB.
The Financial Times
Eurozone periphery bond trading volumes at new lows
By David Oakley in London and Andrew Ward in Oslo
Published: June 12 2011 18:37 | Last updated: June 12 2011 23:20
Trading volumes in eurozone government bonds issued by Greece, Ireland and Portugal have fallen to record lows as disagreements over another international bail-out for Greece unsettle investors and revive fears of a default.
The volume traded in Greek, Irish and Portuguese sovereign debt fell to €1.1bn in May, a sixfold drop from November and the lowest level since 2001, when data were first collected, says Tradeweb, the electronic trading platform.
…
Dr Doom is back to the fore!
‘Perfect Storm’ May Threaten Global Economy
By Shamim Adam - Jun 12, 2011 8:55 PM PT
Nouriel Roubini, chairman of Roubini Economics LLC. Photographer: Simon Dawson/Bloomberg
A “perfect storm” of fiscal woe in the U.S., a slowdown in China, European debt restructuring and stagnation in Japan may converge on the global economy, New York University professor Nouriel Roubini said.
There’s a one-in-three chance the factors will combine to stunt growth from 2013, Roubini said in a June 11 interview in Singapore. Other possible outcomes are “anemic but OK” global growth or an “optimistic” scenario in which the expansion improves.
“There are already elements of fragility,” he said. “Everybody’s kicking the can down the road of too much public and private debt. The can is becoming heavier and heavier, and bigger on debt, and all these problems may come to a head by 2013 at the latest.”
Elevated U.S. unemployment, a surge in oil and food prices, rising interest rates in Asia and trade disruption from Japan’s record earthquake threaten to sap the world economy. Stocks worldwide have lost more than $3.3 trillion since the beginning of May, and Roubini said financial markets by the middle of next year could start worrying about a convergence of risks in 2013.
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THE WEEKEND INTERVIEW
JUNE 11, 2011
‘On the Beach, I Bring von Mises’
The tea party favorite on her start in politics, where she learned her economics, and why she disagrees with Reagan on the War Powers Resolution.
By STEPHEN MOORE
“If I’m in, I’ll be all in,” says Rep. Michele Bachmann of Minnesota, artfully dodging my question of whether she’s running for president. Given that she just hired campaign strategist Ed Rollins, whose past clients include Ross Perot and Mike Huckabee, rumors abound. “We’re getting close,” she says, “and if I do run, like all my races, I will work like a maniac.”
That’s pretty much how she does everything, and it helps explain how the relatively junior congresswoman has become a tea party superstar—and uniquely adept at driving liberals bonkers.
After spending a good part of two days with her in Washington as she scurries from one appointment to another, I have no doubt that Ms. Bachmann will announce her presidential bid soon. And it would be a mistake to count her out: She’s defied the prognosticators in nearly every race she’s run since thrashing an 18-year incumbent in the Minnesota Senate by 20 points in 2000. Says Iowa Congressman Steve King, “No one has electrified Iowa crowds like Michelle has.”
Ms. Bachmann is best known for her conservative activism on issues like abortion, but what I want to talk about today is economics. When I ask who she reads on the subject, she responds that she admires the late Milton Friedman as well as Thomas Sowell and Walter Williams. “I’m also an Art Laffer fiend—we’re very close,” she adds. “And [Ludwig] von Mises. I love von Mises,” getting excited and rattling off some of his classics like “Human Action” and “Bureaucracy.” “When I go on vacation and I lay on the beach, I bring von Mises.”
As we rush from her first-floor digs in the Cannon House Office Building to the House floor so she can vote, I ask for her explanation of the 2008 financial meltdown. “There were a lot of bad actors involved, but it started with the Community Reinvestment Act under Jimmy Carter and then the enhanced amendments that Bill Clinton made to force, in effect, banks to make loans to people who lacked creditworthiness. If you want to come down to a bottom line of ‘How did we get in the mess?’ I think it was a reduction in standards.”
She continues: “Nobody wanted to say, ‘No.’ The implicit and then the explicit guarantees of Fannie Mae and Freddie Mac were sopping up the losses. Being on the Financial Services Committee, I can assure you, all roads lead to Freddie and Fannie.”
Ms. Bachmann voted against the Troubled Asset Relief Program (TARP) “both times,” she boasts, and she has no regrets since Congress “just gave the Treasury a $700 billion blank check.” She complains that no one bothered to ask about the constitutionality of these extraordinary interventions into the financial markets. “During a recent hearing I asked Secretary [Timothy] Geithner three times where the constitution authorized the Treasury’s actions, and his response was, ‘Well, Congress passed the law.’”
Insufficient focus on constitutional limits to federal power is a Bachmann pet peeve. “It’s like when you come up to a stop sign and you’re driving. Some people have it in their mind that the stop sign is optional. The Constitution is government’s stop sign. It says, you—the three branches of government—can go so far and no farther. With TARP, the government blew through the Constitutional stop sign and decided ‘Whatever it takes, that’s what we’re going to do.’”
Does this mean she would have favored allowing the banks to fail? “I would have. People think when you have a, quote, ‘bank failure,’ that that is the end of the bank. And it isn’t necessarily. A normal way that the American free market system has worked is that we have a process of unwinding. It’s called bankruptcy. It doesn’t mean, necessarily, that the industry is eclipsed or that it’s gone. Often times, the phoenix rises out of the ashes.”
She also bristles at the idea, pushed of late by the White House, that the auto bailouts were a big success for workers and taxpayers. “We’ll probably be out $15 billion. What was galling to so many investors was that Chrysler’s secured creditors were supposed to receive 100% payout of the first money. We essentially watched over 100 years of bankruptcy law thrown out the window and President Obama eviscerated the private property interests of the secured creditors. He called them ‘greedy’ for enforcing their own legal rights.”
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Given that she just hired campaign strategist Ed Rollins
Oh geez…for a minute there I thought she wanted to win. I’m still a little frustrated over the Perot debacle.