Weekend Topic Suggestions
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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How come the economics forecasting profession is chronically worstered by data releases? You’d think they would eventually catch on, but the evidence suggests they are collectively inept.
July 15, 2011, 10:02 a.m. EDT
July UMich consumer sentiment plunges to 63.8
By Ruth Mantell
WASHINGTON (MarketWatch) — A gauge of consumer sentiment plunged to 63.8 in early July, reaching the lowest level since March of 2009, from 71.5 in June, according to media reports of the gauge from Thomson Reuters/University of Michigan released Friday. Economists surveyed by MarketWatch had expect the barometer to tick down to 71.3.
…
Collectively inept? Do you think any of these a**clowns have a clue what life is like in flyover? They won’t notice their weekly food expenses rising from $500 to $600 as much as a working family will the increase from $200 to $300. They are like George Bush senior marvelling at the grocery store barcode scanner, totally detached from economic reality.
+1…
Is economics really the study of things to come, or the study of things that happened? Historians would not be relied upon to predict the future, maybe just to point out dangerous similarities. Just sayin.
Speakin’ as someone who studied the dismal science, here’s a bit of perspective:
Up until the 1980s, economics was just muddling along as a social science. Y’know, kind of like sociology.
But then the math-heads moved in and larded things up with lots of statistics, differential calculus, and other quantitative delights.
There. Take that, sociologists. Now we economists are serious scientists!
Unfortunately, even at its best, economics lacks the level of rigor that is commonly found in, say, chemistry or physics. That’s because, at its root, economics deals with human behavior. And you know how irrational and non-rigorous people are.
Not to mention the “WTF are you people talking about?” problem. That happens a lot when outsiders try to deal with economists. This was especially apparent when the Washington media — and others — tried to decipher what Alan Greenspan was saying.
Now, I’m going to go all HBB Librarian on you and recommend Yves Smith’s book, Econned. And James K. Galbraith’s “disgraced profession” essay. That’s good backgrounder too.
In short, we do need economics. But it needs to become a better tool in the policymaking toolbox.
According to Robert Lucas, people rationally form expectations of what is to come.
However, Lucas is an economic theorist; it strikes me as quite challenging to reconcile the recent epidemic of economic stupidity on display during the housing bubble and its aftermath with the notion that economic actors behave in a manner which even vaguely qualifies as rational.
Is the talk about an economic calamity if the debt ceiling isn’t raised really just an Obama scare tactic?
Analyst: Bachmann’s debt ceiling talk “just nonsense”
Posted at 12:55 PM on July 14, 2011 by Brett Neely (12 Comments)
Filed under: 2012, Michele Bachmann, U.S. House
WASHINGTON - At a Capitol Hill press conference yesterday, Rep. Michele Bachmann sought to downplay a failure to raise the Treasury Department’s borrowing authority when it expires Aug. 2.
“This is a misnomer, that I believe that the president and treasury secretary have been trying to pass off on the American people and it’s this,” Bachmann, who’s also running for the Republican presidential nomination, said. “If Congress fails to raise the debt ceiling by $2.5 trillion that somehow the United States will go into default and we will lose the full faith and credit of the United States. That is simply not true.”
“It’s just nonsense,” said Stan Collender, a partner at Qorvis Communications and a former House and Senate budget staffer with decades of experience, of Bachmann’s comments. “She has no idea what she’s talking about.”
Before dismissing Collender as a biased source, consider this: earlier this year, Bachmann invited Collender to speak about the federal budget before the House tea party caucus that she co-chairs.
Bachmann was promoting a bill, co-sponsored with fellow House Republicans Louie Gohmert and Steve King, that would prioritize government payments to make sure America’s creditors and soldiers would be first to get their checks in the event that the debt ceiling isn’t increased.
“Do they really want to tell Medicare and Social Security recipients they’re not getting paid?” Collender asked.
Not really.
…
Michelle Bachmann and her closeted husband need to stick to topics they know like peoples sex lives, religious activities, etc.
“Do they really want to tell Medicare and Social Security recipients they’re not getting paid?” Collender asked.
This is different than defaulting on the debt. There is plenty of money to service the outstanding debt.
July 15, 2011, 3:35 PM ET
Fundmastery Blog home page »
JP Morgan, Goldman, Treasuries & Default
A commenter to one of my recent posts, pointed out, with approval, that support for a mult-trillion dollar debt ceiling extension has been voiced by both Ben Bernanke, Chairman of the Federal Reserve and Jamie Dimon, Chairman and CEO of JP Morgan Chase. The commenter viewed their support as being definitive and I do not. However, I do support an extension of the debt ceiling. It is just that I am suspicious of the motives of either luminary — Bernanke or Dimon.
After all, Bernanke is the architect of Federal Reserve much-maligned quantitative easing I and II. He has presided over an enormous expansion of the Fed’s balance sheet which holds over $1.6 trillion in Treasury securities (see here). Bernanke has been all over the map on what is happening with the economy and has undertaken highly questionable Fed activities so my confidence in his objectivity or competence has been shaken to say the least. And, I say that as someone who supported the choice of Bernanke to head the Fed.
Would big banks bite the hand that feeds them?
And, Dimon heads one of Wall Street’s biggest bank, which was the beneficiary of billions in Federal largesse during and after the financial panic. Dimon’s organization has prospered at least in part due to government connections and he would be unlikely indeed to go against the hand that feeds him. Of course, JP Morgan Chase owns lots of Treasury securities and a default would have a deleterious effect on its balance sheet and that of the other big banks such as Goldman Sachs, Bank of America, Citigroup and Morgan Stanley.
As you can see from this table, the big five Wall Street banks all hold substantial assets in Treasuries when compared to the actual equity of each bank.
…
Perhaps if the unholy alliance between the Fed and Wall Street Megabanks were severely unhinged by a failure to raise the debt ceiling, the other potentially calamitous consequences could be justified?
http://www.washingtonpost.com/blogs/ezra-klein/post/how-default-would-harm-homeowners-cities-businesses-and-everyone-else/2011/07/11/gIQAELwVGI_blog.html#pagebreak
How default would harm homeowners, cities, businesses and everyone else
“….The first to fall will be “directly linked” debt. These are bonds that rely on payments from the federal government. Naomi Richman, a managing director in Moody’s Public Finance division, puts it bluntly: “There are certain kinds of municipal bonds that are directly reliant on Treasury paying or some other direct payment,” she says. “If those bonds don’t receive their payment, they have no other source of revenue.” So down they go.
Then there’s the “indirectly linked” debt. That’s debt from state government, local governments, hospitals, universities and other institutions that rely, in some way or another, on payments from the federal government. If Medicaid stops paying its bills, all the hospitals that rely on Medicaid’s payments become less creditworthy. If we stop funding Pell grants, then all the universities that enroll students who pay using financial aid become less creditworthy. And since the federal government passes one-fifth of its revenues through to the states, and the states pass those revenues through to cities, if the federal government stops paying its bills, all states and all cities are suddenly in worse financial shape, which will make it harder for them to get loans….”
Sounds like holding the line on this debt ceiling will offer another great opportunity for the Republican Congressmen to crush the American middle class yet a little bit closer to the strangulation point.
Is that the plan?
Weekend topic suggestion: the books and ideas of James Howard Kunstler.
When I read ‘The Geography of Nowhere’ in 1994, I was living in nowhere, the exurban sprawl of Cleveland/Akron, where there was zero public transit, and to be a teen without a car was social death. That book helped me understand why I hated growing up there, and influenced my decision to go to college in Columbus, where I lived for several years without a car.
Kunstler was a proponent of ‘New Urbanism’ which IMHO has failed as a development strategy. The mixed-use development that occurred organically in say Brooklyn or Queens, can not be created from scratch and integrated into an existing neighborhood/environment. The top two examples of epic fail in this regard that I have seen are Crocker Park in Westlake, Ohio and Belmar in Lakewood, Colorado. They are totally corporate, soul-less, inorganic physical spaces. Who wants to live in a mall?
My other favorite book of his is ‘The Long Emergency’ which I read right around the time that Hurricane Katrina hit. On his blog lately he has become a cranky (albeit funny) old man that likes to b*tch about how ugly and stupid the young people look covered in tattoos (I agree) and fixated on doom/collapse (my favorite outcome) but still enjoyable reading.
And possibly also Dimitri Orlov as well. (club orlov blog)
As a possible topic, what about possible long term changes to peoples consuming habits? Once we begin to face the fact that we can’t shop our way out of this one?
We know that the Great Depression had a permanent impact on many people (including my parents).
When I was in high school in the 1970’s, I helped a friends family clear out her deceased aunts house. In it we found a shoe box labeled “pieces of string too short to use”. This has always stuck in my mind - someone keeping something they clearly labeled as useless, but couldn’t let go of…
whyoung
Thank you for the introduction to Dimitri Orlov. Another possible weekend topic for this week or the future.
There are some videos of Orlov giving talks that you can find on older articles on his blog or on youtube. He also wrote a book “Reinventing Collapse” which I found interesting. Especially his observations of how the Soviet Union devolved and how they coped.
Have you read Kunstlers’ novel “World Made by Hand”?
whyoung
No, “The World Made By Hand” isn’t on my reading list right now. Should it be?
I did read “The Long Emergency” which inspired me to attend a few Congress For New Urbanism meetings at USC a couple of years ago, and I met some of Kunstler’s “group”.
I’ll check out those videos of Orlov. Thanks for the lead.
He’s a strange guy. Like a lot of us, he’s kinda out there on some stuff, but that doesn’t mean he’s wrong on other stuff. The trick is just figuring out which is which. He seems kind of prone to “The Stand” fantasies.
World Made by Hand is an enjoyable read as speculative fiction, perhaps not as a blueprint for the future. A view of how people might cope once they don’t have the access to the global economy, etc. There was a subplot about a religious group that had a somewhat mystical element that was not resolved to my satisfaction, but perhaps he addresses that in the next novel. (Which is recently published, but I haven’t read.)
I’m not sure I liked it enough to recommend anyone pay full retail, but if you can get it from a library it’s probably worth a try.
Howard Kunstler is a great weekend topic idea,Left Ohio. Kunstler has such interesting ideas and opinions, and boy, does that guy have command of the English language.
I think old people should get tattoos just to freak out the young ones. It would probably make them stop.
It’s probably very difficult to tattoo old, saggy skin. A tie-dye might work better.
Ah! I’ve got just the thing — tie-dyed knee socks!
Oh if only I knew how to provide a link. So if any of you are bored goggle the Monterey County Weekly, CA. There is an article in the 831 (tales) section that should stop the young uns from getting inked.
X-GSfixr’s “Default Trickle Up Theory”, AKA
“Default NOW, and avoid the rush”
The Banksters and the Federal government have painted all of us into a corner. Too much debt on too many books. Taxes need to go up, but the bottom 99% of the turnips are fresh out of blood, and the MNCs and top 1%er can/will take their balls and go play somewhere else if anyone dares to raise their taxes.
Federal spending needs to go down, but any solution there is going to put people out of work, or take money out of poor people’s pockets.
(IMO saving money by eliminating “wasteful government spending” isn’t going to save as much money as advertised)
If the bottom 99%ers started getting these old fashoined things called “bonuses” and “raises”, you might actually solve the government’s revenue problems. Fat fricking chance that that’s going to happen. In fact, 20% haircuts for everyone seem more likely
Ditto, the “Manufacturing moving back to the US” propaganda. Nobody is going to do that, if there is no demand for the product.
So, since it appears that we are destined to descend into some kind of hybrid cross between Russia and Somalia, what’s wrong with this plan?:
-Stop paying all loans now. Even if you can currently cover your payments
-Invest savings from not paying bills into gold/silver coins, other non-traceable, portable, easily convertible assets.
Guesses about what percent of the top 1%s’ bonuses trickle down? Sure, it’s discretionary, but they likely won’t buy more groceries. What do they buy, and what is the velocity of the money they spend?
This recession has been going on since approximately 2007 with no end in sight.
Much has been written about Japan’s “Lost Decade”.
Are we in an American “Lost Decade”? Will it last longer than a decade?
That’s a topic which could provide for an interesting discussion.
Some have already labelled the first decade of the third millennium A.D. the lost decade for the American economy, beginning around the time of the tech stock crash.
For us guys in the aerospace business, and a bunch of other “mature” industries, the “Lost Decade” started about 1986.
I have every one of my 1040s, dating back to about 1977. Pull one of those, and a few online inflation calculators, and it’s a real eye opener.
Inflation corrected, I’m making less as a “Chief of Maintenance” than I did as a newbie A&P back in 1979-80. And I started in General Aviation (AKA “the little planes”). If I’d gone to the airlines, the comparison would be even worse.
Talk to anyone else in any of the “smokestack” industries, and you’ll hear the same story:
Pay and benefit cuts/cram downs……cuts in training budgets……leveraged buy outs, where the buyer-outers max out the company credit card to pay management, walk with all the cash lying around, and the company and working stiffs get stuck paying the bills. …..if they are able to avoid Chapter 11.
Companies holding local governments hostage, demanding and getting tax breaks, free infrastructure improvements, and free employee training; paid for by increases in local property and income taxes (they don’t even try to hide this anymore……several programs transfer employee income tax money straight back to their employer).
Now, we have reached the “Only in Corporate-Socialist America” stage where severance packages are held hostage, in order to force their soon to be kicked out the door US employees into training their new Mexican/Chinese replacements.
And what’s funny about it is that J6P is still “underworked and overpaid” after 30 years of cramdowns.
All this crap started rolling down here about 1980. Any correlation between the screwing of J6P America,the rise of Trickle-Down, Supply Sider Republican Theology and the purchase of the Federal Government by the Banksters and Corporations may be purely coincidental.
Time to re-read “The Jungle” and “The Grapes of Wrath”.
Back to the future, baby.
I met many complaining contract engineers (I am not picking on you X-GS) who make me want to pull out a violin and sob with them. Yet if I could make a lot of money in this field, others can! I also met a software contractor whose only exercise was to take his super sized coffee mug to refill at the break room. He would start munching chips by 8:00 a.m. At his desk. Of course obese. Drove a Mercedes to work almost every day except when he drove his Viper. Wrote only 400 lines of code in six months. Fired. I know another fraudster who made an appointment with a direct hire to let him work on the weekend. He charged two hours sitting in the car waiting for the employee to show up and unlock the building.
I know too many contractors milking the system and I outlasted every one of that type at my former client, over seven years.
‘For us guys in the aerospace business, and a bunch of other “mature” industries, the “Lost Decade” started about 1986.’
I’m sorry to hear that. In case a bit of Schadenfreude might cheer you up, I note that start of my full-time employment career roughly coincided with your dating of the onset of the “Lost Decade.” And U.S. employment opportunities seemed still bleaker in the immediately preceding period! It’s been a rough sleigh ride on the tail end of the baby boom.
“It’s been a rough sleigh ride on the tail end of the baby boom.”
Older baby boomers caught all the breaks
http://tinyurl.com/26o775
Yah! I realized in the 1990s as the tail end that I could only have two out of three things: a rewarding career, health, a great relationship/family. It was all about the middle class squeeze, which hit the younger boomers. I chose rewarding career and health. My lovely girlfriend said goodbye to me at the airport, that I will not meet another woman like her again, and she was right…
But this is a mother of a recession and I am in the right lifestyle for these dark American days by focusing on health and career. It is far easier to earn over $100,000 by working than from investing. It takes $1.3 million in my investment mix to get an average $100,000 of gain.
However, I am aware that younger generations are having it tougher.
I wanted to say at the beginning, if you were handed a lemon, make lemonade. And that is what I did. I made the best of the fewer resources that I was left with.
Yes the older boomers found jobs right away. Yes it was tough when I started out. And yes I missed the nicer retirement plans the older boomers got.
But I found a nice career after age 41! Very rewarding! Eleven years into this nicer career!