Another Leg Down For Housing?
Readers suggested a topic on government finances and housing. “A question which I am sure is on the minds of many die-hard HBB U.S. housing market watchers is that of what the recent stock market route portends for the ongoing housing bust. A simple but plausible prediction is for the stock market dip to herald the second dip of a double-dip recession, dashing all hopes for a near-term housing recovery, and leading to ‘lower than expected’ U.S. home prices over the next five years, at least compared to MSM-favored ‘expert predictions.’”
“Once lenders and investors sitting on shadow inventory capitulate and put their homes on the market, further efforts to prop up housing prices will prove futile (not to suggest they have worked very well thus far…). No small part of future housing price declines will stem from U.S. federal government policy moving on to larger concerns than propping up home prices, such as ensuring that Uncle Sam can continue to pay his bills over the coming decades.”
A reply, “Definitely another leg down for housing. A doozy this time. The widespread acceptance of even a little drop will cause the banks who have been holding massive inventory waiting for prices to go up to throw in the towel and try to sell before the other one does. A REAL race to the bottom…”
One said, “I’ve reported all along the only period where our local ‘lower than median Northeast housing price’ prices seemed to substantially drop was when there was a loss of confidence in job stability. If the market volatility does not provide a bounce from this correction but instead turns into the 20% off previous heights bear market indicator, the layoffs will accelerate again. However, the government backed meds/eds/feds infrastructure is the base of the economy here so it will be gov budget cuts that break the dam.”
“When that happens, I expect to finally revisit the home prices we were seeing in 2008/early ‘09. I think we’ll still see the price stickiness for a bit* and then if the layoffs are real bad, a big drop down.”
To which was said, “You’d think the Tea Party people would shine a bright light upon the vast amounts of federal tax dollars wasted on the futile attempt to keep the housing bubble from continuing to collapse, wouldn’t you?”
A reply, “Not until talk radio starts beating that drum. Note: HBBers are excepted from this statement. The general populace gets their news from people who tell them what they want to hear.”
The Associated Press. “Standard & Poor’s, one of the world’s three major credit rating agencies, cited ‘difficulties in bridging the gulf between political parties’ as a major reason for the downgrade from U.S.’s top shelf AAA status to AA+, the next level down. The rating agency has essentially lost faith in Washington’s ability to work together to address its debt.”
“The downgrade, hours after markets closed on Friday, is a first for the U.S. since it was granted an AAA rating in 1917. The downgrade is a psychological blow to an economy that has struggled to recover from the financial tumult of 2008.”
The Street. “The fragile housing market may attract the attention of the Congressional committee charged with finding ways to cut the growing U.S. deficit. The Joint Select Committee on Deficit Reduction won’t be able to put much of a dent in the deficit by going after housing subsidies, but the subsidies are nonetheless thought to be relatively easy pickings.”
“The biggest savings from housing would come from cutting tax deductions on mortgage interest. Estimates vary widely, but the numbers–whether $80 billion per year or $200 billion are enormous. ‘Killing the mortgage interest deduction would be huge,’ wrote Robert Litan, a former associate director of the Office of Management and Budget, in an email exchange with TheStreet, though he is convinced it won’t happen as it is too popular with middle class Americans.”
“‘Instead, the idea in Simpson-Bowles of putting an overall cap on personal deductions - including home mortgage - is an ideal that may have legs,’ he says.”
“Another less talked about issue the committee may take up is fees charged by Fannie Mae and Freddie Mac. As part of a white paper published earlier this year, the Treasury Department has already proposed gradually raising fees the mortgage giants charge for guaranteeing mortgage backed securities, known as ‘g-fees.’ The idea would be to offset the government sponsored enterprises’ debts to the Treasury, while allowing the government to gradually withdraw from the mortgage market, which it currently backstops almost singlehandedly.”
“‘It’s inevitable that some g-fee increase will be part of deficit reduction,’ says Rob Zimmer, a former Freddie Mac lobbyist who now represents Community Mortgage Lenders of America. ‘It’s a relatively easy thing to do versus cutting other social programs for Dems or, in the case of Republicans, cutting defense spending or raising taxes.’”
“Over the long term, such a move would likely benefit big mortgage lenders like Bank of America, Wells Fargo and JPMorgan Chase says Ed Mills, policy analyst with FBR Capital Markets. That’s because they would no longer have to compete with Fannie and Freddie, whose fees are below what the market would dictate. However, raising the g-fee too quickly could further weaken the housing market, Mills says. ‘In the short term it could be viewed as a tax by some because they have no other options, and the only thing that changes is it is more expensive to make a mortgage.’”
I still don’t get why people would buy at a price that would be at negative cash flow if they had to rent it out.
At least here in NYC you can build an illegal 3rd basement apartment. But either i am way out of touch with the rental market or lots of peeps have been putting down a big down payment so they can afford to rent it out in an emergency.
“I still don’t get why people would buy at a price that would be at negative cash flow if they had to rent it out.”
It’s simple: Real estate always goes up.
Lol. It REALLY IS that simple.
Here in So Cal a place on the beach will rent for a lot less than what is needed to cover the costs of buying - and it will ALWAYS be so!
That’s because it is on the beach, and being on the beach is reason enough to justify the price.
Not eveyone thinks so, but not everyone has to think so. Such a place needs to have only one buyer that thinks so.
And if you think coastal CA is immune from what is happening in Vegas/Phoenix and all of FL, you’re deluded.
Vegas and Phoenix and all of Florida do not have beaches at their door.
These beaches makes these places rare and thus they make them special. And it is this specialness that makes them desireable.
As long as the number of buyers who are willing to pay up for the specialness of a beach house outnumber the number of beach houses then the prices of the beach houses will be held up.
And there are several degrees of this specialness.
There is the specialness offered by places that border The Strand in Redondo Beach, Hermosa Beach, Manhattan Beach and so on all the way up to The Colony of Malibu - and then there is the very special specialness of the Malibu Colony itself.
Those who live on the beach in Redondo, Hermosa, Manhattan etc. SHARE the beach with everyone else. Part of the attraction of these places is they get to see everyone at the beach and everyone at the beach gets to see them. It’s not enough to have arrived at a certain level of prosperity; others must be able to see that you have arrived at a certain level of prosperity. Thus the appeal of a beach house.
But Malibu is another story. The people who live in The Malibu Colony DO NOT WANT others to share the beach because in their minds THEY OWN the beach and they will have you chased off if you happen to land on THEIR beach, even if you come in from the ocean. Another mindset altogether from the other beach dwellers.
Either way, living on the beach is desireable enough for the number of people needed to keep the prices elevated.
lmao…. uh huh.
“…living on the beach is desirable enough for the number of people needed to keep the prices elevated.”
When it becomes far cheaper to live in non-beach houses than in beach houses, many beach lovers will opt to drive to the beach in exchange for the chance to live in much cheaper housing. At this point, the demand for beach houses will go down, along with their prices, even though they will remain more expensive than non-beach houses.
“At this point, the demand for beach houses will go down along, with their prices, even though they will remain more expensive than non-beach houses.”
This is true. But the issue was not whether a beach house would retain it price; the issue was whether a beach house would ever rent at a price that would cover its costs.
A lot of these beach houses are bought as investments and are rented out rather than lived in by the buyers. But the rents go up and down with the seasons: Rents go up in the summer, they go down in the winter. And there is a lot of tenant turnover. So as an investment that depends on cash flow beach houses as a rule do make good investments.
But the illusion persists that the prices of beach houses will always go up makes them desireable as an investment due to their capital gain attributes. And there are enough people around with the bucks to keep this illusion alive.
Beach houses may always be desireable, but as California’s slide into bankrupt Third World dystopia continues, nobody is going to want to be trapped between the ocean and the riff-raff.
I think a fundamental issue is not the house, but the financing. When money is freely available then, of course, the prices rose. And, because beach houses are nicer than inland homes, more of the easy money chased the more attractive home. Now, with money harder to get, the prices will drop until the smaller pool of $$ can afford the home. Simple macro economics.
Here in San Diego during the uptick we had the familiar schills pulling out all the same arguments to support amazing skyrocketing of prices: Sunshine tax; not making any more land; weather, etc. It wasn’t sustainable and collapsed. Had a client in the office last week who purchased the house for 1.2 mill. They’re now selling for high $300s.
Amazingly, I’m starting to hear the same mtg. lenders offering wacky loans again. I don’t know whether easy money is becoming available again but there is definitely a concerted effort to re-inflate the bubble.
“I think a fundamental issue is not the house, but the financing.”
Totally! There simply is not enough financing available for a new cohort of too-clever-by-half beach property investors to snap up the properties of the pre-bubble-collapse cohort of too-clever-by-half beach property investors who each bought ten or so investment homes.
I lived in a middleclass beach neighborhood once.(So Ca). The overcast climate month after month, the snobs, and the rich chemical dependent macadamias, weren’t my flavor. Beach life wasn’t for me. Although I did enjoy the bike paths and the local Hotel’s amenities.
Yes…the overcast that nobody talks about. It’s downright depressing!
Lots of interesting things here, most tied to long standing denial about reality and the housing bubble.
‘Feb 28th, 2005: Last week Countrywide Financial fessed up to a derivative problem, and left investors with this ominous note; “..the Company concluded that its interim unaudited financial statements for the periods ended March 31, 2004, June 30, 2004 and September 30, 2004 should no longer be relied upon.”
‘This is becoming a trend as this note from the Fannie Mae website reminds us. “On December 22, 2004 Fannie Mae announced that its previously issued financial statements should not be relied upon in light of the SEC’s determination that the financial statements were prepared applying accounting practices that did not comply with generally accepted accounting principles.”
Feb 1th, 2005: ‘This morning the global credit evaluation service, Fitch Ratings, held a conference call and issued a position paper titled “GSEs: Are the ‘AAA’ Ratings at Risk.” While the short answer is maybe, the statement makes it clear that the GSE bonds receive a high grade due to the understanding that uncle sam will guarantee them. “Senior debt ratings…include an assumption of support from the US government that would be provided in the event of severe financial stress”.
‘It goes on to say this view is reinforced by current legislation being considered that would increase oversight rather than cut ties to the firms. Fitch also made clear that if the guarantee were removed it would damage the entire economy. “If there was a major problem in their ability to issue debt, then the government would have to step in in order to support not just the GSEs but the overall economy as well,” said Fahey. “It’s very similar to support that we view in the money center banks in the United States.”
Feb 10th, 2005: ‘In a speech on Jan. 13, 2005, the President of the Federal Reserve Bank of St. Louis gave a detailed list of the risks facing GSEs like Fannie Mae and Freddie Mac (”F-F”). The following is a summary of the full text found here. William Poole said: 1. Credit risk-”Credit risk occurs because homeowners can and do default on mortgage loans”.
‘3. Interest-Rate Risk-”Because of imperfect dynamic hedging, F-F may suffer a significant loss whenever there are unexpected and large interest rate movements in either direction…Fannie Mae and Freddie Mac are (also)exposed to the counterparty default risk in their derivative contracts”.
‘4. Liquidity Risk-”Fannie Mae and Freddie Mac must roll over roughly 30 billion dollars of maturing short-term obligations every week. At a time of disrupted financial markets, the credit markets might refuse to accept the F-F paper..Therefore, if Fannie Mae and Freddie Mac are unable to sell new debt, then they may also be unable to carry out sales of the “liquid” securities from their investment portfolio”.
‘5. Operational Risk-”In the past two years, there have been surprising news reports of accounting irregularities, first at Freddie and more recently at Fannie. In both cases senior executives have left the firms and audit attestations have been questioned. Both firms have been required to restate earnings for a number of years… The recent revelations are another example of our inability to predict shocks that will impact our financial system”.
‘6. Political and Regulatory Risk-”The bottom line is that there is substantial uncertainty over the future regulatory structure that will apply to Fannie Mae and Freddie Mac, and over the likely behavior of the government should the solvency of either firm come into question…even if the federal government bailed out F-F, their obligations might be redeemed eventually but cease to trade actively in liquid markets. Finally, there is of course no guarantee that the federal government would in fact bail out F-F. Many observers, myself included, believe that a bailout would not be a good idea”.
This from The Street article: “raising the g-fee too quickly could further weaken the housing market, Mills says”
Yesterday I heard that mortgage rates had declined to the lowest since Fannie Mae had tracked them. Yet we hear people talk about how damaging it would be to prices if rates rose, or govt guarantees are withdrawn!
‘allowing the government to gradually withdraw from the mortgage market, which it currently backstops almost singlehandedly’
Singlehandedly? How long did they think that could go on? Maybe “think” didn’t enter into it.
‘Fitch Ratings, held a conference call and issued a position paper titled “GSEs: Are the ‘AAA’ Ratings at Risk.” While the short answer is maybe, the statement makes it clear that the GSE bonds receive a high grade due to the understanding that uncle sam will guarantee them.’
I’d love to see a follow-up paper from Fitch on the effect of implicit too-big-to-fail guarantees on a nation’s credit rating. Those of you who make auto, health, life and even Social Security insurance premium payments may have noticed that ‘normal’ insurance comes with a price tag, which is the premiums you pay in advance to ensure the insurance company has the funds on hand to make payment when needed.
Who pays for ‘free’ too-big-to-fail insurance, and how? My conjecture is that hidden, though massive, unfunded too-big-to-fail insurance liabilities may have significantly contributed to the Treasury debt ratings downgrade that just occurred, as the Fannie and Freddie debt guarantees became explicit after the Fall 2008 GSE collapse, adding plenty of weight to the burden already in place.
Ben, nobody could have seen this coming. Nobody.
/Sarc off.
+1, Sammy.
My question is, how much liability does the federal government have for future housing market declines. How much have the losses be socialized? And who should pay when the government re-privitizes them?
‘how much liability does the federal government have for future housing market declines’
You might think that would come up, huh? It shouldn’t be that hard to calculate, and I’d bet 5 bucks that somewhere, it’s been done. IMO, a lot and none. As I said a long time ago, how does the biggest debtor in history guarantee anything? It’s sorta like giving the town drunk a credit card, making him Mayor and saying all our problems are solved. You can believe it if you want, but if the arrangement is unworkable …
BJ…. you have a way with metaphors. So well done!!!!
“If the market volatility does not provide a bounce from this correction but instead turns into the 20% off previous heights bear market indicator, the layoffs will accelerate again. However, the government backed meds/eds/feds infrastructure is the base of the economy here so it will be gov budget cuts that break the dam.”
It’s very hard to spot the green shoots of recovery these days.
Job worries surge as debt-limit issue recedes
By TOM RAUM, Associated Press – 50 minutes ago
WASHINGTON (AP) — Anger at the nation’s leaders for taking so long to strike a debt-ceiling deal has turned into high anxiety over jobs and the economy amid growing fears of a new recession.
The news that credit rating agency Standard & Poor’s downgraded the nation’s credit rating a notch for the first time ever only added to the tension.
The darkening clouds come in what should have been a good week for President Barack Obama. After all, he and Republican leaders finally ended a months-long game of brinkmanship with a bipartisan agreement to raise the government’s debt ceiling and to trim spending.
The deal kept the government from beginning to run out of cash last Tuesday, averting a first-ever U.S. default and a possible global financial meltdown.
And there was a relatively good jobs report on Friday.
But applause for the debt-limit deal or the increase in jobs never came.
In fact, stock markets around the world tumbled during the week as grim new economic figures suggested the U.S. recovery has stalled and as debt default tensions climbed in Europe.
Terms of the deal to extend the U.S. government’s borrowing authority and trim federal spending contributed to investor angst. Many economists suggest the debt-limit measure could even wind up making economic problems worse if belt-tightening spending cuts coincide with a new recession.
And the Standard and Poor’s downgrade late Friday cast new doubts on the value of the U.S. debt-limit deal. The credit rating agency said it was cutting the country’s top AAA rating by one notch to AA-plus because the deficit reduction plan passed by Congress did not go far enough to stabilize the country’s debt situation.
…
Friday’s jobs report — a net increase of 117,000 new jobs in July and an unemployment rate ticking down to 9.1 percent from 9.2 percent in June — was better than expected by forecasters, but it did little to ease fears of a new recession. The jobless rate now has exceeded 9 percent in all but two months since the recession officially ended in June 2009.
Recent reports suggest the economy is slowing to a near-stall.
The U.S. gross domestic product grew at less than 1 percent in the first six months of 2011. Adding to the woes: Manufacturing has slowed and so has consumer spending. At such a sluggish pace, job creation can’t even keep up with population growth. GDP growth needs to be above 3 percent to push down unemployment significantly.
After dropping more than 500 points on Thursday, the Dow industrials seesawed Friday, finally closing up 61 points, while other major U.S. stock indexes were down. And that was before the S&P downgrade.
Ross Baker, a political science professor at Rutgers University, suggested that the debt-limit issue is quickly receding into the background and becoming less relevant to consumers. “You can’t eat a debt-limit extension,” he said.
“I suspect that when members of Congress go back to their districts, people are going to come up to them and say, ‘My 401(k) has cratered. What are you doing about it?’” said Baker. And least for those who have jobs and 401(k)s.
While the public is clearly unhappy with leaders of both parties, the stalling recovery will likely hit Obama and his Democratic allies the hardest. As he prepares for next year’s re-election race, the president clearly needs to be seen as doing more to help the economy and to create jobs.
“There’s not a lot of precedent for an incumbent president getting re-elected in economic circumstances like this,” said William A. Galston, who was President Bill Clinton’s top domestic policy aide in 1993-95.
“People know the economy is bad. And there’s no way even the most artful politician can convince them that it isn’t,” said Galston, now with the Brookings Institution. “And anybody that tries to convince them that things are getting better is going to get his head handed to him.”
White House and Treasury officials reject the idea that a double-dip recession looms, insisting that the economy will continue to grow and create jobs, if slowly.
…
“White House and Treasury officials reject the idea that a double-dip recession looms, insisting that the economy will continue to grow and create jobs, if slowly.”
Obama’s mistake: he didn’t make this mess, but since he bought into
“maintaining confidence” to help the economy, he is now being blamed for it. He should have made 100 “blood and tears” speeches in his first year in office.
I think Geithner and Summers believed this was just a cyclical downturn, rather than the collapse of a fundamentally flawed economic structure.
Flawed economic analysis and initial misperception of the seriousness of this financial crisis hurt Obama big time.
He will go down with the ship, even though he didn’t steer it into an iceberg while on a drinking binge.
He could have set his AG lose on the rampant fraud during the bubble, but he didn’t. He could have put competent economists rather than Wall Street shills on his economic team, but he didn’t. He could have put the focus on jobs and rebuilding infrastructure and building a new economy. While he did some of that, he refocused on debt relief too early, which will sink what’s left of the economy. There’s so much he might have done, but didn’t.
While he actually has done a lot, he hasn’t done enough in the areas that could have mattered most. While he has been better than his predecessor, his opponent, and most likely whoever will be his successor, we needed more and he could have given us more.
A faithful captain always goes down with his ship, doesn’t he?
“A faithful captain always goes down with his ship, doesn’t he?”
I’m not sure this captain realizes the ship is going down when there might have been other options. The previous captain had to know there was an iceberg ahead, but hoped the collision would be in January rather than September. To tea baggers, this difference doesn’t seem to matter.
It took a while for the passengers on the Titanic to realize the iceberg they struck was going to sink the ship, didn’t it?
Good post, SDGreg. Could not agree more.
One has to wonder who was behind his decisions, too.
“I think Geithner and Summers believed this was just a cyclical downturn, rather than the collapse of a fundamentally flawed economic structure.”
They both know all about the boomer retirement wave approaching, but there is little they can do this late in the game. If you haven’t done your own homework and prepared accordingly it’s too late, financially speaking.
Geithner on the Future of America:
Harder Than Anything You’ve Experienced In Your Lifetime
http://www.youtube.com/watch?v=cw_outZ4ka4
‘Anger at the nation’s leaders for taking so long to strike a debt-ceiling deal’
First, I have never heard such foot-stamping from the media than about the debt ceiling thing.
I don’t know what people expect. Back in 2005 or 06, the total obligations of the US govt were around $50 trillion, an amount that was mathematically impossible to pay back. Now I read it’s more like $100 trillion.
Fannie and Freddie should have been delisted in 2005. That would have saved us a ton of money, but they mysteriously kept going. How did that happen? I never heard of an official deal, but something must have happened. And here we are years after they failed, and they are still making MOST of the housing loans?
Again, I don’t know what people expect. The Federal Reserve makes some of the worst decisions in history regarding the housing bubble. What happens? Congress gives them MORE power. Wall Street? Congress gives them $billions of free money! And what the HELL is a jobless recovery?
And what about the voters? Congress does these things and what happens? Barney Frank is still there. Richard Shelby is still there. The NAR is still handing out lobby loot, shamelessly pushing people into buying houses they can’t afford. How could this possibly go wrong?
I recently heard the President say something like, “eat our peas,” meaning take our medicine I guess. But what this country wants to do is eat it’s peas and have them too.
IMO, this is the biggest mistake in this regard: ‘The downgrade is a psychological blow to an economy that has struggled to recover from the financial tumult of 2008.’
It wasn’t 2008 that was the problem. It was the housing bubble of the mid-90’s and onward that was the problem. And our failure to recognize the root of the matter is why the govt is flailing around, generally making things worse.
‘The downgrade is a psychological blow to an economy that has struggled to recover
Sedition may include any commotion, though not aimed at direct and open violence against the laws. Seditious words in writing are seditious libel. A seditionist is one who engages in or promotes the interests of sedition.
Typically, sedition is considered a subversive act
Standard Moody & Fitchety “True$erialEnabler$™” spewing Opinion$-4-Fee$…they’ve come along way from the dotcombomb$ & $ingle Depo$it Tran$action RE cult$ of yesteryear. Looks like they’re still using their tongues to wipe their sticky “opinion$” dripping from below their lip$.
Sedition…
I have to admit, this whole “debt ceiling” debate seems to have moved popular sentiment in a way I never expected.
Namely, I have -never- seen so much talk of pitchforks and torches. Growing up, this sort of talk would have been heresy. Nobody talked -seriously- about taking down the government, that was an idea left to the nutcases who lived in cabins in the woods. I was raised on the idea of patriotism and love for country.
I’m sitting in a constitution class as I type this, listening to an incredibly biased and opinionated professor spout off abuse after abuse within the legislative system. The class discussions between and before class have been borderline threatening toward our government. I don’t know why this “crisis” was the catalyst, but I see rising anger in these individuals that is starting to bubble over vigorously.
And it’s not just here on a liberal college campus with a bunch of kids.
I turn on the tv and I see Keith Olbermann go on a 10 minute rant about how we need to storm the government and break out the pitchforks:
http://www.youtube.com/watch?v=ndkRgj6j-Pg
Seriously? A newsman yelling at me to go take the government back before it’s too late?
I go on social news sites like reddit and there’s this huge number of posts and discussions on ideas ranging from open rebellion to recreating a “tahir square” by occupying wall-street for several months. People are planning big protests and demonstrations as we speak. I’m a little scared of the repercussions.
We’ve hit some kind of tipping point. Unemployment is horrendously high (in -real- terms, not the phony 9% figures). There’s a glut of individuals ready to act and now it seems like there’s a popular sentiment that makes action reasonable and even encouraged. All people need now is a trigger. One government abuse in the wrong direction, one draconian action, one speech, one gathering, one death.
I hope they reign this in quickly. I have a life, a son, a wife, and dreams for the future. I don’t need the crazy instability I see blooming in the world around me. I’ve taken enough punches. I’ve always laughed at the idea of a new “american revolution”, it could never happen here. I’m not laughing today.
I really wish I could record and share a recording of what this professor here is saying. We’ve spent 6 of our 12 total hours talking about how terrible the government is, in a class that’s supposed to be specifically about the arizona constitution. We have yet to discuss a single “serious” topic about the AZ constitution. He just went on a rant about government debt and congress getting our credit rating dropped at s&p. There’s a well dressed 24 year old self-professed “republican” sitting across the room and his head is literally spinning listening to this. He was trying to defend congressional actions this morning before class and half the class was in the hallway counter-debating angrily with him. The peasants are getting angry…
“I hope they reign this in quickly. I have a life, a son, a wife, and dreams for the future. I don’t need the crazy instability I see blooming in the world around me. I’ve taken enough punches. I’ve always laughed at the idea of a new “american revolution”, it could never happen here. I’m not laughing today.”
Trudat.
I have to tell you guys, if I knew this class was going to be like this I would have recorded the whole thing.
This is not an AZ constitution class, this is 14 hours of bashing the US government interrupted by frequent bashing of the republican party. So far, no discussions of the democrats or any connection/complicity they have in the current mess - it’s a very carefully narrated and directed discussion. I wonder if this is isolated to this particular teacher/class or if this is a wider experience.
I’m not associated with any party and if I -had- to associate myself with a political party I’d say my beliefs and ideologies would be identified as more “democrat”, but I see this sort of one-sided “they are the bad ones” finger pointing to be just another symptom of our current problems. A few more hours of this and I’m done, having fulfilled my “arizona constitution” requirement by suffering through this garbage.
Awesome.
“This is not an AZ constitution class, this is 14 hours of bashing the US government interrupted by frequent bashing of the republican party. So far, no discussions of the democrats or any connection/complicity they have in the current mess - it’s a very carefully narrated and directed discussion. I wonder if this is isolated to this particular teacher/class or if this is a wider experience.”
Do you sense any steering shills among the audience?
Steering shills? I don’t believe so. There was plenty of agreement and laughs at the cracks about the “corrupt” politicians who also happened to be red in color.
I was just surprised that there was such a directed and clearly partisan level of instruction. You get the occasional joke etc from faculty, but I’ve never seen anything like this. The whole class was just a soapbox for this professor. He stood there on his little box and shouted about the bad guys. At the end of class he handed us a test that had nothing to do with anything he’d talked about, then told us we could use open laptops, books, notes, and each other. The whole class went through the questions together (which were -actually- about arizona constitution etc, a subject we had spent perhaps a total of an hour actually talking about). I used google to answer them.
And that, was that.
“I was just surprised that there was such a directed and clearly partisan level of instruction.”
I was in college in California during the nineties downturn, and there were plenty of unemployed adults working toward a second career, so I doubt bias like you describe would fly so easily. Thanks for the follow-up!
http://www.seditionproject.net/FAQ.html
In times of national crisis, or when it’s inconvenient to tolerate those who don’t go along with the party line, sedition charges are a useful tool to keep the populace in line. Laws such as those passed (and enforced) by Montana during WWI were travesties from a legal or Constitutional perspective, yet no one objected to seeing non-violent objectors getting railroaded.
“Barney Frank is still there. Richard Shelby is still there.”
Both parties picked off, bought and paid for through these two individuals by the Housing Crime Syndicate.
NAR/NAHB/FNMA/FMCC are criminal enterprises whose leadership(current and former) need to be indicted under RICO.
Don’t confuse the monkey with the organ grinder. The entities you name were only one arm of the larger Federal Reserve - Wall Street looting syndicate which has captured and corrupted BOTH parties. Unfortunately, given our docile, stupid electorate, it’s going to be business as usual until the country goes off a cliff.
And what about the voters?
Bingo. People get the government they deserve. The sheep who blindly vote for Republicrat corporatist stooges have lost the right to wail and curse when the chickens come home to roost. While I have mixed feelings about “Tea Party” candidates in general, at least someone FINALLY put their foot down and said, “Enough!” which is long overdue.
It wasn’t 2008 that was the problem. It was the housing bubble of the mid-90’s and onward that was the problem. And our failure to recognize the root of the matter is why the govt is flailing around, generally making things worse.
————-
Bingo, Ben!
Too much debt, and too-high prices that resulted from all that debt — that was the real “crisis.”
Asset price inflation is no way to grow an economy. How these economic theories ever gain any traction is totally beyond me.
What a difference a day makes.
That’s my quote you used in the lead in for the your article submission, PB. But after the debt downgrade w/the suggestion there might be more next week, I bet people are sleeping a bit less easy now. If they are still confident in their situation, they haven’t been paying attention.
My home state, NH, has cut Medicare payments to hospitals and so medicine is no longer a job safe haven there. There have been layoffs left and right and hospitals suing the state to reinstate that income. If that happened here, housing would really be shaken. But you know, they always go after the little people, the ones that really do the work and make things happen but get paid a pittance. To really shake this town, the administrators need to be in the crosshairs.
Why does the SU chancellor retain her free housing when she already makes so much money while janitors that need to feed their families are kicked to the curb? Which change would really save more? Are the students going w/o while the janitor takes the hit instead of the chancellor?
That’s always bugged me, too, CarrieAnn.
Why is it that rich people always get comped, while the poor people always pay full price for everything?
“‘Killing the mortgage interest deduction would be huge,’ wrote Robert Litan, a former associate director of the Office of Management and Budget, in an email exchange with TheStreet, though he is convinced it won’t happen as it is too popular with middle class Americans.”
I wonder to what extent this is because most middle class Americans fail to understand that their personal ‘benefit’ from the MID only begins where the I.R.S.’s standard deduction ends. Unless your mortgage interest payments are large enough to push your itemized deductions far above the standard deduction, you benefit little from the MID.
This is why I call the MID ‘Welfare for the Wealthy,’ as it is highly regressive, disproportionately benefiting those with the largest (mortgage-funded) home purchases realize far larger than it benefits than those whose loans barely generate sufficient interest to make it worth the time it takes to complete a Schedule A. Above all, anyone who rents or has a fully paid-off home gets to cross-subsidize tax deductions for those with super-sized mortgages.
“Middle class Americans” have been voting for their own destruction for the past several decades.
My son called me mid-day on Thursday to tell me the market had tanked…He asked me what do you think is going on ?? I said, they (wall street) know something that we don’t yet…Then, after the market closed on Friday this came out;
“The downgrade, hours after markets closed on Friday”
Insider information certainly can provide a leg up in the race to the exit door from the crowded, burning theater!
It might have been insider information. But I wouldn’t discount what was going on in Italy. When people hear bank runs their next thought is liquidity going “poof!”
My conspiracy theory is that S&P is working on behalf of the Fed/govt, and downgraded our debt in anticipation of the Euro imploding.
IMHO, the Euro will be finished within the next month or two, and they are worried about the effects on the dollar when more people rush into our currency. My bet is that they are trying to put downward pressure on the dollar.
If the Euro collapses, I think they will announce another round of QE, followed by another downgrade from another credit ratings agency.
I am laughing at some of the comments on MSM blogs, angry at S and P for lowering the ratings on the US $. The very same people wish to have government provide for their happiness.
Sammy will agree with me on this: the winners are the advocates of small government. We have to cut spending across the board. Not just a tepid $2 trillion but cut $1 trillion per year.we have to abolish the Patriot act, eliminate hundreds of federal agencies, end foreign aid, bring all US troops home and de-enlist half, close all our foreign bases, eliminate any kind of housing subsidy, which includes MID, section 8, fair housing opportunity, Hud, eliminate all food stamps, have a balanced budget amendment, abolish NAFTA, replace the income tax and corporate tax with tariffs, and that is a start.
Combo is going to be proven right. Cash is king. Interest rates will rise and I remember how they burst the gold bubble in 1980.
“Interest rates will rise and I remember how they burst the gold bubble in 1980.”
A big potential complicating factor is the likely policy response to attempt continued suppression of long-term interest rates in an era of depleted U.S. savings at all levels from households to governments. The consequences of an interest rate spike in the present environment could prove far more dire than it did in 1980-1982.
This is not to say efforts to contain rates will ultimately succeed, but rather to suggest the impetus to contain them is far greater this time.
The consequences of an interest rate spike in the present environment could prove far more dire than it did in 1980-1982 ??
Boy you got that right…That period shaved a few years off my life span I am sure…IMO, even a 2% interest rate spike right now would send this country into a “real” depression…
Yep.
One thousand A’MEN’s. It won’t be done though, because
the suits in Washington know they might lose their lives in
the riots that would sweep the country when the welfare checks stop coming. This is the catch 22 of the century.
Not to mention only strip search Muslims in full garb carrying the Koran…..
.we have to abolish the Patriot act,
Bill, my brother from another mother, great or at least active minds do indeed think alike. I can’t see, though, how TPTB can LET interest rates rise, as interest rate charges on the staggering national debt alone, not to mention private and corporate debt, would quickly push us into insolvency. Still, I’ve noted the first real resistance to Zimbabwe Ben’s deranged money-printing coming from China and Russia, who between them have the potential to end the dollar’s status has the world’s reserve status. If THAT happens, we are going to see a collapse that will make the Great Depression seem like a walk in the park.
Credit Markets Archives
Aug. 6, 2011, 10:01 a.m. EDT
U.S. joins China, Spain in double-A club
By Sue Chang, MarketWatch
SAN FRANCISCO (MarketWatch) — After losing its coveted triple-A credit rating Friday, the U.S. has joined the ranks of sovereign borrowers sporting a double-A stamp that includes China and Spain.
The double-A club is a diverse group that includes countries wrestling with their own debt crises or, in China’s case, flush with cash. And it’s one from which some nations have moved up.
…
I guess it’s different for clubs with involuntary membership policies. I’m thinking of Hell, for instance.
The Dollar Tree had quite a few copies of Thomas Sowell’s book “The Housing Boom & Bust” (2009).
I just started it last night, and haven’t got into the background noise (F&F, WS,etc…) or his opinion yet.
Great info in that book on the “affordable housing” debacle from an economist who can hardly be accused of harboring a racist perspective on minority lending programs.
Thanks PB. Apparently, it’s worth the read.
I found “Gimmie Shelter” (2009 also) by Mary Elizabeth Williams there too (Dlr Tree this evening), about her 3 year journey trying to find a home with her husband & 2 young daughters in the bubble nightmare. It’s got some laughs in it, according to some reviews.
They’re dumping housing bubble books there these days. For $1 a book, what the h*ll.
I wonder what’s with all the people making political comments, anti R or anti D, with regard to our economic problems.
When you have a country that decides to individually and collectively live beyond its means for most of 30 years, with a huge blowout in the last ten, what to you expect?
Bottom line is Government spending is way too much and needs real cuts, not just cuts in rate of increase in spending. The cuts have to be significant. They have to be major cuts in both political partys’ favorite areas: Entitlements (Democrats) and the military-industrial complex (Republicans).
Then after that, let the supreme court decide which types of spending are constitutional and which are not. Then immediately stop that spending which is not constitutional.
“Then immediately stop that spending which is not constitutional.”
Here we go again: what is your take on the Constitution, say, for an entity like the FBI?
I get that for education most “get back to the Constitution” types people don’t want to pay to educate ELL, ESE, Minority kids, etc. That’s why I think you’re all insane.
I need to know:
- If Libertarians support Constitutional interpretation
- If the the TEA Party supports Constitutional interpretation
Because is you truly support the Constitution, you’re happy to pay to educate kids of illegals (en.wikipedia.org/wiki/Plyler_v._Doe)
Let’s see who the “True Patriots” are.
When the recession began I was overseas. People asked me as an American how do I feel about America’s dimishing economic power. My answer surprised them. I said that though I was sad that many Americans had lost money in the market and housing, and that America’s power had diminished, I was glad that Americans were waking up to the new reality and would finally start to live within their means. As it turned out some became “minimalists,” but for the majority, it was business as usual. So I’m sad about the current happenings, including the downgrade of the AAA rating, but maybe we Americans and our government will finally wake up and face reality. To borrow a phrase from this forum, “No, America is not that special…”
Question du juor (and one my BIL and I just discussed around his kitchen table):
How bad will the current leg down of the financial crisis have to get before Wall Street traders’ pitiful cries for relief are answered with the Fed’s enactment of QE3?
as soon as interest rates spike and tens of millions start defaulting on their credit cards because they all are now adjustable rate ones….
I think S&P 900 will be the trigger. The plunge in the markets has to be severe enough that the sheeple will cry out for relief, too empty-headed to realize that QE 3 will usher in hyperinflation that will be far more damaging in the long run than letting markets and housing correct to sane and sustainable valuations.
You’re right about the sheeple, Sammy.
The S&P downgrade, coupled with the demise of the Euro should certainly bring about QE3, no matter how foolish it would be.
I see a declining economy in 2012, with 2013 and 2014 potentially very much worse. The economy is already slowing with employment having never recovered, even a little. Government policies are skewed towards contraction. I expect that whatever government emerges after the 2012 elections will be even less functional than what we have now and/or will make far worse policy decisions.
The signs of strain are all around if anyones looking. There are armed robberies in places that had been safe, and other examples of social stress such as the woman with the DUI accident at 12:30 PM on a Sunday afternoon who was “driving” at more than 4 times the legal limit.
This next leg down could be ugly. More cuts to what’s left of the social safety net will leave more people with fewer options. Housing could have an even bigger leg down. Those who thought they bought cheaply the past couple of years and thought they had safe jobs may find out otherwise.
http://readynutrition.com/resources/teenage-mobs-a-rising-epidemic_25052011/
Every week seems to bring new incidents of “youths” or “teenage flash mobs” launching not-so-random assaults and wholesale thievery in areas previously more or less safe from such thuggery. These incidents are almost always underreported and downplayed by authorities and the media, but the implications for social order and public security are alarming.
I agree. Looks like things will be worse than 2008-2009 in a few months. And 2017-2019 will probably be a “recovery” to what we have today: an official unemployment rate of 9.1%.
But hey! Houses selling today for $400,000 will be selling for $100,000 by then!
Maybe gun turrets and concertina wire will replace granite countertops and stainless steel appliances as realtor selling points.
Granite counter-tops are great for protecting you from falling shrapnel.
Stainless steel appliances can be re-purposed for use in armor and weapons production!
A typical dishwasher face will net you almost a dozen stamped-sheet ak-47 receivers.
I know this because, thankfully, suzanne researched it.
“Maybe gun turrets and concertina wire will replace granite countertops and stainless steel appliances as realtor selling points.”
I remember watching an episode of House Hunters International in Israel where having a bomb shelter in the house was a selling point versus having to go to the community bomb shelter (for missile attacks).
SDGreg,
+1
Tehran Times
August 4, 2011
The Road to Armageddon
By Paul Craig Roberts
As the second decade of the 21st century began, the U.S. economy had not recovered from the Great Recession that began in December 2007.
The economy’s failure to recover was despite the largest fiscal and monetary stimulus in the country’s history. There was a $700 billion bank bailout, a $700 billion stimulus program, a couple of trillion in “quantitative easing,” that is, in debt monetization or the printing of money to finance the government’s expenditures. In addition the Federal Reserve’s balance sheet had expanded by trillions of dollars as the Fed purchased troubled mortgage bonds and derivatives in its effort to keep the financial system solvent and functioning. According to the Government Accountability Office’s audit of the Federal Reserve released by Senator Bernie Sanders, the Federal Reserve provided secret loans to U.S. and foreign banks totaling $16.1 trillion, a sum larger than U.S. Gross Domestic Product (GDP).
Despite the enormous fiscal and monetary stimulus, the economy remained dead in the water.
In 2011 the deficit in the federal government’s annual expenditures was 43 percent of the budget. In other words, the U.S. government had to borrow, or the Fed had to monetize, 43 percent of federal expenditures during fiscal year 2011. Despite this unprecedented fiscal and monetary stimulus, the economy did not recover.
At the end of the first decade of the 21st century, the economy’s decline was temporarily halted by federal subsidies for car and home purchases. The $8,000 housing subsidy helped newlyweds purchase starter homes as the subsidy was a big chunk of the down payment in a depressed housing market. The car purchase subsidy moved future demand into the present. When these subsidies expired, the economy’s life support was turned off.
Problems with the statistical reporting of unemployment, inflation, and GDP disguised the worsening economy. Seasonal adjustments used to smooth the data over the course of the year were not designed for prolonged recession. Neither was the “birth-death” model used by the U.S. Bureau of Labor Statistics (BLS) to estimate non-reported jobs from new start-up companies and losses from companies that have gone out of business. The birth-death model was designed for a growing economy and during downturns overestimates the number of new jobs created.
The “substitution effect” used in the consumer price index (CPI) underestimates inflation by assuming that consumers substitute cheaper foods for those that rise in price. For example, if the price of New York strip steak rises, this does not show up in the CPI, because of the assumption that people shift their purchases to a less expensive cut such as round steak.
Cooking the Books
…
Tehran Times? Gulp….
The scary thing isn’t the source, but rather the reasonableness of the content combined with the source.
Yes, and the fact this guy who tells it like it is would never be published in our MSM.
World War Three:
What if the next “big one” did not involve bombs or guns or invasions or occupation? What if an era of extreme protectionism evolved and the country with the least debt won? What if the war was well into the first phase before anyone really knew it? What if you and I already lost because of the irrsponsibility of others?
Who needs weapons when everbody starves to death.
United States’ bond rating might be downgraded by credit-rating agencies
Published: August 6
So much for enactment of a debt-ceiling hike smoothing the feathers of ruffled investors. America’s AAA credit rating is safe — at least for the next few months — but the markets are acting as if the threat of imminent default by the U.S. Treasury were still real.
For stocks to break out of their funk, you’ll need to see better news on jobs, industrial output, exports, retail sales and gross domestic product. Few economists and fewer stock-market strategists foresee much of that in the months ahead.
The outlook for bonds is more complicated. A downgrade of the United States’ bond rating by one or more of the credit-rating agencies remains a possibility. The issue is no longer the debt ceiling but the inability of our political system to rein in soaring budget deficits.
If the agencies do downgrade Treasury debt, panic selling of bonds isn’t likely to ensue.
…