What Constitutes Progress
Readers ss a topic on house buying, financing and owning. “I’d like a better understanding about the historical context of home financing/owning/buying.
1) The evolution of FHA, HUD, VA loans, etc. (And how were homes purchased prior to the invention of the 30 year mortgage?)
2) Historical down payment requirements.
3) Redlining and flight to the suburbs
4) Impact of the change when they allowed exclusion of housing capital gains instead of rollover requirements (late 90’s if I remember correctly). (Did this perhaps begin the ATM mentality?)
5) When did we adopt the “move up the property ladder” mentality instead of aiming for the goal of a lifetime home and a mortgage burning party?
6) The creation of adjustable loans (early 80’s I think).”
A reply, “You can’t have a analysis of the items you mentioned without considering how the repeal of Glass-Steagall Act in 1999 had on the financial markets. Basically getting rid of Glass-Steagall ( enacted in 1933 ) removed the separation between Investment Banking and commercial banking. In the 1930’s after the great stock market crash they figured out there was a conflict of interest between investing and lending and the two worlds should be separated. Basically the investment world will resort to faulty lending because they want the person to make the investment. Lending should be based on qualifying for the loan ,not how attractive the investment is for the future in other words, and the 2 worlds have different principals .”
“It didn’t take them more than 7 years from the repeal of Glass-Steagal to screw up the entire financial markets when the crash of real estate gained speed. People went into debt based on the wealth effect of fake real estate prices ( destined to crash ). De-coupling debt from ability to pay is crazy.”
One said, “The idea was home prices would go up 15% a year (in the bag) and ability to pay was irrelevant. What I am trying more seriously to figure out is how to either make the debts go away gracefully or inflate the money supply to cover the debts. Once people realize that the debts, at least the real component of the debts is largely held by pension funds, governments etc will allowing debt failure remain an option. If not an option, so far efforts to print money have not made it down the chain where they can do any good…”
A reply, “What, if Freddie & Fannie with the fed’s backing offered 80% financing, on a owner occupied SFR, @ 0% interest rate for 30 years…Would the market clear ??”
I asked, “Along these lines, someone suggested this week that we have a topic on what readers would like to hear or not hear from presidential candidates.”
To which was said, “Similarly, and I know this is slightly OT, how could a sane and responsible ‘third’ political party be created?”
A reply, “I don’t know that a third party could work. The two that currently exist have so much organization, money and whatever that they have to win. With a substantial third party, you are almost always going to split one of the two and throw the election to the one that isn’t split.”
“What I think you might be able to do in the age of the internet is get a few people to run for office with a pledge to not take any money from PACs, contributions of no more than $200 (or something like that) from any one person, and the staff looking after donations would not communicate to the candidate/person in office any information about you have X number of donors from industry Y so that X percent of your support was from that industry. No one who worked with donations would be allowed to get a regular staffer job. If any person or company came in to give information to the staff or candidate (or office holder) and mentioned contributions or told how much they gave or aggregated in the past, they would be asked to leave and couldn’t come back for 6 months. Every time someone got themselves kicked out, it would be tweeted and put up on the web as well as released as a regular press release. No junkets - if the candidate had to go on a trip for information purposes, he or she would pay for it.’
“If a candidate could actually get elected under those rules, he or she would have amazing freedom that the money scroungers don’t have. And a few of them just might be able to shame the rest of the Congress into behaving a little better.”
Another added, “The internet could possibly be the tool for undermining the stranglehold that the big financial interests have on our government, because these financial interests also have a large measure of control over the traditional media.”
And finally, “It doesn’t matter what the Presidential candidates say. All you need is 40 Senators in the other party and CSPAN turns into Hostage TV.”
From The Hill. “Plans to boost the stymied housing market continue to emerge, with a New York Democratic lawmaker adding his proposal that would provide incentives for real estate investment to sell 3 million existing homes into the mix. Rep. Gary Ackerman will introduce a bill when Congress returns from its August recess designed to spur home sales and ‘to decrease the glut of 3 million existing unsold, vacant, often-blighted and foreclosed properties that are currently impeding economic recovery across the country.’”
“The measure would offer 2 million qualified borrowers a matching subsidy of up to $20,000 for a down payment for single-family home purchases. The subsidy would be a loan, with 20 percent forgiven in each of the first five years of owner-occupancy.”
“To help cover the cost of these programs, the bill would use currently unrealized revenue by leveraging the first $500 billion of the estimated $1.2 trillion ‘in idle capital that U.S. companies have sitting off shore and incentivizing those companies to bring the money home by reducing the corporate tax rate on repatriated earnings to 10 percent. That revenue would cover the cost of the program,’ Ackerman said.”
“Last week, the Obama administration announced that it is seeking creative ways to revive the sluggish housing market by selling off certain repossessed properties, a move Sen. Jack Reed (D-R.I.) has said goes along with his plan to turn vacant, foreclosed homes into rental units. Reed’s proposal seeks to increase the resale value of vacant foreclosed homes for Fannie Mae and Freddie Mac by turning them into profitable rental units that could be sold to the private sector. The senator’s plan to retrofit and renovate the houses would create jobs.’
From CBS News. “Republican presidential candidate Rick Perry officially jumped in the race for the White House Saturday and is already considered a major player. Perry has a double digit lead over former Massachusetts Governor Mitt Romney, according to one poll released Tuesday. Perry is not backing down from his controversial remark that it would be ‘almost treasonous’ for Federal Reserve Chairman Ben Bernanke to try to boost the U.S. economy ahead of next year’s election.”
“‘If this guy prints more money between now and the election, I dunno what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treasonous in my opinion,’ Perry said when asked about his views on the Federal Reserve.”
‘Bernanke, who served as a top White House economist under Bush before becoming Fed chief in 2006, has lowered interest rates and overseen a host of extraordinary measures to revive the U.S. economy which was officially in recession from December 2007 through June 2009.
US News and World Report. “Texas Rep. Ron Paul’s presidential campaign is taking a victory lap this week as he is vindicated for standing by his views on the Federal Reserve. While Paul has long been considered outside of the mainstream for his strong libertarian views, some of his predictions have come to pass—like the housing bubble’s burst and the recent economic downturn—and some of his views are now hitting center stage.”
“‘What fascinates me,’ he said with pride, ‘is we’ve been talking about and thinking about and understanding [this] for so long, who would ever have thought, you know, the former speaker of the House would come out and say, ‘Audit the Fed!’”
“And former Speaker Newt Gingrich isn’t the only other candidate focusing on the issue, as Paul pointed out. ‘Now we have this other governor—I can’t remember his name—who’s coming into the campaign,’ he joked, referring to Texas Gov. Rick Perry. ‘He realized that talking about the Fed is good too.’”
“‘But I tell you what,’ Paul continued. ‘He makes me look like a moderate. I have never once said Bernanke has committed treason. But I have suggested very strongly that the Federal Reserve system and all the members have been counterfeiters for a long time.’”
“The past two months have taught us that the Republican presidential candidates are going to try to make the 2012 election a referendum on President Obama’s first term, and one of the most effective means of attack is starting to pop up both on television screens and websites — using the president’s words against him.’
“Former Massachusetts Gov. Mitt Romney’s (R) campaign has released a series of videos over the summer in that vein. Romney’s campaign released a video presaging a visit to the early primary state of New Hampshire. Once again, neither Romney’s face nor his words shows up in the ad. Instead, it leads with the president’s promise in 2008: ‘We Democrats have a very different message of what constitutes progress in this country. We measure progress by how many people can find a job to pay the mortgage.’”
‘The implication was obvious: With a 9.2 percent unemployment rate at the time the ad ran and housing prices continuing to struggle, holding jobs and paying off mortgages were even more difficult than when Obama ran for president.”
From WTMJ. “People looking to buy or sell a home can find out more information from a national organization touring through the Milwaukee area on Wednesday. The National Association of Realtors has a bus tour which has been scheduled to make two stops in and nearby Milwaukee.”
“‘We’re here to help. We know a number of programs and resources to hep people facing the situation of foreclosure,’ said John Horning, the Chairman of the Wisconsin Realtors Association.’
“People could meet with those in the realty industry if they were facing foreclosure, a short sale, or simply if they wanted to get a better mortgage deal. Those attending could learn how to reduce loan payments, which in this market could mean being able to stay in their home.”
“The group is also making its voice heard in Washington, D.C. with federal officials. ‘There’s a lot of opportunity right now, and our message in D.C. is (not to) do any harm in the housing industry. That would harm our economy.’”
“…@ 0% interest rate for 30 years…”
That’s a crazy idea. Only Megabank, Inc gets loans at rates approaching 0%; the rest of us pay ‘market rates.’
Not sure what the overall cost would be but I just wonder if it would work…
Just for example, I will use myself…I am not much of a 2nd home guy but, at some number I would consider a purchase of a modest house in Tucson Arizona for 3 months or so (I love to watch Baseball by the way)…$100,000. loan for 30 years equals $277. per month…I would pull the trigger on that in a heart beat…
I can’t help but be tempted by that also scdave (dig watching baseball also )
I think it could possibly work…The banks would get their principal, the inventory would be in stronger hands and stabilize the housing market…The Fed’s (us) would take the hit on the zero interest but its not likely that those loans would go to term anyway…Maybe on average the fed’s may be paid back in ten years vs. thirty…How many people would get off the fence and buy vs. rent if they were able to get a 0% loan ??
I use to think that if they bring down the rates to 4% all the FB’s could be refinanced into that low payment and
it would at least stop some FB’s from defaulting because
they could maintain the payment at that point .
The problem was that there was so many on the 2 year investment plan of flip that house that nothing will help them . The ATM refinancers are a lost cause also .
But no question in my mind if they gave 30 year fixed ,or
even 10 year 0 % loans ,that would kick up the biggest storm of activity you could imagine .
The point is that it’s another form of bail out ,and it certainly would kick up a rise in prices .
So much of the activity was based on the rising prices and what the future equity was going to do for the borrower .
The problem was real estate debt was not in strong hands
and this would make it strong hands again . But wouldn’t it
raise the prices in a artificial manner again with such low
finance costs and bring out bubble investment ,not home ownship for long term ,again ?
Who would be offered these loans ,first time home buyers
or what ?
Texas presidential candidates to Bernanke: “Don’t mess with Texas.”
Wasn’t Greenspan a rightist-libertarian, Ayn Rand Apostle? And wasn’t Ben his hand picked successor ? How is it that the far right and Ron Paul gets the self-appointed assignment of credible critics of the Fed’?
Maybe there should be a drinking game called the seven degrees of Ayn Rand? IIRC, Rand told Greenspan to get lost. Greenspan didn’t pick Bernanke. And credibility comes from being consistent on an issue for 40 years. Also, the first congressman I remember demanding an audit of the Fed was Henry Gonzales; hardly far right.
Other than that, I’m not sure I get your point.
My point was poorly expressed – but let me attempt to illustrate I had one. First, Greenspan was a charter member of the Ayn Rand Institute and a member of her “inner circle”, they were close enough that she had a nickname for him – “The Undertaker”, he made essay contributions to her book – “Capitalism: The Unknown Ideal”, he continued to follow her philosophy, Objectivism, and defended it publicly as recently as 2010 and they remained friends until her death. She may have told him to “get lost” but he never distanced himself from her laissez-faire economic views. BTW, I’m confident something quite less than a 7th degree relationship existed here.
Second, It’s correct that Ben was not “hand picked” by Greenspan, that obvious overstatement was intended to show that no sharp break in philosophy between the two either existed or exists. As Ben stated on appointment to the FED Chairmanship, “My first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years”. Incidentally, the markets were euphoric with that news. Later, he defended Greenspan’s FED policies by claiming, “…the policy of low rates in the early 2000s did not cause a bubble in housing.” IMHO, despite telling Alan to “get lost,” something less than a 7th degree relationship existed here.
Third, Gonzales was a FED critic but is neither widely quoted nor widely known in the public mind for that stance. And more germane to my point, there are a vast number of consistent FED critics on the left that the public knows little to nothing about such as Noam Chomsky. Which was my point - isn’t more than ironic that the only figures know by the public to have policy differences with the FED are those that are closely ideologically aligned to those running it? Or more specifically, I meant to question where the public “credibility” title is coming from?
Combination of investment and commerical banking was not the problem. Morgtage lending companies like Countrywide were neither commercial or investment banks. The investment banks that packaged the now down payment “Countrywide” loans were not commercial banks (Merril Lynch, Lehman Bros) one of the big problem institutions was even an insurance company–again having nothing to do with the absence of Glass-Stegel. Commercial banks pretty much steered clear of the mess, until BofA bought Countrywide and Wachovia bought whoever and had to be taken over by Wells. But the heart of the problem were brokered morgtages and packaged investment vehicles that were put together by institutions that would have operated just as irresponsibly had Glass Stegel still been effective.
Too big to fail is a real problem, but not because too large institutions are combining partiuclar lines of business. Seperate the business and they could still be too big to fail, as well as more likely to put all their eggs in one or two lines of business.
The reality of what happened disputes you assertion that it had nothing to do with Glass-Steagall and the co-mingling that went on ,the lack of proper reserves ,the leverage increasing by investment bank Casino games in which they used mortgage back securities as the bogus backing ,the creating of toxic loans and the breakdown of underwriting standards to keep the Ponzi Scheme of this fake wealth creation going .
In my humble opinion .
All the things you cite were certainly problems…but they really had nothing to do with Glass-Steagall. Seperate morgtage lenders and investment banks could, and did, do those very things. Most of the world gets by nicely without seperating investment and commercial banking…Canada, England, Germany, etc etc. Of course they also have problems, but not because they allow universal banking.
We have always had to big to fail business entities . The fact that they didn’t fail before was because they had regulations
that prevented situations in which they could become at risk .
Europe is having its problems because they went for the debt to create wealth equation by faulty lending also in the last
10 years . Europe drank the koolaid ,where before they were conserative .
Adding the equation of global financial markets contributed
to the set up for the fall .
‘holding jobs and paying off mortgages’
Are DC politicians unable to understand that a lower priced house is easier to pay off? And after all the money Washington has thrown at the housing market, have any jobs been created?
I knew things were going in the wrong direction back when McCain and Obama started trying to out do each other on ending the “foreclosure crisis.” But here’s the question for the President; this stuff has failed. Why can’t we at least enjoy cheaper houses? If I buy a house today, and the govt is propping the price up, aren’t I taking a risk that I’ll be underwater someday?
What about the moral hazards on Wall Street? What about our liability as citizens for Fannie Mae, Freddie Mac and HUD? What about affordable housing, Mr President? Doesn’t that constitute progress too?
I heard yesterday that one in four people in this country think Obama has done a good job on the economy. I’d say you got about 6 months or so to turn this around or you are out of a job Mr President.
“Are DC politicians unable to understand that a lower priced house is easier to pay off? And after all the money Washington has thrown at the housing market, have any jobs been created?”
Professor Bear’s local real estate market jobs creation program:
Stop using federal tax dollars to artificially prop up home prices; instead support measures to enable local housing markets to adjust to price levels supported by local incomes and employment opportunities.
More home sale transactions would ensue, providing renewed employment opportunities for used home sellers. New college graduates would be able to afford to relocate to areas where their skills are in demand, providing local economic stimulus with added productivity in the workplace and with increased consumer spending at area retail outlets. Furniture sellers, housewares purveyors and other merchants to the newly housed would see an uptick in their businesses. Economic multiplier effects would wash a bath of cash over the local economy with no need to raise taxes or to print money for this to occur.
Further, the reduced cost of housing would make people more able to comfortably accept lower wages and salaries for a given standard of living. This in turn would make that labor proportionately more competitive in larger (national and international) markets. Jobs that left due to global wage arbitrage would begin slowly but surely to return.
Exactly!
Our labor can’t compete with China when basic tract houses are going for half a million dollars.
““Are DC politicians unable to understand that a lower priced house is easier to pay off?”
They aren’t stupid, Ben. They know full well that a lower price house is easier to pay off. But a low price house is only good if you want to buy one. Too many voters already bought, so low prices won’t help them. I really think that there are a LOT fewer people “on the sidelines” than everybody thinks there are. We have to stop thinking that HBB is representitive of the population. It is not.
The only way for low prices to work politically is if there is massive — and I mean massive — walking and declaring of BK, to the point where you create a few states worth of renters. THEN, they can repair their credit whlie houses fall and fall and fall. When their credit comes back and they put a little away and keep or find a job, they will find low-prices houses waiting for them, hopefully not rotted and molded away.
Clearly, favoring profligate borrowers over prudent savers has been the rule of he land. Sad, really
“I really think that there are a LOT fewer people “on the sidelines” than everybody thinks there are. ”
Absolutely but with this caveat….. A dramatically lower price incentivizes market transactions. It’s that simple and I’ve said so for years. You want a vibrant market, the only way to get there is affordable prices which begets the question;
Why do you Realtors have such a problem with affordable housing?
Why do you elected public servants want me to commit financial suicide in order to provide shelter for the RAL family?
These are very simple questions that WE don’t ask frequently enough and they’ve gone unanswered. The evil axis of of public/private interests that created this problem have walked away, scot-free, refusing to answer these two questions.
I ask these questions and sit here in silence, waiting for an answer.
“Why do you Realtors have such a problem with affordable housing?”
Is it a problem of the average Realtor IQ lying below 100?
I think you’re spot on here, Oxide.
Most voters who are able to own homes already own them. To a some extent propping up housing prices is done to prop up the balance sheet of the middle class.
Those on the sidelines with cash demanding that the mortgage servicing organizations flood the market with ALL their shadow inventory RIGHT NOW so they can buy at firesale prices are being a bit naive.
This mess is going to take a long time to work out. And as we have already seen, a large component of this is tied to policy and politics.
We live in interesting times.
“I’d say you got about 6 months or so to turn this around or you are out of a job Mr President.”
Would the last holdout from the Obamanomics team have to go for this to happen? Because at this point, it seems like they have run out of new ideas, not to mention people to think them up.
I’d say you got about 6 months or so to turn this around or you are out of a job Mr President ??
Yeah, I agree Ben…Its just very disturbing to me that we could end up with Perry…I am hoping for someone, that could run down the middle, will step up…I still think Mayor Bloomberg would have a legitimate shot…Why he won’t do it is a little confusing to me…Makes me think that he has some dirty laundry that he does not want exposed through the vetting process of a Presidential Run…
I may be surprised by what happens, but I am holding out hope that the religious fundamentalist extremist Republican party candidates (Bachmann, Perry, etc) will not prove sufficiently close to the center of the political spectrum to stand a chance of being elected.
‘end up with Perry’
Why don’t the Democrats feel they should find a candidate better than Obama? It looks like he’s not gonna be re-elected, and he hasn’t won the nomination yet.
Why don’t the Democrats feel they should find a candidate better than Obama ??
Is there a outside chance that Obama and the Democratic party, recognizing that he is going to lose and trying to hold the presidency, declare that he will not run for a 2nd term ??
What would the right wingers do if they had to run against a successful democratic Governor ??
“What would the right wingers do if they had to run against a successful democratic Governor ??”
LOL…(oxymoron)
I think ultimately, the Democrats are going with the theory that when faced in the ballot box on election day, people will choose the devil they know rather than the devil they don’t. That’s the best thing they have going for in Obama, which they would give up with a different candidate.
In 1980 Ted Kennedy ran against incumbent Jimmy Carter in the early Democratic primaries for the US Presidency. If I recall correctly (and I’m really fuzzy on this) Kennedy dropped out by April.
I’d love to see the GOP find a centrist candidate along the lines of Eisenhower.
We sure could use some statesmen and stateswomen in D.C., but I’m not sure they exist anymore.
“the govt is propping the price up”
They tell us it is for our own good. Obviously not true, so why would they do it? The only reason I can figure is to prop up the existing debt. Keeping existing shareholders of the banks whole doesn’t seem to be working either.
“Keeping existing shareholders of the banks whole doesn’t seem to be working either.”
I don’t think they care about the banks’ shareholders, I think they only care about the banks.
A similar situation happened with Genaral Motors. GM was saved but the shareholders - the old GM sahreholders - were thrown under the bus.
The banks will live on regardless, but as for the bank’s shareholders … poof.
Have any of the rival presidential candidates uttered a peep on housing policy, or is this another one of those political “third rails” along side of the unsustainable Social Security system’s pension promises?
IMO the only third rail now is globalism.
Actually, someone did address globalism; but you’ll probably not hear of him beyond this video:
http://www.buddyroemer.com/2011/07/cnbc-roemer-expanding-the-gop-field/
I heard yesterday that one in four people in this country think Obama has done a good job on the economy. I’d say you got about 6 months or so to turn this around or you are out of a job Mr President.
That’s only true if you find a candidate w/higher poll numbers or that can sell themselves as a true outsider. So don’t look at many people in Congress to do that. After Obama, the US populace is already once bitten, twice shy to the “outsider” campaign rhetoric.
I still think at this point, anything could happen.
“the bill would use currently unrealized revenue by leveraging the first $500 billion of the estimated $1.2 trillion ‘in idle capital that U.S. companies have sitting off shore”
Sure, it’s not really debt if you put up what is someone else’s as collateral?
Then I really started laughing. Corporations are INDIVIDUALS! Individuals get taxed on their income outside the US. Oh my, it’s too ironic.
‘We Democrats have a very different message of what constitutes progress in this country. We measure progress by how many people can find a job to pay the mortgage.’
Are the Republican candidates going to come clean on how the hard line Republican stance on the debt ceiling deal is likely to result in higher unemployment just in time for the 2012 election?
‘…how many people can find a job to pay the mortgage.’
And for the Democrats in the virtual room, I note that the above statement has two distinct parts:
1) Find a job;
2) Pay the mortgage.
Finding a marginal job that barely pays for food does not offer much hope for the ability to pay off a mortgage on a home whose price is artificially inflated, thanks to the federal government’s ongoing program to keep home prices propped up at levels which are unaffordable for young families and other prospective new entrants to the Ownership Society.
Want us to pay the mortgage? The mortgage is too damned high.
There truly has never been a better time to rent. Our landlords are at least $60K underwater, so there is little prospect they will sell out from under us. And though the rent we pay them covers their carrying costs, it also enables us to avoid losing money on a falling-knife single family home purchase in a market which is temporarily perched on an artificially high plateau.
For me, the better time to rent was 2005-2006.
At the moment, house prices in my area have all dropped to the 2004 timeframe. 2004-price houses are nicer but they aren’t being bought. But anything livable that drops to 2002 pricing goes to “pending” pretty fast.
I know this sounds mean, but I’m hoping that the government cuts will crash this area to 2002 pricing, in about a year. At that point it will be a very good time for me to buy.
Government cuts and Wall Street woes will both bite this area in the butt.
“…the debt ceiling deal is likely to result in higher unemployment”
Report from your Man on the Dock: People get it. Debt funded government jobs are an abomination for the tax mules. Their future and their children’s future is being sold without their consent. They have to earn over $50,000 to be ahead of nonworkers on government cheese. Who benefits from this borrowing? Elites, Bankers, Foreigners, Illegals, influence peddlers, Insurance companies, and the politicans that they pay, blah, blah, blah.
You should hear what the Rednecks say at a Friday Night Chicken BBQ down at the Mom & Pop Grocery Store around a cooler of cold beer.
As for the jobs, here is my take: 10 million of them already gone in the last four years and all we got for it was more debt, more stupid government programs and bailouts, and higher food and gas prices.
I’m not sure that people really get it.
Yes, a bunch of jobs were lost just as Obama took office, but what about the millions of jobs that were lost before that? I’m thinking of the factories that moved from the Midwest to the South, to Mexico, and finally overseas. After that it was the compter/internet -related jobs , and then the insourced manual labor done by Latins without papers. The people that worked those jobs had no money, which led to the job losses we see today. This has been going on since 1981.
So what were all these sages at the chicken BBQ saying while this was going on under their noses for the past 30 years? Or did it escape them entirely?
“So what were all these sages at the chicken BBQ saying while this was going on under their noses for tht past 30 years? Or did it escape them entirely?”
They saw it but the situation was “explained” to them by pundits in the MSM who put a positive spin on the whole matter.
Ya got tossed out of yer good payin’ blue collar job? Ain’t you lucky. Now ya don’t have to bother quittin’. Now you can jest sit back as a con-sum-er and let them low wage producers somewheres else do all that there heavy liftin’.
Ya got equity in yer house? Yeah? Well that’s all ya need. Jest cash out some of that equity stuff ya got stashed away in your rafters and joists and live it up fer once in yer life. It ain’t as if this equity stuff will ever run out.
Can’t say about this bunch Oxy, I was only by there this week. I didn’t mean to imply the conversation was about the present guy so much.
Exactly. This $hit has been going on for 30 years and all of a sudden everyone is asking what happened and act as if the problem began since 2008 election. And I’ll be there to remind everyone of this historical fact every single time.
and your solution is?
Step 1
Stop acting surprised about it and stop acting as if it was some event that landed from outerspace post 2008.
Step 2
Start admitting that this was a 30 year failed experiment with a failed economic model.
Beautiful, exeter.
Thank you CA.
‘the debt ceiling’
If the global markets pull the plug on the US govt bond markets, how will that help the unemployed?
Don’t know, but I can tell you that pundits have worried over this prospect ever since I first developed an interest in economics, which was the late-1980s.
Do you remember this book, by a professor at a Texas university? The basic premise was that foreign creditors were going to dump U.S. Treasurys, leading to a second great depression:The Great Depression of 1990. What we got instead were the mothers of all tech stock, housing, student loan debt, gold and Beanie Baby bubbles.
Contrary to fears of foreigners exiting the demand pool, yields on Treasurys have never been lower than this past week, suggesting demand for them remains very strong, at least for the time being.
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If the global markets pull the plug on the US govt bond markets, how will that help the unemployed?
It won’t and if it happens anytime soon we will be bringing our troops home because we will need them here….Police will not be enough…
“The National Association of Realtors has a bus tour which has been scheduled to make two stops in and nearby Milwaukee.”
Coming soon to a neighborhood near you: The NAR’s Propaganda Bus Tour!
I can imagine the pronouncements issuing from the tour bus’s loud speaker:
‘Real estate always goes up!’
‘Buy now, or you will get priced out forever!’
‘Everyone wants to live here!’
‘Home prices will never go down, because everyone needs to live somewhere!’
‘They aren’t making any more land!’
‘But I have suggested very strongly that the Federal Reserve system and all the members have been counterfeiters for a long time.’
I’m trying to understand this accusation. The U.S. effectively went off the gold standard in the early 1970s with the end of the Bretton Woods accord. Has the Fed hence been counterfeiting ever since then? If not, at what point did the counterfeiting operation begin?
I think what this gets to is that the currency of the US should be created by the Treasury, not by a private bank and then loaned at interest to the Treasury. To some, this is a scam of the highest order.
So RP’s “long time” goes back all the way to 1913, then?
I guess I should order a copy of his book and read it. The price is right.
I’m particularly curious about what alternative to the Fed the likes of RP and other critics propose. It seems like handing all monetary policy over to the Treasury would be a recipe for Zimbabwe-style inflation. On the other hand, given the existence of the President’s Working Group on Financial Markets since 1988, I am highly skeptical of the Fed’s claim that it remains an “independent central bank.”
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59 used from $3.51
6 collectible from $9.99
We won’t have hyperinflation in this country unless there is a revolution and we get a dictator. The elite will not tolerate hyperinflation. Slow this or slow that is OK, because they can play the trade. In hyperinflation, there is no trade.
Hyperinflation fosters economic breakdown, wealth destruction and potential revolt — hardly what the PTB are hoping will occur.
We won’t have hyperinflation in this country…The elite will not tolerate hyperinflation.
They abhor deflation. They abhor hyperinflation. But they’re shooting themselves in the foot on a regular basis regarding policies that are supposedly meant to keep things in balance. At some point, they might have to actually admit even they need a strong middle class to give them their best chance at attaining that balance.
I have never understood this arrangement at all. The FED probably serves some kind of role, but should be a division of the Treasury.
And WHO actually owns the FED? Are there a group of shady characters in dark cloaks with trillion dollar fortunes behind it? Is it owned by the US?
Answer to who owns question :
http://www.factcheck.org/2008/03/federal-reserve-bank-ownership/
I guess it makes sense Congress should not have direct control of the FED, but when it comes to the act of creating currency (no debt should be allowed to be issued for which there is not corresponding currency) this absolutely should sit with the Treasury.
Agree 100%.
“…but should be a division of the Treasury.”
If you are really interested, there is a large body of empirical economic research showing the relationship between central bank independence and the ability to control inflation; the take home message is that less independent central banks are more prone to inflation, due to the moral hazard for the national government’s executive branch to run the printing press as much as possible to goose the economy, increasing the chances of leaving the next administration with the problem of cleaning up after an economic meltdown.
My question is, with the President’s Working Group on Financial Markets putting the Treasury Secretary in the chair position, is central bank independence compromised? And how about if the Treasury Secretary is a former New York Federal Reserve Bank president? It seems pretty incestuous, no?
Right ,who owns the Feds if its private ? I don’t remember seeing shares of FED on the New York Stock Exchange .
The Fed is definitely not a publicly-held company.
Not all things privately owned are for sale to the general public.
Guess what: The German DAX, representative of the world’s 2nd-largest economy, is down by over 20% this year, in bear market territory. U.S. pundits are busily explaining how it is different here, and why we are not headed for a double-dip recession.
Time will tell…
Speaking of progress; Slim posted a link to Smith’s 2006 simple bubble profile chart from 2006. He indicates there that peak foreclosure occurs before the second big leg down in prices. Caught my interest. So I wonder, how could one track the foreclosure numbers? Can it be done locally?
Slim is a she. Just saying…
Smith is a he.
“Speaking of progress; Slim posted a link to Smith’s 2006 simple bubble profile chart from 2006. He indicates there that peak foreclosure occurs before the second big leg down in prices.”
For past events, wasn’t the process much faster and cleaner from default, to foreclosure, to return to the market? In that scenario, it’s easy to see why the peak in foreclosures would precede a decline in prices.
However, this time, the process is anything but fast or clean with title issues among other issues that could drag on the process indefinitely. While I think the general trends and eventual outcome won’t be much different, the path to get there could be very different and especially slower.
I was under the impression either Ben or another hbb member had posted something recently (in the last few months) where a banker insider had admitted they couldn’t dump the entire inventory on the market at once because they knew prices would collapse if they did.
I know how to get the housing market moving again.
All the government has to do is get out of the way. No more Fannie or Freddie, no more “helping” homedebtors to hang on by their toenails. Just let the housing market crash to where the prices are attractive.
Yes, I know, that’s crazy talk.
April 26, 2011, 11:50 am
Whither the Housing Bottom?
By CATHERINE RAMPELL
4:54 p.m.
Today’s Case-Shiller index report showed that housing prices fell for the seventh consecutive month in February. Some analysts now say that a bottom may finally be approaching — for the second time.
It was, after all, two years ago that the index’s long slide appeared to be over, only to bounce up and then fall again…
As of February, the 20-city index was down 32.6 percent from its peak, and 10 metro areas posted new index lows for the third consecutive month. These areas were Atlanta, Charlotte, Chicago, Las Vegas, Miami, New York, Phoenix, Portland in Oregon, Seattle and Tampa. Detroit was the only metro area where prices rose in February, but prices hit a new bottom there just the month before.
Detroit — like Atlanta, Cleveland and Las Vegas — has home prices below 2000 levels.
Depending on when you think the housing bubble really started, this could mean that in some markets homes could be undervalued. But that doesn’t mean prices will soon shoot up.
“The enormous supply overhang of existing homes (particularly factoring in all those in foreclosure or soon to be) promises to keep pressure on prices for some time,” Joshua Shapiro, chief United States economist for MFR Inc., wrote in a note to clients.
Addendum: NPR’s Planet Money has presented the chart above operatically, by converting home prices into musical notes. It makes for a sad song.
First ,if everything is screwed up ,don’t you go to a business model
that worked ? You have to define the objective to begin with . For example :
Under 5% unemployment in USA
Health care thats affordable
Housing prices in line with income because most homes are financed based on income and long term ability to pay . Under 30%
of income toward housing costs .
Credit card debt limited to ability to pay .
10% of peoples budget going to savings or investments
Wages decent to meet cost of living ,wage increase with inflation
taxes that are levied sufficient to cover cost of government and
welfare needs for Society ,and protection and mass schooling ,roads ,etc.
Absense of Monopolies ,price fixing , etc .
Limit on tax breaks that increase profits for high profit industries
Protection of borders ,trade balances and proper tariffs
Limits put on money flowing out of USA ,encourging investments
made in USA .
Regulations that keep systems from corruption ,and law and order
Safey nets for population ,such as insurance ,old age retirement ,
FDIC insurance , unemployment insurance ,on and on .
War on poverty as a society goal
Capitalism based on supply and demand ,with regulations ,with some systems based on the need for the good for society .
inncentives for hard work ,creative effort and education advancement,investment and invention ,etc etc .
Growth incentives .Provisions for the common defense of the
Country . Goals for energy efficiency ,min pollution ,no dependance on
hostile nations . Governemnt for the people and the society as a whole . limits on national debt and goal for surplus .
So than its a matter of what will achieve that goal for a Nation .
Going back to the past you can look at periods that were highly productive and balanced in power with the major self interest groups .
i just don’t understand why Politicians are looking at models that don’t work The above was just a example of a model ,might be better examples of a good model . its all about having functional systems as a whole .
Great post, Wiz.
“i just don’t understand why Politicians are looking at models that don’t work The above was just a example of a model ,might be better examples of a good model . its all about having functional systems as a whole .”
Their models are working just fine for them, at least for some of them. Their goals are far different than yours. I much prefer your goals to theirs.
Much of what you listed was a reflection of the flow of power/wealth into a smaller circle of hands. I’d love to reverse it but we’re not the ones w/the power that can make it happen.
Also the debt load we have now will still be around our necks regardless of whether we return to these practices or not. As soon as interest rates are forced to reflect risk the real pain begins. I’m talking about the pain of the interest payment eating deeper and deeper into budgets at all levels of government. The bottom line is there is more debt than we have wealth. People have told us for years we’re already too late and no one has ever provided numbers I’ve looked at to prove otherwise.
The debt load has to be addressed as the big elephant in the room no question . We can’t have a jobless recovery ,along with wage decrease and price increase just so the Stock Market can
soar based on this lack of balance .
I don’t think the answer lies in keeping current systems and tranfering the pain to 85 % of the population that has nothing to give and can barley survive .
We can’t have this huge investment class that just makes money off of fake wealth creation and short term gains ,that doesn’t produce anything but bubbles ,and actually creates the situation in which proper investments aren’t made . It all get rich quick
crap .
The money can’t keep flowing out of the United States and we
expect that we can maintain the tax base necessary ,or the money flows that creates jobs .
Money keeps flowing to wrong things . In fact you have to much money flowing right now to what people consider safe havens
at time and other times bubble investments ,that than are shorted . It’s fake wealth creation by money flow rather than the merits of the investment ,especially in terms of long term benefit .
All this has created one of the most unstable situations for economies . Also Government cannot afford to pick up the gap
in what the powers want to tranfer to the backs of the taxpayers.
I’m sure the debt problem is the major hurdle ,but everything that has been done so far is not creating the situation that
will solve any of the problems for the majority of the population .
Look,its possible that extreme measures might be necessary in the correction process .