Bits Bucket for May 30, 2012
Post off-topic ideas, links, and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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More Blowback from the housing bust.
In response to dwindling property tax revenues and rising medical care costs for its employees, Kern County (CA) Board of Supervisors is seriously considering allowing an off shore, for-profit diploma mill to pay them $35M to allow it to rotate its “medical students” though Kern Regional Medical Center for ten years.
Ross “University” is a division of DeVry, Inc., which also trains veterinary assistants, computer repair technicians, and something called “criminal justice administrators” in its online “degree programs”.
Mind you, these students are not medical residents or interns or even MD’s from accredited American medical schools; their only qualification is having obtained a big enough loan to pay the tuition to the unaccredited Caribbean “medical school” that proposes giving them white smocks and sending them to Bakersfield to literally practice on Kern County patients.
Next time you advocate allowing massive numbers of otherwise unqualified people to obtain MDs to bring down medical costs through “competition”, think about what you’re going to end up with. Like the emergency patients who get brought into KMC by ambulance and end up being treated by one of these “doctors”.
http://www.bakersfieldcalifornian.com/health/x84913677/KMC-proposes-35-million-deal-with-Caribbean-medical-school
It’s pretty rare to see anyone who graduated from a “Caribbean” medical school on staff at a hospital (and for the reasons you mentioned above, I hope it stays that way). If you ever do, and perhaps have a choice to make between Doctor A from St. George’s and doctor B from unpronouncable university in India, take Doctor B.
Doctor B likely had to retrain in a medical specialty here in America and usually was at or near the top of his class in India.
All that being said, the students rotating at the hospital above will not likely have much responsibility for patient care. They do the clinical rotations on teams with the interns, residents and attendings.
As you must know, the attendings don’t actually “attend”, the residents don’t reside, and the interns rely heavily on the observations and experience of the nursing staff for oversight. Foreign “for-profit” students rotating through a low-level county facility are more likely to be given responsibilities beyond their ability and training than they might at a higher caliber hospital — which shouldn’t instill in us a great deal of diagnostic confidence in any case.
I always check the credentials of my physicians before I select them. I would pick from a well known USA medical school, such as Johns Hopkins.
—————
“Coveted medical school rotation spots in California”
“If the KMC proposal is approved, Ross will be given priority for those slots.”
“St. George’s, on the island of Grenada in the West Indies, was also pursuing KMC in hopes of securing those coveted rotations.”
“Having more guaranteed slots in California will likely attract more of the state’s students to Ross.”
“clinical availability is hard to come by”
—————-
And this is all in one article. WTF. Is there such a paucity of sick people that for-profit schools have to submit competitive bids for rotations? There are hundreds of poor counties in this country — deep South and Appalachia come to mind — which could use medical services of any stripe. Not to mention a burgeoning inmate population. Does Kern County look better on a resumé?
Then again, I do wonder about the unaccredited med schools. Are they unaccredited because they are truly low-quality, or because they didn’t lick the AMA’s boots?
Little known fact: There are 100,000 people killed each year as a direct result of malpractice. Now you know another reason why.
But tort reform ought to fix that, right?
“There are 100,000 people killed each year as a direct result of malpractice”
That can’t be possible. We all know those sorts of horror stories only happen in places with socialized medicine, like Canada or the UK.
It’s odd that we haven’t heard that term since 2004, isn’t it, considering we were told that (other than terrorism) it was the number one threat to the country.
Go any links on that Turkey? I want to make sure that those 100,000 deaths were caused by non-accredited doctors.
I was curious, too. Found this (note - PDF file): http://www.justice.org/resources/Medical_Negligence_Primer.pdf
“Little known fact: There are 100,000 people killed each year as a direct result of malpractice. Now you know another reason why.”
Another little known fact: Communism is responsible for upwards of 70,000,000 deaths worldwide. Doesn’t stop people from trying to bring communism to the United States.
When I had to have an emergency appendectomy late Christmas eve/early Christmas morning several years back, the on-call doctor was hammered drunk. He was unable to find my appendix during laparoscopic surgery, so he went for the old-fashioned laparotomy and I now have a scar that screams “drunk man with scalpel playing doctor.”
OMG!
“St. George’s, on the island of Grenada in the West Indies, was also pursuing KMC in hopes of securing those coveted rotations.”
KMC was already admitting Grenada students in the late 90’s. I knew one who was a medical technologist their, went to medical in Grenada for two years, came back and did a two year residency and is now a qualified doctor. You might look at them as a more qualified PA.
If this person only attended med schoool in Grenada for 2 years, (s)he then had to do 2 years of clinical rotations in hospitals, still as a medical student. After that, at least one year of internship is necessary before taking part 3 of Boards to obtain a general M.D. license. And the only place to find employment with those bare minimum credentials is in a very underserved area or public health clinic.
I’m not a fan of foreign medical schools for U.S. citizens but I do wonder if those first two years of classroom training are truly so different in second-rate schools. There is so much rote memorization in the early phase of med school; does it make much difference where or how a person stuffs the multitude of facts into their head? In my clinical rotations, we had a couple of transfer students from Guadalajara and Italy who seemed OK compared to my top-ten-school classmates. And they were better than me at putting together facts, signs and symptoms into a coherent picture of a given disease. Not all foreign med students are created inferior.
According to the article, these students aren’t foreigners. They are mostly American students who couldn’t get into med school any other way, so they went to a for-proft version of med school in the Caribbean. Unaccredited, which I guess could span anything in the range of “ok but not accredited” to a color printer where you buy the diploma.
I’m a bit skeptical of the U of the Caribbean med school for this reason: I saw an ad for it on the Metro.
Medical students are pursuing dual degrees in greater numbers
April 24, 2012
A growing number of medical students are deciding that a medical degree is not enough to compete in the job market and are enrolling in dual-degree programs, according to the American Medical Association.
http://www.cmanet.org/m/news/detail.dT/?&article=medical-students-are-pursuing-dual-degrees-in
There IS, however, a paucity of appropriately equipped and staffed teaching facilities.
The idea used to be that foreign graduates would be admitted for training in US teaching hospitals to (eventually) fill underserved slots in rural and urban health facilities here –and of course, back in their home countries.
But many Americans who weren’t qualified enough for American medical schools bought their way into these impromptu Mexican and Caribbean diploma mills and took advantage of the foreign graduate loopholes. Now it’s big business. Ross University in particular was started by the rich daddy of a kid who couldn’t get into US medical school.
Agreed that most Indian and Thai physicians in particular are far better qualified for the profession than these American cheaters.
“Qualified enough” is relative.
Just because someone is not accepted to a medical school does not mean they are not qualified. Medical applications are the only school applications for which you must provide a recent photograph.
I wouldn’t be surprised if St Georges in Grenada was not over run with very ugly med students.
I knew the “least qualified” medical student in the US one year. He was accepted off the waiting list to the worst US school (I don’t remember which off-shore school he was going to attend) and got the call to fill in the last slot a day or two before classes started. He was a menace as a child and didn’t improve much that I can tell. Wasn’t dumb, just an entitled jerk who never failed to take a short cut he thought he could get away with. Spent most of the semester before the MCATs taking expensive prep classes (daddy paid) while somehow getting young women to do all his classwork for him including papers and take home exams.
he shoulda been in sales
ahansen, why can’t we achieve economies of scale in medical care? Why can’t I see a nurse for my pneumonia for $50 instead of a doctor for $300?
Doctors, lawyers and teachers have long enjoyed a stranglehold on our money with their revolting, anti-American monopolies. It’s time to destroy those monopolies and bring their services to the public at true competition-reduced cost. By any means possible, up to and including driving them out of work if they won’t cooperate. After all, when a monopoly forms and demands to have my money, it’s war, and in war, all tactics are valid.
#1 Medical insurance isn’t really insurance except with catastrophic illnesses or injuries. Purchasing medical care for a flat rate isn’t cost effective.
#2 Employers do the shopping not the consumers in most cases so the consumer generally doesn’t care about the costs of the “coverage.”
#3 The consumer doesn’t pay for doctor visits or treatments or if they do their co-payment is a fixed price so again the consumer doesn’t care about the costs.
With the consumer buying medical care and not caring about the costs and the consumer wants all the care they are “entitled” the end result is a total lack of cost control.
The consumer needs to be impacted by the cost in order to be motivated to shop for the best deal.
The consumer needs to be impacted by the cost in order to be motivated to shop for the best deal.
True, CharlieTango.
In other words, our non-insurance medical insurance industry is to a significant degree responsible for sheltering the medical industry from feeling the real effects of competition.
Better,
Absolutely agreed, this country needs to train significantly higher numbers of PA’s, nurse practitioners, and medical technologists of all stripes. Routine clinical care should be vastly expanded and placed under the purview of these non-MD clinicians. But diluting the caliber of those we admit into our medical schools is a self-defeating proposition on the face of it.
The training to become an MD is so rigorous and so prohibitively expensive that only using the very best minds–as selected by the profession itself– can justify the enormous cost in time and (let’s face it) human suffering.
At times, any grunt in the military thinks he can be a better General than the one he’s serving under. But when lives are at stake, I’d prefer the buck stops with the best and the brightest.
As for the AMA, it’s far less influential than you might imagine it to be. Doctors are notoriously dismissive of both its power and influence, but it was founded for one reason– to control medical quackery. And it has– as evidenced by the number of for-profit entities that are willing to bribe lower-eschelon American medical facilities for the credibility an association with the US medical system will provide its “graduates.”
“Absolutely agreed, this country needs to train significantly higher numbers of PA’s, nurse practitioners, and medical technologists of all stripes. Routine clinical care should be vastly expanded and placed under the purview of these non-MD clinicians.”
Thanks but no thanks, I’ll keep seeing the guy who spent 10 years getting trained to be a doctor vs. the PA who took a community college class or two.
Last week I had dinner with a friend of mine who is a pharmacist. He told me some real horror stories of PAs writing prescriptions that had he administered as written probably would have killed the patient.
At times, any grunt in the military thinks he can be a better General than the one he’s serving under.
As someone who witnessed it first hand, sometimes they’re right :-).
Thanks but no thanks, I’ll keep seeing the guy who spent 10 years getting trained to be a doctor vs. the PA who took a community college class or two.
Last week I had dinner with a friend of mine who is a pharmacist. He told me some real horror stories of PAs writing prescriptions that had he administered as written probably would have killed the patient.
I looked into a PA program one time out of curiosity. It’s much more than “a community college class or two”.
The pharmacists I know can also tell plenty of similar stories about MDs, too.
Having said that, there are some situations a “real” MD (specialist) makes total sense. But I’d be fine with a PA I liked for GP work.
You would think the Ca Medical Licensing Board would be all over the Kern County issue.
Smithers,
You tend to get what you pay for. For those who do not, trained ancillary personnel who answer to a physician manager are a far more cost-effective way of dealing with public health issues.
Those of us who prefer to pay our boutique MD to administer our flu shots and write a refill prescription for our Lunesta are, of course, still free to do so.
Awaiting,
You would think so, but you’d be wrong. Just as we would expect the FBI to be all over our local governance, the Board of Realtors to be all over our local realtors, and the Attorney General to be all over our local courts. But this is Kern Kounty, the reddest of the good old boy Republican red. It’s not for nothing Hwy makes use of the $ in his posts about this place.
But I’d be fine with a PA I liked for GP work.
I used to see an ARNP as my general ‘doc’. She was by far my favorite ‘doc’ - knowledgeable, good bedside manner, etc. Certain exams were a bit awkward (being a guy), but I didn’t encounter any limitations in her skills.
But I’d be fine with a PA I liked for GP work.
I’ve gone to a PA here in Tucson.
Saw her at an art exhibit not too long ago. And that’s typical Tucson. A very artsy town. You never know who you’ll run into and at what gallery.
ahansen
Good point. You’re right. I guess I had an Idealistic moment thinking the licensing board of MDs would be on the straight and narrow. Thanks for the 2X4!
“Why can’t I see a nurse for my pneumonia for $50 instead of a doctor for $300?”
You should be able to, but what if it isn’t pnuemonia? And what if the nurse is told that if she refers more than 10% of her cases to the doc for further evaluation she is fired?
In fact why even go to a PA? Just do an internet search on your symptoms and diagnose yourself. It’s really cost effective and probably accurate 8/10 times. Just hope you’re not in that 20% that gets it wrong….
Diagnoses tend to require a certain minimum of equipment. Even so, the $300 minimum cost of a doctor’s time is untenable. And we must ever remember that regardless of how you obtained a diagnosis, pharmaceutical treatment thereof requires a doctor or some sort of licensed professional.
And that’s the problem; the system’s setup across the board to force us to pay the most. The USA pays the most in per-capita health care in the world. So my question is: Why does France have such a good system (#1 in the world for quality of care, per the U.N.) for only 55% of our per-capita cost? Why in fact do over 35 other nations than ours achieve better quality of care for less per-capita costs than ourselves? It’s like our government is acting like a guarantor of medical profits.
Better,
Um, a for-profit health insurance industry? The majority of the docs in America are salaried employees of corporations that are owned and operated by their parent insurance companies.
And those who are not are controlled by the fee schedules set for reimbursement by the insurance giants (currently as low as 10% reimbursement of billings).
Amazing the lengths that some states will go to in order to avoid touching one public union goon salary/benefit/pension…
Actually, KMC’s patient base is more Medicaid, illegal immigrantry, and HMO/Worker Bee care. You should be touting this development, not disparaging it, nannerz.
lmao…. “union goons”…
Banana…. you are GoonMan!
Does the campaign from here on in hinge on whether Trump/Romney can prove Obama was not born in America?
If Romney lacks the courage to say what needs to be said on the campaign trail, how can America trust him to say it when he faces the real world pressures of governance from within the White House?
Posted at 10:38 AM ET, 05/29/2012
Will Romney trump ‘birtherism’?
By Susan Brooks Thistlethwaite
Donald Trump speaks at a news conference in Las Vegas, Thursday, Feb. 2, 2012, to endorse Republican presidential candidate, former Massachusetts Gov. Mitt Romney, center, accompanied by Romney’s wife Ann. (Gerald Herbert - AP)
GOP candidate for president, Mitt Romney, has refused to repudiate Donald Trump, though the reputed billionaire continues to promote “birther” fantasies, the idea that President Obama was not born in the United States.
Romney’s apparent rationale for continuing to associate with Trump is “I need to get 50.1 percent or more and I’m appreciative to have the help of a lot of good people.”
What’s “good” about continuing to blow a racial dog-whistle in a presidential campaign? It is no secret that “birtherism” is racial code for “he’s not one of us.” More disturbing than Romney’s failure to disassociate himself with Trump and the birther fantasies, however, is labeling someone “good” who holds them. “Birtherism” itself is a troubling ethical failure that reveals how deeply divided Americans are on race despite their religious views that each person is created by God.
Despite decades of seeming progress on transcending racial divides, this racial gulf remains. Presidential campaigns expose this not only as candidates are selected and what those candidates say, but also through their “surrogates.” Trump’s function in the Romney campaign seems to be precisely to play the race card through birtherism. It speaks volumes to those whose ultimate choice in a Presidential candidate will be determined by the race of that candidate. Why aren’t we past this kind of division?
…
I don’t think the “Birther” movement is actually racist.
It has more to do with the Republican viewpoint that THEY are the only people qualified to run the country.
Its racist. McCain wasn’t even born in the US, but you never heard anyone question his birth.
“Its racist. McCain wasn’t even born in the US, but you never heard anyone question his birth.”
Really? I Googled McCain born Panama and got 1.3 million hits. Here is one of them.
NY Times on 2/28/08
WASHINGTON — The question has nagged at the parents of Americans born outside the continental United States for generations: Dare their children aspire to grow up and become president? In the case of Senator John McCain of Arizona, the issue is becoming more than a matter of parental daydreaming.
Mr. McCain’s likely nomination as the Republican candidate for president and the happenstance of his birth in the Panama Canal Zone in 1936 are reviving a musty debate that has surfaced periodically since the founders first set quill to parchment and declared that only a “natural-born citizen” can hold the nation’s highest office.
_____________________________________
Here’s another, also from 2/28/08 from CBS.com
“Does John McCain’s birthplace disqualify him from serving as president? The New York Times raises the issue in a report this morning. McCain is a citizen, but he was born on a U.S. military base in the Panama Canal where his father was posted. The Constitution says only a natural-born citizen can serve as president. So far no one born outside the U.S. has served as president.”
It speaks volumes to those whose ultimate choice in a Presidential candidate will be determined by the race of that candidate. Why aren’t we past this kind of division?
Is this referring to all the folks who voted for Obama simply because they wanted to see an african-american in the white house?
We can’t ask those type of questions.
He just asked it, nick.
This country makes it so awfully hard on racists anymore….
It’s every American’s right to vote for whom they want for whatever private reason they choose.
For instance, racists are free to vote against Obama, merely because of the color of his skin, without admitting their reason to anyone.
Romney Clinches Nomination, But Trump Overshadows
by The Associated Press
LAS VEGAS May 30, 2012, 04:25 am ET
LAS VEGAS (AP) — Mitt Romney has won the Republican presidential nomination after years of fighting, though his triumph was partially overshadowed by the celebrity businessman who helped him along the way.
…the focus Tuesday was on Trump, who once led polls of GOP primary voters. He endorsed the former Massachusetts governor just before the February Nevada caucuses, offering his support at a morning endorsement event in ballroom in the hotel that bears his name. In the same room Tuesday night for the fundraiser, Trump introduced Romney. He steered clear of the “birther” issue as he spoke to donors, though just hours earlier he had repeated his doubts about the authenticity of the birth certificate that shows Obama was born in Hawaii.
“A lot of people do not think it was an authentic certificate,” Trump told CNN of Obama’s birth certificate. When CNN anchor Wolf Blitzer told Trump he was “beginning to sound a little ridiculous,” Trump responded, “I think you sound ridiculous.”
…
$4 gas? Look over there, a shiny object called Trump.
Dow plunging again? Look, a shiny object called Trump.
20,000 people applying for 800 jobs at an assembly plant? Look, here, everyone, check out this shiny Trump.
16 trillion debt and climbing? Look, look, look, over here, really shiny object named Trump.
It hinges on what it always has: who has the best psycho-propaganda.
It’s more likely to hinge on Romney’s choice for VP. Evangelical to excite the fundy base? Moneymaker to attract Wall Street? Popular politican from a swing state? Minority to attract the non-whites? He won’t find all four in one person. He might not even find two.
I’d say that Romney should so all he can to court Evangs and Fundies. The GOP can usually take these folks’ votes for granted, but with an LDS candidate that puts their vote into jeopardy.
Fundies like the rattlesnake handling preacher who got bit and died last weekend?
Meg Whitman’s name is being bandied. If only she were Latina….
The great thing about aging pundits is that they are quite prone to saying exactly whatever is really on their minds.
Donald Trump Called ‘Bloviating Ignoramus’ By George Will
Posted by Eli Wads On May 29, 2012 2:11pm in Celebrity
Don’t you just love it how celebrities, businessmen and politicians mingle to give us in the media something to write about? Unfortunately for the electors, what Donald Trump and George Will have going on now is hard to call politics. With Donald Trump being called ‘bloviating ignoramus’ by George Will, this looks more like a verbal slapstick act.
Now, we all know that Donald Trump is one of the most popular men in the world, but it’s not a secret he’s not exactly the most pleasant person around. In fact, Donald Trump has been slammed more than on one occasion for his particular behavior. This time, it was conservative columnist George Will that slammed him down with quite an unusual term. Donald Trump was called a “bloviating ignoramus” by George Will.
George Will was on ABC’s “This Week” when he made the controversial comment. During the show, Will was asked about his point of view regarding his upcoming participation at Mitt Romney’s fundraiser, along with Donald Trump. His exact words were: “The cost of appearing with this bloviating ignoramus is obvious, it seems to me”.
Will continued his scrumptious statement with another controversy: “Donald Trump is redundant evidence that if your net worth is high enough, your IQ can be very low, and you can still intrude into American politics”.
…
“George Will may be the dumbest (and most overrated) political commentator of all time” Donald Trump
I rather agree with him on the overrated issue. George Will and his bow tie and prune-mouth.
Anyway this is great entertainment. You just can’t take this stuff seriously. But people do and Trump has a ball at their expense.
“Anyway this is great entertainent.”
And great publicity for Trump. He continually gets his name in the news and it’s all done for free.
America’s toughest Sheriff, Sheriff Joe Arpaio here in Maricopa County, the world’s most publicity whorish Sheriff, has jumped on the band wagon, sending deputies off to Hawaii and Indonesia to investigate all this….
His findings? …other than the birth certificate, the newspaper announcements, the doctors testimonies, and all that other already ignored proof… there is no new proof that Obama was not born in another country.
Joe Arpaio is one of the biggest wastes of tax dollars this state has ever seen.
“Joe Arpaio is one of the biggest wastes of tax dollars this state has ever seen.”
Apparently, the voters don’t think so.
“Apparently, the voters don’t think so.”
Most of us know he is a waste of money. We keep voting for him as symbolism since he is the only one that even pretends to be doing something about illegal immigration.
A vote of the media ho, waste of money, Sheriff Joe, is a vote to get serious about enforcing immigration laws.
So which Trump do you think voters on the right see? Elitist celebrity, or shrewd businessman?
I suspect that depends on how many real shrewd businessmen they know. Or IQ. Or both.
Cantankerous…did you lose money on a bad Trump real estate or something? Odd for someone to have such a fixation on the guy.
It’s all part of being cantankerous. You pick someone as a target, then focus on them for a while. At least until you find a new target.
I tend to agree with George Will on this one — probably for the first time ever in my life!
You apparently haven’t spent much time around these parts; otherwise you would be familiar with a long history of posts about Trump’s myriad flim-flam real estate development deals during the course of the Housing Bubble era. To see him put up on a pedestal as some kind of pinnacle of conservative political virtue is a bit sickening in light of all those who have been around here for a while know about the guy.
The thing that bothers me most about Trump is his legend in his own mind status. Despite such status, he still gets quite a bit of attention.
“…legend in his own mind status.
… he still gets quite a bit of attention.”
One bad turn leads to another.
Greek Exit From Euro Seen Exposing Deposit-Guaranty Flaws
By Liam Vaughan and Gavin Finch - May 29, 2012 4:01 PM PT
The threat of Greece exiting the euro is exposing flaws in how banks and governments protect European depositors’ cash in the event of a run.
National deposit-insurance programs, strengthened by the European Union in 2009 to guarantee at least 100,000 euros ($125,000), leave savers at risk of losses if a country leaves the euro and its currency is redenominated. The funds in some nations also have been depleted after they were used to help bail out struggling lenders, leading policy makers to consider implementing an EU-wide protection plan.
“These schemes were not designed to deal with a complete meltdown of a banking system,” said Andrew Campbell, professor of international banking and finance law at the University of Leeds in the U.K. and an adviser to the International Association of Deposit Insurers. “If there’s a systemic failure, there needs to be some form of intervention.”
With European officials openly discussing a Greek exit from the euro for the first time, savers in Spain, Italy and Portugal may start to withdraw cash on concern that those countries will follow Greece and their funds will be devalued with a switch to a successor currency. None of those nations has the firepower to handle simultaneous runs on multiple banks.
Pulling Deposits
Households and businesses pulled 34 billion euros from Greek banks in the 12 months ended in March, 17 percent of the country’s total, according to the ECB.
Deposits at banks in Greece, Ireland, Italy, Portugal and Spain fell by 80.6 billion euros, or 3.2 percent from the end of 2010 through the end of March, ECB data show. German and French banks increased deposits by 217.4 billion euros, or 6.3 percent, in the same period. Bank-deposit data for April will be released starting this week.
“Contagion fears might compel individuals in Portugal, Ireland, Italy and Spain to withdraw bank deposits due to concerns over solvency, redenomination, or otherwise,” UBS AG (UBSN) Chief Investment Officer Alexander Friedman said in a May letter to client advisers. “This could spark a major banking collapse, requiring truly unprecedented action from the ECB.”
…
National deposit-insurance programs, strengthened by the European Union in 2009 to guarantee at least 100,000 euros ($125,000), leave savers at risk of losses if a country leaves the euro and its currency is redenominated.
It would be difficult to operate a business these days with less than $125,000 on hand.
Agustino Fontevecchia, Forbes Staff
Bringing You The Bull And Bear Case From The Markets Desk
Markets
5/29/2012 @ 11:24AM
Housing Double-Dip Worsens As Prices Fall To New Lows; Recovery Nears
The feared double-dip in housing markets continues to grow deeper, with the Case-Shiller indexes hitting new post-crisis lows, reversing back to levels not seen since mid-2002. The rate of decline appears to be slowing, though, leading to some “cautious optimism” by economists that believe prices have found, or are close to finding, a floor. Analysts at Nomura expect home prices to turn positive by the end of the year, despite the recovery’s loss of momentum and possible spill-over effects from Europe.
All three of S&P/Case-Shiller’s main composites fell to new post-crisis lows in the first quarter, a report released on Tuesday showed. The national composite slid 2% during the first three months of 2012, and is down 1.9% year-over-year. The narrower 10-city composite is now down 2.8% annually, while the 20-city recorded similar declines, down 2.6% from a year ago.
Both composites are about 35% off their 2006 peaks, while five cities (Atlanta, Chicago, Las Vegas, New York, and Portland) made fresh index lows in March. The tide could be beginning to turn, though, as the rate of decline has eased compared with the nine cities that hit fresh lows a month earlier. Only three cities, Atlanta, Chicago, and Detroit, recorded annual declines.
On the flip side, seven cities (Charlotte, Dallas, Denver, Detroit, Miami, Minneapolis, and Phoenix) recorded prices above year-ago levels.
…
Tch! Still calling the bottom. We’re nowhere “near” the recovery, since prices rising again isn’t recovery, since it’s not NORMAL. Prices have to fall to the 1990s level, then stagnate for a while. Of course the media couldn’t say that in 2008 since it would have led to riots.
The more I read about the issue, the more I believe that the Housing Balloon started in the early 1990s. Banks were developing “innovations” in finance around then, with links to other attempts in the 1980s. Combined with direct government interference, it was all designed to eke out more profits from what Americans had been doing all along: Buying houses.
This crash/deflation is generational. It can’t recover in anything less than generational time, therefore.
Many here would suggest prices at the mid-90s levels with a few, FPSS most notably, suggesting inflation adjusted 1983 prices.
1983 prices
Did anyone ever calculate what 1983 prices + inflation would be equal to in terms of a particular years’ nominal prices?
Here’s one source:
http://www.jparsons.net/housingbubble/
“The more I read about the issue, the more I believe that the Housing Balloon started in the early 1990s.”
Ya think?
Housing Starts: Total: New Privately Owned Housing Units Started (HOUST)
2012-04: 717 Thousands of Units
Monthly, Seasonally Adjusted Annual Rate, Updated: 2012-05-16 10:31 AM CDT
Take homes:
1) Housing starts from the late-1950s through the Great Recession remained in the range from 800K-2.4M/year.
2) The gradual meltup from around 800K/year at the trough of the early 1990s recession (3/1991) through the housing bubble peak level around 2.3M/year (2006) was the longest unabated increase in housing starts in modern history (15 years); previous booms, before the so-called Great Moderation, were limited to five years’ duration.
3) The 3-year plummet in starts from 2.3M/year (2006) to a trough around 500K/year (2009) was the deepest, fastest decline in housing starts in modern history, and possibly the greatest which will ever be realized, before or after. (I’m guessing we will learn from the folly of so much central bank-sponsored cyclical smoothing, and refrain from making the same mistake going forward, but perhaps I am overly optimistic about society’s collective ability to learn.)
4) The tepid, halting recovery to a current level of 717K/year has still not brought the rate of housing starts back up to the range occupied from the late-1950s up until 2009 (a period of half a century).
5) The current weak recovery is supported by extraordinary and unsustainable government intervention to subsidize housing demand which would otherwise be nonexistent.
6) The aftermath of the Eurozone debt crisis, coupled with the eventual return to the market of millions of U.S. homes in default or foreclosure, is likely to result in a double-dip housing recession.
Any questions?
The feared double-dip in housing markets continues to grow deeper,”
Not around here
Euro Watch
Spain Takes Center Stage in Euro Crisis
By DAVID JOLLY
Published: May 30, 2012
PARIS — All eyes in the euro crisis fixed Wednesday on Spain, which is struggling to cut its budget even as its economy shrinks and borrowing costs rise.
With Washington increasingly concerned that the euro crisis will spill over into the United States, and into election-year politics, Treasury Secretary Timothy F. Geithner has dispatched Lael Brainard, a Treasury undersecretary for international affairs, to Europe for meetings with senior officials “to discuss their plans for achieving economic stability and growth in Europe,” according to a Treasury statement.
Ms. Brainard arrived Tuesday in Greece, and will be also be in Germany, Spain, and France this week.
On Tuesday, the governor of the Bank of Spain, Miguel Ángel Fernández Ordóñez, added to the sense of crisis, announcing that he would step down early, on June 10.
Mr. Fernández Ordóñez has taken some heat over a new bailout request from Bankia, the country’s biggest mortgage lender, which said Friday that it would need another 19 billion euros, or $24 billion.
Investors sold Spanish debt, seeking the safety of German bonds, driving the spread, or gap, between them to a euro-era record, Bloomberg News reported. The yield on Spanish 10-year bonds, which moves in the opposite direction of the price, rose 8 basis points to 6.48 percent in early trading on Wednesday.
The Euro Stoxx 50 index, a barometer of euro zone blue chips, fell 1.0 percent, while the FTSE 100 index in London fell 0.9 percent.
Shares of Bankia which are down 71 percent this year, fell 11 percent Wednesday as the Madrid benchmark Ibex 35 stock fell 1.8 percent.
Standard & Poor’s 500 index futures fell, suggesting Wall Street stocks would open lower. The S&P 500 rose 1.1 percent on Tuesday.
…
Originally published May 15, 2012 at 8:44 PM | Page modified May 16, 2012 at 2:30 PM
Boehner threatens another debt-ceiling showdown in D.C.
Treasury Secretary Timothy Geithner and senior Democrats protested that the Ohio Republican’s ultimatum could put the nation’s credit rating — and the broader economy — at risk early next year, when the debt is expected to hit its $16.4 trillion limit.
By Lori Montgomery
The Washington Post
WASHINGTON — The capital braced Tuesday for a replay of last summer’s tense battle over the burgeoning national debt as House Speaker John Boehner threatened again to block an increase in the federal debt ceiling without significant new cuts in spending.
Treasury Secretary Timothy Geithner and other senior Democrats quickly blasted the Ohio Republican, arguing that his ultimatum could put the nation’s credit rating — and the broader economy — at risk early next year, when the debt is expected to hit its $16.4 trillion limit.
“This commitment to meet the obligations of the nation, this commitment to protect the creditworthiness of the country, is a fundamental commitment you can never call into question or violate,” Geithner said. “We hope they do it this time without the drama and the pain and the damage they caused the country last July.”
…
dog and pony show…again?
Congress finally doing its job?
i guarantee you; they increase the debt ceiling.
The question I have is, with a Romney presidency, would there still be an ultimatum to cut spending?
Two possibilities:
1. Yes.
2. Implement the Obama strategy and say “we wanted to cut spending but obama left us in such bad shape…much worse than even we expected…that we need this stimulus. We need…to invest in America!”
ok…a third one…yes they cut spending…realize it’s diasatrous effects on the economy…then implement strategy number 2.
Really? They are going to attack and reverse the trade imbalances, both domestic and international, that created the need for unsustainable debt growth in the first place?
If so, SWEET!
May 29, 2012, 7:13 p.m. EDT
JP Morgan reported in Japan insider trading probe
By Atsuko Fukase
(”2nd UPDATE: JPMorgan Securities Investigated In Japan SESC Probe,” at 1320 GMT, misstated the name of Sumitomo Mitsui Trust Bank in the 10th paragraph. The correct version follows:)
TOKYO (MarketWatch) — J.P. Morgan Chase & Co. faces a new regulatory headache, as Japan’s securities watchdog is probing the company for possibly leaking insider information, a person familiar with the matter said.
J.P. Morgan was a lead underwriter for Nippon Sheet Glass Co. in 2010 when the glass maker issued new shares, and the company’s stock dropped sharply in the days leading up the announcement.
Japan’s Securities and Exchange Surveillance Commission Tuesday announced it was seeking to fine an asset management company called Asuka Asset Management Ltd. for short-selling shares based on illegally obtained information in advance of the offering from an underwriter. While Asuka gained Y60.5 million, or about $760,000, from the insider trading, the watchdog only recommended a fine of Y130,000, or about $1,600, because of the small amount of fees earned from its clients on the trades.
While the SESC didn’t name the underwriter under suspicion, J.P. Morgan was just one of two underwriters and the other, Daiwa Securities, has said it had no involvement in the case.
J.P. Morgan’s Japan unit issued a statement saying that it was cooperating with investigators. A person familiar with the probe added that a J.P. Morgan sales trader was the suspected source of the leak.
In the statement, JPMorgan Securities Japan Co. said that, “to date in connection with this matter,” the company “has not received any indication from authorities that suggest J.P. Morgan’s involvement either by the company as a whole, or by any department as a whole.”
News of the probe comes less than a month after it disclosed more than $2 billion in trading losses, triggering a firestorm of criticism in Washington and undermining a campaign by the financial industry to water down tough new regulations enacted in the wake of the financial crisis.
…
Shocked I tell you. Just shocked.
(btw, good find)
May 29, 2012, 12:17 p.m. EDT
New scandal puts J.P. Morgan in rare air
Commentary: J.P. Morgan’s latest scandal feels familiar
By MarketWatch
NEW YORK (MarketWatch) — J.P. Morgan Chase & Co. seems to be playing copycat to a Wall Street legend.
Unfortunately, it’s Goldman Sachs Group Inc.
In another blow to J.P. Morgan, Japanese regulators are reportedly targeting the bank’s role in underwriting an initial public offering in Tokyo. They’re looking into whether short-sellers allegedly traded on information leaked by the bank. Read full story on J.P. Morgan and insider trading in Japan .
Even if the charges prove false, the bank’s critics are sure to link them to the “London whale” trade which has saddled J.P. Morgan with more than $2 billion in losses and humbled J.P. Morgan’s famously smug chief executive and chairman, Jamie Dimon.
Dishing insider information anywhere in the world is illegal. Making a bad bet in the credit derivative markets may be stupid, but it’s legal.
Even without it, J.P. Morgan has enough scandal in the last year to rival Goldman.
…
Buy a House or Pay Off Student Debt
by Dave Ramsey
Published May 29, 2012
FOXBusiness
Dear Dave,
We’re on Baby Step 1 of your plan, and we have $1,000 saved. We have a baby, my husband brings home about $2,000 a month, and we have $50,000 in debt, the majority of which is student loans. My mother-in-law has offered to let us move in with her for a while in order to pay off our debts more quickly and save up to buy a house. Does this sound like a good idea?
-Ann
Dear Ann,
If your husband can get his income up, I’d prefer that you guys maintain your own residence. Moving in with a parent would be my last choice, if for no other reason than keeping your independence and maintaining some dignity. Plus, it’ll just be better for your marriage. But you don’t need to even think about buying a house until you first clean up the mess you’ve made.
…
$2000 month income and a baby? Wouldn’t that put them in foodstamp territory? And $50,000 of student loan debt? They went to college and all they got was a Lucky Ducky income?
Something tells me that this isn’t that uncommon.
I think they should move in with the MIL. A free baby-sitter would let wifey get a job and pay off those student loans a lot faster.
I think they should move in with the MIL. A free baby-sitter would let wifey get a job ??
How about not having the baby in the first place, let MIL have her own life and lady can get a job….
So now “living within your means” includes not being allowed to have even one child?
So now “living within your means” includes not being allowed to have even one child ??
Oh your allowed…No problem…Go for it…It can happen in a matter of seconds ya know….Its the free support later that is expected that I have heart-burn with….
IMO, having children is not a right but a privilege…A privilege that you should be prepared o take “full” responsibility for…
IMO, having children is not a right but a privilege…A privilege that you should be prepared o take “full” responsibility for…
I’m with you, Dave. And the responsibility part, along with the desire to take it on, is why I’ve never had children.
And a difficult chice that probably was Slim…But one that was obviously thought through…
All of this “privilege” talk is fine, as long as you understand that saying that, it limits the right to have children to the top 10% of the income earners.
Too bad I wasn’t smart enough to figure out that the politicians would sell us out to the banksters and 1%ers, and turn my kids from “affordable” to “unaffordable” in a generation. If I’d smothered them with a pillow when they were babies, I’d have saved a lot of money, and a lot of trouble, just to raise cannon fodder.
oxide said: “So now “living within your means” includes not being allowed to have even one child?”
Correct, if you can’t support it. I’ve NEVER had the means to support a wife and child. I’m the working poor. Bringing a child into this mess of a life is unconscionable, and I was never so immoral to believe that I should just do it anyway and let society pay for it.
Being a lifelong Libertarian makes my fellow Americans seem more like Martians with each passing decade.
All of this “privilege” talk is fine, as long as you understand that saying that, it limits the right to have children to the top 10% of the income earners ??
I said it was a “privilege” in that you took full responsibility for it…You do not need to be in the top 10% to afford children unless you chose to live in Manhattan…Point being, the decision to have children should be objective not just emotional…
Too bad I wasn’t smart enough to figure out that the politicians would sell us out to the banksters and 1%ers, and turn my kids from “affordable” to “unaffordable” in a generation ??
I agree 100%..
How much government interference in private activities are you willing to live with to make sure that having a child is a privilege? Really. It doesn’t sound very libertarian to me.
Now, if you are just advocating to let the little darlings starve or die of various childhood diseases if their parents can’t afford the vaccines, then that is a slightly different matter. But making reproduction a privilege requires medical intervention of some kind.
How much government interference in private activities are you willing to live with to make sure that having a child is a privilege ??
None…
The privilege part comes in conjunction with the word responsible…Its easy to be irresponsible if one knows someone else is going to pick up the tab…
I mean, for goodness sakes, does it take much effort today to NOT get pregnant….
All of this “privilege” talk is fine, as long as you understand that saying that, it limits the right to have children to the top 10% of the income earners.
And only the top 10% should be allowed to own a home, too. Oh yeah, and health insurance should be reserved for that small segment of society.
“It can happen in a matter of seconds ya know”
Ouch. Better go heavy on the foreplay then!
X-GS: well put
You do not need to be in the top 10% to afford children unless you chose to live in Manhattan
I call BS. You just told Ann and her husband that they shouldn’t have had the baby, and that Ann needs to get a job.
And that was the point of my post. HBB is fond of telling everybody to ditch the iPhone, ditch the Escalade, ditch the latté at Subx, and now we’re supposed to ditch the babies too, all in the name of “living within our means.” Is this how far we’ve fallen? Kids are now reduced to a luxury item to be crossed off the budget, as if they were a dinner at Applebee’s? Tomorrow we’ll be telling people that they can’t afford to live in a house because that’s beyond their means too — best to get an apartment. Oh wait, that apartment is too expensive and you have to live within your means — find a box… How far do you want to take this?
I think y’all are being a little dramatic on the responses to “one should be responsible about having kids” posts.
Frankly, I think everyone should run their lives like a business. And let’s face it, while kids (with good nature/nurture) occupy a spot on the credit side of the page, they also represent a large debit on the other side.
On the other hand, I don’t think most people think “society” should pick up the tab. I think they just don’t think at all. Their parents did it, and “everybody” does it, so they do it.
Perhaps if they thought of their lives a little more like a business, those of lesser means would finally consider the costs of raising a family and make appropriate plans or set more appropriate expectations…like having 0 or 1 or 2 instead of 3 or 4.
make appropriate plans or set more appropriate expectations…like having 0 or 1 or 2 instead of 3 or 4.
Comment by oxide
2012-05-30 08:25:57
So now “living within your means” includes not being allowed to have even one child?
Frankly, I think everyone should run their lives like a business.
Good idea. Let’s all commit ritual suicide at birth. It won’t please the stockholders but at least it’s guaranteed to not lose principal.
Yes, I’m arguing a straw man — that is, purposely jumping to an extreme case to make a point — but aren’t we sliding down that slippery slope already? May as well get to the bottom and decide what to do next.
I call BS. You just told Ann and her husband that they shouldn’t have had the baby, and that Ann needs to get a job ??
I went back and read my post…Can see why it could be misinterpreted in what I meant…
It was not my intent to suggest she get a abortion….Let me correct my statement which is where I stand;
Insert “a” for “the”….In other words, don’t get pregnant and you won’t find yourself in the precarious position that your in..
.
Asking people to make sure they have the means to feed, clothe, and raise kids to give them the best chance to be a net positive to society is a slippery slope?
Let me back up oxide. Maybe I missed your point.
Are you suggesting that each couple should be guaranteed one child? As in, since society sees a benefit to having kids, society should be willing to backstop the cost of one child per couple if they needed financial support?
society should be willing to backstop the cost of one child per couple if they needed financial support?
Does that mean I can sell my ‘child’ allocation?
Does that mean I can sell my ‘child’ allocation?
Can I sell mine too?
Oh, wait. I think my biological clock disqualifies me. Darn.
polly said: “How much government interference in private activities are you willing to live with to make sure that having a child is a privilege? Really. It doesn’t sound very libertarian to me.”
Uh, what? Where the heck did you pry that out of my statements?
As a Libertarian I don’t support all this government interference in private activities. It’s the same govt involvement that has driven up costs, making middle class living more unreachable. Subsidies, insurance and credit all drive up costs, absolutely, and you should clearly see by now how much the govt has either performed, mandated or encouraged those things.
In the end, regardless what happens on the outside of your family unit, you’re still responsible for supporting your children. And if you can’t support them, then don’t have any. It’s really that simple. Too bad 99% of the people can’t even follow that logic, so propagandized are we… hence my “Martians” comment. People (i.e. Martians) jump into having kids and then effectively dump the support costs on society as a whole. That’s about as anti-Libertarian as you can get.
LOL, Slim and J. More slippery slopes!
scdave and sleepless, X-gs fixer had it right.
For the past 30 years, the prices of household necessities have gone up while household revenue has stayed stagnant, mainly due to the relentless pursue of profit. How do you keep up with the increasing prices on less and less income? You cut your budget and “live below your means.” Again and again. Your “means” that you must live below keeps getting lowered, like doing the limbo. But there are only so many iPhone bills you can cut or lattés that you can’t buy. Then the profiteers lower the limbo bar again. So what do you cut next? You prevent having children.
I was hoping that someone would draw the line at that. I was hoping that we would blame the private sector, the profteers who are actually lowering that limbo bar of means to where even children can’t fit under it. But, noo-o-o-o, not HBB. It’s the workers being irresponsible! Good ol’ HBB put kids on the chopping block without a skipping a beat. Hand out the BC and occupy a job you irresponsible bums!
That’s what got my hackles up. I hate that we have become so conditioned — by the 1% — that our steadily decreasing standard of living is our own fault. I hate that that cutting little luxuries and living in destitution is now some badge of honor, to the point that we’ll cut even having children out of our national household budget without a second thought. All in the quest to “live within our means.” Even if those means are the wretched life of the migrant non-benefitted laborer… which is right where the 1% want us.
I’m not asking for the government to guarantee support of one kid. I’m asking the private sector and the 1% to quit bribing the government, be satisfied with 7% profit, and actually bring some JOBS back to this country, to the point where a kid is actually affordable again.
I hate that that cutting little luxuries and living in destitution is now some badge of honor, to the point that we’ll cut even having children out of our national household budget without a second thought.
And I agree.
My decision to forgo having kids was a decision based on my temperament, not on my economic situation. I know myself well enough to say that I’d be a crummy parent.
“…we’ll cut even having children out of our national household budget…”
Look on the bright side: There will be no need for government-mandated population control measures if households autonomously decide to forgo starting families.
Luckily “minorities” are picking up the slack. Get ready for a “majority-minority” population in a state near you! And a twisted notion of what “minority” even means in a rapidly evolving melting pot.
Bloomberg News
Nonwhite U.S. Births Become the Majority for First Time
By Frank Bass on May 17, 2012
Minority babies outnumbered white newborns in 2011 for the first time in U.S. history, the latest milestone in a demographic shift that’s transforming the nation.
The percentage of nonwhite newborns rose to 50.4 percent of children younger than a year old from April 2010 to July 2011, while non-Hispanic whites fell to 49.6 percent, the U.S. Census Bureau said today.
The trend is likely to have a far-reaching impact on the country’s political alignment, the nature of its workforce and on its economic future. Predominantly white, older enclaves in the Northeast and Midwest will increasingly rely on an expanding population of young Asians and Hispanics in the West and Sun Belt to support Social Security and other retirement programs.
“This is a fundamental tipping point signaling a change in our demographic structure for decades to come,” William Frey, a demographer and senior fellow at the Brookings Institution in Washington, said in an e-mail.
The figures highlight the rapid growth in the Hispanic and Asian populations, both of which have surged by more than 40 percent since 2000. Hispanics were 16.7 percent of the population in July 2011 and Asians were 4.8 percent. The black population has grown 12.9 percent since 2000 and makes up 12.3 percent of the nation. Non-Hispanic whites rose only 1.5 percent from 2000 to 2011, slower than the national growth of 9.7 percent, and are now 63.4 percent of the population.
Becoming a Minority
Four states — Hawaii, California, New Mexico and Texas, plus the District of Columbia — now have majority-minority populations.
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Get ready to enjoy your discriminated minority status, white boy!
“Becoming a Minority
Four states — Hawaii, California, New Mexico and Texas, plus the District of Columbia — now have majority-minority populations.”
you seems to be forgetting the apartheid model.
I think you have to be careful of exact language. She said he takes home $2000. That could be after taxes and (if he is with a large employer) some other withholdings like insurance. It might be a little less dire than it sounds. There really isn’t any way to tell from the info provided.
2k income is “poor” these days no matter how you slice it. Take home or pre-tax, it’s frickin’ poor. For one person!
Add a baby and it’s now poverty.
This is the world the next generation has inherited. They’re lucky they have a job.
A three person household doesn’t hit the poverty “guidelines” until their income is $19,090 or less in the lower 48 states. For a one person household, it is $11,170 or less. They don’t even qualify as poor.
With rents averaging around $800 for a crummy apartment I don’t see how a small family could not be considered “poor” on that kind of income, government “definitions” be damned.
The federal guidelines are bullcrap and NOWHERE near reality.
They should have been doubled 10 years ago.
“They should have been doubled 10 years ago”
No doubt. Of course, we would have 100 million people on foodstamps under that scenario.
we are close to that already even without doubling the guidelines.
Something else tells me the writer is looking for validation of a plan they already have in their head.
1) The “majority” of the debt is student loans. Let’s be fair: it is probably around $35k - $40k. So the other $10k is probably credit card debt. For what?
2) How did they amass the student loan debt? Did the husband or wife get a degree, or was it a grand plan with no finish line? Can the hubby stay home and mom go to work if she could outearn him, or do they have a hangup with that?
3) The take home income: is this before or after tax? Is there other income not in cash, such as a 401(k), that is not identified?
4) What is the living situation with the Mothter-in-Law? Is it an in-law apartment with seperate kitchen, or is it your hubby’s childhood bedroom? Can the Mother-in-Law provide daytime care for the kid?
Not that they’re in a good situation, but I suspect that someone (not the baby) has drank the real estate kool-aid and thinks it is the best way to get ahead in the world, and wants someone else to validate their opinion. This is why I hate financial columnists: there is only part of the story the writer selects to provide, then it is edited down further, and there is no real analysis of the situation. And 99% of the time, the writer is in deep trouble and just wants a “its ok you blew all your money on beany-babies, but here is an easy way out for you”. And in this case, Dave falls into the trap: “Can your husband get more income.” Yeah. Like the Mother-in-Law has an income tree growing in her front yard.
The stats are pretty bad for college grads… huge fraction of them end up unemployed. With only $50K in loans probably only one of them has a degree. Its quite possible the Mrs is unemployed with a degree, maybe in nursing or education. My cousin’s wife recently graduated, you’ll be pleased to hear that after decades of screaming “nursing shortage” we now have a huge glut of nurses along with imported Filipino nurses, at least locally. The education field is hopeless to enter right now, every recent grad I know is waitressing or trophy-wifeing or secretarial temp work or literally doing nothing at all. A decade ago my sister in law only had to work retail for a couple years after graduation before breaking into non-urban kindergarten teaching, but now its completely hopeless for anyone to enter. Nursing and Ed degrees are the “new” art history or liberal arts degree WRT future employment.
WRT to Overdog’s comments about the college degree glut not existing because “only about 30% of Americans over the age of 25 actually have a bachelor’s degree or higher” you can not assume that 100% of Americans over the age of 25 have jobs. I believe I recently read actual figure is closer to 50%. So the percentage of working americans with advanced degrees is somewhat less than 60% but probably not too much less. My waitress last week was a former student teacher at my sons school. Endlessly inflating education requirements can be seen where my high school only grandfather got up to the executive level at a national sized railroad, some college father got into management, and with my BSCS a couple years back and a couple decades of experience I’m lucky to have an entry level job … at all. At least until ageism kicks in (average football player has a longer career than average IT guy)
WRT to the link yesterday about grade inflation, don’t forget its a stealth ageism attack. My HS GPA was around 3.3 which according to modern standards indicates I was either the village idiot or a gangbanger. However I was pretty early in the grade inflation era, a couple decades ago now (vaguely gen X) so my 3.3 indicates I was a pretty smart kid who slacked a bit. My younger coworkers with 3.9s and 4.0+s seem to be idiots… Probably because you get a 4.0 just for showing up now.
And finally putting everything into one post, yesterday I claimed that primary producers will be the only jobs around the time of total debt collapse. Universal response was primary producers CURRENTLY use debt so they would all be outta business along with everyone else. However its a dependency thing… Farmers can, theoretically, farm without debt, even if they use debt now. On the other hand, independent cell phone contract dealers literally cannot operate, at all, without debt as an inherent part of doing business. Mortgage brokers cannot operate, at all, without a “working/expanding” debt system. But a small time farmer can plant and sell vegetables at the farmers market without debt. Also people can live quite well without pirate and scrapbooking stores, or cell phone dealers (pointless once the indebted national carriers collapse anyway) or mortgage brokers, but they will find a way, somehow, to get food. Therefore with extra explanation I stand my my original comment that the last to go/first to recover/only jobs after a debt collapse will be the primary producers and a couple others. For example, the day after the end of the world as we know it … or heck, probably the day before, too, most business transactions will probably be at a farmers market, not a mortgage brokers office.
trophy-wifeing
Is that a job?
Yes it is. No joke.
One you can do while resting on your back too. Just close your eyes and think about the new Beamer he gave you for your birthday.
But a small time farmer can plant and sell vegetables at the farmers market without debt.
I question this. Farmers have been in debt since the beginning of farming. Where is mikeinbend? He used to sell veggies for a pretty good income. He would know better than I.
IT careers are not shorter than football players unless you have some incredibly narrow definition of IT - I work in IT and I’m young with 12 yrs experience. My director (next position up) has 35 years.
The average player in the NFL lasts 4 years.
As for unemployment of college graduates, go here:
http://www.bls.gov/news.release/empsit.t04.htm
4% with a 77% particpation rate. It’s not 0%/100%, but that blows every other category out of the water, and the median individal income is $43k (from another website) vs $31k.
Good IT’ers and programmers do last, but a lot of people do drop out of the profession, as UC Davis Prof Norm Matloff has documented.
So it’s not so different from football. The not-so-great running backs drop out quick; Brett Farve had to be dragged out kicking and screaming… several times.
“Probably because you get a 4.0 just for showing up now.”
YMMV. My son just graduated with a 3.9 GPA and he was in the top 15% of his class. A lot of kids in his HS graduated with C averages.
A lot of kids in his HS graduated with C averages ??
So where are the public supported trade schools for these students ?? Nah…That will cost money…Lets let them go hang out in junior college taking remedial math and then getting their $10.00 per hour job or help support the money flow into the criminal system…
So where are the public supported trade schools for these students ??
That’s a good one. The Centennial State is only funding State U’s to the tune of $60 per credit. Vocational training? That’s what student loans are for!
I graduated HS 15 years ago with a 3.4 gpa that put me in the top 10% of my class (28/410). It seems like grade inflation has occurred.
There has no doubt been some grade inflation, but the claim that kids get A’s just for showing up is risible.
What part of IT are you in? Software (programming) or more hardware (Cisco, storage, servers, etc)?
I’ve got 3 open (soon to be 2, just found someone, finally) positions in IT hardware right now, all around 100K and am having a terrible time getting them filled. The market for people with CCIE/VCP/storage certifications is shockingly tight right now. I had one guy (without all the certs, IIRC, he had a CCNP) laugh at the salary we were offering (”I’m making almost 3X that today”), and he already had another offer on the table for a job that supposedly was going to pay him more.
IMHO, the IT field, at least for “hardware guys” is very, very strong right now. “The cloud” has really taken the need for mid-level people down, and the need for high level people way up; much of the talent is being centralized in big companies to support the cloud based computing initiatives.
Software, however, I’d agree; that’s a bad market and seems to continue to get worse. It’s too easy to outsource, you don’t need people with good interpersonal skills (or even the ability to speak the language) and locality does not matter.
The only interactions I have with hardware are purchasing it after it’s been spec’ed out by someone else.
I work in enterprise software. Hardware calls remind me of garage guys (and gals) talking about their hotrods - all horsepower and superchargers and it doesn’t really grip me. Definitely a limitation on my part, but not one I feel compelled to deal with quite yet.
Software is a difficult business, and, with the exception of high level consulting (going in and showing a GE how to use your software package, for example) it’s going to be very difficult to compete against the ongoing outsourcing of support. Again, for very expensive software, people aren’t going to accept “tech support from India”, they want a guy who they can call, fly to their office, and have work with them.
Hardware became a LOT more fun when virtualization really hit the scene. I was ready to give it up 5-6 years ago, I couldn’t stand the unpredictable nature of Microsoft operating systems running directly on hardware. VMware honestly saved my career in IT.
“VMware honestly saved my career in IT.”
VMWare saved Windows. Virtualization is also catching on with the UNIX side of the aisle too.
Virtualization is also catching on with the UNIX side of the aisle too.
At my previous job I was doing software development for an embedded linux platform. Virtualization allowed me to do development on any platform I wished - most notably my personal mac laptop so I could work whereever whenever…
Virtualization is also catching on with the UNIX side of the aisle too.
Lots of VMware infrastructure in the Linux SCADA world too usually with a virtual Windows honeypot near the exterior entry points. VMware recently bought out Shavlik, which was a good move, IMHO.
Vince,
I’ve had the opportunity to sit through a college graduation recently. Reading through the program,and some quick counting, just about 1/2 the class graduated with honors.
I’d say that 20% of my son’s HS school class received the “Honors” diploma. He qualified, but didn’t do the public service requirement.
When I did my MBA a few years ago, only a fraction of the class received “honors”. And A’s were not automatic. I know because I overheard plenty of students bitch about a B they received, plus I got a few myself.
I’d say that 20% of my son’s HS school class received the “Honors” diploma. He qualified, but didn’t do the public service requirement.
Good for your son! He recognized slavery when he saw it.
“They went to college and all they got was a Lucky Ducky income?”
Janus Capital Group is hiring telephone customer service reps for its mutual fund customers. Through an agency, as contractors of course. Finance, accounting, economics, or other business degree preferred. Temp to hire, no benefits, $11.50/hour
My wife has coworkers with degrees working P/T no bennie positions at the local public library for just above minimum wage.
Person with MLS degrees are a dime a dozen and schools of information studies are cash cow’s for university PLUS university’s benefit from a cheap labor pool. Of course students benefit by gaining valuable experience, which is useful until they graduate and can no longer work because they don’t have work study and “you’ll only stay until you get a real position” so they won’t even get hired for the temp positions.
Now the big thing for library schools is distance education so they can charge more people for the degree and further saturate the market. Then there’s the complaints about not enough qualifies applicants which makes me think they should raise entrance standards.
There are folks with all sorts of degrees, not just Library Science.
We have a baby, my husband brings home about $2,000 a month, and we have $50,000 in debt, the majority of which is student loans.
Just like the stars in the night sky they’re already exhausted, but you can still see the light.
“Just like the stars in the night sky they’re already exhausted, but you can still see the light.”
+ lots
A whole $1,000 saved? That does not even cover a transmission or a hot water tank.
Move in with mom pronto and save some money.
You are one mis-step away from bankruptcy.
That is what credit cards are for.
GAAAAAAAAAAA!
Responding to the Dave Ramsey article at the top of the thread.
Just read last night’s later posts…
If Keynes is ancient history, then so is Adam Smith, so is Von Mises, so is Hayek. So are any previous RE bubbles in Texas, California, and Japan.
So is historic data such as income to house prices.
Let us never mention these things again.
We are in a new paradigm.
“We are in a new paradigm.”
We certainly are. Unfortunately, it’s one that doesn’t work.
“Brother, can you paradigm?”
Nice, prof.
“We are in a new paradigm.”
neo-liberal capitalism…it’s not new…been around for awhile.
the housing bubble just exposed it.
As the saying goes, history doesn’t repeat, but it certainly rhymes…
So is historic data such as income to house prices.. ??
I respectfully disagree….It is a new paradigm…This one with the foundation being interest rates…So, its not income to house prices…Its income to house “payments”…
“Its income to house “payments””
Correct. Which is why 200K houses are selling in my neck of the woods. A 200K mortgage is less than rent, which is all that matters to the “howmuchamonth” crowd.
Until you add in HOA fees, property taxes and metro district taxes. All those little things that get pushed to the bottom of the ad in little letters.
Until you add in HOA fees, property taxes and metro district taxes ??
Well, unless you are absolutely “Brain Dead” you would include those in your “payment” analysis now wouldn’t you…Besides, you don’t need to do it…The underwriters will…And they won’t stop at taxes either…They calculate utilities and reserves for replacements nowadays also…
Taxes are low out here. About $1000 on a 200K house. Lots of nabes here with no homeowners assocs too.
Thats pretty low…Taxes here (vari) but roughly 1.2% with a 2% max per year increase…
Wow, what part of Colorado are you in. I live on the southside of Denver and that wouldn’t even cover the schools part of the tax bill.
I think Colorado is somewhere around Colorado springs…
I’m in Loveland. The tax on our 400K McMansion is $2000.
PMI also.
Comment by Ben Jones
2012-05-29 14:40:23
“Keynesian theory is contrary to common sense.”
Only if you fail to accept that one person’s money is someone else’s debt. Money is not created by work. Money changes hands when someone trades it for work. Money is created when someone borrows it into existence.
No debt, no money. No money, no economy.
You have to accept this basic truth of economics before ANYTHING else makes any sense.
EVERYONE should spend less than they earn, accumulating money. That is just common sense, right? Sure, and mathematically, it completely and totally IMPOSSIBLE!!!! If you do not understand why it is impossible, then you can not understand anything more complex about economics.
Back to Ben,
” We all can see the value of living within your means, keeping debt as low as possible, producing goods and services that have real value, etc.”
And those that understand what money is, see that it is IMPOSSIBLE for everyone to live within their means. There would be no money!
As far as producing goods and services that have real value, how is someone supposed to get a job doing that, making $20 an hour, when a few hundred miles from my house there are people willing, even eager, to do those jobs for $2 an hour?
Or, in my case, I’m hoping to continue to get paid $45 an hour to do a job that there are tens of millions of people in Chindia eager to do for $5-$8 an hour.
“They say forget all that; borrow, print the money and spend it defending against space aliens and all will be super.”You never have to pay it back; something for nothing. It’s just bunk.”
If everyone paid back their debt, there would be no money and no economy. Why are you so intent on their not being an economy?
“Well, there’s lots of big shots that think we can close all our factories, send them overseas, and borrow/spend our way to prosperity too. And most people in power think we can borrow gobs of money for the military, stick our head in every hornets nest in the world, and we’ll be safer for it.”
So, you agree with me? We need to attack and reverse the trae imbalances? Leap of logic here… If international trade imbalances are bad, because the imbalance can only be funded by borrowing the money into existence to fund it… if this is true… then, are internal trade imbalances (richee getting richer) the same level of bad as the international trade imbalances?
“Keynesians are the equivalent of religious snake handlers.”
Keynesians have accepted the basic economic reality that money is just someone’s debt. Without debt, there is no money. If we need more money, then we need more debt.
I am of the basic philosophy that if the economy needs an ever increasing amount of money (international trade imbalances, or the rich getting richer) then the economy is fundamentally and fatally flawed and doomed to collapse.
What we should be focused on is fixing the fundamental flaws that have made our economy dependent on an ever increasing amount of money/debt… That is, attacking and reversing the trade imbalances, both international and domestic.
I’m an not convinced that it was just World War II that ended the Great Depression. What happened economically when WWII started? People (and countries) with money, spent it. In the USA, we cranked up the max income tax bracket, and encouraged people with money to spend it. In Germany, the government confiscated money and spent it. In England, tax rates were cranked up and money was spent. In France, the government fell, rich became poor as money and debt were wiped out, new money was created and spent. In Soviet Union, money was taken and spent….
If you want to get the economy growing, you need to get the people with money, to spend it… AND, we need to end free trade which is dragging down the wages of American workers to that of the 3rd world.
“AND, we need to end free trade which is dragging down the wages of American workers to that of the 3rd world.”
Testify, brothah!
“No debt, no money. No money, no economy.
You have to accept this basic truth of economics before ANYTHING else makes any sense.”
I don’t have a clue what you are talking about. Could you cite a reference so we can at least get a clue, or did you just make this stuff up?
the dollar is backed by u.s. treasuries…u.s. treauries are debt…in order to have $ 1 in the economy…there must be $ 1 in debt.
debt is money… money is debt.
the spice is the worm…the worm is the spice.
the sleeper must awaken!
The private banking sector multiplies the seed of government debt.
The gov prints a bond and sells it to the Fed Reserve, creating money. The government spends it into the hands of people. Those people deposit it into a bank. The bank then loans out new money leveraged against those seed deposits.
Isn’t the bank loaning out the deposited money? No. The money is still in the account of the person that deposited it AND it is also in the hands of the person that borrowed it. The private banking sector has created new money to loan out.
But how is that possible? How do they just create money by lending it into existence?
Money is debt. When a bank makes a loan, it is creating money and debt in equal offsetting amounts.
If banks can just loan money into existence, then how can it have any value? Simple. Debt is also created, and the people with debt will need to get money to repay the debt. The lending of money into existence, creates its own demand for money as people try to get money to repay the debt.
Loaning money into existence creates both money and debt, creating both a larger money supply and a larger demand for money.
So, what is the problem? IF we keep total debt at a level where people will continue to try to get money to repay the debt, there is no problem. If we allow debt to grow so large that people lose hope and quit even trying to get money to repay their debt, then the debt defaults and has to be written off as noncollectable. This poofs the money that was created by the debt, out of existence. If you traded goods and services for money, and then that money poofs out of existence, you lose faith in money, and the economy stops to function effectively.
So, why are trade imbalances bad?
Trade imbalances can only be funded by the creation of new money/debt. Eventually, the debt will grow so large that there is no hope of repaying it, they stop trying, and the debt and money poof out of existence, people lose faith in money, and the economy stops to function.
Therefore, rather than embracing trade imbalances as the main goal of the economy as we have been doing for 50 years, we need to reverse this thinking and begin aggressively attacking and reversing trade imbalances.
that’s why the fed isn’t technically “printing” money. every dollar they create is offest by the obligation of someone else to pay it back.
“that’s why the fed isn’t technically “printing” money. every dollar they create is offset by the obligation of someone else to pay it back.”
Hmmm… When the Fed buys long-term debt (US Treasuries, mortgages, mortgage backed bonds) it is doing so with money that did not previously exist.
There is something I am missing here.
Let’s say the Gov issues $100B debt that the Fed buys with money it creates out of thin air…. The Gov now has $100B, but also owes the Fed $100B. Money and debt are offset.
The gov spends that money. Now people that sold stuff to the gov have the $100B, and the gov owes the Fed $100B. Money and debt are offset.
People deposit the $100B in to the private banking sector, then the private sector makes $90B in loans. There is now $190B in money ($100B in the accounts of those that sold stuff to the gov, and $90B in the accounts of the people that took out the loans but have not spent the money yet) and $190B debt ($100B the gov owes the Fed and $90B the people that took our the loans owe the banks). Money and debt are offset.
Now, the people that borrowed the money withdraw and spend it. People who get it, deposit it, the banks make new loans against these deposits… eventually the total debt increases to (assuming 10% reserve instead of the current 3% for most loans) 10x the Fed seed, or $1T. $100B the gov owes the Fed, $900B people owe banks offset by $1T in the hands/accounts of someone/somewhere in the system.
I follow up to this point.
Now is where I seem to miss something. QE.
Banks are up against the lending limit as they have fully multiplied the seed by the inverse of the reserve requirement. To re-liquify the banking sector so they can lend again, the Fed buys some of the loans from the banks. So, let’s say the Fed buys $100B of the $900B in loans that people owe banks. They do so with money that did not previously exist.
Now, people owe $800B to the banks and $100B to the Fed. The Gov owes the Fed $100B. Total debt = $1T.
The $1T is still in the hands of someone, somewhere in the economy… but now there is also $100B in the banks that the Fed used to buy to loans via QE.
So, in QE, are we breaking the balance that money is offset by an equal amount of debt? Is some new debt created somewhere, like a repurchase agreement that the bank owes the Fed $100B?
In the case of QE, I do not see the new debt that is offsetting the money that the Fed is creating and handing to banks.
What am I missing here?
i think the fed is still lending money directly to the banks…it’s just that the financial assets it “purchases” are still owned by the banks…they are just using it as collateral for the loan from the fed.
“I must not fear.
Fear is the mind-killer.
Fear is the little-death that brings total obliteration.
I will face my fear.
I will permit it to pass over me and through me.
And when it has gone past I will turn the inner eye to see its path.
Where the fear has gone there will be nothing……Only I will remain.”
that one…and this one are my two favorites:
“I’ll miss the sea…but a person needs new experiences. They jar something…deep inside…allowing us to grow. Without change…something sleeps inside us…and seldom awakens. The sleeper must awaken.” – Duke Leto Atreides
Doesn’t matter how many times you repeat it “Money is Debt” is still incorrect. AKA “Mammal is Dog”.
+1. This posit was tedious six months ago. Now it’s just an annoying waste of pixel. Charity is not debt. Produce is not debt. Created is not debt. Found is not debt. Barter is not debt….
Sheesh.
None of those are money, either.
Really? Tell that to Medecins sans Frontiers and all the other organizations I get a deduction for.
Nice one, A. I’m fond of that particular organization. I’ve often dreamt of working for them, if I had that skill set.
I made it up, like Einstein made up Relativity.
I’m looking forward to the published version of your theoretical findings.
Has anyone read “Cheap - the high cost of discount culture” by Ellen Ruppel Shell?
I found it interesting, would be interested in what others thougnt.
Cheap has been added to your HBB Librarian’s reading list.
“Only if you fail to accept that one person’s money is someone else’s debt.”
My money doesn’t have to be a person’s debt. It can be the Fed Reserve’s debt.
“EVERYONE should spend less than they earn, accumulating money.”
Two criticisms. First, EVERYONE can accumulate money as long as the Fed Reserve increases its debt.
Secondly, you will never have everyone accumulating money. Say for instance I want to buy a house. I don’t have to go into debt to do it. I can save the money and then buy the house. And guess what! When I withdraw the money from the bank to pay, I
will have a dramatic short-term negative savings rate. My saved money that was the Fed Reserve’s debt goes back into the system. And no debt was required.
Likewise, once people retire they tend to have a negative savings rate. Except for whatever money might be left as an inheritance, the lifetime net savings rate for people is 0.
In other words, everyone can live within their means and accumulate money most of their lives. Your theory does not disprove this.
“I am of the basic philosophy that if the economy needs an ever increasing amount of money (international trade imbalances, or the rich getting richer) then the economy is fundamentally and fatally flawed and doomed to collapse.”
Technically the economy doesn’t need more money, but it helps. As the economy grows in real terms (making more stuff, growing more crops, more services, more transactions) either the money supply has to grow, the velocity of money has to increase, or prices have to fall. Velocity is impossible to control, and falling prices (which include wages) tend to have negative side effects, so increasing the money supply to match the growth in the economy is a tricky but worthwhile task.
So an increasing money supply is not in itself a warning sign of trouble, but the sudden increase in money supply we’ve seen of late is.
“My money doesn’t have to be a person’s debt. It can be the Fed Reserve’s debt.”
The Federal Reserve doesn’t owe anyone anything, and therefore has not debt. It LOANS money to people by buying debt. Much of the debt that it buys is Federal Government debt, and if you are a US Citizen, then you owe a share of that debt.
“In other words, everyone can live within their means and accumulate money most of their lives. Your theory does not disprove this.”
The money they are accumulating… where does it come from?
The Federal Reserve does not borrow money into existence. It loans it into existence buy buying debts of someone/something (like the government).
Is not the federal government debt really our collective debt. So, even if I as an individual am accumulating money, but that money was borrowed into existence by the federal government, which is really my debt, am I really living within my means and accumulating money faster than I am going into debt? Or, am I axxumulating money in one hand and debt in the other for a net 0 sum gain?
“The Federal Reserve does not borrow money into existence. It loans it into existence buy buying debts of someone/something (like the government). ”
How can the Fed Res buy debts of someone/something else if there is no money?
How can the Fed Res buy debts of someone/something else if there is no money?
Do you doubt the reality of QE-I, QE-II, and the coming QE-III?
I have some South Afrikan Krugerands.. Whose debt is that?
Nobody’s. Did somebody tell you it was money? I don’t think it is by Darrell’s definition.
And what store are you going to walk into and exchange the rands for goods and services? In this country, none. Because those Cougar Rands are not money in this country.
Ask Ben Bernanke. Since money is not longer used as common tender for goods and services, it is no longer considered money. They are an asset that has to be sold to get money, that can then be exchanged for goods and services.
And, before you talk about going back to the gold standard, even under the gold standard, the VAST majority of money was lent into existence by the private banking system. 5 billion ounces of gold and 8 billion people on the planet. The gold in my wedding ring is more than my share, if we tried to use gold as the only “real money”.
Because those Cougar Rands are not money in this country.
Cougar Rands? Are they Rand-y women of a certain age?
Do tell, man. We want some details here!
“Rands are not money in this country.”
Wanna bet? I’d accept a rand for this 55 gallon barrel full of buckwheat honey I just harvested. Or this filly my mare birthed. Or as a thank-you gift to the ranch. Or….
Actually, you will probably need to pay someone a Kruggerand to take the filly.
You guys think boats and airplanes are holes you pour money into?
At least boats and airplanes don’t eat and crap, even when you are not using them.
Signed,
Former horse-owner/unpaid stable hand/mucker
No debt, no money. No money, no economy.
Money is simply a medium of exchange. It has nothing to do with debt.
If everyone paid back their debt, there would be no money and no economy.
See my statement above. Money is a medium of exchange, but also a proxy for labor. Debt is simply tomorrow’s labor paid today. An economy would still exist with all debt paid as people would still be able to provide labor for goods (or instead of goods, a proxy, like money).
f you want to get the economy growing, you need to get the people with money, to spend it
Now you are discussing the velocity of money, not the supply of money. There is a difference. US Treasuries (debt) do not “back the value of the dollar”. The taxing authority of the US government, the US military, the money supply, and demand for dollars provide the variables for the “value” of the dollar. Treasuries have nothing to do with the spot value of the dollar… it has much more to do with interest rates, i.e. at what rate money is loaned.
Actually, let me rephrase that last part. The value of the dollar is set by supply and demand, i.e. money supply and the need for dollars to enact trade.
Demand is impacted by confidence in the dollar as a medium of exchange (since it is a fiat currency). So, in essence, the good faith and credit of the US government. That is supported by the things I listed above: taxing authority, US military, etc. As long as the government can borrow money and tax, it doesn’t need to “print”, which means the value of the dollar is indeed impacted by Treasuries in an indirect way. Also, as debt can increase the money supply, the more debt there is, the more dollars in existence. However, those dollars are offset by a debt that could be paid or cancelled.
Bottom line, money is a medium of exchange. We use dollars because of the things I listed above. Debt (treasuries), in and of itself has nothing to do with money, or the dollar. If the US started printing dollars to pay back debt, the value would decline, not because of more money in circulation, but because demand would drop as people lose faith in the value of the medium of exchange…
Question: Why were people losing faith in the United States $ back in the crash of 2007 and 2008? Was it because the government was becoming insolvent? Of course not.
The answer is, because the dollar is not backed ONLY by the US Government. The $33T that existed back then, now $38T, is backed by an equal amount of debt.
In late 2007, of the $33T that existed, only $5T was owed by the United States Government (The Federal Reserve does not count the trust funds and other intergovernmental borrowing as real money or real debt). Of the other $28T that existed, $13.7T was backed by household debt and $10.7T was backed by business debt.
People were all like…. Ohs, nos. No one is going to pay back their mortgage. Every business will go bankrupt. The $27.5T in private secotr debt is going to default, collapse, not be paid back, be written off as noncollectable, and the $27.5T created by that debt is going to poof out of existence… quick, get rid of your dollars before they poof!
Debt backs money. Debt creates money. Debt creates the demand for money as people need to get money to repay their debt.
That is, of course, until people stop trying to pay back the debt and it has to be written off as uncollectable. Then both the debt, and the money the debt created, cease to exist.
yep.
Most of what you say is true, in that with a fractional reserve banking system, a bank can lend more than it has in total receipts. As debt is loaned into existence, so are dollars (supply). Those dollars are then circulated in the economy (velocity). All this is true, however, it doesn’t change the fact that money is a medium of exchange. I get paid in dollars. I can convert those dollars to something else, for instance gold. If all the debt in the world is repudiated (global jubilee), I would still have gold, and no debt. Because gold has traditionally been a money (as well as a store of value), I could trade that gold for other things. No debt involved…
The confusion I think is that our fractional-reserve banking system is based on debt, but the banking system is not the economy and money is not debt. Dollars may be created via debt, but that has little to do with the actual value of dollars… again, supply and demand determines value.
Northeaster, where do dollars come from? How is a new dollar created? How does the money supply grow?
hint: it doesn’t start with a mommy dollar and a daddy dollar that are very much in love…..
See my post above as response.
Your confusion and others is that the fractional reserve banking system is not the (whole) economy and money is not debt, rather a medium of exchange and a convenient store of value. Debt is a function of the economy and happens to be a transmission mechanism for the creation of dollars in a fractional reserve banking system. You keep missing that part…
Unless mummy and daddy are the US and PRC.
This only works as long as there are people willing to pay back the debt scary huh
Glasser — low housing prices are good.
http://www.bloomberg.com/news/2012-05-29/low-stable-housing-prices-what-s-not-to-like-.html
He believes we are bumping along the bottom, and will be for some time. Bad for sellers, but good for buyers.
About Edward Glaeser
Edward Glaeser, a professor of economics at Harvard, is the author of “Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier and Happier.”
Is he the only highly-regarded housing economist who speaks the plain truth in the MSM?
Micro, meet macro.
Money is borrowed into existence.
For the private sector to keep borrowing the money into existence that we need to fund our trade imbalances (lest our trade imbalance plagued economy cease to function) we needed asset price inflation so that households would have collateral to borrow against.
Low house prices means the collateral goes away, the debt defaults and can not be repaid, the debt is written off, the money poofs out of existence, the debt stops flowing, the trade imbalance plagued economy stops functioning.
Low house prices = good for individuals that do not already own a house.
Low house prices = death for a debt based economy where a significant portion of the money supply is leveraged against house prices.
Low house prices = death for a debt based economy where a significant portion of the money supply is leveraged against house prices.
How else are middle class Americans supposed to be able to afford expensive vehicles and Disneyworld vacations?
Exactly… With wages failing to keep up with inflation, how are consumers to keep spending if not MEW?
WT Economist, there’s a larger issue here: Low prices for EVERYTHING is not only good, but should have been the natural result of the alleged high-energy economy in which massive economies-of-scale were at work. Like I asked in another posting, why can’t I see a nurse-like medical practitioner to treat my pneumonia for $50? Demand for such services should be driving lesser-rated GPs into the system.
But we stopped doing many things like that. As industries fully mature, they become far more interested in controlling the government, to assure customers. In effect, they all try to force people to buy, to maximize profit. Innovation and competition (necessary for all cost reduction) become rare.
If Americans were still being hired to do their own work, this wouldn’t be much of an issue. We’d grouse, but would still be able to afford our own civilization. But we gave up on domestic hirings, too.
So we’re doomed. The entire U.S. economic system has literally nothing under it.
Our 75% consumer driven economy has decided that we don’t need to pay people enough to… consume.
Frickin’ genius.
Our 75% consumer driven economy has decided that we don’t need to pay people enough to… consume.
Frickin’ genius.
Karl Marx figured this out a while ago.
“Our 75% consumer driven economy has decided that we don’t need to pay people enough to… consume.
Frickin’ genius”
And they are right. As long as we can ensure that everyone has access to huge amounts of debt, which they never have to pay back, no problem. Consumers borrow mass sums of money into existence, people selling those consumers goods without having to pay them sufficient wages accumulate all this newly created money, and as long as those consumers and keep borrowing and using the borrowed money to make interest payments on their existing debt, NO PROBLEM….
Right?
All we need to do is ensure that people can borrow endless amounts of money without them ever having to pay on or for any of it. Seems easy enough. It worked for 25+ years. Why can it not continue to work?
It worked for 25+ years. Why can it not continue to work?
Past performance is no guarantee of future results…
Because debt is a claim on future labor. Eventually, you reach a point where there is no more future to borrow against. This is true for countries as it is true for individuals… when that point happens, it’s game over, aka debt is repudiated.
Northeastener… I think you need to adjust your sarcasm detector.
Many times I have ranted about how, over the last 30 years, we have increased each household’s share of the total debt from 2.5x median income to 5.5x median income and how there is a max, and we can not continue to increase debt at 3x the sustainable rate.
For Polly:—> Why wouldn’t the lender take legal possession and liquidate? Why leave it in the name of the defaulted borrower for 3 years?
———————————————————————–
Comment by polly
2012-05-29 13:10:07
The bank/bondholders for whom the bank is action don’t own it until a foreclosure takes place. The bank/bondholders can decide to pay the taxes to prevent the town or county from bringing the action (or that may be reqired in the servicing agreement). That is their choice. The tax collector doesn’t care who pays. Why would they?
I still don’t know what the confution is.
If they foreclose they stop being able to accrue the income they are paid to service the loan. They also risk being sued by the bond holders someday if they foreclose and sell at the “bottom” of the market. We may know that is absurd, but to a lot of people it isn’t. In addition, they may not have the paperwork needed to do the foreclosure.
We have talked about all this many times. It hasn’t changed.
they may not have the paperwork needed
No worries- it’s all electronic now! It’s all recorded…somewhere…they tell us…
They can recreate the paperwork through the courts. That would just take lots of time and legal fees.
Exactly. Even back in the old days when banks kept the loans they made on their own books, there were warehouse fires and original documents were sometimes “lost” through misfiling. All states have ways to do what has to be done without the original docs. But it takes time and employees and lawyers and therefore money.
Why spend the money now when someone else might take care of it later and especially when your bonus is tied to you not spending any money in your department. Besides, you can’t get permission for the head count anyway.
It’s somewhere in the “cloud”
Polly
If more than 90% of USA mortgages are insured by F&F then why wouldn’t the banks foreclose and secure the insurance payout as soon as they see a default?
That I don’t know. There may be something different with F&F since they are currently government owned and I don’t know if there is something different going on with those servicing agreements.
Here is a pure guess. I think that a lot of the F&F loan originators end up being the servicers. I think. If they didn’t properly underwrite the loan in the first place (it didn’t really qualify to be F or F) then foreclosing now and trying to get the payment is a little like asking for the underwriting to be examined to see if it was a qualified loan in the first place.
GSE are buying up 90% of NEW loans, but that is only because the other pipelines have pretty much closed down. In the past it was very different….
According to Fed Reserve, there is $13.5T in mortgage debt.
$4.4T is held by financial institutions
$5T is held by GSE, FHA, VA, or other gov.
$3T is held in MBS or other pools
$1T other.
http://www.federalreserve.gov/econresdata/releases/mortoutstand/current.htm
The ones in the pools are the ugliest loans, therefore, more likely to be the ones in default.
The loans in those “private mortgage conduits” under the pools heading has dropped from over $3T to $1.6T in 4 years. That is a HUGE chunk of the foreclosure wave.
10 million loans losing $100,000 each… poof goes $1 trillion dollars.
Polly / Darrel
You have raised a very interesting point and I think Darrel has nailed it down for you.
From Darrel’s TBTF numbers only .6T has moved downward and almost all of that from S&Ls, and we know (think?) that most S&Ls were direct lenders.
Consider that to individual lenders who reduced their exposure by 30% (.3T) with only 1.3T vs TBTF 3.6T. This would suggest a bank further exposure of about 1T(E), as Darrell suggests or 1.8T (E) compared to S&Ls.
Interestingly, if you look at FHL and FNM pre and prior nationalization, the only paid out insurance policies appear to be S&L (.6), private and individual (1.9), for about the 2T difference.
I think that this is further proof that TBTF is getting away with promoting values to buy them time to reduce their leverage.
Thank you both for your excellent responses.
Darrell, can you expand on that a bit?
Is the $4.4 T directly held? Because financial institutions can hold MBS. That was a huge part of the original problem (before mark to market got thrown out).
Patrick, S&L = Savings and Loan? Do you mean Credit Unions?
1 HOUR ago
Video
Facebook shares tumble below $30
Facebook shares give up another 10% as options trading begins for the shares, giving investors yet another way to go bearish on the company. Kaitlyn Kiernan has details on The News Hub. Photo: Reuters.
LOOSERS!
LOOSERS!
LÖSERS!
Something tells me he will soon be back on the list…
Facebook stock drop fallout: Zuckerberg off top 40 richest list
Facebook CEO Mark Zuckerberg on his honeymoon in Capri, Italy. (Giuseppe Catuogno / EPA / May 29, 2012)
By Deborah Netburn
May 29, 2012, 8:30 p.m.
Well, that didn’t take long.
Less than two weeks after Bloomberg’s Billionaire Index declared Mark Zuckerberg the 29th richest person on Earth, the Facebook founder has fallen off the list entirely.
Bloomberg’s index measures only the wealth of the top 40 richest people in the world, and as of now, Zuckerberg is $800,000 behind the current No. 40 on the list — Luis Carlos Sarmiento, a septuagenarian who controls more than a quarter of Columbia’s financial industry.
Of course, no one is suggesting you feel bad for the 28-year-old newlywed — as of Tuesday his estimated net worth was still a whopping $14.7 billion, according to Bloomberg. But on the other hand, the guy did lose $4.7 billion in just 11 days — at least on paper.
(Could this be why he skimped on tipping a waiter in Rome?)
…
Facebook is for loosers. See also Businessweek article linked from Drudge noting that 40% of accounts on social media sites are spammers, and that 8% of messages sent on social media are spam. LOOSERS!
The other day, a member of one of my LinkedIn writers’ groups described LI as “this wasteland of promoters and recruiters.”
I’m inclined to agree. And I’m also relieved to find such intelligent discourse in that particular writers’ group. It’s actually a community. Y’know, like this one.
Less than two weeks after Bloomberg’s Billionaire Index declared Mark Zuckerberg the 29th richest person on Earth, the Facebook founder has fallen off the list entirely.
But I imagine that he still sits in the front pew.
44 MINs ago
Update
Treasury 10-year yields retouch all-time low
NEW YORK (MarketWatch) — Treasury prices rose on Wednesday as increasing worries about Spain’s fiscal health and its banks weigh on the euro and equities, increasing the appeal of the relative safe haven of U.S. bonds and the dollar. Yields on 10-year notes fell 7 basis points to 1.68%, after a brief tumble below that level. “Ten-year Treasury yields hit 1.68% and a break of the 1.67% low will take us to new territory, most likely seeing calls for a test of the 1.50% area,” said Richard Gilhooly, U.S. director of interest-rate strategy at TD Securities.
P.S. The all-time low was reached in December 2008, during a period when the Dow Jones Industrial Average was headed down towards a March 2009 low in the mid 6K range.
All time low? I remember when the DOW was hovering around 1000.
Not all time low in stocks. All time low in treasury rates.
Until today…
Never been a better time to own Treasurys than the 2008-2012 period!
May 30, 2012, 11:18 a.m. ET
US 10-Year Treasury Yield Hits New Record Low
By Cynthia Lin
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)–The benchmark 10-year U.S. Treasury yield hit a record low of 1.641% on Wednesday as fears about Europe’s financial crisis hit a boiling point.
A combination of concerns about Spain’s banking system and Greece’s future in the euro zone compelled global investors to seek out financial safety. The scramble to haven assets dragged 10-year Treasury yields below the 1.672% mark originally set in February 1946 and briefly matched last September amid fears about a Greek default.
German bunds, considered their region’s safe haven, were also on the receiving end of flight-to-safety flows. The two-year schatz offered a never-before-seen 0% yield, while the 10-year bund yielded a fresh low of 1.286%.
“This is fear,” said David Coard, head of fixed-income sales and trading at the Williams Capital Group. “If we didn’t have the fear and panic over in Europe, we wouldn’t be at these levels.” He warns that while he believes there is still some room for yields to go lower, the market can also turn on a dime because the buying is being fueled by emotion.
With Treasury yields venturing into uncharted territory, many traders are citing 1.5% as the level to watch for 10-year notes. The seven-year note also scored a new record low of 1.076% at one point in the session. The 30-year bond gained 2 8/32 to yield 2.731%. Bond prices move inversely to their yields.
In contrast, yields rose on bonds issued by debt-ridden euro members. Spanish 10-year debt yielded 6.613%, while investors demanded Italy pay 5.922% on its 10-year debt, according to CQG.
After a short-lived sigh of relief in March, when Greece managed to conduct an orderly debt restructuring, fears about the continent’s credit crisis resurfaced quickly in recent weeks. The newfound anxieties center around Greece’s potential departure from the monetary union because of a shake-up in the country’s leadership. Investors are focused on the June 17 elections, a pivotal event that will determine if a pro-euro zone or antibailout ruling party is put in place.
But while nerves about Greece’s potential exit spurred a lot of the Treasury-buying in recent weeks, it never took 10-year yields below 1.672%. Bond managers say an exit would be more symbolic than detrimental to the financial links across the euro zone, whereas problems in Spain or Italy would have serious and widespread implications.
These fears hit home Wednesday when the European Central Bank signaled it would oppose any attempt to fund a Spanish bank bailout using the central bank’s lending facilities. Spain has already pledged to rescue Bankia, its third-largest lender, but it comes at a time when the country is having financial problems of its own.
“The reality this morning is that the ECB expressly rejected a unilateral idea from Spain that they inject bonds into Bankia, funded by the ECB,” said Richard Gilhooly, interest-rate strategist at TD Securities. “The prospect of a further deterioration in the global economy intensifies amidst policy paralysis.”
…
I have owned treasuries during this period if my 401(k) is telling me the truth. Doesn’t seem like I’ve made a whole lot of money owning them, though. But I haven’t lost any.
Too late to “sell in May and go away”?
May 30, 2012, 9:07 a.m. EDT
U.S. stock futures drop; Spain downgrades weigh
By Shawn Langlois, MarketWatch
NEW YORK (MarketWatch) — U.S. stock futures took a hit before the opening bell on Wednesday, sputtering along with the European equity markets and oil, after Spain’s debt was thrust deeper into junk territory.
The yield on the 10-year Spanish government bond surged 22.7 basis points to 6.690%. A level of 7% for Greece and Irish 10-year government bond yields prompted bailouts for those nations. Read more.
Futures on the Dow Jones Industrial Average (DJM2 -0.94%) slipped 110 points, or 0.9%, to 12,473 ahead of the opening bell.
Futures on the S&P 500 index (SPM2 -0.93%) declined 10.9 points, or 0.8%, to 1,322.50.
Futures on the Nasdaq-100 (NDM2 -0.83%) gave up 21.5 points, or 0.8%, to 2,538.
…
As far as the city itself goes, I can tell you that this is true.
But WTF - so I wait 12 years for the bubble to pop, decide to take the plunge and quit being a tenant, only to find out that I am 6 months late for the party?
We’ve been looking since Jan. 2012. Five offers to date, all outbid, even though in each case we offered over asking. We did find one small house with views that would make me happy until the day I die, but the owner is asking such a ridiculously high price that no one is interested (we even bid higher than we knew it would ever appraise and she still rejected our offer).
Here’s to the election and the fall of Europe bringing prices down further.
San Francisco Bay Area Home Prices Increase 8.3% in April
By Dan Levy - May 17, 2012
Home prices in the San Francisco Bay area rose in April for the first annual gain in 19 months as buyers acquired costlier properties, according to DataQuick.
The median paid for houses and condominiums was $390,000 in the nine-county region, up 8.3 percent from $360,000 in April 2011 and 8.9 percent from $358,000 in March, the San Diego-based data firm said in a statement. The year-over-year advance was the first since September 2010.
Median changing 8.3% does not mean that house prices increased 8.3%. Median can be greatly effected by the mix of houses sold.
There is still a lot of bubble mentality out there. Large pools of money are still looking at real estate as an investment, not an expense. Prices may have dipped, but the hyper-speculative environment has not gone anywhere.
Prices may have dipped, but the hyper-speculative environment has not gone anywhere.
Rents here have become insane and now everyone has dreams of striking it rich by landlording.
Very true with your median comment, but it is an indicator of there being less distress in the markets (fewer low priced homes, and more higher priced homes).
Same thing happened in Phoenix a few months ago.
I just read about in CA how various levels of distress are falling:
REOs now represent ~22% of sales, down from 28% a year ago;
Short sales are flat year on year, representing 19% of sales.
Per Zillow, homes that were foreclosed in the prior 12 months still represent ~30% of all home sales.
So, I think this means that 22%+19%+30%=71% of all home sales are either distressed, or were foreclosed within the past 12 months…wow…a very high number (but falling).
I think there may be some double counting in my math…many of the REOs were likely foreclosed within the prior 12 months.
The overall percentage of home sales that is likely distressed is probably on the order of 50-60% as opposed to 71%.
My bad…
But WTF - so I wait 12 years for the bubble to pop, decide to take the plunge and quit being a tenant, only to find out that I am 6 months late for the party?
Other than inheriting a San Francisco home your best bet is to wait until the tidal wave of boomers retire and die-off if you’re waiting to buy there.
Other than inheriting a San Francisco home your best bet is to wait until the tidal wave of boomers retire and die-off if you’re waiting to buy there.
I’ll be ready to retire then.
I’m *almost* a boomer myself. Born on the cusp (1966) but don’t quite fit into gen x or boomers.
You’re Gen X. People date the end of the Baby Boom at 1964 or 1965.
wait until the tidal wave of boomers retire and die-off if you’re waiting to buy there ??
Flawed logic…Boomers between 55-65…Life expectancy (assuming it does not improve) roughly 80…You prepared to wait 20 years for them to die-off ??
Flawed logic…Boomers between 55-65…Life expectancy (assuming it does not improve) roughly 80…You prepared to wait 20 years for them to die-off ??
SF has lots of really old people too.
Anyway, RE purchases are best done during a dip. Maybe you can see one happening earlier? Maybe facebook will drag things down to soup kitchens and garbage can fires?
SF has lots of really old people too ??
Yeah, but they are not boomers which is what you were suggesting sfrenter to wait for them to die-off…
“Life expectancy (assuming it does not improve) roughly 80″
And falling…
And falling… ?
Link ??
I could see it falling nationally as we increasingly become land whales, but aren’t SF types health food types?
Figured Ben would appreciate this little nugget.
Bangor officials grapple with abandoned homes
“The Bangor area missed the worst of the housing crunch, but it was still bigger and deeper than anything this community has seen since the Great Depression,” said Dan Wellington, who was Bangor’s code enforcement officer for 18 years.
Wellington said that when it came to tracking down the owners of abandoned houses, he sometimes felt more like a detective than a code enforcement officer.
…Many times, tax records, the city registry and even bank records don’t help, forcing people like Wellington — and now Martin — to play Perry Mason and go digging — deep.
“After two days of making calls and doing Internet searches, we tracked down one house where the mortgage was being held by a pension fund in Dallas, Texas,” recalled Wellington. “I talked to someone there and they said they bought a bundle of around 8,000 to 10,000 high-risk mortgages at 9 percent.
“He said they thought they were guaranteed a 9 percent return on investment and that it was a heck of a deal, but now they’re all toxic and they have to unload them.”
Wellington said he heard some sobering tales while researching the issue of abandoned houses.
“We’ve had several landlords of rental properties who got so desperate they just took off and left the tenants to their own fates,” he said. “The tenants hadn’t seen their landlords in three months and we’d have to tell them the end was here and they’d have to find somewhere else to go because the winter was coming and there would be no heat or water in the near future.”
Martin said when his office is notified of an abandoned house, people from the office usually go there along with a police officer to secure the site by boarding up open spaces and making sure people can’t gain easy access.
“We get occasional calls about them,” said Jason McAmbley, the Bangor Police Department’s community relations officer. “It’s more an annoyance than a problem for us.”
McAmbley said Bangor residents have been very vigilant about reporting activity in empty houses in their neighborhoods.
“People going in those houses are not going in to live there,” he said. “They’re going in temporarily to drink or use drugs. I think it’s more stealing things and causing damage. The most we’ve seen is buildings being stripped of copper pipes and fixtures.”
Martin said the frequency of such calls was about once a month last year, but that pace has slackened.
“In the last six months … I think the frequency of abandoned buildings calls has gone down,” he said. “Compared to a lot of places, we’re not feeling it like they are.”
Wellington agrees, saying he chalks that up to old-fashioned Yankee values.
“Mainers are pretty conservative people and a lot of us got our mortgages from Bangor Savings and other local institutions rather than fly-by-night lending places,” Wellington said.
The Bangor City Council held a workshop on abandoned properties last year and is keeping tabs on the issue.
http://bangordailynews.com/2012/05/29/news/bangor/bangor-officials-grapple-with-abandoned-homes/?ref=mostReadBoxNews
No bubble in Madison, Wisconsin?
Why rent when you can reap the benefits of being a proud homeowner at this unbelievable price
http://www.trulia.com/property/3061392734-8206-Starr-Grass-Dr-207-Madison-WI-53719
I found this gem as I have been apartment hunting the last few weeks and have gotten to know this area quite well. I couldn’t believe a new listing would actually use this in its advertising.
This area of Madison, Wisconsin, was cornfield 7 years ago. I’m convinced the complex I’m moving into was supposed to be condos, but it came on the market too late so is being used as apartments.
Anway, there are three condos like this (at least one is a foreclosure listed for less than 100K), the other two are listed at 114K and 114.9K.
By my estimates the “owners” were paying between $930 to $1048/month (assuming only 3.5% down), including piti and condo fees. Less than 1/4 mile up the street, in same area, you can rent a similar unit for $895.
Adding in selling fees and losses these people were paying an additional $230 to $471 PER MONTH to own rather than rent. At best, these places shouldn’t sell for any more than $100,600. One of the places was originally purchased for $133,800.
I’ve located another development that seems fairly stable - a few hundred units, very few foreclosures and very few resales. What concerns me is the developer is dribbling out the new units to keep the price up and the few resales have all been for less than the original purchase price. The developer does do rentals and it’s interesting that the price to rent is less than what it would cost to purchase the same unit.
I have heard over the past eight years that there was no housing bubble in Madison, WI, or Dane County because the prices weren’t as high as in California or Florida, but no agent has been able to explain to me how the price of a house could double in eight years with no bubble.
I am seeing more and more REOs listed as “cash only”, as well as quite a few homes with tenants selling very cheap but without being able to inspect or even go inside at all.
I hope those investors get burned when they realize how tough the renters’ rights are here in San Fran.
A colleague’s son is trying to buy an REO on the peninsula and she said that he is experiencing the same problem there. REO’s are taking cash only, and there are lots of people with cash to pay.
REO’s are taking cash only, and there are lots of people with cash to pay ??
Getting a loan not only takes to long but the REO administrator is never quite sure it will close…The trend has been to want the sure thing at the highest possible price even if they possibly leave some money on the table…Ben probably has some insight on this since he is active in the REO market…
What worries me is where this cash is coming. If the larger trend is anything like what I’m seeing here in Tucson, be very afraid.
A lot of our local all-cash buyers seem to be coming from the ranks of those who are Of A Certain Age. They have big piles of money saved up in retirement and other accounts, they’re afraid of the stock market, and the interest rate on savings is in the dumper.
So, they’re taking those stacks of cash and putting them into rental houses.
I don’t know about you, but the thought of dealing with tenants in my Of A Certain Age years makes me even crankier than I usually am. I think it will test the patience of a lot of these newly minted in-VEST-ors.
I’m not looking forward to the day when they simultaneously throw in the towel on their rentals.
Around here, the cash is coming from a few different places:
1. Mom and dad, buying for kids;
2. Individual investors;
3. Professional invetors who are pooling cash (mom and pop don’t have enough to buy an entire house, but will contribute $50k to a pool).
Thank the Fed. People think that a 5-10% yield with the headaches of landlordship is better than 0.1% in a savings account.
If they hold the properties all cash, I don’t think they are adding instability to the market.
Oh dear, AzSlim! Are you having a problem with the next step in the marching of the sheep?
We already knew from the shadow inventory that there’s a plan in motion to keep rentals high. And we also already knew there’s an ongoing plan to take the savings of the elderly.
But the sheep never seem to know. Best to just stay out of the way.
But the sheep never seem to know. Best to just stay out of the way.
A few weeks ago, one of them knocked on my door and asked my opinion of her plan to buy a rental house a few blocks away. Well, to put it politely, it was of the same sort of opinion that would be best be characterized as Slim emitting dragon fire.
Let’s just say that I opposed her plan. I know exactly where the house is, on a crummy block, and I don’t think that area will improve any time soon.
“…the cash is coming from…”
What about drug trade and other illegal activities? Is this a significant source of cash for home purchases? (If I were into organized crime, I would launder my money into housing and other big-ticket-item all-cash investments…but I am not
).
I still think if prices show any signs of retreat and these super smart cash investors begin to take losses on principal, regardless of rental income, they could run for the exits. You may even see a liquidation race begin…kind of like a run on the banks.
Houses are still too expensive in most areas, even the ones under 200k, they only look “cheap” when you compare to peak.
We just had a pre-offer inspection on a curb appeal gem this past weekend. It had the big 3’s:
*HVAC replacement/abestos around ducts
*mold (could be a toxic variety as well)
* no rebar in the slab (60’s home-So Ca earthquake risk)
and a host of other anti-FHA loan goodies
A Haz Maz house for sure.
They would have welcome our cash offer. An REO all cash sends up my antenas.
A Haz Maz house for sure ?
Haz Mat is the term..I am sure yo just misspelled…
Anyway, a few of the best deals that can be made are on contaminated sites or required abatement materials….Almost everybody runs for the hills and in that lays opportunity…Its just getting your arms around what it is you have…
I just missed an opportunity a few months ago…I was busy and I waited to long to jump on it..You snooze you lose…It was a full blown HAZ-MAT with every agency involved…Meth Lab blew up and the house caught fire…Some guy got it and will do quite well…Minimum 6 digit profit in 5 months…
‘… more REOs listed as “cash only” …’
What advantage does the seller gain by restricting the prospective buyer pool?
Not an advantage. I’m guessing they are properties in such disrepair that lenders won’t lend on it, and buyers won’t put their money into a property beforehand to bring them up to, uh, lendable condition?
I bought my second house in a similar, though much less dramatic, fashion. Lender wouldn’t lend on it unless I put tub $500 tub surround in a shower that was used 3x in the 6 years I lived there.
In the houses in question, my guess is the upfront outlay is on the order of 10s of 1000s of dollars, making it unfeasible for a traditional buyer to remedy them.
I’m looking for a little advice from the HBB’ers out there (cause if you can’t trust people on the interwebs, who can you trust). Anyway my wife and I are starting to look at houses on Long Island (NY) and I wanted to see what peoples thoughts are about the short and long term prospects for the housing market there.
At this point we are looking at Western Suffolk County are most likely going to be cash buyers (or at least bring $500K to the table). I know that the demographics of LI on not very good (aging population, no move up buyers, etc). This combined with low interest rates (which are propping up the market) make now an especially bad time for a cash buyer. The main problem is that I absolutely hate living in our apartment in the city (I’m a car guy and need a garage). We’ve looked at house rentals, but they don’t seem feasible (FB’s with huge mortgages and property taxes seem to oddly control the rental market).
Anyway my question to the audience is, do you think that we are going to see any systematic shocks in the next year (interest rate hikes, releases of shadow inventory) that may cause prices to drop? I ask because while we’re in no particular rush to buy a house if the landscape is going to be similar in a couple of years, I’d just assume buy now.
Thoughts?
At this point we are looking at Western Suffolk County are most likely going to be cash buyers (or at least bring $500K to the table) ??
I will take a stab at it;
Assumption…You have income to support the payment….
With that said, I would leverage into your purchase..I believe time will show that you will never borrow money for a home purchase again at more favorable rates & terms…Set aside the $500,000. that you suggest you are prepared to bring to the table minus of course the required down payment….Future conditions will dictate what you do with the reserve funds that you set aside…You may find that the future allows you to invest those funds at rates of return far higher than the fixed costs that you borrowed…My 2-cents…
As far as where you are buying and the economics of it, I will leave that opinion to someone who has more local knowledge of where you intend to buy…
If you do decide to buy, IMHO, you’re crazy to use cash, get a 15 year fixed at 3.5% and let someone else eat the inflation risk. If interest rates aren’t higher in 15 years, I’ll eat my hat. This is the best time in history to be a borrower (which, given the cause of the housing bubble, seems very counter-productive). Take your 500K and invest it elsewhere; I buy muni-bonds, but; pick your investment; there are lots of stocks yielding 4-6% (very solid companies).
Munis are a great story right now, earn 4-5% tax free, use that to pay your tax deductible mortgage. What a boondoggle that would be for you. You’d earn 4% and use it to pay a mortgage that, after the deduction, is costing you 2% or so. And you retain the use of your money.
Buying cash today, with interest rates at historic lows, seems like a fools game to me.
My biggest concern is that if interest rates go up to 6-7% in a year or two all of a sudden the house I paid X for could be had for 20% less. While I don’t have any plans to move the reality is that everyone nowadays has to be prepared. As far as cash I’ve always thought of that as giving me an advantage if I’m offering on a shortsale/REO (or just with a seller that had a deal fall through over financing). From what I’ve been reading I can’t say I’m very bullish on Muni-bonds (what should I be looking at).
“My biggest concern is that if interest rates go up to 6-7% in a year or two all of a sudden the house I paid X for could be had for 20% less.”
That’s true and that would certainly change my suggestions (knowing that you’re willing to wait a few more years). However, if you’re looking to buy soon, I’d stick with my first recommendation, finance as much as you can.
“While I don’t have any plans to move the reality is that everyone nowadays has to be prepared.”
You’ll be a lot more prepared with 500K in the bank and an underwater house than you would be with 500K all tied up in one illiquid asset. Also, you always have the “bail out” plan when you finance a house. If you put 100K down and pay 500K, 5 years later you want to move and it’s worth 100K, you can walk away and let the bank eat the loss. This is a HUGE benefit to using other people’s money to buy houses (please, save the flame, I know it’s immoral; banks do it every single day, they are reaping what they have sown).
“As far as cash I’ve always thought of that as giving me an advantage if I’m offering on a shortsale/REO (or just with a seller that had a deal fall through over financing). ”
That’s probably true. I’m not sure it’s enough of an advantage to offset the benefits of financing though.
“From what I’ve been reading I can’t say I’m very bullish on Muni-bonds (what should I be looking at).”
Don’t take my investment advice; I’m just giving you an idea of things that I’ve done with my capital. Other’s include things like VZ, DOW, MRK, and other blue chip, high dividend stocks. Diversify, and don’t buy all your bonds at once (should you decide they are a good fit for you). Also, remember, unless the bond defaults (shockingly unlikely for general obligation), you will always get the money back at the end. You might “lose” some interest that you could get by buying munis at a better time, but it’s sure nice to know that the money will, at the very least, come back to you.
I hold individual munis and some funds (which the “money will come back” rule DOES NOT APPLY, but they are much more liquid). The funds I own are HYD and BFK; both have done well for me over the past few years, and both yield 5-7% tax free.
Ignore Overtaxed, TheNYCdb. He doesn’t think there is any risk in municiple bonds. And he isn’t considering any of the issues that you raised. Your outlooks are too different.
I have friends in commutable LI (walkable to an LIRR station). They are just about at the end of their ability to keep making payments. They had a very large downpayment (and paid for a number of improvements for cash) and think they could currently sell for about what their mortgage is but would lose all they have put into it over the past 4 or 5 years. They think the bank that originally made the loan still has it because it was jumbo, so doubt there is anything that would prevent a quick foreclosure if they stopped paying. I have no idea if they are typical. I don’t see any reason for them to have hit their limit at the same time as a lot of others. I don’t think there is any way to tell if a lot of inventory is going to get freed up soon.
I don’t see interest rates going up soon. We are still dealing with a flight to quality and the US is still better than Europe. China can’t afford to collapse our economy just now. At least I don’t think they can.
I think you should wait. Rather than live in a house on LI so you can tinker with cars, what about rent a garage in LI so you can go tinker with cars on the weekend? Yes, it is a pain to “commute” to your hobby, but doing it once or twice a week take less time than commuting to your job 5 (or more) days a week. It is worth putting up a Craig’s list ad.
Renting a place to “tinker with cars” is 100 times harder than finding a house..
Around here, a decent sized shop rents for more money than a nice 2 bedroom apartment.
I’ve got two projects that have been sitting in outside storage for 4 years, waiting for me to find affordable work space.
Polly,
If you’re going to slam my post, at least get it right. I never said there’s no risk in munis; I just feel that the risk on general obligation bonds is very low (as they have taxing authority).
“I don’t see interest rates going up soon. We are still dealing with a flight to quality and the US is still better than Europe. China can’t afford to collapse our economy just now. At least I don’t think they can.”
Soon being over the next 30 years (the term of the mortgage the OP is likely to get)? The term of the mortgage is what makes them attractive now, they are lending with interest rates that reflect something like a 5 year term, not a 30 year term.
Again, just so I’m clear, DON’T FOLLOW MY INVESTMENT STRATEGY. I’m only talking about what I did, and what works for me. However, regardless of the investments, I think it’s crazy to buy a house for cash today when you can get mortgages at the current rates. “Locking in” a 3.75-4% yield for 30 years (which is what you’re doing if you pay cash) is nuts. The banks are nuts for making these loans. This will be a crisis in the next 10 years when the FFR starts to rise and the interest rates start to rip these banks apart.
If you acknowledge risk in muni’s you should mention it when you describe your investments. Yuu have detailed your leverage game over and over and I have no recollection that you have ever mentioned the possiblilty that your tax free munis could go belly up and not ever return principle, making the purchase of the house with cash (if you want it to live in) a better deal.
As for the rest? You responded to a post requesting advice with advice and now say that it is just a description of your investing strategy and not advice. OK. As long as you get around to saying it isn’t advice eventually. You are playing games with risk. The new guy clearly is not as comfortable with risk as you. That makes your strategy not appropriate for him. You should have said that your strategy is only for people who love risk in the first post, not save it for shouting later.
Tax free munis could default. But, in an effort to mitigate that risk, I never buy individual bonds, I buy funds of bonds (both for liquidity and for diversification against default).
My strategy is not for those who “love risk”, those people are buying calls on FB, not trading muni bonds. Bonds in general, and munis in particular are one of the most conservative investments available to investors today.
Here’s the fact sheet on one of the funds I hold:
http://etfdb.com/etf/HYD/holdings/
And here are the statistics on historic default risk of munis:
http://en.wikipedia.org/wiki/Municipal_bond#Default_rates
Make your own decisions, but describing this strategy as “high default risk” is simply ignoring the facts and historic data. The risk here is interest rates; if they go up, the bonds go down. And they ARE going to go up someday. That’s why anyone doing this type of investing needs to keep money on the sidelines; the bonds (or funds) are going to get cheaper at some point in the future than they are today.
IMHO, even if you bury the money under your house (and earn no return at all) you’re better to use the leverage offered today. Financing something for 30 years at 3.5-4.5% is insane, it’s a fools game. Take the banks for all their worth; they are going to implode when interest rates rise. Bury the money and buy bonds (or put it into a money market if your very risk averse) when rates go up. But handing over large sums of money to buy anything when the inflation rate is HIGHER than the the interest rate is, IMHO, bad financial planning. Unless, of course, you’d spend the money on Hummers and ski trips to Aspen..
Then, by all means, pay down your MTG or buy your house with cash!
I am pretty confident that interest rates will remain where they are – near historic lows - for the next few years. So much of the economy is based upon the visage of wealth derived from home ownership that any spike in interest rates would negatively impact home values. (The inverse of this is what created the spike of home prices to begin with.) The FIRE industries control the current administration and with so much undervalued inventory on the books of the TBTFs, they will do everything in their power to maintain the current interest rates and bubble prices.
I doubt rates are going to rise in the absence of a broader economic recovery. When we were looking at rent vs. own analysis in Southern CA, things are so out of whack there, that even if rates rose by 2-3%, it was STILL cheaper to own at today’s prices than rent at today’s rents–I’d be interested to see what the math looks like in your neighborhoods.
I bought last May. While I could have liquidated stuff, paid my taxes on gains, and paid cash for the house, I put 25% down, and borrowed for 30-years fixed. I’m now refinancing into a 4 3/8% 30-year loan. I’ll self-amortize to be paid in a bit under 29…I’m not refinancing to extend the overall term, just lower rate.
I know many folks don’t like the risks of holding equities, but for those who are OK with risk, read on…
The $ that I didn’t use to buy the house, have generally in dividend paying REITs (paying 3-4%). The way I figure it, as the Fed pushes 2%+ inflation down our throats, by midway through my mortgage, the REITs should be essentially paying my mortgage.
I know, I know, REITs are exposed to interest rates…however, most of the REITs that I’ve been tracking and own have been utilizing the current interest rate environment to lock in fixed rates for the long-term and generally have lowered their dividend payout ratio to de-levering their balance sheets (ie. they could pay more in dividend, but are not). For example, one REIT I own generates ~$1 per share in cash, is paying out ~$0.50, and is trading at ~$14 per share (3.6% cash yield, but de-levering to the tune of another 3.6%, which long term will benefit the shareholders).
If you’re not comfortable with REITs, look for other long-term dividend paying stocks. There are plenty of them…look up “dividend champions” on Google, and you’ll find an Excel list of stocks that have steadily increased their dividend over a period of 25+ years. The average dividend yield for the ~100 companies is just under 3%. Pick 50 companies in various industries (to diversify), and put $10k in each, ignoring the lowest dividend yields and smallest companies, rebalance each year or two. Today, the dividends will pay 50%+ of your mortgage, and in 15 years, you’ll have a good chance that your dividends will be paying your entire mortgage, and in 30 years, you’ll be debt free, with all the income.
Thanks for the feedback everyone. I think we are going to take a wait and see approach where we are casually looking to find a value opportunity in the market but without any real pressure to buy.
Polly - Thank you for the advice I currently rent a garage and commute to tinker, but who want to work on cars on the weekends, that’s when we go to car shows.
Just out of curiosity, does anyone think the presidential elections (and their outcome) will have any significant impact on housing policy (FED Interest Rates, FHA Mortgate Criteria, GSE forclosures)?
Whether the election has any impact on housing policy depends entirely on how the Congressional races come out. If we get President Romney plus a Republican House and Senate (with enough of a lead that one or two moderate/conservative Democrats could get them to 60), he might have no choice but do something about it, though I assure you his finance buddies don’t really want it to happen.
This is way more complicated than just who happens to be president.
I can’t even guess what happens with any other combination.
By the way NYC, that’s what my wife and I did (wait and see approach). I’ve been keeping my eye on the market for a LONG time (pre, during, and post bubble popping). We have been more casually looking for the past couple of years, and then started walking open houses more regularly early 2011.
When the right house for the value came up, we knew it, and jumped on it.
Without being casual observers, with cash in the bank and no pressure, we wouldn’t have been able to act as quickly with conviction when the right opportunity arose. Good luck.
Are you going to be commuting into the city?
If yes, I’d consider a couple of aspects very carefully…
The cost of commuter train tickets can go up substantially and give your budget a big hit.
One friend who moved to Westchester county did not consider this and was shocked and outraged when ticket prices went up multiple times… daily cost was $29.00 last time I heard the B!tc#ing.
Proximity to the train station. If you need to get a second “station car” (and pay for a station parking permit, insurance etc.) factor that in.
Have you considered/looked at areas within the city, such as Astoria, Riverdale, Forest Hills, Kew Gardens, Douglaston and Bayside?
You might want to take a look at these kind of areas for comparison, some of the areas have a lot of charm and decent schools (if that is a consideration). Property taxes are also lower in the city.
I primarily commute to LGA or work from home, wife commutes to the Bronx so she is looking at a slightly longer car drive (she drives to work from the city now for some unknown reason). I’ve lived in Riverdale, but for the most part anything with a enough space for the garage I wan’t is going to be $2MM+. That said we’re looking at Western Suffolk more because we both have family on LI and when we have kids proximity to the family will be a factor. Folks here have brought up some stuff to think about, especially about financing. Growing up in a family that lived hand to mouth with CC payments has given me a (perhaps irrational) fear of debt (lived lean to pay my way through school and never carried a CC balance).
With those commutes, I highly recommend taking a look at the Bayside/Douglaston/Whitestone areas… close to the bridges to the Bronx and an easy zip out to Suffolk on the GCP/NSP or LIE.
Another area you might consider is the area of “Upper Ditmars” (just west of the LGA Marine Air Terminal and north of the GCP.) It’s not quite as architecturally charming as the other areas but with some nice houses of various vintages, public transportation options to LGA, etc.
Expect a tax shock due to pension costs. And falling school quality.
I see prices continuing to go down, unless and until someone breaks up the criminal conspiracy that is the LIRR and Long Island local government and East Side Access (the LIRR connection to Grand Centra) is completed.
Long Island
Still in bubble land for prices
Insane property taxes
All jobs moving out of state
Stay away.
I’m considering paying cash for a condo here in CA (I already know about the negative opinions about condos, so please don’t bother).
If I were to pay $200,000 cash for a condo, expenses to own it would be around $8,000 per year, would the $12,000 saved in rent be imputed income of 6% tax free?
With that ratio, then go ahead — as long as you plan to stay in the condo indefinately. Is it possible that you could get that deal on the coast, or are you talking about Sacramento or some such place? Because there is CA and then there is CA.
Without more information, it’s hard to say if I agree with that statement. First off, I think you need to look at the difference in monthly cost for the rental of a condo vs. dues as an owner for the same condo, and compare that difference in monthly cost to the price. If the annual savings vs. total purchase price is low (<5%), then you better really like the condo, because it is going to pay you 8%), then it pays you >8% annually to convert your cash to real estate…which is pretty darn good.
It is hard to compare your current rental if it is dramatically different, since there is no differential for quality.
That’s the buying vs. rent decision (assuming no rental inflation, etc….simple example).
Leverage in my view is a different question. The way I would look at leverage is as follows:
How much leverage you use is a function of your wealth/income, risk tolerance and opportunity cost of your capital.
If $200k means a lot to you, and losing any meaningful amount of it will be very painful (even on paper), and as such, you are not willing to put it in risky assets (stocks, etc.), then I’d absolutely pay cash and sleep well at night knowing that if everything goes to hell, you have a place to call home for $8k per year, also recognizing that you could put on a HELOC for unforseen near-term liquidity needs (not wants).
If you have a lot of wealth/income, and/or are more tolerant of risk, then you would be more able to handle payments on a $200k loan even if bad things happen in your personal financial world, I think you should seriously look at borrowing on a fixed rate. The money is virtually free, but you need to be comfortable that you can reasonably expect over a long period of time to do better in your investments than the 4% fixed rate you have on your mortgage.
If, for example, you really like AT&T, they pay a 5% dividend…if you put all $200k into AT&T (which I don’t recommend…no diversification), then it would pay you $10k per year as a dividend (15% tax rate+10% CA taxes). Your interest cost would be $8k per year at 4%, and deductible (your highest marginal ordinary rate). After tax, assuming you have other sources of income, your investment in AT&T would pay your mortgage, and you’d have a few dollars in your pocket (or principal reduced on your debt), you’d be better off than paying all cash.
At the end of the day, risk tolerance is a very personal thing, and the right loan/equity mixture is different for each person. A good way to judge your own (at least an exercise that I do sometimes), is to think hard about two scenarios, say:
1. No debt; or
2. $100k of debt, $100k of risky assets.
Flip a coin as your “decider”, and judge your gut reaction.
If your coin flip lands you on no debt, and you wonder if you’re being too conservative, then you may want to consider some level of debt.
If your coin flip lands you on $100k of debt, and your heart sinks, then you know $100k is too much, and you should be considering something more than $0, and less than $100k.
If on the other hand, the coin flip on no debt gives you no pang of regret what-so-ever with respect to NOT taking advantage of today’s interest rates, then buy all-cash.
“…are going to see any systematic shocks in the next year….”
The election in November. When the charade no longer needs to be perpetuated to ensure reelection, the real housing economy will emerge.
The on-going collapse of EU with its money flight to value (in progress now as seen in the brief housing market upsurge we’re seeing).
The housing bubble burst in Canada and Australia with Chinese investors there (thus here) selling out in panic.
Zombies.
Late yesterday Northeasterner was giving X-GS advice on moving up the money (and BS) stream. I just had to comment:
Of course this isn’t achievable for everyone, nor is it scalable. At a certain level, this is survival of the fittest. Those who are smart, driven, dedicated, resourceful, and lucky are the ones who will come out on top. The idea is to be in the group that succeeds, not the group that fails. If you do fail, try again until you succeed… What other choice is there? Give up? Accept the fate that has been given? Not an option for me.
IMO you’ve described quite well what is wrong with our country. Our best and brightest have given up on making the pie bigger and are 100% focused on carving off bits of other people’s pieces.
Our best and brightest have given up on making the pie bigger and are 100% focused on carving off bits of other people’s pieces.
When you think about it, making pies is a risky proposition, whereas “taking a cut” is fairly risk free.
Having attempted many enterprises myself, let me just say… it ain’t all that easy.
And after you lose your butt a few times, it’s harder to try the next one. It’s taken me ten years to recover from my last attempt. You try doing ten years of starting completely over with nothing. It doesn’t make you younger.
The low hanging fruit of yester-years are long gone. By light years. Where the old rule said you needed at least one year of savings to live on when you start a business, now you need 5. That’s a huge increase.
Where the old adage of a little promotion would help your business, now you have to go big time (radio/tv) or go home. Those that make it without, are the exception, not the rule.
Then there’s IP theft, usually by the big corps. Then there’s vendor theft. Usually by everyone. And laws seem to favor everyone but you.
The best and brightest aren’t doing anything because… they ain’t stupid. They know a stacked deck when they see it. That, and the best and brightest aren’t always from “the right side of the tracks”, so they stand no chance of finding any investors, let alone semi-honest ones.
There are currently four groups of people trying to make livings in the airplane business. I suspect that the IT field, if not every other industry in the US is similar.
-The guys that weathered the storm, are still employed, but haven’t seen raises/COLAs in 10-15 years.
-The guys that had jobs disappear, and have the skills to find new employment, but at 30-40% less than what they were making in 2006.
(This group has skills as good as, or better than, the guys in Group 1, but are in Group 2 solely because they were working at the wrong place at the wrong time)
-The over-45 unemployed, who are trying to scratch out a living as “consultants” or “contractors”
-The “Bull$hit Artists”; usually, financial/sales types that are attracted to the bucks floating around the business, and who are trying to make a score, usually by applying some kind of screw job to Groups 1-3. (Gotta make sure the “talent” gets their cut….)
Look across about any industry, and Group 4 is calling the shots. Until Group 4s get thrown under the bus, things are going to be messed up. I don’t expect this to happen before there is a systemic collapse.
The IT industry is more like this.
Group 1) Has the job at the start up or small company, clinging to stock option in hopes the company can survive long enough to be bought up so they can move to group 2.
Group 2) Waiting for the Chindia team to come up to speed, so can be laid off.
Group 3) Job already off-shored. Looking for a new job at a start up or small firm so they can get back into group 1.
To answer his question, I would say… get some skills you can exchange for a good wage. Take most of the dice roll out of it.
Oh, that’s right. I’m the sucker that is living poor while the crazy gamblers live high on the hog. Well, the 1% of the crazy ganblers that win live high on the hog. 99% are far worse off than me.
Some say you can not win lottery if you do not play. True.
However, the contrapositive is also true. You can not lose if you to not play.
And, since prices = 50% of sales, over the long run, for the vast majority of people, you are far better off being the person working to sell lotto tickets than being the person buying the lotto tickets.
If the pace of used home sales seems dismal now, just wait until interest rates return to normalcy and the all-cash Canadian and Chinese buyers throw in the towel.
You ain’t seen nothin’ yet!
Pending Sales of U.S. Homes Decrease by Most in a Year
By Shobhana Chandra - May 30, 2012 7:57 AM PT
The number of Americans signing contracts to buy previously owned homes fell in April by the most in a year, indicating the U.S. housing recovery remains uneven.
The index of pending home resales dropped 5.5 percent following a revised 3.8 percent gain the prior month, figures from the National Association of Realtors showed today in Washington. The median forecast of 42 economists surveyed by Bloomberg News called for no change in the measure.
Mortgage rates at record lows failed to sustain the pace of demand as some buyers may have waited for home prices to decline further. Limited access to credit and persistent foreclosures still weigh on housing, adding to concern it will remain a source of weakness for the world’s largest economy.
“The pattern of demand is sluggish and volatile,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York, who projected a decline. “Until the supply issue is resolved, we could see further declines in prices and the housing market will continue to hover around the bottom. It’ll be a gradual improvement, we don’t expect anything stronger than that.”
…
What, I wonder, is the endgame? What is the The Bernank’s image of a steady state, sustainable economy, and how long will it take to reach it?
Notice I didn’t mention Congress. Their venality and feckless buffoonery has made them mostly irrelevant (JOBS Act anyone?) in this situation.
Regardless - What is the endgame?
Regardless - What is the endgame ??
Avoid the greatest depression and the anarchy that would follow….
Congress’s plan: Crash the economy some more with another mid-summer debt limit showdown…
Crash the economy some more with another mid-summer debt limit showdown… ??
#1 goal is to defeat Obama….WIN at all (ANY) cost…
If obama’s only chance to be re-elected is to spend $1.5 TRILLION in DEBT every year of his presidency…
Then he deserves to lose.
If obama’s only chance to be re-elected is to spend ??
And your solution ?? And please, don’t bother me with the right wing double talk about growing the economy…Be specific…How would you get into balance….
Seems like Two-ti-fruity’s candidate is self destructing through an overly cozy association with The Donald. What’s up with that plan? Isn’t it clear that you guys are losing the hearts and minds of the median American voter?
Perhaps the plan is to steal the election through fraud…
Don’t read too much into the Trumps stuff. I expect that Romney is doing it now to get it over with long before the visuals actually get important. There is no reason to leave the money the Donald can raise on the table, but you don’t want to be doing it in September. It will be over before you know it.
“And your solution ??”
1. Blame Obama.
2. Never bother to mention what the Republitards would have done differently.
“There is no reason to leave the money the Donald can raise on the table, but you don’t want to be doing it in September.”
Good theory!
Trump: Use him, then lose him.
What is the The Bernank’s image of a steady state, sustainable economy, and how long will it take to reach it?
I don’t think *anybody* with any power is aiming for that any more. Everything is about getting rich quick and getting out. It’s now a loot-ocracy.
You will notice that rhymes with “plu-tocracy”.
loot-ocracy ??
+1…Good One Carl…
Or maybe they are finally doing their job.
When is enough debt enough?
When we become greece?
Which job: Crashing the economy and blaming it on Obama?
Your suggestion that America is becoming Greece is one of the worst political strawmen, ever. If we are becoming Greece, then why are Treasury yields dropping to record lows, even as Greek debt is selling off?
Exactly Pbear….
why are Treasury yields dropping to record lows
Because demand is high? Because our central bank is buying (read: monetizing) the debt of our federal government?
“Because demand is high? Because our central bank is buying (read: monetizing) the debt of our federal government?”
http://www.federalreserve.gov/releases/h41/current/h41.htm#h41tab3
In the last year, the Treasury has borrowed something like $1,600B. Of that, the Federal Reserve has bought $155B.
Demand is high, but the demand is not coming from the US central bank.
The global economy is an UGLY neighborhood, but our house looks the safest right now, so people are trying to get in.
“Because demand is high? Because our central bank is buying (read: monetizing) the debt of our federal government?”
Yes and yes.
I believe it would be quite a challenge to separate the effect of the Eurozone panic flight-to-quality into Treasurys from that of the Fed’s bond purchase program. I would be interested in any information on this potential decomposition of effects which HBB posters could provide.
In the last month, the Fed has not added ANY new bonds to its balance sheet, and in the last year, has bought less than 10% of the new bonds issued.
It is not the Fed.
“It is not the Fed.”
Stop raining on my pet conspiracy theory!
The debt is a symptom, not the illness.
If someone is not bleeding, and you try to pump 10% more blood into him, every hour, for a couple days… well, you are going to cause problems.
Similarly, if we had a fundamentally sound economy, and were pumping new money into the system at a rate of 10% of GDP per year, we’d be having some serious inflation.
In reality, our $1.5T new debt is barely enough to replace the money that is leaking out.
Stop pumping the blood into the bleed patient before stopping the bleeding, the patient dies.
Stop pumping new money into our trade imbalance plagued economy before we attack and eliminate those imbalances, the economy dies.
The imbalances that drain money out of circulation, that created the need for the unsustainable debt growth in the first place, is THE PROBLEM!!!!
Folks…. generally, Bananas strawmen are the most absurd ever. Hands down.
OTOH, the two bananas I put in my lunch smoothie made it quite delicious.
“OTOH, the two bananas I put in my lunch smoothie made it quite delicious.”
Hey now!!!
I want to re-emphasize a point that was made yesterday:
“During 2008 the two GSEs had combined losses of more than $100 billion. For some perspective, over the 37 year history of the two companies (1971-2008) they earned $95 billion less than they lost in 2008 alone. During the next three years ending in Q3 2011 the GSEs lost another $251 billion. “In other words, the losses incurred during the conservatorships are more than double the cumulative net income the GSEs reported as public companies.”
Link
So, while “financial innovation” could inflate the market for decades, ultimately, when the true bill comes due, it will wipe out decades of profit, and more.
There was a lot of “financial innovation” involved in the GSEs’ operations. Ultimately, the chickens come home to roost. And the people who bear the cost are not the executives of the financial and real estate companies who profited, it’s the rest of the citizenry.
My conclusion is this: The rules governing the economy are not arbitrarily defined by politicians and the leaders of the financial sector. It may look like that for a while, for years even, with very large players who can warp the market. But eventually, the underlying drivers of human behavior which ultimately drives the economy, will reassert themselves.
…and eventually we’re all dead.
If that correction doesn’t happen in my lifetime AND benefit me, then the action (and the theory) is worthless.
(to you)
Technically, the sum of the loss can not be more than the sum of the gain.
When looking at GSE profit as gain vs. loss, you are ignore all the gain to the economy that came from the wages the GSE’s were paying.
Money is borrowed into existence. The money exists until the offsetting debt is written off. When the debt is written off, it can not destroy more money than it created… just all the money it created.
Rumors of an incipient U.S. housing recovery are greatly exaggerated.
A question of interest for anyone who has the data: How big would the drop in pending used home sales have been without the NAR’s downward revision to the March number?
May 30, 2012, 11:09 a.m. EDT
Home builder stocks drop on pending sales data
SAN FRANCISCO (MarketWatch) — Home builder stocks dropped Wednesday after a report that pending home sales fell for the first time in four months. The iShares Dow Jones U.S. Home Construction Index Fund (ITB -3.96%) fell 4.2% after the National Association of Realtors said pending home sales for April fell to 95.5 from a downwardly revised 101.1 in March. Shares of Lennar Corp. (LEN -5.91%) led the charge down falling 6.5%. Standard Pacific Corp. (SPF -6.20%) shares shed 6.4%, KB Home (KBH -6.54%) shares fell 5.8%, Toll Brothers Inc. (TOL -4.97%) declined 5.5%, and Hovnanian Enterprises Inc. (HOV -5.30%) shares fell 4.8%.
Totally off-topic, but interesting: A video of a parked 747 being lifted in place in high winds. It’s remarkable something so massive can fly in the first place, but it’s all driven by physics.
Safe for work, 02:48 minutes: “Amazing video of 747 lifting in place in extreme wind conditions - 1080P HD”
Bernoulli’s Principle, baby……..
Make it in the shape of an airfoil, and put enough wind across it, and you can make a battleship fly……
(In this instance……light airframe/747SP…..no fuel……no engines….probably no interior (seats/galleys/etc) = Big AZZ glider.
And, for the education and enlightenment of the audience, see my late post on yesterday “Bits Bucket” on how airplane doors can fall from the sky “unexpectedly”……
And yes, the seats will need to be reupholstered, for the reason that Carl Morris noted. Nothing like an explosive decompression, and a big chunk separating from the airplane five feet from your seat, to get your attention.
About as much fun as the new jet being stolen by a schizo mechanic that had never had a flying lesson……or the pilot trying to show the newbie how to do a barrel roll in the bizjet (badly, and at night), or the newbie mechanic with no training, who didn’t know that the brakes are disabled when the aircraft “squat switches” go into “Air” mode……..or the Experimental Test pilots who were doing an “Unusable Fuel” test too far away from the airport…….or the “Don’t Shoot the BabyJets” campaign.
The aviation business may not be very lucrative, but one thing it ISN’T is boring…..
This article illustrates just how hard it is to get a good job anywhere in this depressed world. That professionals are flocking to work in low wage Brazil speaks volumes.
http://money.cnn.com/2012/05/30/news/economy/brazil-jobs/index.htm?iid=HP_LN
If were lucky, all of our Wall Street financial “talent” will haul azz down there, and give Brazil some of the benefits of their expertise.
Maneater Lyrics - Hall & Oates
She’ll only come out at night. The lean and hungry type. Nothing is new, I’ve seen her here before. Watching and waiting. She’s sitting with you but her eyes are …
I wouldn’t if I were you
I know what he can do
He’s deadly man, he could really chew your face apart
Mind over matter
Ooh, the fillings are there and the cops just towed his car
(Oh-oh, here he comes) Watch out boy he’ll chew you up
(Oh-oh, here he comes) He’s a face eater
(Oh-oh, here he comes) Watch out boy he’ll chew you up
(Oh-oh, here he comes) He’s a face eater
More grisly details emerge from face-eating attack in Miami
By DAVID OVALLE, SCOTT HIAASEN and DIANA MOSKOVITZ
Miami Herald
Posted: 11:43 p.m. Tuesday, May 29, 2012
For almost 18 grisly minutes, Eugene savaged his victim, punching him and stripping the man’s pants before gnawing off the homeless man’s face — all as cars and cyclists rolled by on the busy causeway on a sunny Saturday afternoon.
The new details of the horrific attack were captured in additional video footage taken by security cameras at the nearby Miami Herald building.
It appears Eugene had been in Miami Beach — in full party mode for Urban Beach Week over the Memorial Day Weekend — shortly before the attack. Eugene’s car, a purple 1995 Chevrolet Caprice, was towed for being parked illegally at 1100 10th St.
http://www.palmbeachpost.com/news/crime/more-grisly-details-emerge-from-face-eating-attack-2381628.html -
I shouldn’t be laughing, but I am……
Zombie apocalypse…
Sometimes truth is stranger than fiction.
Story linked on Drudge Report confirms assailant was an Obama voter and labor union member.
“Story linked on Drudge Report confirms assailant was an Obama voter and labor union member.”
Now that is just ridiculous. If he was a labor union member he wouldn`t have chewed off 75% of the man`s face in 18 grisly minutes. It would have taken 40 hours with 15 breaks and a vacation day.
“…he wouldn`t have chewed off 75% of the man`s face in 18 grisly minutes.”
Very efficient! He must definitely have been a private sector worker; probably a banking CEO, in fact, given the parasitic nature of his act.
US STOCKS-Wall St slumps as Europe worries grow
Wed May 30, 2012 1:07pm EDT
* Energy, other cyclical shares hardest hit
* Spanish, Italian yields rise on euro zone concerns
* U.S. housing sector gauge falls to 4-month low
* Research in Motion tumbles, sees operating loss
* Indexes off: Dow 1.3 pct, S&P 1.4 pct, Nasdaq 1.4 pct
By Ryan Vlastelica
NEW YORK, May 30 (Reuters) - U.S. stocks fell more than 1 percent on Wednesday as mounting fears about the euro zone prompted investors to sell sectors tied to economic growth.
The region’s debt woes sent investors fleeing to safe havens, like the 10-year U.S. Treasury note, whose yield fell to the lowest in 60 years. The euro, meanwhile, slid to its lowest against the U.S. dollar in 23 months. U.S. stocks have been closely tethered to the euro’s fortunes, with a 50-day correlation between the currency and the S&P 500 index at 0.91.
Yields on 10-year Spanish bonds moved closer to 7 percent, a level at which other euro zone members were forced to seek a bailout.
Spain is expected to issue new bonds to fund its troubled banks and troubled regions despite increased borrowing costs.
Adding to the concern, Italian 10-year yields topped 6 percent for the first time since January at a bond sale, raising concerns the region is vulnerable to contagion. European shares ended 1.5 percent lower.
“We’re being held hostage by Europe, by the increasing tensions in Spain,” said John Kattar, chief investment officer at Eastern Investment Advisors in Boston, which manages $1.7 billion. “We’re back to a risk-off mode, with cyclical sectors getting hit really hard.”
…
The international bond market seems to be tearing apart at the seams.
WSJ: Bankia Tumbles As Spanish Stocks Slide
Published May 30, 2012
Dow Jones Newswires
Continued concerns about Spanish banks sent the country’s stock market to fresh nine-year lows, Germany’s two-year note yield to zero and the euro to its weakest level against the dollar in nearly two years.
Investors scrambled for safe havens, dumping stocks as well as debt from Italy and Spain, two financially stressed nations that also are among the biggest in the 17-nation euro zone. They brushed off the European Commission’s statement that the euro area’s permanent rescue fund might be given permission to directly recapitalize the currency union’s ailing banks, saying it would first need the direct agreement of Germany, the euro zone’s de facto pay master, and the European Central Bank.
(This story and related background material will be available on The Wall Street Journal website, WSJ.com.)
Amid fast-moving events, Spain’s IBEX 35 dropped for a third day, sliding 2.6% to 6090.40, its lowest close since April 1, 2003. Shares of Bankia tumbled another 8.6% for the sixth consecutive loss.
The moves came as the ECB said it would oppose an attempt by Spain to use the central bank’s lending facilities to fund the bailout of the troubled lender. Finance Minister Luis de Guindos clarified the government’s rescue plan for Bankia, saying it will raise the EUR19 billion ($23.76 billion) needed for the bailout through sales of government bonds.
“The botched rescue of Bankia is fanning concerns over Spain’s creditworthiness at a particularly inauspicious time for the euro zone,” said Nicholas Spiro, managing director at Spiro Sovereign Strategy. “The bailout of Bankia, in whichever way it is undertaken, raises more questions than answers and brings Spain closer to an international rescue.”
Overall, the benchmark Stoxx Europe 600 index fell 1.5% to 240.56, its fourth lowest close of the year. U.S. stocks also were lower, and the euro tumbled against the dollar.
In another sign of shrinking confidence in Spain’s banking sector, retail and corporate deposits at its banks fell in April to the lowest level since the start of the euro-crisis, the ECB said.
Spanish 10-year yields soared 0.23 percentage point to 6.64% as European markets closed, while Italy’s 10-year yield broke above 6%, rising 0.18 percentage point to 6.06%, according to Tradeweb. An auction of Italian bonds attracted tepid demand.
Borrowing costs at these levels are widely considered to be unsustainable in the long run. Indeed, strategists at Royal Bank of Scotland Group warned that Spanish 10-year yields are likely to hit 7% in the coming weeks, which they said could prompt market intervention by the ECB or the euro zone’s bailout fund.
Meanwhile, the yield on the 10-year German bond hit an all-time low of 1.261% as nervous investors clamored for the safety of German debt, before ending the European session at 1.27%, down 0.10 percentage point. Yields on the country’s two-year notes at one point hit zero for the first time, raising the prospect that investors could soon be paying for the privilege of parking their funds. They ended the day at 0.007%, down 0.04 percentage point.
The benchmark 10-year U.S. Treasury yield hit a new record low of 1.642% Wednesday and the 10-year U.K. gilt fell to a record low of 1.653%.
…
Hello,
Spoke to A. Hansen and I am hoping to get some advice. We are first time home buyers and are considering buying in Livermore CA. Should we wait for awhile for another possible wave of foreclosure properties to hit the available inventory? Thanks very much!
Why buy now…. buy later for alot less.
Livermore is a pleasant place…A little hot but what the hell that what A/C is for
Anyway, close enough to commute, access to rapid transit…If it were me, I would stay close to the downtown area unless your some kind of cowboy and want to have some space…They have done a very nice job re-habing the downtown…Not sure about the schools but that easy to look up…
We are first time home buyers and are considering buying in Livermore CA.
The two labs, Lawrence Livermore and Sandia, are packed with $100k/yr+ engineers and scientists, so don’t expect to find any deals. Overall home prices will still fall though, IMHO, because of high levels of debt especially throughout California, and the demographic pressure during the next dozen years. BTW, do you have two incomes?
Several relevant discussions starting halfway down today’s blog if you missed them. Look for sfrenter and the NYcdb threads on renting vs buying.
More specifics as to your particular situation would be useful, too.
Which investment strategy is best for now: Hide money under the mattress, ride out the storm, or gamble?
May 30, 2012, 12:02 a.m. EDT
Three options in uncertain European times
By John Nyaradi
Fasten your seatbelts. Extreme turbulence ahead.
For the past two years, the “Greek Tragedy” has been roiling global stock markets and now appears to be coming to its final climax with new elections to be held on June 17. Citigroup C -3.77% forecasts that Greece will depart the euro zone in January 2013, and analysts estimate that the euro zone’s GDP could decline as much as 4% in the event of a “Grexit,” which is comparable to the recession that ensued after the collapse of Lehman Brothers in 2008.
A mini bank run has been underway, as money has been fleeing Greece for two years with estimates of as high as 30% of deposits having been pulled from the country since 2009. In recent days, it appears that the flight of capital is accelerating and Google searches for “bank run” have been at an all-time high.
While the outcome for Greece remains uncertain, Spain is now in the hotseat of the global financial crisis. In days going forward, Greece and its travails could prove to be a sideshow for Spain, which is the fifth-largest economy in Europe and twelfth largest in the world.
The news flow around Spain has been hot and heavy in the last few days as major banks undergo severe stress and the country’s stock market has declined more than 50% from its 2007 highs. Here are some recent highlights that all investors need to consider as we move into summer 2012:
1. Bankia SA, the recently nationalized lender, says it needs $24
billion and Spain is rapidly running out of options to recapitalize its third largest bank.
2. Spain’s 10-year government bond continues spiking higher, now at
6.53% and perilously close to the “unsustainable” level of 7% which is
the level at which Greece and Ireland needed European bailouts to
survive.
3. A major region, Catalonia, gave notice that it might need government help with its debt load.
4. Spain’s leader, Mariano Rajoy, insists that Spain won’t need outside help but investors obviously don’t agree as Spanish credit-default-swap pricing rose to record levels last week, the euro has been pounded down to $1.2482, near a two-year low, and Moody’s recently downgraded 16 Spanish banks, including heavyweight Banco Santander.
So what is an investor to do during such uncertain and treacherous times?
One option is to head for the safety of cash or bonds, as many retail investors have recently done; equity mutual fund outflows have continued so far every week in May with significant positive flows into bond mutual funds.
Another option is to “ride it out,” which gets increasingly difficult to sustain as the environment gets more turbulent and uncertain.
A third option is to seek profits from the current situation. However, this option requires discipline and a well-thought-out set of tactics and strategies to be successful. Danger and opportunity always arrive hand in hand, and today’s climate offers potentially big dangers and big opportunities.
…
ride out the storm, or gamble ??
It is tempting isn’t it…Its either overblown fear or it could be meltdown…So which is it and which way do you bet… T-Bills in Germany & USA say its may get ugly but that could be part of the fear play right…
“T-Bills in Germany & USA say its may get ugly but that could be part of the fear play right…”
That’s what I thought in Fall 2008, right up until the onset of that puzzling deep plunge in the U.S. headline stock market indexes that played out through the end of March 2009.
Will it be different this time? I guess time will tell…
Donald Trump for Vice President 2012!
Yeah, baby! The Donald + Mitt in 2012…
(I will deeply regret my feeble attempt at campaign humor if this comes to pass.)
Renters begin bidding up apartment prices
By Jeff Ostrowski Palm Beach Post Staff Writer
Posted: 4:00 p.m. Monday, May 28, 2012
Multiple offers, bidding wars and rising prices have returned to Palm Beach County’s housing market - but this time, it’s renters, not buyers, who are desperate for a place to live.
Five years after the housing bust, the now-frothy rental market’s supply-and-demand equation is eerily reminiscent of the housing boom.
Dan Gallien, president of West Palm Beach-based Rent 1 Sale 1 Realty, said his company’s agents warn renters that prices are rising fast and urges them not to haggle over rental rates.
“We’ve seen places jump $100 just like that,” Gallien said. “We tell people to offer full price. You don’t mess around for $50.”
Damien Barr, owner of KangaRent in Palm Beach Gardens, said demand is being driven in part by an influx of former homeowners who lost their homes to foreclosure. While lenders might take months or years to put the houses back on the market, the occupants need a place to live now.
“The supply is getting extremely thin,” Barr said. “If you lowball on rent, you’re probably not going to get it.”
Palm Beach County apartments are filling up and getting more expensive, according to a new report by commercial real estate brokerage Marcus & Millichap. An improving job picture and a still-scary housing market are boosting demand for rental units.
The average rent for an apartment in Palm Beach County is expected to climb 3.8 percent this year, to $1,055 a month. And apartment vacancy is on track to fall to 5.9 percent, a seven-year low.
As a hedge against rising rents, some tenants have begun asking for leases longer than a year, Barr said.
Meanwhile, investors have responded to rising demand with plans to build new rental units. For instance, Wood Partners said this month that it would put up 116 townhouses at 4200 Old Germantown Road in Delray Beach.
Developers plan 1,500 new rental units in Boynton Beach and Delray Beach and an additional 900 units in Boca Raton, Marcus & Millichap said.
Gallien said he knows of no new units planned for West Palm Beach, and even downtown condo buildings are filled with renters.
The rental boom comes even as the cost of buying a home has plummeted. Palm Beach County’s median home price is down 50 percent since October 2005, affordability is at an all-time high and mortgage rates have fallen to record lows.
But for buyers whose credit scores have been decimated by foreclosures and short sales, landing a loan has proven nearly impossible
“Qualifying for the mortgages is extremely difficult,” Gallien said.
Realtors Snort Bath Salts®
You’re cracking me up.
A Realtor Chewed My Face Off® ……. and robbed me blind.
Was he naked? (The “naked” element in the story really threw me for a loop…)
And BTW, I do consider the “naked man eating another naked man’s face” story a sign that we are at least half way to a housing bottom.
Yes…. he was wearing his birthday suit.
Let’s say, for the sake of argument, that I asked “What is a framing hammer?”
An acceptable response would be, “I took for driving nails into wood.”
“Okay”, I say, “an acceptable answer. But not really the context I’m looling for. How is it created? Where does it come from?”
The answer I’m looking for is, “A framing hammer is a heavy, molded steel head attached to a long wooded handle.”
What is money? It is a medium of exchange, can act as a store of value, something you exchange for labor, goods, services, that you can use to pay debts…
Nice, and all correct. However, I’m looking for the “How It’s Made? Where does it come from? What is money made of? What gives it value?” Answer.
The answer to those questions are, in order….
How is money created? It is borroed into existence.
Where does it come from? Banks and other institutions authorized to make loans.
What is it made of? An obligation to repay the debt that created it.
What gives it value? The fact that people with debts need to get the money to repay their debts.
“a bank can lend more than it has in total receipts.”
Technically, not. Let’s assume an economy of 5 people. Me (deadbeat), you (farmer), the governor, central banker and a private banker.
There is no money. The governor wants to spend to create money and stimulate an econoy. He gets a piece of paper and wirtes $100 bond. He hands this to the central banker, and the central banker hands the governor 100 $1 federal reserve notes that we like to call dollars. The central bank has no deposits, but it doesn’t need them. It just loans money into existence without needing any money. It isn’t like it needs money on hand in case someone comes to withdraw a deposit… no deposits to withdrawl.
So, the gevernor looks at the other 4 people. You are the only person with anything to buy, the goods you produced on your farm. The governor says to you, I would like to buy $100 worth of food. You are all like… nah uh… not with that worthless paper that is backed by nothing but your promise!
The governor answers, it is not my promise that gives this stuff value. I have debt, and I am going to repay that debt by taxing all 4 of you. So you will have to get this paper so you can pay your taxes. They will have to get this stuff to pay their taxes. You can safely accept this from me, knowing those other 4 people will trade you stuff for it so that they can pay their taxes. You think and say… hmmmm… okay, I guess so. You trade the 100 $1 bills for some food.
Governor says… thanks. Now give me $30 for taxes. $15 payroll and $15 income. You are all like.. WHAT? And the governor is all like… hey man, they are going to have to pay taxes too!!!! Remember, that is what gives your money value. So, you pay the $30 taxes.
I go to the Governor and say.. Hey, I have no money and no food. You have to take care of me. The governor hands me $10 and a 4th of the food he bought from you. I don’t have to pay payroll or income taxes since I have no income.
I go to you and ask for $10 worth of food, and you are all like… that will be $11, and I’m all like, I said $10.. and you are all like, yeah, but the governor is making me collect sales tax, so $11. Okay, I’ll take $9 worth of food, and you are like, fine, that is $10. And then you give the governor $4, $1 sakes and $3 payroll and income taxes.
So, now you have $76. The governor has $24, and the governor owes the central bank $100. Money and debt are offset.
The commercial banker comes to you and says, “Hey, give me the $76, and I’ll pay you $1 a year interest.” There isn’t really anything else you can do with your money since you are the only one producing anything. You deposit your $76 into the bank.
The central panker mails me a credit card offer… only 20% annual interest rate. I’m like sure, and mail back the ap. The banker issues me a credit card with $68 limit. See, the banker can only leand out 90% of the $76 becasue he has a 10% fractional reserve. I have to keep $8 n case you want to come withdraw some of the $76 in your account.
I go to you and say, I want to buy food, but all I have is this credit card. You are all like, heck no! I don’t take worthless plastic. I only want legal tender federal reserve notes that you can use to pay your taxes, becuase those have value, because the government needs them to repay its debt.
The banker approaches you and say, don’t worry. If you swipe this plastic, I will deposit money into your account in the amount he spends, minus a 6% fee for my processing charge. You are all like… well, I want more money…. Okay, I’ll accept the plastic and pay the fee.
So, you swipe my card and give me $69 worth of good. You deduct $76, and send $30 to the governor… $7 sales rax and $23 payroll and income taxes. You pay the $2 to the banker for processing fee.
Now…. I have no money. You have $76+$69-$23-$2 = $120. The governor has $54. The banker has $2 you paid him as a swipe fee. $176 total money supply.
The governor owes the central bank $100 and I owe the bank $76. Yes, $176 total debt.
Money = debt.
The commercial banker comes to me and says, hey, you owe me $1 interest on the $76 you owe me. I’m all like… I don’t have an money. The banker says, no problem. I have $120 in deposits (your money), but only $76 in loans. With 10% reserve requirement, I can loan out another $32…. Want a loan? I’m all like… Hecka yeah. So, I sign a piece of paper and the banker depoists $32 in my checking account, and hands me a stack of checks. I write one of my checks to the banker for $3… $1 interest and $2 repayment on my $76 credit card balance. I am now down to $29 in my checking account.
I go to you and say, I’d like to write you a check for $26 worth of food. You are all like.. no way. I only want legal tender or credit cards, not those signed pieces of paper. The banker says, Do not worry, he has the money in his account. Come to me with his check and deposit into your account, and I will move the money from him to you. You are all like… okay, I guess. I write you a check for $29. You give me $26 worth of food. You deposit the check into your account. You send $3 sales tax and $8 payroll and income tax to the governor.
You now have $120+$29-$11=$138 in your account. The governor has $65. The banker has $3 ($2 swipe fee and $1 interst I paid). Total money supply = $206.
I owe $74 on my CC and $32 on my signature loan = $106. The governor owes the central banker $100. Total debt… yes… $206.
Now I owe the bank $2 in interst, $1 on the CC and $1 on the loan. I say, I can only pay you, if you loan me more money. The banker say, no problem. I have $138 in deposits and $106 in loans. I can loan out another $18.
See, the bank can not loan out more than it has in deposits… it has to maintain a fractional reserve. HOWEVER, every time it loans out money, that money finds its way back to the bank in the form of deposits. Those deposits increase the bank’s ability to lend.
It is not that the bank is laoning out more than it has on deposits. It is that the loans it issues creates money, that money is deposited, allowing it to loan out more, that comes back to the bank, allowing it to loan out more.
If we had excluded the tax going to the gov, or had the gov also depoist money, then they $100 depost = $90 loan, that gets redeopsited making $190 in deposits, allowing another $81 loan, that increases deposits, allowing another $72 loan… etc.
Back to Easterner:
” As debt is loaned into existence, so are dollars (supply). Those dollars are then circulated in the economy (velocity). All this is true, however, it doesn’t change the fact that money is a medium of exchange.”
Medium of exchange is how it is used, not what it is. Just as a framing hammer is used to drive nails, it is really molded steel head on a wooden handle.
Money is used as a medium of exchage. What it really is, is other someone or something (business or government) elses’ debt.
“I get paid in dollars. I can convert those dollars to something else, for instance gold.”
And when you buy gold with the dollars, it is no longer money since gold is no longer used as a medium of exchange. This is the exact answer Ben Bernanke gave Ron Paul when Ron Paul asked him if gold is money. In the mondern economy, no. Gold is no longer money since it is not used as a medium of exchange. There is not a store where people take gold and exchange it directly for goods and services. You have to convert the commodity know as gold, into money, before you can spend it.
Gold is a store of wealth, but it is not a medium of exchange, so it is not money.
Heck, you can’t even use it to repay your debt, without first selling it, to convert it into money, so that you can repay your debts.
“If all the debt in the world is repudiated (global jubilee), I would still have gold, and no debt. Because gold has traditionally been a money (as well as a store of value), I could trade that gold for other things. No debt involved…”
Gold is no longer considered money. If all debt was repudiated, all money would cease to exist. The mondern economy could not function, and we’d be back to barter.. that is, trading commoditeis directly for commodities. No money, in the moden meaning of the word.
“The confusion I think is that our fractional-reserve banking system is based on debt,”
Our entire modern money supply is debt. Look at the money supply. M0, physical currency, withdrawn from checkable deposits whch were boroed into existence. M1 = M0 + checkable deposits, that were borrowed into existence. M2 = M1 + CDs, created from checkable deposits that were borrowed into existence. M4 - M3 plus money market which were funded with checkable deposits that were borrowed into existence.
There is no commodity listing in the money supply. Commodities, even gold, are no longer considered money.
“but the banking system is not the economy and money is not debt.”
The banking system is not the economy, but the economy runs on money, and money, in the modern economy, most certainly is debt. Or, perhaps I should say, the UOMe that offset the IOU of debt. Money is the mirror image of debt, created from the creation of debt, equally and oppositely offsetting debt.
Money is the claim on someone’s future labor, becasue that someone borrowed and spent money now, with the promise of doing work later to get money to repay the debt.
“Dollars may be created via debt, but that has little to do with the actual value of dollars… again, supply and demand determines value.”
The fact tha money is equally offset by debt, means someone will have to do something to get money to reapy the debt, is what gives debt its value.
If there was money, with no debt, then there would be no reason that anyone needs the money, and no value to it.
“Your confusion and others is that the fractional reserve banking system is not the (whole) economy”
It is your confusion in not understanding that in a non-barter economy, commopdites such as gold, are no longer money.
“and money is not debt,”
It is the offsetting counter value to the negative value that is debt.
You had me at framing hammer.
Obviously, trying to apply logic to the greatest ever debt Ponzi economy in history can make you kind of edgy. The kernel of truth here is that the debts cannot be repaid. Ironically, the realization of that will make gold quite handy as money. Moreso silver. And yes, people will accept payment in tangible things when they no longer accept your IOUs.
This took you only two minutes to write? I worked a 9.5 hour day. I cannot keep up with you people and I assume you are all more productive than me. That’s the party line from commies such as slob, Rio and Colon-orado.
Time to rotate your invective, bilious. These are growing staler and sillier by the post.
(Also Ben has asked we curtail the personal attacks against members of our community.)
Would this be a good time for dips to buy?
Or would it be prudent to await a crash through the 52-week low on the GDOW? Just 115 or so points down from here to get there…
Global Dow Realtime USD
DJI: GDOW 1,742.49
Change -7.05 -0.40%
Volume 86.93m
May 30, 2012, 8:52 p.m.
Previous close 1,749.54
Day low 1,742
Day high 1,780
Open: 1,780.06
52 week low 1,665
52 week high 2,182
“Day low 1,742
Day high 1,780
Open: 1,780.06
52 week low 1,665″
Long division problem: How many more days like today would it take to breach the 52-week low on the GDOW?
Arithmetic answer: (1,742-1,665)/(1,780-1,742) = 2.03 days.
Geometric answer: log(1,742/1,665)/log(1,780/1,742) = 2.09 days.
It’s about 2 days, no matter how you cook the numbers.
Got blood in the water?
May 30, 2012, 8:19 p.m. EDT
Japan stocks plunge, as weak euro hits exporters
By Michael Kitchen
LOS ANGELES (MarketWatch) — Fresh concerns over Europe’s debt crisis, and a consequently weaker euro, helped send Japanese stocks sharply lower in early Thursday trade, with the Nikkei Stock Average (JP:100000018 -1.96%) dropping 2% to 8,463.13, losing the 8,500 level, while the broader Topix fell 1.6%. The euro (EURJPY -0.2484%) fell to (¥97.50) overnight, after trading north of ¥99 the previous day, and the surging yen slammed Europe-exposed exporters, particularly in the tech sector. Sony Corp. (JP:6758 -3.04% SNE -3.84%) dropped 3%, Advantest Corp. (JP:6857 -5.34%) tanked 5.7% lower, Tokyo Electron Ltd. (JP:8035 -3.86% TOELF -5.82%) gave up 3.5%, and Komatsu Ltd. (JP:6301 -3.16% KMTUF -4.76%) retreated 3.1%. Among other notable decliners, steel maker JFE Holdings Inc. (JP:5411 -3.89% JFEEF -16.05%) tumbled 3.5%, and energy major Inpex Corp. (JP:1605 -3.00% IPXHY -0.55%) fell 3%, as global growth worries rose after poor bond-auction results in Italy and Spain. The few gainers were the utilities, rising after a Kyodo News report that Prime Minister Yoshihiko Noda is considering reactivating some of Japan’s nuclear power plants, none of which are currently in operation.
…
“Fish are friends, not food.”
May 30, 2012, 8:39 p.m. EDT
Australia stocks fall sharply, as resources weaken
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LOS ANGELES (MarketWatch) — Australian stocks traded sharply lower early Thursday, as weak commodity prices led to heavy drops for resource shares, repeating a theme from the previous day’s trading. The S&P/ASX 200 (AU:XJO -1.10%) sat 1.2% lower at 4,046.90 in early moves, with Alumina Ltd. (AU:AWC -4.52% AWCMF -21.94% AWC -5.12%) falling 5%, Rio Tinto Ltd. (AU:RIO -2.27% RIO -4.86%) losing 2.3%, and Fortescue Metals Group Ltd. (AU:FMG -5.28% FSUMF -5.15%) extending recent losses by 5%. Among financials, National Australia Bank Ltd. (AU:NAB -5.12% NAUBF -3.21%) tumbled 5.9% as the shares traded ex-dividend.
…
Damn meddlesome populists…they messed up the European monarchy back around Marie Antoinette’s time, as well.
Furious European voters pose threat to political elite
By Ruby Russell and Blaz Zgaga, Special for USA TODAY
Updated 20m ago
A man walks past a sign against the European Fiscal Treaty in Dublin on Wednesday ahead of Thursdays referendum.
By Niall Carson, AP
LJUBLJANA, Slovenia – European voters furious that they are not being consulted about how to solve a debt crisis are threatening to derail the plans of political elites at the ballot box in coming weeks.
The Irish vote today on a deal negotiated by European Union financial ministers in Brussels that will force nations that use the euro as currency to adhere to strict spending and borrowing limits or be penalized.
The fiscal compact, which surrenders sovereignty on budget matters to the European Union, is being demanded by richer nations who are funding bailouts of debtor nations. But whether increasingly angry voters will go along as Europe heads for a summer of elections is a big question.
“It’s outrageous,” Oscar Rivas, 39, a sound engineer in Madrid, said in reference to demands that debtor nations rein in public spending and benefits. “Europe looks down on its citizens. When the European Union started, it was a good idea. (But now) they’re out of touch with the citizens.”
…
My gosh, it’s hard to ignore this mushrooming crisis!
Europe Fears Bailout of Spain Would Strain Its Resources
Published: Wednesday, 30 May 2012 | 10:52 PM ET
Landon Thomas Jr.
As Spain’s deepening financial problems make a European bailout a more distinct possibility, a looming question is where the money will come from.
Spain is the euro zone’s fourth-largest economy, after Germany, France and Italy, and the cost of a rescue would strain the resources of Europe’s new 700 billion euros ($867 billion) bailout fund that is to become available this summer. That would leave little margin for any additional bailouts.
Spanish and European officials hope a bailout will not be needed. But each day, financial turmoil mounts over the government takeover of the giant Spanish mortgage lender Bankia, the flight of money to safer borders and a worsening recession.
Compounding Spain’s problems has been an outflow of foreign capital from the country, meaning the Spanish banks in recent months have been the only major buyers of its government bonds needed to finance the nation’s budget deficits. With those bonds now plummeting in value, the fate of Spain’s banks and government are intertwined in a financial tailspin.
Because Spain is the euro zone’s fourth-largest economy, after Germany, France and Italy, its problems pose a far greater challenge to European policy makers than does Greece, which is much smaller. Hoping to ease the pressure, the European Commission on Wednesday urged Spain to take market-calming measures, and Lael Brainard, an under secretary at the United States Treasury Department, arrived in Madrid for talks with government officials as part of a regional tour. Worries about Spain helped send stock markets down broadly in Europe, with Wall Street retreating in afternoon trading.
In the bond market, the Spanish government’s borrowing costs are approaching the symbolically dangerous level of 7 percent on 10-year bonds. The rise has stoked worries that Spain might need bailouts similar in scope — though many times larger — than those extended to Greece, Portugal and Ireland. Interest rates in that range had pushed them out of the debt markets that governments rely on to finance their operations.
“At 7 percent, it will be very hard for Spain to obtain funding,” said Santiago Valverde, an economics professor at the University of Granada and a research consultant for the Federal Reserve Bank in Chicago. “It’s not just the government either, but big banks and companies, as well. The markets will close.”
On Wednesday, Spain’s economy minister, Luis de Guindos, acknowledged as much when he said interest rates were “not sustainable in the long term.”
The yield on Spain’s 10-year bond rose 0.21 percentage point Wednesday, to 6.61 percent. In Italy — a country whose debt burden of 120 percent of gross domestic product is much higher than Spain’s — the yield on 10-year bonds rose about 6 percent, hitting a 10-month high.
Since the nationalization of Bankia on May 9 signaled the perilous state of Spain’s banking industry, and drew attention to the limited ability of the government to shore up the banks and prevent the flight of capital from the country, the prime minister, Mariano Rajoy, has insisted that Spain will not need a Greek-style bailout.
No head of state would welcome such intervention, because as Athens and Dublin and Lisbon have found, those rescues come with demands for deeper budget cuts and fiscal rigor.
But Mr. Rajoy’s administration has been floating the idea of engineering a bailout by other means. These include getting Europe’s rescue fund to provide money directly to the country’s banks or to buy Spanish government bonds on the open market, without Europe’s demanding new levels of scrutiny and tough payback conditions.
Economists estimate that if Spain were forced out of the bond markets by its high borrowing costs and had to rely on funds from Europe and the International Monetary Fund to survive, the cost could reach 500 billion euros over several years.
Europe’s new bailout fund, the European Stability Mechanism, will have about 700 billion euros when it goes into operation this summer. But it remains untested in its ability to work quickly.
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How is your mattress money supply holding up?
Asia suffers fresh euro flu
Asia markets sink, echoing sharp falls on Wall Street overnight, as worries about Spain and Italy spark fears of a deteriorating situation in Europe.
Time to assume the crash position yet?
May 30, 2012, 5:06 p.m. EDT
U.S. stocks retreat 1% on Greece, Spain fears
Treasury yields hit record low; oil falls below $88/barrel
By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) — U.S. stocks retreated Wednesday, wiping out the prior session’s rally, as bond yields in Spain and Italy surged and polls out of Greece added to the uncertainty over whether it would remain in the euro zone.
“If Greece ends up leaving the European Union and the debt crisis remains reasonably well contained, then world growth will continue at a modest pace. But if that contagion becomes chaotic, then all bets are off,” said Mark Martiak, senior wealth strategist at Premier/First Allied Securities.
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Just got back from break with kids in NC, read yesterday’s posts to get grounded, and was surprised and delighted to find myself mentioned as an author-i-tee!! on something.
Oxy said “The Metro is full of ads hawking the night school “continuing studies” programs not just at U of Phoenix but at local private colleges; associates degrees or certifications. They try to sell the degree as a way to be promoted or to expand your horizons, but the real reason is to keep the job you have. In our rank-and-yank business environment, you need more and more letters after your name just to avoid being in the bottom ranking and therefore subject to yanking.
HBB poster Jane would know more about this.”
It’s been my observation that certs and eds don’t give people a whole lot of traction these days without accompanying experience.
Why I went into this program: I’m in an engineering company, in a technology town. Being in a technology town without tech bona fides is an exercise in marginalization. To my astonishment, I got INTO the program. As long as I made grades, it was FREE. I am CHEAP. Not accepting the gift before me would have been - in my view - the height of arrogance.
So, I’m in this because I wanted to be swimming in the mainstream, and it was free. Other than white knuckle stress about showing up, studying, and getting the problem sets, projects, and finals done. Would I do it again? Yes, because I really am learning how things work, am now able to converse in a common vocabulary, and it gives me chops. Before I took this job, I always had chops.
Will I stay where I am after I’m more along in the program (still have five courses and one M.S. project to go)? Who knows. What I DO know is that having a different lens through which to view the world is a good thing. After all, I am a bookworm. If it weren’t this, I’d be studying Roman concrete. Or the Deccan Traps. Or something. At least now I’ll have another notch in the belt.
I also …umm…figured that if his mother was getting an engineering master’s, my youngest would not have the brass to flunk out of H.S. Three weeks till graduation, it’s still a cliffhanger, but it seems likely that he’ll graduate with his class.
So, it just seemed like the right thing to do and all the pieces fell into place. I’ll admit it isn”t E-Z.
Best to you in your new housie!
The most cogent argument for grabbing another degree I’ve read in a long time. Appreciate the perspective and glad you’re enjoying the experience.
(Go Janie!)
Bovines beware of murderous Syrians and face-eating maniacs! Not to mention a Grexit with a worse-than-expected aftermath and no trailing dead cat bounce.
May 31, 2012, 12:02 a.m. EDT
Markets will rally when Greece leaves euro
Commentary: Spotting opportunities after a bloody May
By David Callaway, MarketWatch
SAN FRANCISCO (MarketWatch)—Seldom has the tired old Wall Street saying “Sell in May and go away” rung more true than it did this past month.
Aside from the U.S. dollar and German bunds, investors pretty much dumped everything in May, with markets plunging around the world on concerns about Europe and China, and, of course, the epic failure of the Facebook (FB -2.25%) IPO two weeks ago.
Trouble is, this year nobody went away. A collective funk has settled over the news cycle, with Syrian executions and face-eating maniacs only adding to the general feeling of dread as investors search for safety. A U.S. presidential campaign already boiling with hate on both sides is not helping to ease the pain.
The Nasdaq (COMP -1.17%) down almost 7% for May, is on course for its worst month since the teeth of the financial crisis in October 2008. Gold is down about 6%, oil down 16%, and take a look at the six-month chart of Spain’s IBEX 35 Index (XX:IBEX -2.58%) if you want a good scare.
In short, investors are rushing to safe havens in preparation for financial Armageddon, the long-feared run on European bank deposits that is expected to develop once Greeks awake some Monday morning this summer to find out the euros in their bank accounts have turned into devalued drachmas. Indeed, unconfirmed reports out of Spain are that some depositors are already withdrawing euros.
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Titanically low Treasury yields demonstrate that everything you ever learned about the bond market was wrong.
HEARD ON THE STREET
May 30, 2012, 5:11 p.m. ET
QE3 Hits European Iceberg
By JUSTIN LAHART
A few months ago, investors might have thought that if Europe got decidedly worse, the U.S. Federal Reserve would launch another bond-buying program. Well, Europe sure is worse, but it has helped bring rates so low that further action would seem pointless.
The yield on the 10-year Treasury hit a record-low close of 1.63% on Wednesday. Data going back to 1798 show that there has never been a period when long-term government-bond yields have been even close to where they are now. Meanwhile, the Federal Reserve is slated in June to end its “Operation Twist” program, in which it has sold shorter-dated holdings of government debt and bought ones of longer maturities. But investors, in their zeal to retreat into the relative security of U.S. Treasurys, don’t seem worried the central bank is about to step away from the market.
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Et tu, India?
India’s Economy Slows, With Global Implications
Manish Swarup/Associated Press
A powerhouse seems less powerful: Prime Minister Manmohan Singh of India and Sonia Gandhi, president of the Congress Party, face numerous challenges.
By JIM YARDLEY and VIKAS BAJAJ
Published: May 29, 2012
NEW DELHI — India’s coalition government just celebrated the third anniversary of its tenure with a self-congratulatory banquet that could not have been more poorly timed: India’s currency, the rupee, is falling; investment is down; inflation is rising; and deficits are eating away at government coffers.
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