Weekend Topic Suggestions
Please post topic ideas here!
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
May 2024 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
Do people want to be lied to?
I look at the debt overhang with this economy, and realize it’s going to be tough sledding until we get out from under it, perhaps for a generation.
In state and local government, I see the crushing burden of past debts and pensions.
And yet no politician is willing to say “here is the reality, let’s work together and deal with it.” It’s like “elect me and I’ll fix things.” But you can’t make the past go away.
Romney is being dishonest. Obama should have been making “blood and tears” speeches for the past four years, but went with happy talk instead.
Here in NYC, those who plan to run for Mayor in 2013 are making all kids of promises. I can promise they’ll impose a nightmare, because they’ll inherit a fiscal disaster.
The current Mayor is still talking about improving the schools, even though the 25/55 pension deal (down from 30 years worked and retirement at 62) passed retroactively in 2008 is causing cut after cut to the classroom.
I guess people don’t want to hear “they did it, it’s done, and you’re screwed.”
The simple answer is yes. It’s human nature to wish for the best even when confronted with evidence the best can’t possibly be.
And thence springs the bubble cycle, with episodes of irrational exuberance punctuated by hard crashes to the ground when economic reality interferes with figments of euphoria.
Do people want to be lied to?
YES, of course they do.
What world have you been living in? Particularly, voters with benefits.
The whole problem with “democracy” is that unless the Courts get involved and say you can’t use “public money” for personal benefits, then the people will vote themselves benefits until the system collapses.
No politician, once the goodies get handed out, wants to try and run on a austerity program.
We have reached the tipping point, where the takers exceed the makers.
Wisconsin was an outlier. It had just enough makers to vote out the parasites, but you can see that they didn’t go without a fight.
It unfortunate that the “opinion makers” have managed to re-write the history and vocabulary of our daily existence.
There is no such thing as “public sector”. It’s one of those euphemisms to make government employees, who are a net drain (tax) on the privately owned businesses, Add, rather than detract from economic growth. Yet, we hear about the “public sector” in Keynesian fantasies as a source of GDP. It isn’t, it’s a negative.
But if you want to substitute real growth and incomes with Government intervention to game the system, then you need the “public sector” as a way to funnel money into the hands of your cronies. Yes, it’s true they “spend”, but they had to take it from the productive side of the working world, first, so they could have the money to spend in the first damn place.
We’ve had Larry Summers, Rahm Immanuel, Alan Greenspan, Ben Bernanke, Robert Reich, Paul Krugman, Lloyd Blankfein, and the crew of crooks running through numerous administrations, R and D, providing advice and fairy tales about how the economy works while they pilfer the countries of the world.
They couldn’t have risen to the positions they occupy without a world of Lies. Yes. We like to be lied to.
Just keep printing more money and giving it to the Banksters to buy up the world. That will keep the Nation and world prosperous and free.
Print more money and give it to the Banks, with no strings attached.
And the biggest lie of all…. Wall Street is the producers, not the takers.
^ +1
See also “free markets”, “free trade”, et cetera…
“Do people want to be lied to?”
Got religion and politics?
Humans have an innate sense of what is just and what is not, and THAT plays against their innate greediness. Somewhere between the two, the manipulative wreak their mischief.
No one WANTS to be lied to, but our small vanities prevent us from recognizing when we are. Hence the rationale of politics.
“then the people will vote themselves benefits until the system collapses.”
What are these “benefits” I voted for myself?
Free college tuition?
Free healthcare?
Just wondering
I’d call the people who bought up W i state power generation facillities in a closed door non open bid fashion the takers. I’d call the people who got 650k for a rail line to their company as a grant (not a loan) from the state the takers. I’d call t he billionaire heiriss who paid no state income tax last year the taker.
Don’t get me started about transportation grants to railroads.
Too many of them are going to “hobby projects”, like repairing bridges and track for the local tourist railroad (so the old coots have somewhere to run their trains), or restoring old steam locomotives.
Locally, we are using FAA funding to repave parking lots, or building new control towers in BFE, on airports with a couple of operations per hour..
Arg.
So hard to have a conversation about economics without talking about the nature of money. I try Ben, I really do.
Monthly trade numbers released for April… $51B monthly deficit.
And we wonder why we struggle with debt? What do people think this money is that is funding these trade deficits?
Knock it off.
Here’s a suggestion. Go back to the drawing board, refine your argument, float it in the academic press, respectfully consider their critiques, THEN present it here for our comments.
You’re obviously a smart, caring man. But this sounds like gibberish. You might want to bounce it off of one of those humanities majors….
PS. I’ll buy your book when it comes out.
“…float it in the academic press…”
Not gonna float.
WT didn’t the teachers have to contribute a lot to their retirement and health insurance to make the 25/55 cost almost nothing to the city?
I think Bloomberg has done a very good job, at keeping the city quiet…I think he has gone way overboard with bike lanes but then he does ride the subways.
He did the right thing raising cigarette taxes so its $10 a pack. and I am sure glad to walk in a club and not choke to death on the smoke fog.
I think he has failed in putting more funds for job training..they are almost dried up unless you wanted to be a security guard, a truck driver for fresh direct home heath aide… or ramp agents at Kennedy. No money to brush up on any new programs or skills.
So yes i fear for the new mayor to screw things up …like Dinkins did glad i wasn’t here for that. we moved to Manhattan in late 94 for my job at court tv.
“WT didn’t the teachers have to contribute a lot to their retirement and health insurance to make the 25/55 cost almost nothing to the city?”
Nope. That was a lie.
The original deal was 30/62, with a three percent employee contribution, and no automatic cost of living adjustment.
In 2000, an automatic cost of living adjustment was added, and the employee contribution was eliminated after ten years.
In 2008, teachers were given the right to retire at age 55 after 25 years of work, with an added contribution of 1.85% of pay FROM THAT POINT FORWARD. Those who were 55 then got to walk out the door immediately without paying an extra dime. Those with a few years to go had to pay that little bit more for just a few years. The cost of the enhancements, meanwhile, which multiply by each other, was huge.
Most other city employees had gotten a similar deal, but they were required to “buy back” all the years they hadn’t contributed the 1.85%. But it still was a killer increase in cost, particularly since starting at year 10 they were paying 1.85% instead of the 3.0% they were promised when they were hired.
“I think Bloomberg has done a very good job”
Except when he wanted to run for President, and cut this deal. Spitzer approved it because he wanted to run for President. Pataki approved the 2000 deal because he wanted to run for President. The deal was pushed by Comptroller Carl McCall, seeking union support to run for Governor. Giulani did the cut in employee contributions because he wanted to run for Senator. Lindsay did the original massive pension enhancement, the one that destroyed city services, because he wanted to run for President. All figured they’d get union support, quid pro quo, and be gone before the bills hit.
Current Governor Andrew Cuomo probably wants to run for President.
I think Bloomberg has done a very good job, at keeping the city quiet…I think he has gone way overboard with bike lanes but then he does ride the subways.
What’s so awful about bike lanes? Do we smell that bad?
Slim, I know you biked across country at some point, but have you ever bike commuted on a regular basis in a major city?
Yes, I commuted to work in Tucson for several years.
And, trust me, there’s no great love on the streets for bicyclists here. It’s one of the reasons why Tucson isn’t going to earn platinum status as a Bicycle-Friendly City anytime soon.
I mean no disrespect to Slim, but there are some really, really awful bicyclists out there who are endangering themselves and others as they carelessly weave in and out of the bicycle lane and into and out of traffic. I would like to see law enforcement address this issue. My biggest pet peeve is when they think it’s ok to form a Peloton and go three wide in a bike lane as they chat with each other, while I am forced to cross a double yellow to avoid grazing the outside rider.
My brother warned me to be careful when walking across the new bike lanes in NY. They are separated from the street (sidewalk, bike lane, raised island, street parking if any, traffic). The insulation from the street means cars don’t ride in the bike lanes and the raised island keeps them from getting doored. Brother says that a lot of riders have responded to this increased safety by deciding that no rules of the road apply to them. They don’t stop for red lights and they don’t yield to pedestrians with walk signals inside crossing lines. I saw what he was talking about a few times. It was pretty obnoxious.
Brother says that a lot of riders have responded to this increased safety by deciding that no rules of the road apply to them. They don’t stop for red lights and they don’t yield to pedestrians with walk signals inside crossing lines. I saw what he was talking about a few times. It was pretty obnoxious.
I agree. I hate seeing — and experiencing — this kind of behavior.
One problem I have in Boulder is that the city is very well set up for biking on the streets and the bike trails. But you always get that one person who would rather ride on the sidewalk and comes blasting out from behind a tree or fence into the crosswalk while you’re trying to make a right on red and you almost run into them and they almost run into the side of you. My opinion is that if you’re going to ride like a little kid, then you need to stop and walk the bike across the street like a little kid.
I’ve run this by my local serious biker friends and so far they’ve agreed that the biker seemed to be the problem in that situation.
I’ve run this by my local serious biker friends and so far they’ve agreed that the biker seemed to be the problem in that situation.
Case in point from here in Tucson: Cyclist killed in crash had ‘significant’ amount of alcohol and marijuana in system.
Slim the bike lanes cause traffic jams in lots of areas…lots of streets were 2 lanes on the one way street, now you add a bike lane and there is only one lane for cars.
Plus with the crazy design of a barrier you take away a lane of traffic on each of the major streets and you also take away some very valuable parking spaces too… It just adds to the cost of doing business in Manhattan
Most of Tucson’s bike lanes are just a stripe on the side of the road. This place doesn’t have the money to do anything fancier.
Most of queens and Brooklyn are just the stripes. I know people love to ride bikes I did a lot even in HS and college even though i got my license in HS, I was in no hurry to get a car and pay high insurance, especially when the main road at college was less then a mile from the dorms.
“He did the right thing raising cigarette taxes so its $10 a pack. and I am sure glad to walk in a club and not choke to death on the smoke fog.”
Not a smoker here, but that attitude is what empowers the nanny state progressives like mayor doucheberg. A bar should be able to let in smokers if they please. Before the bans and the draconian taxation did you see anyone opening a non-smoking bar? No..why? Because they would go out of business in two weeks. Even non smokers used to light up when they had a few, so what, life is pretty fricken short so get over it.
Leave your idea of life to yourself and make your own choice to smoke or not to smoke, make your own choice to frequent a smoking establishment or not…that goes for the wait staff, bartenders and cooks as well. Don’t like smoke, don’t work at the bar or the Casino..capiche?
Do we all have so much free time to sit in our homes and seethe while we think of the many objectionable behaviors taking place out in the world that are absolutely none of our G D business? That appears to be the case.
Well lets eliminate OSHA rules and if you get your hand sliced off in a machine..you are outta luck its your fault so you cant sue anyone….that is also fair…
Don’t like smoke, don’t work at the bar or the Casino..capiche?
Do people want to be lied to?
Do girls at frat parties respond better to lies or to the truth? The relationship between voters and politicians isn’t any better than that.
They don’t want to be lied to exactly. They want to be told what they want to hear. It’s a subtle difference.
“Little Lies” by Fleetwood Mac - “Tell me lies, tell me sweet little lies”
It’s a subtle difference.
I’m not really seeing it.
Hearing what you want to hear may be the truth on occasion. Often it isn’t. Often the truth (this is going to cost a lot, you can’t get the good deal with that credit score/small downpayment/whatever, there aren’t any tickets left) isn’t what you want to hear. But every once in a while, the truth is what you want to hear. The determining factor is whether it is what you want to hear, not whether it is untrue.
Well…nobody asks to hear a lie that they didn’t want to hear. And everybody is happy to hear the truth that they do want to hear. So we’re really just choosing between lies we do want to hear and truth that we don’t want to hear. Tons of people seem to prefer the lie.
+1
The point I was going to make.
If someone is being told something consistent with their beliefs, then they’ll champion it. If it is not consistent, they’ll want to distance themselves as far from the idea as possible, and even try to ignore what is being said.
The greatest challenge is recognizing what your own deep seated views are, and trying constantly to pick them apart using opposing views most cogent arguments.
One of the keys to being a very good liar is to tell someone a lie that they desperately want to believe.
“No, those pants don’t make you look fat.”
“Relax, you can refinance when the rate adjusts.”
If you believe what it sez in this book, you can live in heaven forever after you die.
Otherwise, it’s the eternal flames for you.
Have the agents of government financial scams successfully removed the “excess inventory?”
I am curious. I know it’s an election year. Everything is being tried to get the “markets” up and the real estate market “restarted”. I see optimism stories in the local and national “news” makers. What’s really going on?
Is your part of the country having housing “shortages”?? Is new construction a growing sector of the local economy?
I know the Government is pushing loans again, cheap, with little down payment, and poor credit. It’s bound to promote more buying. In the past is resulted in more defaults.
Is the scam to get the numbers up enough to say Obama “fixed” the housing markets? I am trying to get a read on what’s really going on.
How are things in your neck of the woods?
Looking for a dirt-cheap condo in Phoenix, I can say that over the last year, the inventory is gone.
I can not say for sure where it went, but it is not for sale.
Give it time. When the speculators exit Phoenix, you’re going to be stunned how inexpensive a condo will be.
Oh yeah, I’m in no hurry, not am I really committed to buying.
If I can find something dirt cheap (1100 sqft for $30K) in a good neighborhood, then I will buy. What is actually on the market now is more like $50K (or in the gang hoods with drug and thug filled schools), and I will not be paying close to that (or buying there).
I will add. My daughter is thinking of buying near where her husband would transfer to in Avondale/Goodyear area. Doing an MLS search there, you would SWEAR that you had a filter set to only return “short sale”. Seriously, of the 700 properties in her price range, we didn’t see more than a couple dozen that are not listed as short sale.
Peak Foreclosure seems to have morphed into Peak Short Sale. The phase that follows should still be just as exciting.
Since you are extremely paranoid about debt, perhaps you could set up an account to save $30K before you go shopping.
If it takes a yearto find something I am interested in buying, I may well have the $30K cash.
But, again, do not confuse macro with micro.
While unsustainable debt growth at the macro level is bad for the national as a whole, borrowing a small amount of money (in relation to income) at a rate less than 1% above inflation, is not necessarily a bad thing at the micro level.
When making personal decisions, the micro level is most important.
When discussing national policy, the macro level is most important.
Don’t fool yourself. It’s the same at the personal and the national level. A small amount of debt may be useful. A large amount of debt is debilitating. There is no Paradox of the Spendthrift.
The short sale next door to me is still for sale. I thought that the lastest 15% price drop would bring lots of folks, but I’ve only seen two interested parties so far (both Hispanic) last weekend. Maybe more this weekend? Someone mows the lawn every weekend.
It should be particularly easy to spot showings in the summer now that the heat seems to have arrived. I presume that the windows are all closed while it is not occupied. Someone is going to have to come open the windows to air it out or turn on the AC if it exists. Without that, the house would show like a sauna in our area.
Ventura County-So Ca
Slim pickens here, and what goes private sale is gone within hours. Multiple bids, and Thank God for the FHA taxpayer guarantees.
Short Sales, once the stepchild, are now golden children, a new venue for bidding wars. REOs are seldom showing up. The mid-tier around here, $350K-$450K are the hot spot. Of course, that’s our price range as well. The difference is we aren’t future defaulters gaming the system with 3.5% down, we’re a cash for life. Even our credit union now has a 3% down program. Nuts!
Yeah this howmuchamonth vs. asset price amnesia is too surreal.
I hate elect-tile dysfunction years.It just adds to the illusion of a
r e recovery. (What recovery…we need equilibrium.)
we’re a cash for life
The FHA buyers are also effectively cash buyers, Awaiting. At least from the point of view of the buyer’s bank.
To be brutally honest, nobody likes a cash buy.
The seller doesn’t like it because it lowers the price. Better to have a bidding war from 3.5ers to drive up the price.
The Realtors don’t like it for ditto.
The banks don’t like it because they get no interest payments and NO fee monies.
The government doesn’t like it because that cash is better spent at Macy’s and Wal-Mart. If the gov needs money to backstop a foreclosure, well, that’s in the future.
So if the house isn’t being bought with cash, where is the money coming from? Presumably, 30 years of labor from the buyer.
So much for cash being king.
I thought the 3.5ers were FHA. Can you explain why they are like cash? Is is because once approved the financing is guaranteed?
“The FHA buyers are also effectively cash buyers, Awaiting. At least from the point of view of the buyer’s bank. ”
I think he is saying that it is the same as cash to the lender writing the loan, because they are not going to hold the debt, just pass it through.
Sell to me for cash, and you do not have to worry about the other guy paying you back.
Bank’s response… I’m selling the loan to the government, so either way I do not have to worry about getting paid back.
You don’t need a stellar credit score to qualify for an FHA loan. IIRC, a score in the mid 600’s will do.
Darrell is right. That’s why I used the term “effectively.”
Everyone prefers a mortgage over a cash buy. In fact it’s probably not much different from why retailers like credit cards. The buyer is more likely to spend more if they aren’t standing there counting pennies.
“You don’t need a stellar credit score to qualify for an FHA loan. IIRC, a score in the mid 600’s will do.”
I posted a link a few weeks ago stating they are going all the way down to 540 for the 3.5% down loans and you can also get a loan somewhere between 2 and 3 years after foreclosure. Sorry I did not bookmark the link. That is what’s causing the bidding wars.
“30 years of labor from the buyer”
Not likely. The savy specualtor will leverage up to the max during a credit expansion and buy as much as the bank will let them. The house will make them so much profit in a few years that they can sell with enough net gain to buy a moderate house for cash. It’s called the Canadian Plan. Used to be called the California or the DC Plan.
oxide
Guaranteed closing, no FHA inspection, a quicker escrow, and a higher net, is what we have seen sellers want. We’ve canceled our offers, not been declined. One short sale only did a counter to cash offers. All FHA guaranteed buyers weren’t considered. Only 20%ers and they were back up to the cash offers.
I appreciate your post, and I agree with many of your bullet points, but we are actually a higher net and a clean deal. Our buyer’s broker thinks we should wait for fall. Prices soften.They have every year so far. This year with more rigging, who the heck knows.
How is the new place coming along?
I don’t know if the higher net from a cash buy is enough to make up for a higher price from a mortgage buy.
New house is coming along slow. Had a couple small things done, but major stuff will have to wait until after berry harvest. Besides, it give me time to save up money for projects.
Had to clean up after the previous owners, especially in the yard.
The cheap fianancing money is available but you will be facing several bidders who get an emotional mania going rather than looking at return on investment. It reminds me of that tv show Storage Wars where people are bidding on things they havent even really looked at or understand.
“Storage Wars”
I am addicted to that show for some reason.
Every time I look at something in South Florida there are multiple bidders driving the price thru the roof with cheap financing. Its just an emotional feeding frenzy without any consideration of ROI or the replacement cost.
Its just an emotional feeding frenzy without any consideration of ROI or the replacement cost.
Which is why it’s best to just sit on the sidelines and wait. Better buying opportunities will come.
Patience, grasshopper.
I finally pioneered a new commute route to work yesterday in order to avoid the part along my customary route where the resurrection of new home building from the dead has created a standing mile-long traffic snarl. Shaved 15 minutes off a 40-minute commute as a result.
Cantankerous
Aren’t you in N San Diego county, in the Rancho Bernando area?
What “I” has the parking lot?
What home size/prices are they restarting to build now?
Thank you.
- Carmel Valley (just north of I-56)
- I believe the recent signage indicates “From the $700s” — generally 3-4 br McMansions in the 2000sf+ size range.
“From the $700’s.” Hmmm- sounds like 2005 all over again.
“$700Ks”
Targeted at the GSE conforming loan limit for San Diego of $729,750, no doubt…
We live in a pretty tight real estate market (mid-Peninsula, South of SF). The house across the cul-de-sac went on the market a week ago, with a first open house on Sunday. I’m curious to see what traffic looks like…rumors are that anything of quality has multiple bids. This would fit the bill, being 20 years old, but recently renovated.
FWIW, there is lots of construction, can’t say whether it’s up or down from last year, but it’s typically renovations, or tear-down/rebuilds in our neck of the woods. There is a resistance to any density, and not a lot of land sitting vacant.
My question is a further refinement of your questions, and gets onto a topic near and dear to my heart…regardless of the level of construction, is anyone seeing builders doing new land development? Grading, installation of the infrastructure for a new subdivision, new curbs and roads, etc.?
Right in Darrell’s bailiwick.
U.S. debt load falling at fastest pace since 1950s
WASHINGTON (MarketWatch) — Everyone knows America has too much debt. What they don’t know is that things are getting better, not worse.
Little by little, our economy is reducing its debt burden, slowly repairing the damage caused by 10, 20 or 30 years of excess.
http://finance.yahoo.com/news/u-debt-load-falling-fastest-040045522.html
“In the 11 quarters since the recession officially ended, total domestic debt has risen by just $702 billion, or 1.4%”
Growth or contraction? The author is confused.
Declining as % of GDP.. but that is bad math, which I pointed out in another post that has not shown up yet.
…. and 30 years of massive overleveraging by public and private interests doesn’t de-lever in just a few years.
Exactly. A huge run up until poor old Obama got in. And now a small decline.
I said when he was elected that he wouldn’t know what hit him. Getting advice from Larry Summers didn’t help.
It is not a real decline, it is fail math! …but my posts won’t show up.
I think it has sunk in by now, and he didn’t have his JFK moment.
he didn’t have his JFK moment ??
Kind of difficult when you are handed the biggest financial fraud in US history….
Lets look on the brighter side….If MaCain and the ding-bat had won the presidency, we would still be in Iraq, ramping up in Afganistan, Bombed Iran, Threatened Pakistan with nuclear war and would be invading Syria right now…
Wow, that’s some crystal ball you’ve got.
BTW, he wasn’t just handed the fraud, he embraced it. The moment of decision comes, and then goes. Only my opinion.
“If MaCain and the ding-bat had won”
But you got to admit….. what a hilarious hillybilly show would be playing out right now if the DingBat was VP.
I hope Michele Bachmann gets tapped for VP. She is hot!
I said when he was elected that he wouldn’t know what hit him. Getting advice from Larry Summers didn’t help.
The videos on the Change.gov site (which was up during the Presidential transition of 2008-09) showed Obama wearing an ever more grave expression. It was very interesting to watch the progression from week to week.
So, I think he quickly realized what was hitting him. What he did about it was, well, taking advice from people like Summers. Big mistake, IMHO.
But economics is not Obama’s long suit. And we’re suffering the consequences.
If the AHC law gets struck down I wish Obama would get vindictive and put the economy into a hard tail spin. Call out Boehner and let’s hit that debt ceiling in September and shut down the Govt.. I want him to hand Romney a big pile of steaming sh*t so I can see how a REAL capitalist handles a crises. Just to really screw it up, Obama should attack Iran and let Romney deal with that at the same time.
“As much as we hear politicians, pundits, tea-party patriots and the Congressional Budget Office obsessing about government debt, it was excessive private debt — not public debt — that caused the 2008 financial meltdown. And it was private debt — some of it since transferred to the public — that lies behind the current European debt crisis. ”
EXACTLY!
“In the 11 quarters since the recession officially ended, total domestic debt has risen by just $702 billion, or 1.4%. By contrast, in the 11 quarters before the recession began, in those bubble years of 2005, 2006 and 2007, total debt increased by $10.7 trillion, or 28%.”
Say what?
Looking at the z1, d3 and counting back 11 quarters I find total debt:
2009 Q3 35327.2
2012 Q1 38643.7
The way I do the math, that is $3.3T, not $.7T.
What is the difference? The financial sector debt. Why does the Fed not include financial sector debt in the total debt? Because it is double counting what people actually owe.
I deposit $1 million into a bank. The bank loans out $900K to some individual and holds $100K in reserve. Well, both the household debt and the financial sector debt go up by the $900K. The guy that borrowed the money owe the bank $900K and the bank owes me $900K more than it has. Well, really, the guy that borrowed the money owes ME the $900K.
So, where did the extra financial service sector debt go? Ummm… QE and foreign buyers of debt.
So, now that guy owes the Fed and the Fed owes me, and the debt is no longer considered “financial sector debt”. Or he owes a foreigner and the foreigner owes me.
Does changing whom I he owes the money to alter the fact that he still owes it?
The numbers over the last 11 quarters that really matter are:
Household = down $500B.
Business = up $600B
State and local = flat
Federal government = up $3.2T
Net: Total debt up $3.3T!
The “not real” financial sector down $2.4T due to QE and selling off our debt to foreigners is NOT real debt reduction!
Let me add….
The $500B that household debt is down is less than the amount written off as uncollectable via foreclosure, short-sale, and bankruptcy.
In effect, people are not “paying off” their debt. They are going back into debt more slowly than they are deadbeating the old debt away.
You keep using that word “reserve”. I don’t think it means what you think it means.
Let’s see if it means what I think it means.
Once upon a time, we had a hard currency. Customers would deposit the hard currency. Banks would loan some of it out, but keep enough on hand in case customers came to withdraw some. The amount held back was the “reserve”.
Now that we are not on a hard currency, and we have the Fed around to loan virtually unlimited amounts of money against the banks assets (loan pool) the banks do not actually need reserves to cover potential withdrawals. They can just do a repurchase agreement against some of their loans to get the ledger entries they need to cover the withdrawals.
Instead, the “reserve” is just the tool the fed uses to control the multiplication of the seed money on its balance sheet into the total money supply.
If the Fed had $1T on its balance sheet, and required the banks to hold 3% of deposits in reserve, then the max leverage in the banking system could be 33, multiplying that $1T seed into $33T.
You could never really reach the hypothetical max, but the hypothetical max could be adjusted by altering the reserve to limit the amount banks could actually loan.
One of the innovations of secularization is that it effectively reduced the reserve on the loans to 0%. Removing this limitation of max multiplication of the seed.
QE is the Fed buying up loans from the banks. This increases the banks reserves(amount of deposits not loaned out), hypothetically, increasing the amount of money they could loan out. However, since the real limitation on lending is the number of qualified buyers willing to take on more debt, QE has not been resulting in more loans actually being made (to anyone except he us government).
Well, you are circling around the thing, but not actually landing on it.
Well, you are circling around the thing, but not actually landing on it.
Must be that wind shear again.
Stop raining on Darrell’s rants!
OK, sorry.
Did anybody post this last week? If so, I missed it. Doomer porn, but with charts and facts to back it up. Enjoy.
KEITH JUROW: Prepare For The Coming Housing Collapse
Read more: http://www.businessinsider.com/another-housing-collapse-is-coming-soon-2012-5#ixzz1xCt9TMk0
http://www.businessinsider.com/another-housing-collapse-is-coming-soon-2012-5
My advice to homeowners in nearly all major metros is quite simple. Get an appraisal from a professional appraiser to find out what the market value of your home is. Seriously consider putting your home on the market within the next six months. You will have a chance of selling it.
Within a year, I expect many of the weakest markets to show signs of unraveling. Perhaps the most vulnerable market is the entire NYC metro area. Sooner or later, the banks will have to start foreclosing or even doing short sales. When these properties hit the market in significant numbers, I have no doubt that prices in the entire region – where 19 million people reside – will collapse.
For other major metros, the plunge will depend on how crazy the bubble was during 2004-2007 and how large the total number of underwater owners becomes.
Predictions are always iffy. But I am convinced that things will get ugly from here and that there is no solution that can prevent this collapse. The wisest thing is for you to do is prepare for the worst. Is there anything wrong with renting a nice house or condo to ride out this perfect storm?
Read more: http://www.businessinsider.com/another-housing-collapse-is-coming-soon-2012-5#ixzz1xCsxMYys
SCHWEEET….. I’ll put this to work elsewhere.
“I have no doubt that prices in the entire region – where 19 million people reside – will collapse”
A “collapse” will only happen in places people don’t want to be. There are lots of people who want to be here. They just can’t afford it.
Cut the price by 33 to 50 percent, and houses will sell. What some call “collapse” I call a return to normal. The metro area economy will collapse if it doesn’t happen, because the cost of living will be too high compared with the rest of the country.
A “return to normal” to you would be a “collapse” for someone trying to sell their overpriced house!
I own an overpriced house. Worth over $1 million, in theory, in a neighborhood traditionally occupied by civil servants and small shop owners.
I’ve got one kid in college and one going in. At these prices, they can’t live here. Friends have moved away because they didn’t buy before the bubble.
The only people who benefit from this are those who cash in and move to Florida. That cash pumps up the economy of Florida, while the excess debt on the buyer cripples the consumer economy of New York.
That excess has been going on for over 40 years in my observation. We moved from Buffalo to the NYC area in 1960. Spouse’s parents moved in from Chicago about the same time. I got married and had a really good job as an engineer in the 70s and could not afford to buy a house in the community that my (our) parents found affordable in the 60s. Our parents could not afford even to stay in retirement (and they had real retirement plans). It has only gone up from there. There is a long way to go to see normal.
At these prices, they can’t live here. Friends have moved away because they didn’t buy before the bubble ??
Ditto here WT….
“The only people who benefit from this are those who cash in and move to Florida.”
This is what hammers me in my little beach town. None of the recent comps are from local buyers.
‘A “collapse” will only happen in places people don’t want to be.’
Like that tiny island over in the Western Pacific called Japan, for instance?
Like that tiny island over in the Western Pacific called Japan, for instance?
To be fair, Japanese real estate is still generally expensive, even 20+ years after their bust…
Good point. IIRC an ordinary apartment in Tokyo still fetches half a million USD. I don’t even want to know what they cost during their bubble, probably millions.
According to Wikipedia (trust your source?), in 1989, the highest priced residential real estate was in Tokyo at $20,000 per square foot.
Apparently these high flyers fell by ~90%, and are still among the most expensive in the world at ~$2k per square foot.
“Get an appraisal from a professional appraiser to find out what the market value of your home is. Seriously consider putting your home on the market within the next six months. You will have a chance of selling it.”
I don’t have the courage to ask my colleague at work about plans to sell their home. It was on the market for at least six months last year with no offers. But the red hot 2012 spring sales season is getting pretty long in the tooth to be thinking of another attempt this year…
Rapid update: Just checked on Redfin, and the home is back on the MLS, as of four days ago! The curious thing is that it is listed right in line with Zillow, but the eppraisal estimate comes in at roughly 50% of the Zestimate©. Any thoughts on what might explain this extreme difference?
Here in Salinas epraisal is only good in close in city neighborhoods, go out to the urban areas and they are usually under value because they draw comps over a large area that mix quality and crap homes only on lot size and sq. footage.
Bad data, or not enough data to come to the proper conclusion.
I once saw a <5 year old home in Atherton, CA on more than an acre of land (home to the ridiculously wealthy) with a Zestimate of about one million.
It was something like 10,000 square feet, with 8 bedrooms, new pool, outbuilding, etc.
I think it ultimately sold at like $14 million. A flat acre in Atherton will frequently sell for a multiple of the Zestimate on this mansion.
Get an appraisal from a professional appraiser ??
Appraisers are way overrated, overpaid and in many instances completely incompetent…
Appraisers are needed for the purpose of underwriting the loan…They never have, and never should set the value of the house or any real estate for that matter…Value is set between a willing buyer and a willing seller not under duress…That in essence is what constitutes “Market Value”
I used to rent from a lady who had more than one run-in with a guy who bought up several properties in the neighborhood. He was a professional appraiser and one of the sleaziest people ever to have slithered into Tucson, Arizona.
My landlady knew a thing or two about real estate — she had a license when she lived in Maryland — and it was fun to watch her tear this guy’s reasoning to shreds.
The missing piece to his analysis is what is feeding into the upcoming mess. Not all markets will be the same.
He shows one of my favorite sources of data (Foreclosure Radar), and he shows one piece of the data, slowdown in REO for Arizona. He concludes that banks are intentionally holding back sales, and there will be a wave in the future. However, he conveniently doesn’t talk about how the same chart shows fewer and fewer cancellations homes scheduled to be foreclosed. If banks were slowing down the foreclosures, you should see cancellations stay the same or increase (ie. banks putting off the inevitable)…unless there are simply fewer homes to foreclose.
He doesn’t show is data from LPS that shows the percentage of non-current loans is down in Arizona from the peak (16% at peak down to 9% now). Normal is 5% (a fair number of which are people who miss just one payment, and are never foreclosed because they cure). So, we went from 11% over “normal” in Arizona, to just 4% over normal in 2 years. Don’t you think that a reduction of nearly 2/3 of this excess has something to do with the story in Arizona?
Contrast that with the state of Florida. Their non-current rates are still sky high, and haven’t really fallen from the peak. Last I checked for the state of New York, non-current rates were still going up.
The real question for the judicial states (NY and FL are two of the judicial states), is whether the courts will ever allow foreclosures to happen fast enough to put enough distressed homes on the market to cause the decline he notes. I would be very cautious of bullish views on any market in the judicial states, or any market that still has a lot of non-current loans. Just like some states are passing laws to slow the processing of foreclosures, FL or NY could pass a law that makes it easier, and then, watch out…market flooded, prices crash.
The one non-judicial state that I worry most about is Nevada. They still have a lot of non-current loans set to come through the pipeline (still top 5 worst in the country), where AZ and CA in contrast used to be in the top 5 or 6, and now are in the bottom third (or very close to it).
I’m not saying this guy is 100% wrong, I agree with him 100% on FL and NY (and am surprised he didn’t bring up NV), but there is a big difference between a judicial state with a 20%+ non-current loan rate (and not falling–FL), a judicial state with a 13% non-current rate (and rising–NY), and a non-judicial state with a 9% non-current rate (and falling–AZ). The dynamics of distressed housing are going to be different in each place.
http://www.irs.gov/pub/irs-soi/09intop400.pdf
Reuters has just put out a new US Internal Revenue Service data containing startling revelations of six rich families paying no federal income taxes in 2009 though reporting of average incomes $202.4 million each.(http://link.reuters.com/vec68s). Another six paid no tax and another 110 just 15% or less.
Carrying forward losses from prior tax years?
Isn’t there a cap on that? A really, really small cap for individuals?
The really small cap is against ordinary income. If all your income is capital gains (or treated as capital gains because of the carried interest rule) then that cap doesn’t apply. I think it is around $3000.
My understanding is that sometimes the insertion of flow-though entities between individuals and the profit/loss events makes a difference.
Homebuilders became famous for getting cash back from Uncle Sam after claiming losses post crash against gains (and taxes paid) from prior years.
I know some people who were members of LLCs that got a similar benefit (having gotten back income tax paid in prior years).
So hard to have a conversation when it takes an hour for posts to show up……
wondered about that. full mod mode?
Ever wonder why?
I give Ben a lot of credit. I know from personal experience that blog moderation can be a real PITA. To the point where, on one of my blogs, I disallow comments.
I’ve modded a couple of busy car-hobby-related boards and email lists in my time. A technique I ended up using often was disallowing all profanity. Was I that offended? No. But when people couldn’t stop themselves from using it, it worked as a great trigger to put them on moderated status :-). Nipped a lot of things in the bud…
nope
Is a bailout of Spain’s banking system in the bag? And wither Greece? One week to go before el moment es verdad…
ft dot com
June 8, 2012 1:42 pm
Spain poised to seek bailout
By Peter Spiegel in Brussels
Spain could request bailout aid for its struggling domestic banks as early as Saturday during conference calls between officials from all 17 eurozone finance ministries, making Madrid the fourth member of the single currency bloc to need a rescue from EU authorities since the outbreak of the sovereign debt crisis.
People briefed on planning for the calls, one with senior officials and a second with finance ministers themselves, said leaders want to move pre-emptively in order to assuage growing market uncertainty. The decision was first reported by Reuters.
There were signs on Friday that the Spanish government may back away from a formal request for aid after news of the calls was made public. Spanish media quoted deputy budget minister Fernández Currás on Friday as saying the reports were “false”.
If Spain makes the request, it would come before private auditors hired by the Spanish government to examine its banks’ books make a final judgment on the sector’s needs, now due on June 21. But officials have decided speed would demonstrate their commitment to stabilising the country’s financial sector.
Officials also want to move before Greek elections, to be held a week on Sunday, in order to make sure Spain is not at risk if far-left Syriza – which has vowed to scrap its existing €174bn bailout, putting the country’s euro membership at risk – becomes the largest party in the Greek parliament.
“It is essential that the other euro-area member states are pre-emptively and effectively ringfenced and protected from any possible Greek fallout, before the elections,” said a senior European official.
…
“Grexit vortex”
Sounds dreadful, no?
ft dot com
June 7, 2012 11:39 pm
Papademos warns of Grexit vortex
By Michael Stothard in Copenhagen
Lucas Papademos, the former Greek prime minister, has made an impassioned plea for Greece to stay in the eurozone, saying that an exit would push the country towards a “vortex of self destruction”.
He laid out some dismal predictions, warning that such a move would have “profound adverse consequences”.
He predicted that inflation could jump to 50 per cent following a “Grexit” and that gross domestic product could fall another 20 per cent on top of the substantial declines seen already since 2009.
The possibility of Greece leaving the single currency area has been increasingly discussed following the inconclusive general election last month. The election re-run will be held on June 17.
…
Vortex?!?
The destruction was baked in the cake when the loans were taken.
We recently went through Jury Duty screening , and it is absolutely amazing How many people get off on ”Disability ” and are dismissed, as everyone is asked their occupation . Probably 80% of the ethnic pool ., and a good third of the others in the pool too,claimed that. These were not seniors , but working age folks .
This is nuts and not at all what the disability funds were set out for ….How long can it last like that , when many folks ‘ aspirations ,is not a Job , but to get on the disability rolls ?
Disability is the new welfare.
According to the SS website close to 9 million adults receive some form of SS disability, with an average monthly benefit of $1,111,06.
There are 200,000,000 working age (16-64) people in the USA. 1 out of 20 is receiving SS disability bennies. Interesting that so many of them show up in jury pools. Perhaps since the don’t work they don’t ask for deferrals?
$1,111.06/month? That’s some real high living right there. Better give those cripple non-producers a fat slap of Austerity. They probably all drive blinged out wheelchairs to go buy steak and lobster with their EBT cards. F*ing parasites!
As I get older I thank my lucky stars that I don’t do physical labor for a living, because there’s no way I could that for a living until I’m 70, or whatever age I supposed to retire.
But that’s not all! SSD opens the door to lots of other *social services* you know.
Bringing up a question. If we reformed disability, removing 2/3rds of the people from the program, what would happen to unemployment?
Or, was the very low unemployment of the early 2k0s the result of a lot of people that would have been on unemployment, were collecting disability instead?
Disability, aside from severe disability, is an economic condition.
When the labor market is tight, employers will take on people who are a little slow mentally, a little slow moving physically, or frequently absent due to chronic illness, and try to manage around their problems.
Now? If you can’t run a marathon while doing calculus in your head, they think they can find someone more productive.
Yup, I remember a couple of years ago EvilCapitalist (probably goes by another name here now) seemed to feel strongly that it was unreasonable to expect managers to manage around anything. Bring in more 99th percentile immigrants who can self-manage rather than manage 90th percentile natives.
What really drives me nuts is that I know disabled people who wouldn’t dream of going the disability route. They’re too busy working.
The problem is getting hired again, if they get laid off.
Which is where a bunch of the new crop of “Disabled” are coming from, IMO. They could have qualified, but were able to find some kind of employment that paid better than disability.
If you are still doing heavy manual labor into your fifties, this could easily be the case. Just fail one pre-employment physical, and keep the documentation.
Just like the “fraud” in welfare, food stamps, Medicare, etc., the Repubs will blame fraud for all of the problems, but when an investigation is actually done, the fraud is not as prevalent as they claim, and/or you will find Republican constituents profiting from it.
If this fraud is so easy to do, and so lucrative, you would be stupid to do anything else. Maybe they should go apply, if it’s as easy as they say.
Slim
Add to that list people who get a handicapped parking placard who don’t really need them, and people who buy those service dog vests for fido online, and schlup their family dog into Costco.
Imposter service dogs are a big problem. And getting worse.
One of my friends has a legit service dog, and the imposters just drive her batty.
I was talking with a Regional Sales Rep yesterday…..was telling me the tale of another major Aviation MRO facility going down the tubes, because the new “private equity” owners just can’t help themselves….
“We’re not changing anything” = “The checks in the mail” = “I’ll pull out…..” = “I’m from the Feds, and I’m here to help”.
Here’s how it typically plays out:
-New guys take over, start screwing over the employees, to make the “numbers” look better.
-The employees who can leave (usually the best employees), do, taking a lot of expertise with them.
-Schedules start slipping, not enough help to get scheduled work done, they don’t want to pay anyone, so the MOTU start flogging the remaining employees with mandatory overtime. This works for a few weeks. Unfortunately, the MOTU look at the numbers, and decide that 60-70 hour weeks are great for the bottom line.
-Employees catch on, start stretching (intentionally, or due to fatigue) eight hours of work into ten.
(Here’s how it is,…..everybody I know will bust azz working O/T for a lot of reasons, but they will stop when they realize the O/T is part of the business plan, instead of hiring additional help, and/or some MOTU is using the results to justify his pay raise/bonus).
-Customers can’t get their product, or it’s late, or it’s defective, or a combination of the three. Customers start taking their business elsewhere. Pretty soon, O/T is no longer needed.
But I slightly digress……
This led to a conversation about the perverse incentives that our society and economy currently operates under. One of which is how the incentives are way out of balance…….why risk money building/designing/manufacturing anything for a 2-3% ROI, when you can send the work overseas and double your ROI, or be a bankster and make 5-10%?
Until someone (government? The 1%ers?) steps in and starts realigning people’s priorities, I don’t see anything getting better for us members of the wretched refuse.
This should have happened 20 years ago. We now find ourselves in the situation where the majority of the population, and all levels of government, are economic hostages of the Bankster/1%er class. Who have turned into the whiny brats who threaten to take their balls home, unless the rules are tilted in their favor.
We keep voting for it.
This November, it’s time to vote for anyone but the incumbent. Yeah, the new ones will get co-opted, but then they’ll need to be swept out too.
We’ve specifically limited presidents to two terms, to avoid an imperial presidency. We should not allow an imperial Congress either.
“Politicians and diapers should be changed frequently and all for the same reason.” - multiple attributions
I agree Neuromance. I did the same thing in 2010.
I feel like Richard Pryor in Brewster’s Millions…vote “none of the above”.
Topic:
How bad can it get? Well I think it will ‘feel’ like it’s getting worse by the day but what might be happening is we are being fed propaganda. Check out this PEW research and notice how perception changes have worked so well for our Masters.
http://www.people-press.org/2012/06/05/perceptions-of-economic-news-turn-more-negative/
Census just released characteristics of housing data for 2011:
http://www.census.gov/construction/chars/pdf/c25ann2011.pdf
Big PDF, or just the website with the link:
http://www.census.gov/construction/chars/
Most surprising piece of data that I saw on quick glance was the progression of average home size going back to 1973 (page 389 of the PDF). Other than recessionary times, pretty steady increase from ~1,500 square feet to ~2200 square feet.