Bits Bucket for September 2, 2012
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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What is the probability that some areas of a city are allowed to be dangerous in order to serve as price supports for the “good areas?”
The reason I ask is because if you remove the danger to person and property, many constructive people would move to areas that are currently considered “bad”.
But if this happened, would prices fall in the “good areas?”
I can see a situation where a developer would “hedge by buying ghetto property and bribing city officials to make sure it stays “ghetto”.
Or is this a wild conspiracy?
Not at all Spook…. not at all.
Govt and their “public private partnerships” use tax dollars to manipulate for the simple reason to make work so engineering firms and contractors have new work.
It’s akin to Ben’s often used point of “digging a hole and filling it back in”.
Bad attitude, Stealing time, drama, and theft were the cause we fired 3 people who live in the so called “west side of Syracuse”. They were good workers, not lazy, always willing to work evenings and weekends loyal in their own way. These Guys were messed up from childhood, learning disability, kids with different women, traffic violations, child support garnishments, revoked licenses and the list goes on. They did not do drugs. Selling down loaded movies and trash metal pieces is a way to raise cash for them. The Cops are usually circling their neighborhoods and they get picked up and booked for a few days on petty crime. It is difficult for them to get out of this life.
It was too difficult for my father to get out of his life in the rural MS delta…but he made sure his kids could.
About a third of the population in Onondaga County and Oswego County is on the dole. The New York State has all kinds of jobs plus programs for these people but the success rate is dismal. These people from the iffy neighborhood abuse each other on a regular basis. My conclusion is they will be a lost generation. I am sorry to say this but I would like to see some of the children be brought up in an orphanage rather than their Grandmas homes. But the orphanage is a bad word and will cost the Govt several thousand more than merely throwing 5K per child as a welfare benefit.
Peace
Public housing construction, maintenance, “redevelopment” is a time-honored shake down racket that enriches a few “local” contractors and councilmen at enormous expense to the taxpaying public. Like highway construction, school construction, “defense” construction, the bidding process is so proscribed (some might call it rigged) that it ensures only the politically connected will be awarded the contract. And the cost “overruns” are taken as a matter of course. It’s easier to up the funding than quell a riot.
The kickback loop is so entrenched (councilmanic to construction manager, to subcontractors, to tenancy grants/church ladies, to delivering those tenant’s votes for the councilman/congressman who secures the funding) it’s almost cliche. (For an excellent portrayal of this dynamic see the literate STARZ series, “The Boss” about a semi-fictional and utterly Machiavellian mayor of Chicago.)
But in a larger sense what happens in our communities mirrors exactly the process on the State and Federal level. So yes, Spook, ghetto property is and remains the fiefdom of the ghetto lords and their overlords.
Birds of a feather flock together. Areas go bad because they collect residents that have also gone bad. After the number of bad residents reach a tipping point then the good residents flee, prices fall, and then the bad residents are able to move in in large numbers.
It’s not a wild conspiracy, it’s just the way it is.
People have to live somewhere. People with criminal records cannot get good jobs so they are forced to live where it its cheap. People who are forced to live where it is cheap are forced to live near other people who are also forced to live where it is cheap. Not every one who is forced to live where it is cheap is a criminal but a lot of them are, enough to make life miserable for everyone who lives near them.
Get out to the ‘hood and your problems will mostly be solved.
“Get out to the ‘hood” = “Get out of the ‘hood”
But combo its different today…really it is….the rap and hip hop music glorifies the ghetto….This is my objection to the music…there is no movin on up
Its i was born in the ghetto i will die in the ghetto
except for a few who get rich of ghetto folk Like JayZ Kayne West 50 cent snoop dogg……allow a few to get rich so the millions of others will stay broke…
seriously how many white people to you see lined up for $300 sneakers?
I’d rather have those sneakers than front row seats to a NASCAR race.
If living in the ghetto is glorified then that might mean those whose with a ghetto mentality will choose to stay and live in the ghetto. Which is a good thing for those who choose to get out because these people will have some other place to go - someplace that is not filled with those possessing a ghetto mentality.
But combo this music is aimed for kids…. teenagers…that it’s ok to be in jail and ghetto…..train them young..
There is very little music aimed at the alternative lifestyle, of finishing school getting a job, not having kids you cant pay for,not having a rap sheet, and speaking Englsih….to most that is a wacky idea.
Thank you drug war for giving us a perm underclass (ghetto).
How many white people will line up for 300 dollar sneaks? I would guess the number is very small. But white people are happy to buy 10K Rolex watches, which is “our” version of 300 dollar sneakers. It’s all about showing other people that “you made it”. In the ghetto, that’s nice sneaks. On Wall St, it’s a 10K (or more) watch and tailor suits. Is there really much difference?
“the rap and hip hop music glorifies the ghetto….This is my objection to the music…there is no movin on up”
I’m not sure music is relevant. Its very popular for teenagers clothing styles, but that doesn’t matter. As something of an inductive proof by negative example, if music did control society, then the vast majority of current middle age suburban whites would be pro surfers, pro skateboarders, and live in rainy Seattle, or whatever the mid-career plan is for head banging heavy metal guys… but I’m just not seeing it.
I’m not saying its good to have role models who suck, or anti-heros or whatever you call them, but more an argument that role models simply don’t matter very much, as much as people try guilt tripping society about how icky of a job some role models do. People who are easily swayed are going to be easily swayed thru their entire life, so having exquisitely poor taste as a teen means they’ll probably have exquisitely poor taste as an adult, but probably in a completely different area from rap music. They’ll end up as televangelist audience members, or Realtors(tm)(c) or those people who make spam and telemarketing profitable thus ruining everyone else’s enjoyment. But overall a black teenage kid listening to rap isn’t all that much worse off than a white teenage kid playing dungeons and dragons or listening to the Beach Boys and wearing beach shorts in Wisconsin in February.
I volunteer in Harlem so I have fairly strong opinions on this subject (based on more than a decade of observations.)
One of the biggest problem is that the kids from poorer neighborhoods simply don’t have the basic skills that kids from middle-class neighborhoods have as a routine matter of course.
Is there anyone here that doesn’t know how a lawyer makes their living? Or an editor? Or a graphic designer?
These kids don’t know. And if you’re not even aware of the existence of such a profession, how can you possibly become one?
The problem basically arises because the parents themselves don’t know, and these kids have no contact with anyone that does. (That’s the part we try to change.)
Incidentally, I will note a point of difference between Asian kids in these very self-same Harlem schools. Their parents are acutely aware of class, and absolutely insist even if they don’t know anything about classical music that their kids learn how to play the piano and the violin.
Now, I’m not foolish enough to think that learning “classical music” makes you a “better person” but there’s one thing it does do. The kids rub their shoulders against the kids of the rich and there is definitely social and cultural osmosis.
So culture does matter. Call me Bill Crosby without the hideous sweaters!
Sorry Vince most white kids dont have a rap sheet or been in lockdown…..I’ll keep aggravating everyone, the worst part of rap is its complete takeover of your language….You throw English out the door in favor of Ebonics, which damages you for life.
Come on you’ve all see those old tv shows leave it to beaver, dobie gillis, where they kids can speak the cool hip jive stuff then turn around and Yes Mr. Cleaver. That doesn’t happen in rap.
For blacks it a lifestyle for whites its a fad….how many 30 something Eminems are there?
‘I’ll keep aggravating everyone’
You know, I think we got your message pretty clear. We know what you hate and why. Every nuance of what you despise has been gone over a thousand times. IMO, it’s pretty one sided and ignores a lot of issues and circumstances. But I don’t see why you have to keep beating this drum, day after day. I would be a sad panda if I had all that negative energy boiling in me constantly. It’s not like everyone is going to sit up some day and say, ‘that dj is right. Let’s all turn over a new leaf.’
The world is flawed. People are flawed. You get to make of your life what you can, and you should take comfort in, and act on, that opportunity. IMO.
“Incidentally, I will note a point of difference between Asian kids in these very self-same Harlem schools. Their parents are acutely aware of class, and absolutely insist even if they don’t know anything about classical music that their kids learn how to play the piano and the violin.”
We see that in our SD circle as well. The string sections of the middle school orchestra are ninety-percent plus Asian kids; the couple of pale white faces in the mix tend to be Mormon kids, reflecting a similar emphasis in Mormon culture on classical music training.
Some of the twelve-year-old Chinese kids who attend middle school with our children play the piano at a professional level — no exaggeration! It’s pretty amazing to behold.
Is there anyone here that doesn’t know how a lawyer makes their living? Or an editor? Or a graphic designer?
Growing up in Wyoming those were all pretty hypothetical. I was smart enough to take a reasonable guess, but was still very clueless about the details. I picked engineering simply because I got to play with an Apple II in Jr. High that was owned by the teacher and liked it, and I had an interest in audio equipment. In hindsight I was lucky to find a niche at all…
FPSS has it right. You can’t aspire to or even seek out something which you have no idea even exists.
When your immediate role models (parents) also profess INTENSE disdain for resources and aspirations that could break the poverty and your peers WILL punish you for trying to escape the poverty, it makes it even harder.
Combined with the glorification of ghetto life (oh it’s real alright and the music plays a key roll of re-enforcement, never think different) and you have THE recipe for guaranteed failure.
Lived it. Got the t-shirt. And a few scars.
Then there’s the deliberate persecution just for sport and profit by the PTB, i.e. mass media, legal system bias. I’ve seen that professionally as well.
Deliberate ghettos? Yes and no. The political power structure of any locality really determines what areas can be re-developed and if you aren’t part of the club, you WILL be blocked.
I graduated from an Ivy League college without know what an investment banker did. Found out when I was a baby associate in a law firm and Goldman was one of my clients. I didn’t know that there were different classes of stock until the first day of my corporations class. And I had to explain to my brother what a mutual fund was a few weeks shy of his 25th birthday.
Like Polly, I graduated from a top school without knowing what an Investment Banker did (because I’m sure my parents didn’t know either). However, I did have parents that stressed education, and so I ended up working hard in school. That has made all the difference.
I wonder FPSS, do you see any correlation between parental emphasis on school with the kids who are more successful through your observations in Harlem?
I know that one major reason our school district is very good is that the parents care about their kid’s education, and so the kids for the most part are motivated from home, and other kids who are motivated at home are their peers.
I imagine it would be much different if the kids weren’t motivated from home and their peers likewise were less motivated from home.
The ability to play classical music literally connects the right hemisphere of the brain with the left–especially when acquired between the ages of six and twelve years. This is a physical attribute which carries over into a variety of higher professions; surgery, writing, law, and theoretical sciences and engineering among them.
I’d argue that there’s a direct correlation between instruction in musical performance (which requires reading and comprehending an integrative and theoretical language) and academic success, and that the steady decline in standardized test scores correlates with the deemphasis of musical instruction in the classroom.
Add mathematicians to that list!
Of course, some of us end up structuralism for its own sake.
I am a seasoned lady, who started taking piano lessons a few years back. It has truly improved my analytical skills, my focus, and I really am motivated to continue my studies. I am a different person. (I own an electric keyboard as well, and use earphones to do silent practice in our “unit”). I am getting into the Gershwins, Harold Arlen (Wizard Of Oz), and others. I never thought I was smart enough to read music, but proved myself wrong.
“I never thought I was smart enough to read music, but proved myself wrong.”
Interesting. I never thought you had to be particularly smart to read music. But then, I started when I was 5, so I had no preconceived notions.
Congratulations on overcoming your own bias and doing something that you found difficult!
IMO mathematics IS a theoretical science, although in my experience accomplished mathematicians are less inclined to play an instrument than to excel at cataloguing and analyzing the music itself.
For me it was the fascination with the patten/puzzle. I used to love playing Bach upside down and backward as a shortcut to actual composition. Do you play an instrument, Puss?
Happy2bHeard
I came from a family that didn’t encourage or truly understand me. (If you have to work hard at something, you’re an idiot.) It was outside influences that I used as role models. I’m the white sheep among black sheeps. I’ve overcome a rough start.
And dont forget we have to match BPM keys and tempo to make a seamless mix in a club…..so its takes lots of practice..
And lyrics too…the lyrics flow into the next song is pretty amazing.
The “cost of living” in a bad area that is cheap is quite high for those who can afford to have things worth stealing if there are a lot of criminals living nearby. While you are out working to earn money the criminals are in your house stealing everything you own.
You, personally, can’t convert criminals from being criminals and converting them into becoming something else but you can change where you choose to live.
You could contrarily try to enforce laws and punish people for breaking/entering, stealing cars, robbing, raping and destroying property (including graffiti). It is mostly useless when you can’t control who is in your neighborhood. Law enforcement helps, but usually sets boundaries for mostly law-abiding citizens. You can’t solve the problem of career criminals except by incarceration.
Unfortunately for all this commentary, the government works diligently to move criminals into once save and serene neighborhoods. Welfare is a criminal breeding system. HUD has spent 20 years moving people out of “public housing” and into neighborhoods. Section 8 programs are just a small part of the effort.
The truth is that people with low IQ tend to have problems in civilized societies. They tend to be largely over-represented (to use leftist terminology) in jails, welfare programs and gangs.
The leftist viewpoint, however, is one of fairness,equality, and government care programs. They claim they support “science”, but don’t like it when science shows GENETICS, not environment, is the biggest determinate of a persons outcomes in life. The only solution leftist can come up with is environmental changes (change the neighborhood), change the school, change the job market, provide more “inclusion”, blah, blah, blah.
This leads to stupid programs that support more breeding of the lowest IQ people and an increase in need for government intervention at all levels. NO CHILD LEFT BEHIND, a Bush program is one of the stupidest programs ever devised. It says take MOST of the money and divert to the lowest performers, thereby removing good educations from the better students.
Back to the neighborhood problem. My experience has been that government welfare programs begin the incursion into once safe neighborhoods and supports hoodlums who spend their time defacing property, hanging out, and disrupting the lives of a once peaceful neighborhood with blasting Rap music. In their spare time they will be breaking into your house to steal whatever you have worked for.
Once this begins, you will need NEW government programs to address all the problems created by the parasite class. And a whole league of government education, recreation, re-training, integration, community renewal, etc.,etc, get created.
They solve nothing. They just divert money that could be spent on infrastructure and city/county development projects on supporting the useless. (deficit spending writ large).
Neighborhoods are easily destroyed by a few hoodlums. It is not true that POOR neighborhoods are filled with crime. I grew up in poor neighborhoods. We had no crime. The government helped to “Integrate” our neighborhood and we got crime. But if you point to the criminals, then you are racist, regardless of the facts.
The new generations are used to having the thugs living amongst them. It’s “normal”. It’s just the way things are, they think.
Well, it’s not.
Comment by Diogenes (Tampa,Fl)
2012-09-02 07:24:52
It is not true that POOR neighborhoods are filled with crime. I grew up in poor neighborhoods. We had no crime. The government helped to “Integrate” our neighborhood and we got crime. But if you point to the criminals, then you are racist, regardless of the facts.
———————————————————————–
Diogenes,
this is kinda my point; when you experienced this, did “developers” offer your family the “opportunity” to overpay to move into the brand new SAFE subdivision they just built?
Seems to me the developers make money on both ends.
Black people overpay to get in, and white people overpay to get out (and lose money on their house the longer they wait to move)
Also, your comment about “government programs” is spot on. Black people have always been ignorant; theres always been a lot black people who were unaware , Im one of em. But the government programs have made us apathetic.
Compare black people today to freed slaves after the civil war. Without the government programs, despite our ignorance, our apathey go never go to 100% because we had to feed and clothe ourselves.
There was no “footlocker” to loot; if you need shoes, you had to know how to make them. Thats how we learned to make shoes.
And to combotechie — Im only working on this house, I don’t own it and don’t plan to live here. Your strategy of avoiding the ghetto by avoiding “certain geographical areas” is shaky, because the ghetto is not a place, its a person.
You think you are moving, but you are really “getting moved”
1) In the grocery store I frequent, I used to commonly see black grandparents taking care of their grandchildren. I always wondered why the grandparents always seem to have their acts together - married, able to care for kids - and their children are so damaged that they’d abandon their kids. I don’t see that nearly as much nowadays with young black couples walking with kids or even young black guys walking with kids.
2) Interesting point about the ghetto areas. I don’t know if it’s being managed as such or just a natural occurrence that’s being taken advantage of.
3) Regarding poor white areas, there’s lots of crime. It’s just not the nihilistic violence seen in poor black areas.
” They claim they support “science”, but don’t like it when science shows GENETICS, not environment, is the biggest determinate of a persons outcomes in life. “
Maternal malnutrition and alcohol use are environmental causes of brain damage in the developing fetus. Early childhood intervention can mitigate some of the damage.
http://www.childtrendsdatabank.org/?q=node/214
Lack of prenatal care has been associated with a decline in infant health, including low birth weight and decreased survival rates.
Asthma rates are higher among low income people.
Child maltreatment (abuse and neglect) are more common in low income families.
Children born to low income mothers are less likely to be breastfed. This is especially true for single and young mothers.
Poor children are less likely to see a dentist regularly or to get treatment.
http://www.cdc.gov/tobacco/data_statistics/fact_sheets/adult_data/cig_smoking/index.htm
Poorer and less well educated people smoke at higher rates than the general population. Smoking can contribute to asthma in children and in complications during pregnancy for both mother and child.
http://www.americanpregnancy.org/pregnancyhealth/smoking.html
All of the above are environmental issues. In a lot of ways and from conception, poor children are exposed to more environmental risks and damage than their better off peers.
I would not claim that there are no genetic differences, but I don’t think you can claim that genetics is the biggest determinant of outcome. If you take two families, one rich and one poor, with the same genetic intelligence and health, I would predict that the children of the rich would have a better outcome.
Spook, we are ALL being played for suckers at every level of our lives in this society.
Why? Because they can.
H2H. There is no “prediction” required.
Malnutrition and poor medical access is the leading cause of low IQs in this nation.
Google “leading cause of low IQ in the us”. Ignore the “fringe” sites.
Charles Murray is semantically-clever but widely-discredited crank. If you’re seriously interested in discussing the racial component of genetic intelligence, Dio, you need to look beyond your bias. Here’s a good place to start:
http://en.wikipedia.org/wiki/Race_and_intelligence
then investigate the links at:
http://en.wikipedia.org/wiki/The_Bell_Curve
Then consider Jared Diamond’s “Guns, Germs, and Steel” and get back to us with your original thoughts, okay?
Thanks.
“The truth is that people with low IQ tend to have problems in civilized societies.”
I would expect that this is not necessarily true. I have known people of sub-normal IQ who were not prone to violence or to belong to gangs.
I would expect that there is a higher correlation with impulsiveness. People with poor impulse control do tend to end up in jails more than those with good impulse control. I have read of fMRI scans being done on prisoners that reveal the brain structures involved in impulse control.
There may be a genetic component to poor impulse control, but there are also certainly environmental factors that come into play. The same factors that can produce brain damage in developing fetuses could also affect impulse control. And a strong parental presence can help a person learn to overcome natural tendencies to poor impulse control.
I really enjoyed “The Brain That Changes Itself” by Norman Doidge. It gives a thorough introduction to recent developments in neuroplasticity.
“After the number of bad residents reach a tipping point then the good residents flee, prices fall, and then the bad residents are able to move in in large numbers.”
Are you also currently visiting my parents’ neighborhood in the Midwest? Because the description certainly fits well.
So the U.S government can go halfway around the world and take over an entire country “to make us safe”.
But they can’t make a neighborhood safe in their own country?
Im confused?
Now you are sounding like someone with a victim’s mentality.
If you can’t stand living in the neighborhood then move.
So the U.S government can go halfway around the world and take over an entire country “to make us safe”.
But they can’t make a neighborhood safe in their own country?
Im confused?
Keeping you safe from all threats foreign and domestic is beyond the ability of the US govt.
I almost mistook your post as a sincere statement, combo.
Please use the (/sarcasm) tag in the future.
People with criminal records cannot get good jobs so they are forced to live where it its cheap ??
And we all know how easy it is to be tagged as a criminal today…
Developers don’t want bad areas to stay bad. They only have to be bad long enough for the developers to buy up the land at cheap rates, and then they prefer for the areas to improve as they build them up. They certainly don’t want to fix up all the areas at the same time - that means that someone else will get some of the profit, but they don’t want to keep an area down forever - that is leaving money on the table. Politicians want the property values to increase while they are still in office so they can take credit for it. Just fast enough to be really impressive to voters but not so fast that the process is over and they would have to do something hard to keep the voters happy.
If you look at cities during economic expansions (whether supported by fundamentals or not), the bad areas gradually get better as people who can’t afford the increasing prices in the traditionally good areas move into the areas they normally wouldn’t consider. During economic contractions the opposite happens - people move out of the area that is contracting leaving the most desirable areas cheap enough for people to move to even if they couldn’t have afforded it before.
Can this process be manipulated by TPTB? Sure. Better policing and better schools can make less desirable areas more desirable on the margins, but it is the demand created by the area’s economic conditions that drives the process.
Also roads/transportation issues can mess around with value in different areas. As more and more areas of DC are gentrifying, the people who used to live in those areas are getting pushed out because they can’t afford the rent. They end up at the end of the public transportation systems with long commutes. A few of the news organizations have noted that this is seriously screwing with people who are trying to improve their job prospects through education - they used to be able to put in a full day’s work, go to class and get home in a reasonable amount of time. Now, if they commute in to their jobs, put in a full day’s work, and go to class, they can’t get home because the buses have stopped running by the time they get to their last connection.
You left out political ulterior motives for profit and control as well.
As I stated above, the political power structure of any locality really determines what areas can be re-developed and if you aren’t part of the club, you WILL be blocked.
Seen it personally. Many times.
Gentrification is not always a top down process. I have seen it develop from the grass roots and a couple of dedicated ____ _____ _____ ( oops better not say those words) against the vision of the city.
IMHO, bad areas tend to stay bad, and developers know it, so buying in a bad area hoping that it turns around is a highly risky prospect. Gentrification is a long, slow process. Simply look at East Palo Alto vs. Palo Alto. I challenge anyone to point out a place in the US where the socioeconomic gradient is steeper. My wife once lived in a studio apartment where the building was shut down due to a meth lab being found (in another apartment in the building).
Across the street from her apartment was a creek. Immediately on the other side of that creek are houses that are valued generally at $3 million and up. This type of steep gradient has been in place since my parents lived on the Peninsula ~50 years ago.
I agree with you that when times were good, people pushed to develop parts of EPA. A wonderful place called “Whiskey Gulch” in EPA was turned into Class A office during the dotcom boom.
In California, the major ways these areas were developed were through redevelopment agencies (where developers would take risk only with public assistance). Those redevelopment agencies were disbanded recently…it will be interesting to see what happens in the state’s worst areas going forward without the redevelopment money.
Simply look at East Palo Alto vs. Palo Alto. I challenge anyone to point out a place in the US where the socioeconomic gradient is steeper.
The Menlo Park - Santa Clara county border divides the two places particularly their school districts. I used to earn a good living repo’ing cars from EPA; knew every street and most of the police there. I always make it to Kirk’s Burgers when ever I’m in the area.
“Or is this a wild conspiracy?”
I don`t know what you call it but in Plam Beach County the home prices in neighborhoods that would be considered “bad” were allowed to fall back to 80s prices while the neighborhoods that would be considered “good areas” have had the prices artificially propped up.
Example: A house in Lake Worth in what would be considered a “bad” neighborhood that sold for $55k in 1997 and then for $260k in 2005 sold for $55k in 2011.
A house in Tequesta in what would be considered a “good” middle class neighborhood that sold for $150k in 1997 and had comps right next door at $450k in 2005 sold for $325k in 2011.
I never thought of it as a “conspiracy” to keep the “bad” neighborhoods dangerous. I always thought it was a “conspiracy” to keep the banks or whoever’s balance sheets propped up.
But I have been wrong before and I am sure I will be wrong again.
I can see a situation where a developer would “hedge by buying ghetto property and bribing city officials to make sure it stays “ghetto”.
This sort of thing likely happens in areas that are destined to become sports stadiums or racetracks. The goal is to drive down property values through blight, poverty, etc., and then “rescue” the area with federal dollars providing 80% of the capital, and relocate the poor elsewhere. However, recent changes to eminent domain laws make it easier to take personal real property without paying full value, so not sure if the former situation is needed today.
Exactly.
What is the probability that some areas of a city are allowed to be dangerous in order to serve as price supports for the “good areas?”
[snip]
Or is this a wild conspiracy?
I don’t know…I don’t think it’s that much of a stretch, though.
Alena,
I answered your comment in yesterdays bucket.
JONATHAN MILLER: Don’t Buy The Hype About A Housing Recovery
TBI | 8-30-2012 | Jill Krasny
Much of the housing recovery you’ve been hearing about is still just hype, says Jonathan Miller of Manhattan-based real estate appraisal company Miller-Samuel.
“We keep throwing the ‘recovery’ word around, but the big numbers are coming from sources being created from the tight market,” he told Business Insider. “Tight credit is causing rents to rise; falling mortgage rates are pushing people to buy.
“There’s this sense that no one really has a sense of where we are in the housing market. Recovery is this very generic, undefined term. Maybe that’s a good thing, not one extreme or the other.”
Ultimately, it depends where you are.
“When you say ‘recovery’ you’re implying that things are going to go up,” Samuel continued. “In certain markets you might see that, but in some you won’t.”
So what does the seasoned appraiser think consumers will see in the market over the next five years?
“A sideways orientation,” he said. “For now, it may make lenders more comfortable and help turn prices around, but I guess I take offense to it because I think when people hear it, deep down they don’t trust the message either. All it does is create more confusion.”
Too little too late…
http://www.bloomberg.com/news/2012-08-31/california-lawmakers-send-public-pension-cutback-to-brown.html
“…
Unfunded Liability
Calpers, with assets of $237.3 billion, had 72 percent of the assets needed to cover obligations to its 1.6 million beneficiaries as of June 30, 2011, according to a report.
The fund earned 1 percent in the fiscal year that ended June 30, below its target of 7.5 percent. When Calpers underperforms, the state and municipalities must make up the difference to meet its obligations.
…”
I’d be curious to know what that unfunded liability would look like if valued at a more realistic interest rate assumption than 7.5 percent.
Let’s hope Jerry Brown signs it. You have to start somewhere and I live in CA. Can’t do anything on the national front but we sure can start locally and statewide.
Did anyone notice Obama is proposing a constitutional amendment this week?
Is it…
A) Ban assault weapons, large ammo magazines.
B) Eliminate the electoral collage.
C) Term limits (including the Supreme Court).
D) Overturn ‘Citizens United’ to remove corporate money from politics.
E) All males must wear hats in public.
Wonder if the Romney/Ryan team has a amendment they would like to see passed?
Zygotes are people too?
D
Now is this the same prize that Slim got for playing “Name that Liar”?
Obama is proposing a constitutional amendment
Extensive lobbying is what Israel relies on for their protection in a volatile region; can’t see that changing unless we get something even worse than what we currently have.
Correct!
I would offer another amendment, De-criminalize our drug laws. All health plans should offer detox and rehab programs + abuse education.
Polly, That’s a wonderful idea! Maybe they could include patent protection for big Pharma for key human DNA segments like they do for Agi-Biz.
They already have granted patents for fragments of human DNA. One judge overturned two of them and I’m not sure where the court process is right now (NYTimes server is having issues).
About 20% of human DNA has been patented.
Decriminalize drugs and also pass a statute that provides for prisoner release of those convicted of nonviolent drug offenses. I think that alone would drop our incarceration rate by a huge margin.
The War on Drugs is over, WE LOST. Yes, there will be negative consequences from having legalized drugs. It would be a stretch to think they would be worse than the utter mess we already have.
De-criminalize our drug laws ??
Makes to much common sense so you know it won’t happen because of the entrenched beneficiaries that benefit from them…
Yer crackin’ me up, Bluestar. Good one!
According to current Iowa Electronic Markets 2012 Presidential Election Vote Share and Winner Takes All Market prices, the post-convention bounce was not enough to reduce Obama’s lead by much.
P.S. To those who think this is an anti-Romney post, I intend to keep posting these graphs from now until the election, regardless of who is in the lead.
Keep right on posting but it won’t make one difference how anyone on this blog will vote. Bought a house, moved in in April, haven’t seen tv, newspaper since. Read any news I choose on the internet. I make my decisions on common sense and what’s best for me and family.I adapt to the situations at hand and intend to enjoy life (what’s left of it) in a positive fashion and surround myself with positive people. Let the negative wallow in their negativity.
I hope you join some local community organizations so you can pass that optimism along to your neighbors. Like the conversation above about ghettos and bad neighborhoods they all share weak or missing organizations like the Lions Club or Kiwanis Club. You have to work to keep a good community and voting alone won’t cut it.
“Like the conversation above about ghettos and bad neighborhoods they all share weak or missing organizations like the Lions Club or Kiwanis club.”
That’s because the people who join these clubs choose to move to some other place.
I often talk here of Compton, the one-time murder capital of the nation. But Compton hasn’t always been such a bad place to live - fifty-or-so years ago it was a good place to live.
Then … something happened. It didn’t happen all at once but nevertheless it happened.
After “it happened” - after the tipping point was breached - one could have chosen to pay the price of staying there or he/she could have chosen to move somewhere else. Most people who had the choice eventualy moved somewhere else.
“Like the conversation above about ghettos and bad neighborhoods they all share weak or missing organizations like the Lions Club or Kiwanis Club.”
OK, my apology: Trying again…
Was that optimistic enough for you?
I wasn’t trying to influence how the 30K or so people who read this blog will vote. I don’t care, and frankly don’t think it will make any difference whatever to the election outcome.
I merely wanted to point out that perhaps telling blatant lies to the American public with the utmost of sincerity does not actually as much appeal to the electorate as the neocon Republican propaganda masters thought it would.
“the 30K or so people who read this blog”
I’m curious - how/where did you come up with the estimate of 30k people?
Ben - I imagine you may have access to some host/server stats. Do you care to weigh in?
Don’t know don’t care. I do know it’s one less today than yesterday!
“I’m curious - how/where did you come up with the estimate of 30k people?”
I admittedly don’t know, and just recycled a figure someone else recently threw out here.
But the exact number is irrelevant to my point, which is how HBB readers vote will represent an effect measured a few place right of the decimal point in the November 2012 election outcome.
By contrast, my understanding is that the IEM Presidential Election Futures markets have a fairly impressive track record in predicting outcomes. Not sure they are capable of accurately capturing the vagueries of the electoral college system’s effect on who wins, though.
Thanks for the responses. The 30k figure struck me as being way too high, although I have no idea what the true figure is.
I think you will find that most of the people that play that poll are under 30. In the real polls, they favor Obama by 30 percentage points. The over 65 favor Romney by 20 points and they could not find that site if their lives depended on it. In a real election, I would much rather be winning the old vote than the young vote since they can and do find the polls. Many of the young will be in their parents’ basement surfing the web but not voting.
most of the people that play that poll are under 30. In the real polls, they favor Obama by 30 percentage points.
You guys seem incapable of grasping (I guess it’s the cognitive dissonance) that the IEM is a futures market. They are using real money to ‘gamble’ on the next election outcome. It’s as real world as it gets, far more so than a poll of people who choose to answer their phones.
And in casino land, the odds are unchanged by the GOP convention, still Obama 2 to 5, Romney 15 to 8. They also use real money.
If both of these free and open markets just ‘don’t get it’, then here’s a golden opportunity to make some $.
Hmmmm…the only unrigged market left in the world?
Greed and Debt: The True Story of Mitt Romney and Bain Capital
How the GOP presidential candidate and his private equity firm staged an epic wealth grab, destroyed jobs – and stuck others with the bill
http://www.rollingstone.com/politics/news/greed-and-debt-the-true-story-of-mitt-romney-and-bain-capital-20120829
Thanks for posting that. I was going to post it early this morning and forgot. I really want to like Romney, but I’m finding it impossible.
I don’t know what the politics of The Rolling Stone are, but something billed as the True Story has a red flag for me.
They tend left, as does Taibbi. But that’s OK. Still useful information…which he has delivered more of than possibly any other journalist of this bubble.
I just found this old bookmark on another computer…..
http://www.marcandangel.com/2010/11/15/12-dozen-places-to-self-educate-yourself-online/
When did government morph from being our servant to being our master? Given the sheer number of laws on the books it is now possible to arrest anyone in the country for being in unaware violation of one or more of those laws. Like writing protest slogans IN CHALK on a public sidewalk. Like picking up a feather in the woods that happens to be from any number of endangered birds. Like buying wood from overseas suppliers that you personally didn’t watch get cut down. Like OWS protesting where you’re not “allowed” to protest. Allowed? The Constitution is supposed to PREVENT govt from limiting protest.
So, how long ago was the tipping point in your opinion? And do you think it will take a revolution to turn things back around or can it be accomplished by peaceful means?
It’s so much easier to argue the relative goodness or badness of Tweedledee and Tweedledum and other such trivialities, as is done here on a daily basis. Meanwhile, the velvet handcuffs we all wear look more like steel every year.
Wake up, people. Wake all the way up.
“There’s no way to rule innocent men. The only power government has is the power to crack down on criminals. Well, when there aren’t enough criminals, one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws.”
Ayn Rand
(1905-1982) Author
You mean the Ann O’Conner, 2banana.
One declares so many things to be a crime that it becomes impossible for men to live without breaking laws ??
And, the critical difference now is we are in the information age…So you got a assalt and battery charge after getting into a fight…It happened in Tenn….You move to Idaho…You go apply for a job…And guess what pops up in the security check…
Background checks are far older than the telegraph.
Nonsense.
The military.
The school system
Codes of conduct for govt office workers
Grant requirements
Speed limits
IRS codes
andonandonandon….
+1 Bill….I agree with you 100%….
“When did government morph from being our servant to being our master?”
Not to be insulting, but it happened the day you realized everything they taught you in school was wrong.
In other words, when wasn’t it?
Yeah, I’ve been turning a corner politically, it’s now blatantly obvious that were are in a game of “heads they win, tails we lose” when speaking of the current two party system. They keep us busy fighting one another while they rob us of everything we have or ever will have. However, I will always be a vocal opponent of communists, they are not the answer.
They keep us busy fighting one another while they rob us of everything we have or ever will have.
BINGO!!!!!!!!!!!!!!
We still have the ability to send honest men and women to Congress and our state legislatures. This matters more than which party is in the White House or which party the representative belongs to. It is also a peaceful process, mostly.
Good summary. And this is NOT a right wing newspaper.
Barack Obama struggles to inspire voters on the campaign trail
Guardian [UK] | 1 September 2012 | Paul Harris
When President Barack Obama mentioned the Republican party convention on the campaign trail in Fort Collins, Colorado, and his supporters began to boo his opponents, he paused and went off script.
“Don’t boo. Vote. That’s the best response. Vote and get some of your best friends to vote,” he told the audience at a rally on a campus of Colorado State University.
The tone of urgency was notable. The 2008 version of Obama had no trouble getting people to go to the ballot box during his historic election win. But in 2012 it is a different game. Battered by the realities of four years in office and with a party base that often believes he has let them down, Obama is facing an enthusiasm gap as he prepares to rally Democrats at their nomination convention in Charlotte, North Carolina.
As he knocks on doors throughout the state, Fulkerson can feel the difference. “He was a knight in shining armour. Four years later? OK, there is some disappointment,” he said. “We still have to fight like hell to get this guy re-elected.”
It is a long way from the sunny optimism of 2008. “This has been a dismal election campaign,” said Larry Haas, a political expert and former aide in the Bill Clinton White House.
“The stakes are too high to give up now,” Fulkerson said. “Except it’s not hope and change any more, it is more hope and fear.”
“Good summary.”
So you agree with a leftist Obama Supporter; good for you.
This will be mildly interesting. Obama promised a lot of I don’t know what last time around. Hopeful people thought they heard him promise a lot of things I don’t think he actually promised. Sort of a “we can do it” campaign without telling what “it” was. I am sure I heard some things that he never promised, like my sons would come home from war.
Doesn’t seem to me that much of anything has improved these past few years. Some things I thought I was sure this guy said before the election and then did the opposite immediately after, like the no lobbyists thing. Just feels like the administration bears no resemblance to the campaign. I expect the same is true for R/R, whatever they are promising. Ben mentioned they have excluded everyone they could from the get-go. This morning I heard a soundbite that they were going to unify us all…..
Amazing. Already back to debating the relative goodness and badness of Tweedledee and Tweedledum.
Well, it can’t be OUR fault, therefore THEY must be responsible. WE need to take our country back from THEM.
If baboons ever gain the power of speech, this will likely be their first and favorite statement.
Some top monetary policy wonks are beginning to suspect string pushing may not work as a policy to restore economic growth.
ECONOMY
September 2, 2012, 1:17 p.m. ET
Bernanke Faces Skepticism Over Policy
By JON HILSENRATH
JACKSON HOLE, Wyo.—Ben Bernanke was greeted with a heavy dose of skepticism here this weekend.
In a highly anticipated speech on monetary policy Friday, the Federal Reserve chairman argued that the Fed’s easy-money policies were helping the weak economy and laid the groundwork for more action.
Fed chairman Ben Bernanke expressed concern over the labor market, defended the central bank’s monetary policies and left no doubt he plans to do more to lift the economy at the next meeting in September.
But economists and central bankers here wondered more openly than usual if the Fed had the tools to fix the problems of the day and expressed frustration that four years of super low interest rates and extraordinary money-pumping by the Fed hadn’t done more to spur the slow-moving economy.
“Why is it that we’ve had such incredibly accommodative monetary policy for so long and we’ve had so little growth?” Donald Kohn, a Brookings Institution scholar, said on a discussion panel here Saturday.
It was a striking question because Mr. Kohn is a former vice chairman of the Fed and was Mr. Bernanke’s right-hand man during the financial crisis. The headwinds that the Fed often cites—Europe, household debt-reduction, the housing bust—he said were unsatisfying answers. “There is a lot we don’t understand,” he said.
“We’re in a world where monetary policy has much less traction,” Charles Bean, deputy governor of the Bank of England, said on the panel.
…
Because there is no free lunch.
If there was - governments would have done this for thousands of years to create wealth/prosperity with little/no work or sacrifice.
“Why is it that we’ve had such incredibly accommodative monetary policy for so long and we’ve had so little growth?” Donald Kohn, a Brookings Institution scholar, said on a discussion panel here Saturday.
Currency manipulation has always been a siren song for political leaders. They figure heck, if the people are going to accept these slips of paper or metal slugs as having value - why can’t I just print more and voila! the wealth of my society increases dramatically?
This is the stuff of hyperinflations.
Currencies are logical constructs. A durable one certainly. One that’s been around for thousands of years. The construct gets its value from the fact that people can exchange the currency for the things they need to survive and thrive.
But like I say, excessive money printing is a siren song for politicians. Standing in the currency printing building, staring at the printing presses creating dollars like they create newspapers, they get to thinking. And wind up being a bit too clever.
Why the logical construct can hold up to a point, then dissipate is not completely clear. Why people are willing to part with fruits of their laborious efforts for the slips of paper at one time, then decide that the slips of paper are merely value-less slips of paper at another is an important point on which politicians and bankers need to meditate.
“Because there is no free lunch.”
That’s one of the first lessons taught in freshmen-level undergraduate economics class. Certainly BB realizes it; so why does he keep pretending otherwise?
The wealthy get “free lunches” all the time. Often to the tune of millions of dollars.
To them, this is normal.
I think Ben Bernanke is out of bullets. His response is the same very few months which is to tower the interest rates and buy bonds. The rest is nonsense mumbo jumbo.
Fed is useless at this juncture
Yeah, they may have to start paying people to borrow and spend, which would be kind of cool to watch.
“Why is it that we’ve had such incredibly accommodative monetary policy for so long and we’ve had so little growth?” Donald Kohn, a Brookings Institution scholar, said on a discussion panel here Saturday….
“There is a lot we don’t understand,” he said.
They should read some Keynes.
I’m not the only alarmed observer to note the Fed has recently operated well outside the bounds of its traditional mandate.
OPINION
August 31, 2012, 6:42 p.m. ET
John Cochrane: The Federal Reserve: From Central Bank to Central Planner
The Fed’s ‘nontraditional’ actions have crossed a bright line into fiscal policy and the direct allocation of credit
By JOHN H. COCHRANE
Momentous changes are under way in what central banks are and what they do. We are used to thinking that central banks’ main task is to guide the economy by setting interest rates. Central banks’ main tools used to be “open-market” operations, i.e. purchasing short-term Treasury debt, and short-term lending to banks.
Since the 2008 financial crisis, however, the Federal Reserve has intervened in a wide variety of markets, including commercial paper, mortgages and long-term Treasury debt. At the height of the crisis, the Fed lent directly to teetering nonbank institutions, such as insurance giant AIG, and participated in several shotgun marriages, most notably between Bank of America and Merrill Lynch.
These “nontraditional” interventions are not going away anytime soon. Many Fed officials, including Fed Chairman Ben Bernanke, see “credit constraints” and “segmented markets” throughout the economy, which the Fed’s standard tools don’t address. Moreover, interest rates near zero have rendered those tools nearly powerless, so the Fed will naturally search for bigger guns. In his speech Friday in Jackson Hole, Wyo., Mr. Bernanke made it clear that “we should not rule out the further use of such [nontraditional] policies if economic conditions warrant.”
But the Fed has crossed a bright line. Open-market operations do not have direct fiscal consequences, or directly allocate credit. That was the price of the Fed’s independence, allowing it to do one thing—conduct monetary policy—without short-term political pressure. But an agency that allocates credit to specific markets and institutions, or buys assets that expose taxpayers to risks, cannot stay independent of elected, and accountable, officials.
…
The World Bank’s Food Price Index soared by 10pc in July, but global grain stocks are currently high enough to prevent a repeat of 2008’s food riots, according to the World Bank. Things could rapidly change though.
http://www.telegraph.co.uk/finance/commodities/9515859/Weather-holds-the-key-to-the-worlds-food-price-volatility.html
Oh well I needed to go on a diet.
U.S. Companies Conduct Fire Drills in Case Greece Exits Euro
Even as Greece desperately tries to avoid defaulting on its debt, American companies are preparing for what was once unthinkable: that Greece will soon be forced to leave the euro zone.
Bank of America Merrill Lynch has looked into filling trucks with cash and sending them over the Greek border so clients can continue to pay local employees and suppliers in the event money is unavailable.
Ford has configured its computer systems so they will be able to immediately handle a new Greek currency.
No one knows just how broad the shock waves from a Greek exit would be, but big American banks and consulting firms have also been doing a brisk business advising their corporate clients on how to prepare for a splintering of the euro zone. That is a striking contrast to the assurances from European politicians that the crisis is manageable and that the currency union can be held together.
On Thursday, the European Central Bank will consider measures that would ease pressure on Europe’s cash-starved countries.
JPMorgan Chase, though, is taking no chances. It has already created new accounts for a handful of American giants that are reserved for a new drachma in Greece or whatever currency might succeed the euro in other countries.
http://www.nytimes.com/2012/09/03/business/economy/us-companies-prepare-in-case-greece-exits-euro.html?ref=business
I am having my doubts about this Shiller dude?
Framing’ Prevents Needed Stimulus
WHY have so many teachers, police officers, firefighters and other public workers been laid off since the financial crisis hit — and why are so few being offered new jobs now?
From July 2008 to July 2012, the number of state and local employees nationwide fell by 715,000, according to the Bureau of Labor Statistics. The reality is actually worse than that figure suggests. The total ended up 1.31 million people below where it would have been had public sector employment simply kept pace with population growth.
The situation did not improve as the financial crisis eased and the economy picked up. From March 2009 to March 2012, the nation’s total nonfarm employment increased 0.6 percent. State and local government employment, by contrast, fell 2.9 percent.
It is not as if many Americans say they want this to happen. A CBS News-New York Times poll in July asked: “Looking at your local public schools, would you be willing or not willing to have shorter school days or more crowded classrooms if it meant you would pay significantly less in taxes?” Seventy-four percent of respondents replied that they were “not willing” (21 percent were willing and 5 percent were unsure). When similar questions were posed about firefighters or police officers, the percent “willing” was even lower (12 percent and 15 percent).
http://www.nytimes.com/2012/09/02/your-money/framing-prevents-needed-stimulus-economic-view.html?ref=economy
So long as they are big and expensive, who cares if they are ugly?
America’s ugliest mansions
By Marcelle Sussman Fischler | Forbes.com –
Mon, Aug 27, 2012 2:33 PM EDTA modern mansion in Beverly Hills. (Photo: Forbes)
Architectural beauty may be in the eye of the beholder, but some mansions are just plain ugly. Blots on the landscape, oversize and over-the-top mega-homes are sometimes a pricey mishmash of building styles.
They look garish, gaudy and full of pretension, festooned with too many fancy columns and adornments. Or, under the guise of “modern,” these residences have as much style as a bomb shelter or look like they’re from outer space. Money, after all, doesn’t buy taste.
…
I like the one on the cover, the one made of all glass. I also like the one with the hotel style portico, would make me feel like I was arriving in Vegas every day, I guess I would need a valet and a doorman.
Bernanke is like the chef who comes out of the kitchen and makes 4 more cuts in your pizza then says: “You said you ordered the large instead of a small?
Well now you have the large.”
Not a great choice for a “Sweet 16” birthday party at night.
Updated: 3:22 p.m. Sunday, Sept. 2, 2012 | Posted: 1:36 a.m. Sunday, Sept. 2, 2012
Two teen boys dead; six other males injured after shooting at private party in Riviera Beach
By Sonja Isger and Jennifer Sorentrue
Palm Beach Post Staff Writer
RIVIERA BEACH —
Two teenage boys are dead and six other people ranging in age from 16 to 32 were taken to a hospital after a shooting at a private “Sweet 16” birthday party late Saturday at the city’s marina, police report.
The party may violated city rules. Those rules bar residents from holding teen parties and other events at Newcomb Hall, a banquet building at the marina. According to the city’s rental application for the facility, “absolutely no teen events (under 21)” are to be held there.
The shooting happened just before midnight at the hall, which is in the 100 block of East 13th Street, city spokeswoman Rose Anne Brown said. The six who were taken to the hospital were all boys or men. None appeared to have injuries that were life-threatening, Brown reports.
Detectives are investigating and searching for suspects, Brown said.
Residents can rent the city-owned hall for parties and private events. Those using the building are required to provide security.
The application requires those who want to rent the facility to disclose the type of event they plan to hold there. The fee to rent the facility on weekends is $150 an hour, according to the application.
Brown said that application for Friday’s event shows it was a “Sweet 16” party, adding that organizers paid for a city police officer to be stationed at the facility.
Brown and Mayor Thomas Masters could not be immediately reached for comment about the city’s rental requirements for the building.
“There was an officer on scene who called it in right away,” Brown said of the shooting.
More than 100 people were at the party at the time of the shooting, Brown said.
By late Sunday morning, crews were already working to repair damage to the building. Two windows had been covered with plywood. The smell of bleach hung in the air.
Police ask anyone who may have information about the crime to call police at (561) 845-4123 or Crime Stoppers at 1-800-458-TIPS (8477).
“According to the city’s rental application for the facility, “absolutely no teen events (under 21)” are to be held there.”
Someone is in deep doo-doo.
“Brown said that application for Friday’s event shows it was a “Sweet 16” party, adding that organizers paid for a city police officer to be stationed at the facility.”
Someone is an idiot.
Updated: 10:18 p.m. Sunday, Sept. 2, 2012
Riviera Beach mayor urges shooters to turn themselves in after 2 teen boys killed at party
By Sonja Isger, Jeff Ostrowski and Jennifer Sorentrue
Palm Beach Post Staff Writers
RIVIERA BEACH —
Two teenage boys died and six other people were injured just before midnight Saturday in a shooting at a private “Sweet 16” party at the city marina.
City police searched for the shooters Sunday but made no arrests. Mayor Thomas Masters described the search as “aggressive” investigation, and he urged the shooters to surrender to police.
“Just turn yourselves in — make my day,” Masters said at a news conference Sunday night at city hall.
Interesting thread:
Yes crime control can be influenced by politics. I own a 4-plex in a (mixed race) ghetto and noticed an interesting turn of events. One year the mayor sent out surveys with our tax bills asking what can we do to improve our city. I replied with a rant : how do you ever expect our inner city to improve if you don’t do any &@%# crime control. A converstion ensued, a visible bust was seen by my tenants and no more drug dealers on the corner.
A few months later term limits were up, a new mayor was inagurated, and lo and behold that very day the dealers returned. Fortunately the grandparents of one of my tenants wer connected to the new mayor, words were said, and things calmed down. Now they are on a slide again - noisy white people up the street with new jersey accents.
BTW Dio, No one is forced to rent to deadbeats - the law just states you can’t be discriminatory. This means you can’t rent to deadbeats of one race/ethic group and refuse rental to deadbeats of another group.
I don’t really see it as a conspiracy so much as the police have limited manpower so they choose to tolerate crime in certain areas.
Financial crisis: 25 people at the heart of the meltdown – where are they now?
In 2009 the Guardian identified 25 people – bankers, economists, central bankers and politicians – whose actions had led the world into the worst economic turmoil since the Great Depression. On the fifth anniversary of the credit crunch, what are they doing?
Rupert Neate
guardian.co.uk, Monday 6 August 2012 15.49 EDT
Former Federal Reserve chairman Alan Greenspan testifying before the US Financial Crisis Inquiry Commission in 2010. Photograph: J Scott Applewhite/AP
Central bankers
Alan Greenspan, chairman US Federal Reserve 1987-2006
A disciple of libertarian icon Ayn Rand, Greenspan became chairman of the Fed just in time to save the global economy from the 1987 stock market crash from becoming a full-blown disaster. He went on preside over the boom years of the 90s and lead the US economy through the aftermath of the September 11 attacks and was widely referred to as an “oracle” and “the maestro”.
But Greenspan’s super-low interest rates and consistent opposition to regulation of the multitrillion-dollar derivatives market are now widely blamed for causing the credit crisis. Under Greenspan’s tenure the derivatives market went from barely registering to a $500 trillion industry, despite billionaire investor Warren Buffett warning that they were “financial weapons of mass destruction”.
His rock-bottom rates encouraged Americans to load up on debt to buy homes, even when they had no savings, no income and no job prospects.
These so-called sub-prime borrowers were the cannon fodder for the biggest boom-bust in US history. The housing collapse brought the global economy to its knees.
He was given an honorary knighthood in 2002 for his “contribution to global economic stability”, but in 2008, at a Congressional hearing investigating the causes of the financial crisis, Greenspan finally admitted he “made a mistake in presuming” that financial firms could regulate themselves.
“You found that your view of the world, your ideology was not right, it was not working?” Henry Waxman, the committee chairman, said.
“Absolutely, precisely,” Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”
After he quit the Fed, in 2006, Greenspan joined Pimco, the world’s largest bond investor, as a special consultant. Pimco’s co-founder Bill Gross said Greenspan had helped make the firm “billions of dollars” in his role as a consultant.
Gross said Greenspan’s “brilliance” was a “big money saver for us”. “He’s made and saved billions of dollars for Pimco already,” Gross said in 2008.He has also advised Deutsche Bank and hedge fund billionaire John Paulson.
Greenspan has also found time to criticise current Fed chairman Ben Bernanke’s programme of quantitative easing. “I’ve stayed away from commenting on Fed policy,” he said on US TV earlier this month. “I will say this, however, that the data do show that the expansion of assets has had very little impact on the economy, for an important reason, that we’ve created a major increase in the asset side of the Fed balance sheet and a very large trillion and a half increase in excess reserves.”
…