The Housing Bubble

No it isn’t.

Extend and pretend is what Boomers have done their entire lives. Why expect anything different now that they set governmental policy?

Didn’t you get the memo? Boomers are the opposition. Policy is decided by others.

I meant “extend-and-pretend” is different as a policy response to a housing bust. I believe the policy of Uncle Sam and his agents (e.g. the Fed) to deliberately support housing prices in order to stave off a bust is different than what has occurred in previous housing busts. Thus it may take this bust longer than previous ones to play out.

The Fed’s easy money policies are pushing speculators into housing. Perhaps they will be the ultimate bagholders when the floor drops out of this sham.

For most of the Boomers I know, “extend and pretend” meant extending our bi-weekly insults as long as we could before resorting to ramen, and “pretend” meant pretending we could ever afford to buy a house. None of my circle of friends owned a home until they were into their forties, and not a few still don’t in their sixties.

The aftermath of the Vietnam War (another “pretend” event we were drafted to fake) was years of massive inflation, followed by years of massive corruption that saw our taxes go to support Ronald Reagan’s cronyism. The last decade, where twenty and thirty-year-olds got mortgages, was a cyclic anomaly. WW2 got the GI Bill, Boomers got the tab. 1890’s saw the homesteaders, their kids got the Great Depression. And onandon.

Why do you suppose this dynamic will be any different for you or your children?

Which way does the wind blow today? Let’s watch to see if Obama steps into the CIA power vacuum and appoints a Washington or an ex-military guy/gal. If the next director is military/CIA/FBI then the CIA masters are still in control and the CIA’s ‘War Of Terror’ will continue to interfere in the affairs of sovereign nations. If he goes outside the CIA/DOD bubble we might be seeing a change for the better. Seeing that Hilliary Clinton will be out of the picture soon there could be a historic shift in US foreign policy in the works. Again, watch to see if Obama goes to a military/CIA/FBI person or someone he can control that came from outside the military industrial complex.

“Seeing that Hilliary Clinton will be out of the picture soon…”

Is there any significance to Petraeus getting taken down for the same reason her husband was nearly taken down?

Funny that the DOD’s #1 supplier just lost their CEO to the same thing?? And hey they now have a woman heading the world leading supplier death on demand. Wonder if she has ethics left after a life in the defense business…
BTW, the non-defense part of Lockheed is one of the leading suppliers of computer/electronic services to most state welfare departments. Where do think all those plastic food stamp cards come from anyway?

*It is harder to commit fraud with the new system. Beer and cigs ain’t food.

Eunuchs, need to appoint eunuchs.

“Is there any significance to Petraeus getting taken down for the same reason her husband was nearly taken down?”

This story isn’t over yet. I’m certain that Mrs. (Ms?) Broadwell is every married woman’s fear — intense, intelligent and attractive there’s likely few men capable of resisting her siren song; however, she’s also a commissioned officer. That said, Petraeus was charged with establishing Israel’s security in the region during a volatile period of numerous civil wars and regime change. This sideshow also comes at a time of severe financial crisis and impending demographic depression in the U.S. adding to the burden of commitment.

The UCMJ will likely deal the Broadwell-Petraeus affair a harsh blow setting an example.

I don’t know, but you better keep saying it because I am scared.

It seems like the way around the need for higher wages is to qualify people to take out mortgages they may later prove unable to repay.

Isn’t this generally the purpose of low-downpayment, low-interest mortgage lending?

The other part of the “housing reflation” plan seems to be for the Fed to snap up $40 bn worth of (presumably bad) MBS every month. I’m guessing there might be a connection to all those low-downpayment, low-interest loans that ended up in default?

I don’t know, but you better keep saying it because I am scared.

Silly female.

Why not run out and buy a house or seven? Take on all the debt-pawnership that you possibly can.

It’s not like we are stopping you.

Only if the inflation makes its way into wages.”

It is but not in the USA, probably not in Europe either

in the global market this will show up no matter what Bernake says.

Will the US outlaw exporting farm products like Argentina ?

Will the US outlaw selling costal RE to Chinese investors ?

no and no unless it gets really bad and then we will have a real depression

Sometimes it helps to look at proxy indicators. So what if energy consumption per capita = average standard of living. As long as the world depends on non-renewable energy supplies and our current per capita energy consumption is so out of whack with the rest of the world then there exists a natural pressure for something to equalize the inequality. Rural wages have been increasing in China lately. Fun fact: China is the world’s #1 energy producer.

What would happen if we followed the law?

It seems too terrible to imagine.”

Yeah, we”d end up like Iceland, which had a extremely deep and intense recession that was over by 2010 and has been growing ever since, unemployment dropping to better than you’ll see in the US, and net inward migration. Basically they’re the first post-bubble economy. Good for them.

Overall I prefer that to a couple decades of Japan style extend and pretend. Get this greater depression over with, so we can start to rebuild instead of waiting around as it gets worse and worse.

I think its hilarious that Iceland’s politicians STILL want to join the EU. Looking at their relative economic health, that would be like the USA wanting to join up with Haiti.

“Yeah, we”d end up like Iceland, which had a extremely deep and intense recession that was over by 2010 and has been growing ever since”

I think it is a mistake to think that the US will have the same results as Iceland. Iceland’s recovery happened in an environment of government stimulus by most of the major economies. They are small and isolated. Most of them live close enough to the land that they can survive if they have to.

A deep and intense US recession would take the major economies of the world down with it. Less than 20% of our population lives in rural areas where they are able to live off the land. Another 10% live in small towns and cities (population between 2500 and 50K).

I expect the recession would be longer, deeper, and more painful than those who wish to let it fall would expect. And I think none of us would escape its effects.

Extend and pretend is like the tree that fell on our house after a windstorm. It took 24 hours to do it and by the time it came to rest, it damaged only a few shingles. If it had fallen during the storm, all at once, it would have taken out two thirds of the house and possibly a few family members. We would have been instantly homeless and have lost most of our stuff.

It could be argued that rebuilding would have given us a newer, better house. That could have been done less painfully with time to plan.

Iceland’s rural population lives off the government, not the land, which is too barren to provide anything but banking and obscenely expensive tourist $ervices. They do, however, have an ocean, which provides herring. And puffins. (Yummmmm, herring and puffin….)

The main reason the economy of those 350,000 souls is “bouncing back” is because Iceland is sheltering British plutocrats’ money, and providing NASA a “research” base. The Caymans are doing okay, too, btw.

“They do, however, have an ocean, which provides herring.”

OPINION EUROPE
October 9, 2012, 3:08 p.m. ET

Fishing for Trouble in Iceland
Reykjavik is on a collision course with the country’s most important industry.
By BRIAN M. CARNEY

Reykjavik, Iceland

Four years ago, this remote country on the edge of the Arctic Circle became the most spectacular casualty of the 2008 global financial crisis.

Practically overnight, Iceland’s banking system collapsed, taking the currency and much of the rest of the economy with it. The krona plunged by some 75% in a matter of days before it essentially stopped trading altogether. The country’s three large banks, which had between them borrowed the equivalent of many times Iceland’s annual economic output, imploded as money rushed out of Iceland even faster than it had poured in during the boom years.

By the middle of 2009, it no longer felt like hyperbole to suggest that Iceland, economically at least, could sink beneath the waves altogether. The krona was on a fast track to worthlessness. International creditors, including the governments of Britain and Holland, were demanding huge sums that Iceland patently did not have in recompense for losses suffered when the banking system fell apart.

But in the past couple of years, Iceland has staged a recovery of a sort. Unemployment is down to nearly 5%, although work-force participation isn’t what it was in the boom years, and there’s been some emigration from the population of 320,000. After shrinking 6.6% in 2009 and 4% in 2010, Iceland’s economy grew 2.6% last year and could hit 3% this year.

The rebound is in no small part thanks to the business that has been the island’s mainstay for a millennium—fishing. Fish account for more than 40% of Iceland’s total exports.

What’s more, fishing in Iceland is profitable. It wasn’t always so. In the 1970s, Iceland’s fish stocks were collapsing, and the industry in trouble. But starting in the late ’70s and ’80s, the government in Reykjavik introduced a kind of property right into its fisheries, called an individual transferable quota, or ITQ.

The quotas represent the right to take a percentage of the total allowable catch set by the government. And these quotas can be bought, sold and borrowed against. ITQs have become a valuable asset in their own right, and have allowed the owners of these fishing rights to rationalize their operations, increasing productivity and profits in a business long plagued by overcapitalization and poor returns.

In fact, Iceland’s fishing-rights system has been so successful that, in its own way, it helped contribute to the country’s financial boom: The strength of its fishing industry helped the country earn the triple-A credit rating that in turn allowed its banks to set off on the unprecedented global expansion that ultimately ended in the 2008 bust. The fishermen themselves also poured their money into (bad) investments in the boom years, helping to stoke the Icelandic bubble.

Those banks are now shadows of their former selves, but the fishermen are still here. This is where the saga takes a dark turn, however. In the wake of the financial crisis, the government of the time was swept aside in favor of a left-wing coalition that has made it its mission to undermine the property-rights system that has served the country so well—and has helped it recover from the crash. It has put forward legislation to restrict the buying and selling of quotas, and to allocate more of the catch rights politically.
…

Oh no…Iceland…and you were doing so well…

Iceland had plenty of lush soil right up until the Norsemen chopped down all the trees and all the soil blew away.

BTW, mark-to-market works really well when there is a functioning market…not so well when the market does not function.

So what’s the best way to get back to a functioning market? It seems to me that the suspension of 157 has meant that we still aren’t functioning, although we’ve created a facade that we are which wouldn’t be possible with 157 in effect. My prediction is that if we reinstated 157 today, by the end of the year we’d be right back in a situation where you would consider it necessary to suspend it again.

“IMHO, there was rationale to suspend FASB 157 during the time of greatest disruption in the markets post Lehman collapse. I see NO rationale for the continued suspension today.”

Once opened, Pandora’s box is hard to shut.

“My prediction is that if we reinstated 157 today, by the end of the year we’d be right back in a situation where you would consider it necessary to suspend it again.”

Thx for the explicit version of my Pandora’s box explanation.

“My prediction is that if we reinstated 157 today, by the end of the year we’d be right back in a situation where you would consider it necessary to suspend it again.”

Maybe. However, I would say that to test it out, you could phase it in…where banks need to reinstate MTM accounting for a certain percentage of their assets each quarter (at their choice)…say, 5% per quarter. This would give banks plenty of time to clean things up, and lots of forward planning to sell bad debts, raise capital, etc. At 5% per quarter, after 5 years, no more MTM accounting suspension.

Once opened, Pandora’s box is hard to shut

Exactly…

You covered it completely. It’s things like this that makes you understand how behavioral economics can trump classic economic theory. I bet the French wish they could have done this with the first true economic bubble: The “Mississippi Company” (of 1684). This corporation, which held a business monopoly in French colonies in North America and the West Indies, became one of the earliest examples of an economic bubble.

http://en.wikipedia.org/wiki/Mississippi_Company

“…How is delaying the inevitable helping…?”

Inertia.

Certain very wealthy, well-connected people.

“… cited by top economists …”

Oh, please, try a source other than the opinion of “top economists”. Where were these “top economists” when the problem was brewing?

What did that top economist Galbraith say about economists? Something about an economist will answer a question not because he knows the answer but because he was asked the question?

What did that top economist Galbraith say about economists? Something about an economist will answer a question not because he knows the answer but because he was asked the question?

Many economists disliked Galbraith for his frankness.

‘Where were these “top economists” when the problem was brewing?’

Busily lecturing Japan.

ECONOMY
October 12, 2010, 9:06 p.m. ET

Fed Chief Gets Set to Apply Lessons of Japan’s History
By JON HILSENRATH

As a Princeton professor in the 1990s, Ben Bernanke lectured Japanese officials for mishandling their economy.

Today, Tokyo’s economic problems are more than academic for the Federal Reserve chairman. They are a window into his own situation as he stares at what could be a long period of slow growth, high unemployment and declining inflation in the U.S.
…

Behold the handwriting on the wall:

ft dot com
Last updated: November 12, 2012 12:01 pm
Japan nears fifth recession in 15 years
By Ben McLannahan in Tokyo

The Japanese economy has shrunk at its fastest pace since the earthquake-hit first quarter of 2011, piling pressure on the government to try to avert recession.

Yoshihiko Noda, prime minister, described the 3.5 per cent annualised decline in the July-September period as “severe”. Seiji Maehara, economy minister, said Japan had possibly entered a “recessionary phase”.

Many of Japan’s economic indicators have deteriorated since September, leading economists to predict that the nation has entered its fifth technical recession – two consecutive quarters of contraction – of the past 15 years.

“The question is how long and deep this downturn will be and how policy makers will react,” said Masamichi Adachi, an economist at JPMorgan.

The economy posted relatively strong growth in the first half of the year, as output was boosted by reconstruction in areas of northeastern Japan devastated by the March 2011 earthquake and tsunami. But it took a turn for the worse in the third quarter, as demand ebbed in China while Europe remained sluggish.

In July-September, Japanese exports fell 5 per cent, while household consumption and business investment also slipped. Excluding early 2011, the data released on Monday marked Japan’s biggest quarterly contraction since the fourth quarter of 2008 during the Lehman crisis.

Japan’s post-Lehman growth has been among the world’s most patchy. The economy was one of the best-performing among developed nations in 2010, as it snapped back from a 5.5 per cent fall in real GDP in 2009 to record growth almost double the G10 average of 2.6 per cent. Last year, though, output was knocked by 0.8 per cent as the nation struggled to overcome the various effects of the earthquake and tsunami and severe flooding of production facilities in Thailand.

The economy is expected to suffer again in the fourth quarter of this year, as the country remains locked in a territorial dispute with China, its largest trading partner over contested islands in the East China Sea. The spat over the Senkaku islands – which China calls the Diaoyu – has sparked unofficial boycotts of Japanese goods.
…

Japan nears fifth recession in 15 years

That’s such an odd coincidence. Some people just have the worst luck.

My understanding is that they are buying newer/not defaulted MBS, but I could be wrong.

Doesn’t matter; they can bury an unbounded amount of losses in their QE “profits”.

Not so sure about that. Through the bubble, I was paying less in rent than I would have paid in property tax had I bought the place. Then there’s alk these bankrupt states, hungry for new revenue…

Different math for different places. CA has Prop 13, which makes property taxes VERY definable. I can imagine the difficulty in states with a very high rate of P. Taxes, as well as a propensity to increase them at the first sign of trouble.

“Not so sure about that. Through the bubble, I was paying less in rent than I would have paid in property tax had I bought the place.”

Landlord’s purchase price = $560K

San Diego property tax rate = 1.11153%

Annual property tax paid by our landlord:

1.11153% X $560K = $6225 — a lot less than we pay in rent!

Of course, there are also other components of PITI (principle, interest, insurance), plus HOA, yard care and structural maintenance. And a capital loss of maybe $150K on the investment…

What’s $150k when you can paint your walls purple?

Prop 13 is easily circumvented on the county and municipal levels. And the State periodically assess “special fees” and “penalties”.
And the 2% per year “inflation factor” has added up over the course of the last 35 years. And….

The point being, property taxes on the lucky-ducky crowd approach 4-5%, not 1-2%. For example: A $50K (assessed) property with an $830 tax bill.

CIBT, you pay about $500 per month in rent for a $560k house? The $6,225 is an ANNUAL property tax rate…

That seems pretty low to me for a $560k house.

I said the tax was a lot LESS than we pay in rent…

No CITB. I caught it, too. Re-read your post. Some of us occasionally proofread our posts before hitting “enter”.

I admit I do it too -

Robin — Perhaps my writing style is confusing you, but I put quotation marks around quotes of what others said, such as:

“Not so sure about that. Through the bubble, I was paying less in rent than I would have paid in property tax had I bought the place.”

That was a reference to what someone else posted earlier, not to our situation.

Sorry, I read it backwards…

No matter…glad somebody read it.

Made perfect sent to me. I guess I read Academic Ursus quite well.

“Carmel valley off the ted willaims highway looks pretty 1% to me or at least very high tech and medical intensive. That money will drive prices.”

Already been driven.

I just did a Redfin search on Carmel Valley (92130 zip code). They are no longer showing long-term price data, making it hard to tell how far prices have dropped since the bubble popped.

Have you tried Zillow?

It shows peak at about $875k, with today’s value at about $750k. (this is the median “zestimate”)

I tend to distrust Zestimates™ as inflated to the high side. That said, what I find more interesting is that Zillow shows 379 homes on the market in the 92130 zip code going into the ice-cold holiday sales season. Are there really 379 buyers out there to match up against that many overpriced homes in just one zip code?

Call me skeptical, if you want, but I sincerely doubt it.

Here is another great example of why I distrust Zillow. Check out the huge divergence between recently realized sale prices in La Jolla and current Zestimates:

92037 Home Prices and Home Values
Median sale price ($)
$ 772,300
-11.0 %Y-o-Y

Zillow Home Value Index Y-o-Y
92037 $969,500 2.9%

“Inflation is going into wages, rather, their going into the top 10% of wage earners wages.”

Do you have anything to back this up? Because my guess is that your ‘top 10%’ is an overestimate of the share of the U.S. workforce seeing wage increases, unless you are excluding discouraged workers, would-be workers fraudulently receiving disability, etc.

Only anecdotal evidence. Everyone I know in the “six-figure compensation” camp is seeing higher comp in terms of bonuses, salary, etc. Same goes for those taking new jobs. Those I know in the “profesional” class, like lawyers and dentists are seeing more business than last year, translating into higher compensation. These types are spending as well. A dentist associate recently bought an Audi R8… $100k car.

Everyone I know in the “under six-figure comp” group is holding steady or losing ground because of reduced benefits and a lack of raises. Case-in-point: my parents and my in-laws. All well under $100k household income. They are losing their benefits next year as their employers have decided it is cheaper to pay the $2000 fine per employee instead of continuing to offer health benefits. This will translate to loss of income as they have to purchase insurance through an exchange or via the open market or pay a fine. Same goes for the teachers and city workers I know. No raises this year for them.

The only reason I chose “top 10%” was because generally that’s the beginning of the $100k household income group… it could just as easily be the “top 5%” group, though I don’t belong to that group and I’m seeing strong wage growth personally. Again, all anecdotal.

Hoping for reasonable rents in a coastal area crawling with wannabes is a fool’s game.

What does the government deciding to add an explicit guarantee to debt that was previously not guaranteed have to do with a company deciding not to continue to voluntarily provide retirement benefits to former employees who didn’t have an employment contract?

Companies provided these benefits to retirees because it made current employees believe that they too would get those benefits when they retired. It was a recruiting tool. The executives might also have considered it an ethical thing to do because they knew that people made plans with the expectation that the benefits would be there.

Once the executives give up the idea that they have an ethical obligation to someone other than current shareholders and decide that showing loyalty to former employees isn’t a cost effective way of recruiting/retaining current employees (if you are doing most of your hiring in China, this is very likely to be the case), then what reason do they have to keep paying out the money that the program costs.

If you want a benefit after you work for a company, get a contract.

“…with a company deciding not to continue to voluntarily provide retirement benefits to former employees who didn’t have an employment contract?”

A contract is an agreement entered into voluntarily by two parties or more with the intention of creating a legal obligation, which may have elements in writing,…

It seems likely that there is disagreement between the beneficiaries and the former employer whether there was a contractual obligation to provide the benefits said former employer is trying to rescind. Whether this was stated explicitly in writing is tangential or the executives believe they have an ethical obligation to someone other than current shareholders is tangential to the point…

Similar issues often arise when a wealthy philanderer carries on an extramarital affair with a sweet young thing, believing that he is not liable for her future living expenses because of the lack of a marital contract, only to later discover there was a contract, even though not in writing.

What contract is there with the philanderer and his mistress? You are making things up. If they end up in a common law marriage, there is an obligation created by state law, not a contract. If he wants her to keep her mouth shut, he has to pay for that future restriction on her behavior. If he gets her pregnant, then there is an obligation to pay child support, but that money, while paid to the mother, is the right of the child, not the mother.

Polly;

So why can’t it be mandated the employer must offer a cash out lump sum when you retire or quit to put in your own IRA tax free?

If you want a benefit after you work for a company, get a contract.

“You are making stuff up.”

No I am not.

This seems to have come up a lot in cases where an implicit contract was used because a written contract was not legal (e.g. gay marriage).

Palimony
From Wikipedia, the free encyclopedia

Palimony is the division of financial assets and real property on the termination of a personal live-in relationship wherein the parties are not legally married. The term “palimony” is not a legal or historical term, but rather a colloquial portmanteau of the words pal and alimony coined by celebrity divorce attorney Marvin Mitchelson coined in 1977 when his client Michelle Triola Marvin filed an unsuccessful suit against the actor Lee Marvin.[1]
…
Notable cases

* In 1982, pianist Liberace was sued for US$113 million in palimony by his partner Scott Thorson. Though most of Thorson’s claim was dismissed, he received a US$95,000 settlement.

* Judy Nelson filed a palimony suit against women’s tennis star Martina Navratilova after their breakup in 1991.

* In 1996, Van Cliburn was sued by former partner Thomas Zaremba for a share of his income and assets following a 17-year relationship ending in 1994. Zaremba’s palimony case was dismissed for lack of written agreement, along with claims for emotional distress and that Cliburn subjected him to the fear of AIDS through Cliburn’s alleged unprotected liaisons with third parties.[4][5]

* Canadian figure skater Brian Orser was sued by a former lover in 1998, outing Orser in the process.

* In 2004, comedian Bill Maher was sued for US$9 million by his ex-girlfriend, Nancy Johnson a.k.a. “Coco Johnsen”. On May 2, 2005, a California Superior Court judge dismissed the case.

* In 2010, in the Indian case of D. Velusamy vs D. Patchaiammal, Markandey Katju, a judge of the Indian Supreme Court, referred to the concept of palimony while delivering judgment. This case is also notable for the heavy use of ‘Wikipedia’ and ‘Google’ by the learned Justice in the judgment, which was later criticised in some quarters, notably by the Additional Solicitor General of India, Indira Jaising.
…

Palimony is an obligation CREATED BY STATE LAW. If you live in a palimony state, then the obligation is created if you live in the circumstances that create them. Living with another person in those circumstances is exactly the same as marrying in states that recognize the concept.

If there isn’t a law and there isn’t a contract there is no obligation.

The government didn’t have to back the Fannie/Freddie debt. They decided they wanted to in order to keep people buying the debt. They didn’t want mortgages to be dependent on private market standards. How is this hard to understand?

I know you claim that nobody should take anything you say seriously, but you just look stupid when you pretend that people who do stuff for non-legal reasons are the same as people who do stuff for legal reasons. There is a difference. The former can’t be enforced. You can do it if you want, but you don’t have to. The other stuff can be forced because you took on a legal obligation either by making yourself subject to a law or by entering into a contract. This isn’t physics. It is a human construct like a drawing. Seeing the ball fall doesn’t mean that there is gravity. Seeing the ball fall might mean that the cartoonist decided to make it fall.

I’m not just thinking about health insurance here; remember how those ‘non-contractual’ federal guarantees of F&F debt turned out to be as good as a contract, when viewed through the lens of the rear-view mirror?”

China was on the other side of this one IIRC

2008 about

“…you just look stupid when you pretend that people who do stuff for non-legal reasons are the same as people who do stuff for legal reasons.”

Playing the ’stupid’ card is a poor substitute for reasoned arguments. But I realize you are an attorney, so I understand the impulse to try to scorn your opponent.

“China was on the other side of this one IIRC

2008 about”

That’s right. Uncle Sam had an implicit contract to make good on the debt sold to China.

I realize this implicit stuff is a little hard for st00pid attorneys to grasp…

Martina Navratilova’s former lover won a suite in Fort Worth.

She had a video tape of the verbal contract.

What floor was the suite on? -

Contractual obligations based on mere rumor (too-big-to-fail bailout commitments) proved in Fall 2008 to be worth much more than your typical (insurance) contract in writing.

You are confusing people deciding to do something for reasons other than a legal obligation to people doing something in order to fulfill a contract. The final result may be the same, but the process by which you got there is entirely different.

Imagine someone who is obliged to do something if the sun rises tomorrow and another person who is obliged to do it if they role snake eyes on a pair of dice. Could they both end up with an obligation do it? Yes. Can you know whether that will be the result ahead of time? No.

“…another person who is obliged to do it if they role snake eyes on a pair of dice.”

This legal arrangement has a name: insurance contract. And it’s a lot more similar to the situation described above (employers who customarily provide post-retirement health and welfare benefits) than your strawman ’sun rises every day’ example.

“Companies provided these benefits to retirees because it made current employees believe that they too would get those benefits when they retired.”

That’s exactly where the contractual obligation arose.

No. That isn’t a contract. That is people assuming that a company will continue to behave as it has in the past. Assumptions on the part of employees and former employees are not a contract.

Uncle!!!!!

“You are confusing people deciding to do something for reasons other than a legal obligation to people doing something in order to fulfill a contract.”

You are confusing unwritten contractual obligations with discretion.

Bear,

Stop lying about the law. You don’t know what you are talking about. You never have. You never will if you don’t educate yourself.

Law isn’t fair. Contract law isn’t about doing the nice thing. You don’t create contractual obligations by being nice to people in the past. People don’t have the right to go to court and force you to do something that you don’t want to do just because they thought you would do it.

There is a rule in the interpretation of written contracts that you assume that anything that isn’t written down is not intended by the parties to be there. Makes sense, doesn’t it? The parties actually sat down and wrote a contract. Why would you assume that they meant something to be there and just decided not to write it down?

And employees who don’t have contracts are exactly that - employees without contracts. They don’t have one. While employed they have to be treated according to the employment laws of the applicable governments. Once they are gone, money that is held in trust for them (like their 401(k) accounts) has to be treated according to the rules for those accounts. Anything else? It is basically a gift. Why do you think that companies have a legal obligation to give their former employees a gift?

I get my brother and his family a family membership to the American Museum of Natural History every year. I have done this for a while. They probably expect it. They have no way to make me do it. None. Why does your former employer have any more obligation to provide a gift to you?

“I get my brother and his family a family membership to the American Museum of Natural History every year. I have done this for a while. They probably expect it.”

This analogy is way out of bounds from the discussion.

But I don’t feel like arguing any more with someone who relies on vitriol and an appeal to academic credentials rather than reason to win — it’s truly a joyless exercise.

“Why do you think that companies have a legal obligation to give their former employees a gift?”

I doubt the FASB would have wasted time and energy drafting these accounting standards if they assumed there was no liability.

Summary of Statement No. 106
Employers’ Accounting for Postretirement Benefits Other Than Pensions (Issued 12/90)

Summary

This Statement establishes accounting standards for employers’ accounting for postretirement benefits other than pensions (hereinafter referred to as postretirement benefits). Although it applies to all forms of postretirement benefits, this Statement focuses principally on postretirement health care benefits. It will significantly change the prevalent current practice of accounting for postretirement benefits on a pay-as-you-go (cash) basis by requiring accrual, during the years that the employee renders the necessary service, of the expected cost of providing those benefits to an employee and the employee’s beneficiaries and covered dependents.
…

P.S. Deferred compensation arrangements, such as post-retirement medical benefits, are clearly not provided by employers as “a gift,” but rather as part of the contractual terms of employment.

The fact that FASB (it is a private group, by the way) has a method for including amounts paid for retiree benefits in financial statements doesn’t mean that companies HAVE to provide them. Some companies do provide them. Those companies have to have a way to include the expense in their financial statement. If they decide to stop providing them, they won’t need to use that FASB standard, will they?

Some companies have to provide those benefits to some former employees. Those are the employees who had a CONTRACT that gave them the right to collect those benefits forever. Even they can lose the benefit if the company ceases to exist. It doesn’t even have to go bankrupt. All that has to happen is for the company to be sold in an asset acquisition followed by a dissolution. Poof. None of the contracts exist any more.

Now do you think that because some employees have those rights all of them do? Some employees get stock options. Do all of them have to? Some employees get 4 weeks of vacation a year. Do all of them have to? Some employees get paid a million dollars a year. Do all of them have to?

“At will” employees have NO CONTRACT.

None. Nothing. They work. They get paid. They can be fired at any time for any reason or no reason (the small exception being that they can’t be fired for illegal reasons like race or national origin). There are some minimal legal protections that mean that they can’t be put in really dangerous situation and have to be paid for the work they do. That is it. No employment contract. No requirement to be treated nicely.

Companies that used to offer really great health insurance coverage now often offer nothing but a high deductible plan. Do you think that the people who got hired when the health insurance was better now have the right to get the same coverage because that is what they expected when they got hired? Why do you think that former employees get more rights than current workers?

“Why do you think that former employees get more rights than current workers?”

That depends on the contractual agreement that was established when the workers in question were hired.

They don’t have a contract. You deciding that there should be a contract doesn’t create one. Your utopian fantasies are not contracts.

“Your utopian fantasies are not contracts.”

Your diatribes do not define what the definition of ‘is’ is.

Methinks the lady doth protest too much.

Why do you care so much about whether or not employers have contractual obligations to pay post-retirement medical benefits?

More generally, why are you so obsessed about browbeating everyone who reads here into agreement with your legal opinions?

I never said anything about logic. What I said is if I want to move merchandise I lower the price.

If I lower the price on panties then I sell a lot of panties. The people who buy these panties may not acutally need them but nevertheless they buy them.

Logic? My business is not about logic. If it were I would probably starve.

+1

We’re a long way from the bottom folks. Prices are still at the grossly inflated levels of 2004….. and slipping.

And what would generate so much fear? Knowing you can no longer survive the old fashioned way and therefore MUST succeed at the gambling table?

“And what would generate so much fear? Knowing you can no longer survive the old fashioned way and therefore MUST succeed at the gambling table?”

Maybe a rational fear of missing an opportunity, a fear that everyone in “the market” should probably have. Whether or not that fear is well-placed isn’t necessarily relevant. A good friend of mine has been a real estate agent for 20 years and she says that she sees huge blips like these whenever it looks like interest rates are going to rise. Same type of fear, I think.

Blue good idea and cut off their access to the world.. they will still have cellphones in jail unless you jam the signals.

imprison the violent ones till they repent

History is full of failed attempts to suppress religion.

The athiests who want to re-educate the religious alternately amuse and concern me. I assume they know the history of the 20th century…

As Soviet Russia’s failed social experiment amply demonstrated, an official attempt to suppress free-market religion is likely to be followed by offerings of state-sponsored cults of personality as an inferior substitute.

Well, at least that takes some of the load off of us.

LOL, Touche

We find his writing to be rather uplifting, thank you.

“In particular, at what point will policies designed to keep housing propped up on a permanently high plateau either be abandoned or otherwise fail?”

Until further notice.

“Bernanke purchasing $40 billion in MBS per month until further notice.”

bailouts are coming

housing is the economy.

Housing = Government

Government = Housing

When the Government Bubble bursts, housing will bottom out.

Since they presently are one and the same, housing will remain artifically inflated until government isn’t.

Government will do everything it can to keep itself aloft, prospects for the masses be damned.

Pretty obvious stuff, really.

Government = Housing

Housing - Government

And the minions wonder why the housing market is inefficient and doesn’t clear.

Pretty obvious stuff, really.

Houses back mortgages.

Mortgages back bank capital.

Save the houses and you save the banks.

“housing is the economy.”

It is?? Explain yourself.

For things so obvious, the key ingredient seems to be missing from your equation.

Wages?

I was thinking along the lines of the banks owning the government.

The best government money can buy.

We’ve got 5 more years of the Bernanke (through this term that ends in 2014, plus another 4 year term assuming Obama taps him again).

So my answer is at least 5 years.

“So my answer is at least 5 years.”

That answer seems predicated on the assumption that the Fed controls the movements of the sun, the planets, the moon and the stars.

On what evidence do you assume this?

You yourself note that the policies that are propping up housing need to either be a) abandoned or b) fail.

What do you think will bring about failure of these policies?

And I don’t think they will be abandoned as long as Bernanke is at the helm and politicians get brownie points for handing out nearly free money for mortgages. Since money printing is one way out of the debt mess we are in, I’m not sure the next guy is going to stop the printing either.

“What do you think will bring about failure of these policies?”

That’s the question I keep asking…but perhaps the answer is nothing. The Fed is an all-powerful governing force which can dictate policy outcomes to the global economy.

Isn’t that what you are suggesting?

For a more serious answer, note how the Greenspan Fed’s action to prop up the stock market after the 1987 crash immediately preceded one of the largest speculative stock market manias (aka bubbles) in history during the 1990s, just before it popped in the early 2000s.

Isn’t it reasonable to expect the current overt effort to prop up housing prices will lead to the same kind of speculative price bubble and collapse that we have seen over and over again during the Greenspan-Bernanke era? We see many posts here documenting a housing market overrun by historically unprecedented levels of speculative buyers, which you conveniently ignore.

You phrased my own questions better. That’s what I was wondering. However long this keeps up would most likely (at least I think) be directly affected by either those policies failing or being abandoned. I assumed they might eventually fail before the government stops intervening, so it’s more about at what point would everything just fall apart due to forces our government CAN’T control. I have no idea what would cause everything to finally break, though.

However, I think the fact that a lot of countries are in trouble might cause an issue of some countries (trying to) not allow others to fail, because it will directly impact their own in a bad way. For example, if country a buys a lot of exports from country b, and those exports account for a large part of country b’s economy, there might be incentive from country b to try and intervene. Although, I have no idea how something like that would play out.

“I have no idea what would cause everything to finally break, though.”

An excess of speculative euphoria over the available means to prop up markets?

“For example, if country a buys a lot of exports from country b, and those exports account for a large part of country b’s economy, there might be incentive from country b to try and intervene.”

Similar principle: If investors from China and Canada have been liberating equity from their domestic housing bubbles to make all-cash speculative investments in U.S. real estate, it seems as though this component of U.S. real estate demand could dry up when the China and Canada real estate bubbles pop.

My best answer to what is “propping up” the housing market?

1. Low interest rates;
2. NOT rampant building in places where the markets are tightest;
3. The eeking of distress out to the market.

Let’s hit what stops this in reverse order:

3. Changing of judicial foreclosure laws in judicial states, and/or ending the suspension of MTM accounting. Based on the progress non-judicial states are making as compared to judicial states, I’m going to make the controversial statement that more important of these two is the foreclosure laws. If the reflation of the bubble occurs, MTM accounting will become less relevant. What incentives do state officials have in changing foreclosure laws to kick MORE people out of their homes faster? Very few, unfortunately.

2. NIMBYism unfortunately is alive and well…this will only change market by market, city by city, and not all at once.

1. Fed controls this, and the US Government is propping up the housing finance market. What incentives for the US Government to change? Very few (hurting the housing market so obviously hurts politicians). What incentive does the Fed have to change? None until inflation becomes more obvious…and since the BLS has been cooking the CPI books for more than 20 years, I suspect reported inflation will be tame for a while…

The fundamental answer to your question as to what breaks the policies?

Courageous politicians who, at either the state, local, or federal level, in large enough numbers, vote such changes into existence, because they care more about the long-term health of their constituents than their next election.

Call me when you find a critical mass of those politicians…I won’t wait up.

To the REIC, 2005 was the price, and they will beg borrow and steal to get us back there again.

You see, it’s kind of like the election, they know santa clause will ultimately win the day.

Santa Claus…that is.

“The enemy of the enemy is our ally.”

How’d that work out with Saddam Hussein or Osama bin Laden?

“Well until it backfires on us.”

I hope it doesn’t because the U.S. is on the hook!

“The act Obama signed Friday reaffirms “unwavering commitment to the security of the State of Israel as a Jewish state” and calls for providing Israel with “the military capabilities necessary to deter and defend itself against any threat or possible combination of threats.”

It also pledges a U.S. veto of “any one-sided anti-Israel resolutions at the United Nations Security Council” and outlines U.S. support for an expanded Israeli role in NATO, increased intelligence cooperation and increased training for Israel’s air force.”

http://www.cnn.com/2012/07/27/politics/obama-israel/index.html

Imagine all the accountants, CPAs and IRS agents we could fire?

Oh the humanity!

I would say that the bulk of the complexity of our tax system lies at the corporate level. It’s how GE can make billions in profits and pay no income tax.

(Posted before I read your similar comment…)

No it’s better than that……..you are not giving our swindler class enough credit for creativity:

-Recruit all of the wretchedest refuse/English as a second language types with all of the typical “high demand/good paying jobs” BS.

-Have them apply for student loans covering all of the tuition and living expenses. Buy some crappy apartment complex in the ‘hood, and call it a “dormitory”.

-Have them sign a contract where tuition and rent are paid “up front”.

-School starts……tow or three months in, they find out that they are ineligible to get an A&P due to some previous drug/DUI conviction.

-They go home……the school keeps the cash. Uncle Sam gets to try to recover the money.

Multiply this times just about every kind of tech training out there.

Don’t the students also have to know maths and stuff?

I understand that our local airline, Frontier, starts it’s jet airliner copilots at around $40K per year.

Many airlines won’t hire a pilot if he cannot make captain.

For the past 20 years, this ment no one over 30.

So did I. Nothing particularly wrong with that. But it’s not an existence that leads the majority of kids to Doctorate’s or Nobel Prizes.

Thank God I’m a Country Boy

“Too bad he could never say such things publicly without getting skewered by the other side’s propaganda machine about throwing grandma under the bus.”

Leadership sometimes involves standing in the fire and showing the world you aren’t getting burned, or even uncomfortably warm, for that matter.