Bits Bucket for November 22, 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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Name:Ben Jones
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Happy Thanksgiving everyone!
Cmon Chef Puss…. post today menu.
Happy Thanksgiving to everyone except Ben Bernanke.
Here’s the menu:
Champagne with Pomegranates
♦
Bruschetta with Roasted Squash, Caramelized Onions & Feta
♦
Roasted Lamb with Rosemary & Caramelized Lemons
♦
Pear, Oyster mushroom, Pomegranate & Prosciutto stuffing
♦
Fingerling Potatoes with Figs & Thyme
♦
Cheese Course
♦
Chocolate
SCHWEEET!
Sounds kinda commie. I’m having turkey, stuffing made with nothing resembling an oyster and AMERICAN bacon, mashed taters, broccoli casserole, cranberries, yada, yada. Pumpkin pie.
It was good enough for Adam and Eve (and their pet dinosaurs) at the First Thanksgiving, it’s good enough for me.
(Beaujolais Nouveau too, which was probably not at the first Thanksgiving, until Cain got busy.)
“I’m having turkey”
That sounds rural WT.
sounds rural WT
Just like the Pilgrims.
Actually, if you want to be historical, the Pilgrims probably ate venison, wild duck, goose and swan.
Also, corn and porridge.
Eels, oysters, clams and mussels as well.
the Pilgrims probably ate venison, wild duck, goose and swan.
And turkey (wild). And cranberries. And pumpkin.
To me it’s the autumn harvest feast, and should feature traditional American seasonal foods, prepared in traditional ways.
It’s extraordinarily unlikely they had cranberries that late in the season. That’s an artifact of modern agriculture.
They would’ve had squashes but only in the 1620’s and beyond once they had gardens.
Turkey is relatively unlikely compared to duck based on simple hunting patterns.
There would’ve also been a ton of beans.
Try not to let your personal history get in the way of objective facts of history.
Correction: Try not to let the empires version of history get in the way of objective facts of history.
Well, if you want to get picky about authenticity:
But my point is that I don’t try to eat the exact foods eaten at the first Thanksgiving. To me, it’s the fall harvest feast. I try to focus on traditional American seasonal foods. Turkey, ham, pumpkin, cranberries, succotash, apples, pecans, winter squash, corn, etc., prepared in traditional ways. There’s plenty of time the rest of the year to enjoy feta cheese, caramelized lemons, prosciutto, and pomegranetes.
Oh, yeah, and this:
“…commie…”
Let sleeping McCarthyists lie…
I always find it quite droll and amusing when New Yorkers are accused of being commies.
As the joke goes, “New Yorkers don’t need to worship Mammon. He worships them.”
heh.
What’s worse is the provincialism in New England. NY has 4 distinct areas. None remotely resemble New England except for the area east of the Hudson to the VT an MA borders and north to Canada. This area is solidly New England yet everyone in New England presumes NY isn’t New England.
And then there is the center of the earth, NYC.
The rest of the state?
And then there is the center of the earth, NYC.
Of course it is!
I never screw in a lightbulb. I just hold it up there and the world revolves around the city and screws it in (and the rest of the world!)
Appetizer:
Locatelli Romano/prosciutto/soppressata calabrese plate with terranova bread(sourced in da’ Bronx)
Legal Seafood new england clam chowder
Main course:
Dry aged rib roast seared in pork and fat tallow and slow roasted w/pearl onions
Maine baking taters encrusted in kosher salt.
Pan flashed broccoli crowns Aila e Olio.
Dessert:
UVM Ag school dairy ice cream, coconut and almond amaretto.(nothing but the best)
New england apple pie(the real thing by yours truly)
Da’ Bronx, Da’ Bronx!
I bet I know where you sourced it from.
I’m an honorary Guinea. I’m way too obsessed about food apparently according to my friends.
“obsessed about food”
Impossible.
No sooner did we eat a modest amount of my food, we’re invited to da’ Bronx to a second Filipino Thanksgiving, and no amount of no is working!
Me and my Guineas are eating up all of NYC.
LOL
Faster…GF wants to know where to buy suet in NYC
I don’t care if it’s traditional or not. Every thing posted so far sounds so good. Slurrp.
Dry aged rib roast seared in pork and fat tallow and slow roasted w/pearl onions
“Tallow is used mainly in producing soap and animal feed.[1]”
wikipedia
But it’s also used in candles and lubrication! Yum.
(I swear, I think it was in twinkies, too.)
Your google chemistry rocks.
OMG, delicious FPSS. Pardon me while I catch my drool
Does anyone else remember TxChic66 (or something like that)? She posted great comments on the blog around 2004/5. She always ate a vegetarian dinner in Dallas for Thanksgiving. I miss her caliber of posts. Almost time for dinner here. Thanks Ben for your blog and insightful posts.
I think she would also tip a waitress something like $100. I miss her posts. She kept it real. Also miss Hoz who was here around the same time.
Just finished an (almost) entirely homegrown menu of:
Spinach and gruyer gateau of stacked crepes.
Dried ranch fruits and nuts
Decoy chard
Apple smoked wild turkey with blueberry chutney
Poached asparagus in herbed vinaigrette
Bitter green salad
Wild rice and morel dressing with dried sour cherries and pinon nuts
Creamy garlic mashed potatoes with pan gravy
Roasted root vegetables with red onions and pancetta.
Prisoner cab and Cardinal Zin zin
Spiced pumpkin bundt cake with house caramel and spiced whipped cream.
Veuve Clicot Grande Dame/Hibiki Blended Scotch
(burp) (hic)
Thank you to all at HBB for another year’s worth of pique and enlightenment.
Yummy but where’s the bird ??
Put the Gobbler in the oven at 3:30 this morning…32 pounder…
Have a wonderful Thanksgiving day everyone….
We’ve outsourced our bird preparation effort to a local supermarket.
I’m going to go on the record and say that nobody likes turkey. None in my crowd anyway.
They don’t even like wild turkey or heritage turkey. I was mighty miffed each time. They did run through the capon like animals though.
The only time they liked it was when it was heritage turkey legs grilled with rosemary.
So give them what they want!
And it’s trivial for me. Not much work.
Humans are complicated.
“…capon…”
Poor cocks…
where’s the bird ??
Birds are for squares.
Thank you, FPSS. In particular, I’m giving thanks this holiday that I don’t work in a union, where my co-workers can vote me out of a job.
True, lots of police officers and teachers getting voted out of jobs.
In case it’s not obvious, my comment was sarcastic.
You have a job?
A lot of non union shops use a peer review process. So if your coworkers don’t like you, they can vote you off the island.
How academic! Sounds like tenure.
LOL
One of the most moving experiences was to be invited to one of my best friend’s house in Brooklyn for Thanksgiving a few years ago.
She is Russian Jewish.
To hear her family and friends talk about what they are thankful for and what our country has given them is to be humbled.
I’m not too ashamed that I burst into tears (and I’m not the sentimental type as everyone here knows.)
Then we drank a lot of vodka and danced.
On the way home, her uncle “confessed” that the maid was really his mistress. Now, that was awkward and weird and fun.
Good vodka.
Come on Faster next friday 8pm Connellys on west 45th show us your dancing moves…..
http://www.youtube.com/watch?v=xB9SJ3kH3Fw
Bad news for people who love bad news.
U.S. Deficit Shrinking At Fastest Pace Since WWII
By JED GRAHAM
Posted 11/20/2012 11:18 AM ET
Believe it or not, the federal deficit has fallen faster over the past three years than it has in any such stretch since demobilization from World War II.
Read More At IBD: http://news.investors.com/blogs-capital-hill/112012-634082-federal-deficit-falling-fastest-since-world-war-ii.htm#ixzz2CxD6VbgT
Does this news imply the fiscal cliff may turn out to be more of a mere fiscal bump in the road?
Buy vait, there’s more!
from the article
“Other occasions when the federal deficit contracted by much more than 1 percentage point a year have coincided with recession. Some examples … 1960 … .”
An older friend bought his first home in San Diego in 1960. He said the prices were very affordable at the time.
Of course, with the Fed actively intervening in the market to prop up prices, it is doubtful a similar point of affordability in San Diego prices will materialize in the present cycle.
a 400k home at 7% P&I = 2661.00 payment @ 30 years bubble years
At todays rate of ~ 3.5% that same 2661.00 payment of P&I would buy a home of ~ 600k P&I
At what point at these current rates do we approach the bubble era prices? It seems buy some calculations we have a lot of room to go before we get back to the bubble prices.
Just by lowering interest rates the FED has increased the purchasing power dramatically.
So we get back to the argument of can the FED keep the party going till prices rise to some magical point.
The doomers think that the system will fall apart and the manipulation will fail.
The FED can print as much money as it wants to buy treasuries and keep rates low.
I would like some examples of how they would lose control of this situation they have been doing for years now. I don’t want to pick a side. I want some examples of how the manipulation fails.
“a 400k home”
We’re talking about houses, not entire city blocks.
Go ahead. Keep slipping this shit under the door and I’ll keep running your ass down.
I believe it. After record increases in the deficit due to stimulous spending, we’re seeing record decreases with less stimulous spending. It’s good news, but not spectacular. The deficit is still too high.
There’s a link to a PDF file in the article showing the deficit as a percentage of GDP being:
2007: -1.2
2008: -3.2
2009: -10.1
2010: -9.0
2011: -8.7
2012: -7.0
There’s a long way to go to get back to 2007-2008 level of government overspending.
But you will note the percentage is declining, not increasing. That’s the key. (It’s actually declining at a record pace, as you will see if you click on my upcoming link.)
I opened the article, and yes the rate of debt growth has slowed from 2009, but up 3.8 points (7-3.2) from 2008.
“From fiscal 2009 to fiscal 2012, the deficit shrank 3.1 percentage points, from 10.1% to 7.0% of GDP.”
This quoted mini paragraph is 6th from the bottom of the article. If you click on ‘7.0% of GDP’ it pulls up a PDF that shows 2007-2008.
The Great Turning is at hand.
We are saved.
“Unpossible!”
What homeless with a lavish teachers’ Pension?
Liliam Alvarez, 63, is home for Thanksgiving. She plans to set out a holiday dinner on the glass table in her living room and welcome friends into the warmth of her corner apartment — friends who helped her through darker times last winter.
That was when Alvarez found herself homeless, walking the streets, frightened and alone in the February chill, and waiting for a bed at the Pine Street Inn.
Alvarez, a former Spanish teacher and a published author, had joined the growing population of homeless seniors, a problem that is especially acute in Boston, with its high cost of living.
Homelessness among people 65 and older is projected to grow nationwide by 33 percent by 2020 and double by 2050, according to a 2010 report by the National Alliance to End Homelessness. Older homeless people face a particular challenge: They tend to be beyond their employment years, and therefore less likely to find a way to support themselves.
http://www.boston.com/news/local/massachusetts/2012/11/21/thanksgiving-some-homeless-seniors-are-grateful-for-permanent-hearth/WT2f85GALJ8XMTxGdk0fBO/story.html
What homeless with a lavish teachers’ Pension?
Good question. Naturally this level of inquiry is beyond the ability of modern journalists, particularly in Liberal Boston, where digging into such causes would bring shame upon left wing practices.
Teachers in our school district don’t get pensions anymore.
It’s also likely that Liliam Alvarez was only briefly a teacher, and was never vested in her pension. A lot of teachers quit after a few years.
One of the cashiers at my local grocery is a 5th grade teacher in a private school. She works at the grocery store for the health insurance and other benefits.
I have been thinking for several years that employer based health insurance is a bad model. Apparently, many companies think so, too.
Obamacare will either reinforce the employer based health insurance model (if lots of companies sign on) or accelerate its demise (if companies choose to pay the fines because it is cheaper than providing insurance).
Gobble.Gobble.Gobble.Oh, and gobble.
Greenville SC is the place where a developer claims he will spend 55 million$$ to turn an old cotton mill into 300 ‘luxury”apartments .
All the similar developments in the upstate I am aware of tend to turn into ”Section 8 Hotels” , if they are lucky.
The developer gets rich,and dumps a huge mess (And a one-stop baby making place),on the local community to police and avoid.
they stuff people into these developments around here too. Lots of kids are growing up in apartments.
“Lots of kids are growing up in apartments.”
My parents started their family in an apartment in NYC, Peter Cooper Village in Peter Stuyvesant Town, which Robert Moses persuaded MetLife to build for returning war veterans and their families. Not the worst place to live in NYC if you were a family starting out. Of course, when they had their third child, my parents decided to move to the Westchester burbs, to a RENTAL HOUSE!!!!!!! Where we lived happily for 12+ years.
After just five more years in our rental, and our kids will be in the same place you were growing up…
My kids have now lived 16 years in the same rental house. In the meantime, a lot of their friends, whose parents are homeowners, have moved multiple times in the same town.
Lots of kids are growing up in apartments ??
Back to the Future…..
But Kids today seem to have a lot less BIG stuff….
No records laserdiscs VHS cd’s big 15″ woofer Fisher speakers….big tube or console tv, books shelves with the obligatory encyclopedia…..
You can fit all that into an iPad now. That’s part of why those 220 sq ft apartments are viable now.
They keep trying that in my city’s collapsed, old industrial downtown. The thing that’s inhibiting much of it, at this time, is the total lack of private investor interest in blowing money in such a dead midwestern city. So the developers are constantly buzzing around city hall, looking for free government cheese, like flies on a dead crow.
My city is already hobbled with over $35 million in default bonds that must be paid for in the coming decade, all due to the “urban renewal” scams that were pulled on us by developers in the 1990s and 2000s. I’m glad there’s a limit on these things, since given their druthers, city politicians would have run up $300 million in bad debt.
San Francisco approves tiny 220-square-foot apartments
Some lawmakers worry the tiny units will drive up apartments in a city where the average studio rents for more than $2,000 a month.
THE ASSOCIATED PRESS
Published: Wednesday, November 21, 2012, 7:08 PM
San Francisco could soon be home to some of the tiniest apartments in the country: studios for up to two people that include a bathroom, kitchen and a minimalist living area measuring 10 feet by 15 feet.
The Board of Supervisors on Tuesday approved legislation allowing construction of up to 375 micro units as small as 220-square feet. Building codes previously had required that apartment living rooms alone be that size.
Several city lawmakers said they were worried that sanctioning apartments so small would exacerbate, rather than help, San Francisco’s shortage of affordable housing by driving up rents for bigger places.
The itsy-bitsy studios are expected to fetch $1,300 to $1,500 a month. The average studio apartment in the city now goes for more than $2,000 a month.
“Even though they do maximize their use of the space, you are still talking about very small units being very expensive,” Supervisor David Campos said. “If these places that are 200 square feet are going for 1500, what is that going to do to the rest of housing prices in San Francisco?”
http://www.nydailynews.com/life-style/real-estate/san-francisco-approves-tiny-220-square-foot-apartments-article-1.1206029 -
San Francisco approves tiny 220-square-foot apartments ??
Should have been building these long ago…
My take is, what possessions could they possibly have in that low of a square footage? Oh my, the thoughts of everyone having just enough space to sleep and eat and nothing much else. Where would the economy head? A trailer-park by any other name……
everyone having just enough space to sleep and eat and nothing much else ??
Go visit a few senior facilities….Or boarding houses…I understand from my son, that renting rooms in San Francisco is not only quite common but very expensive…These type of units are long over due and should be built on a wide scale…Problem is; NIMBY’s….
“San Francisco approves tiny 220-square-foot apartments ??”
I’m waiting on VMware to clone my higher order functionality to a virtual server, so I can continue being productive. Won’t require financing for cars, clothes, entertainment, housing, etc., just the essentials like a hydro-electric generator or fusion power plant so I won’t disappear into the ether. The blue pill?
they were doing this in portland oregon during the bubble…wonder howit turned out…
There’s a great graphic in the article showing the layout. Well worth a look. It reminds me of some of the layouts I saw while shopping for a camper.
well we are all supposed to upgrade ourselves into complete mobile entities right?…..so who needs space?
With the Eurozone sliding into recession, who is providing the demand to stimulate the increase in China factory activity?
Nov. 22, 2012, 9:43 a.m. EST
China factory data boost Europe stocks
By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets were on track for a fourth day of gains Thursday, as upbeat Chinese factory data lifted the global trading mood, and a cease-fire in the Middle East brought relief.
…
With the Eurozone sliding into recession, who is providing the demand to stimulate the increase in China factory activity?
Visa and MasterCard?
“Visa and MasterCard?”
+1 Just keep the kool-aid coming!
I just stimulated China because my computer took a crap and I ordered a new one. The tracking # on the shipment shows it just passed through Shanghai.
Any chance Grexit uncertainty will finally be resolved in 2013?
Can’t they just punt again in six months time?
Greek Eurozone exit in 6 months after Europe goes to worse place
Steen JakobsenSteen Jakobsen , Chief Economist & CIO, Saxo Bank
Filed in Macro Digest
Denmark, Monday at 15:01 GMT-8
Non-Independent Investment Research
Greece is in the midst of a negative compounding story and the only relief in sight is a short to medium term break from the Eurozone within about six months’ time, says Steen Jakobsen, Chief Economist Saxo Bank.
“Although I want Greece to have all the best things in the world I think ultimately it will need to do something which is outside the box,” says Steen.
He believes an exit from the Eurozone within six months is a very likely scenario considering Europe’s desire to try to keep Greece alive for some time yet, particularly ahead of the upcoming German election. Until then Steen sees Europe going through some rough patches before a recovery begins in 2013.
A worst place is ahead for Europe
“The first quarter of next year will be the worst quarter of the debt crisis in terms of growth and the amount of headwind to austerity and the lack of ability to move to a mandate for change,” says Steen. “We will see recovery inside the next four quarters in Europe but we need to go to a worse place first.”
Disintegration and desperation
The main problem for Greece is that none of the promised austerity measures have been implemented. And with no one willing to give up their entitlements this has created a negative compounding story where everything disintegrates and gets worse month by month as seen by the recent social tensions.
Meanwhile, the rest of Europe is so desperate for Greece to continue as if nothing has happened and so it is very likely that within the week Greece will be paid its next tranche of financial aid in order to stay afloat, says Steen.
…
“The main problem for Greece is that none of the promised austerity measures have been implemented.”
What a surprise!
Why are these people rioting over austerity measures that were never even implemented?
Managers shrug off austerity riots
Anti-austerity riots spur respected managers to buy up opportunities.
By Bradley Gerrard | Published Nov 20, 2012
A number of respected European fund managers last week shrugged off the anti-austerity protests that flared into riots in troubled eurozone states.
Old Mutual’s Kevin Lilley, BlackRock’s Vincent Devlin and Royal London’s Neil Wilkinson all told Investment Adviser they were remaining positive amid the chaos.
Strikes took place in Greece, Italy, Spain and Portugal last week with demonstrators breaking out into riots in some regions, amid a wave of mass unemployment fuelled by the government austerity being wheeled out across the continent.
The strikes came as the gross domestic product (GDP) of the 17-member eurozone area was officially reported as having fallen by 0.1 per cent in the third quarter – placing the region back in recession.
…
“…none of the promised austerity measures have been implemented.”
Apparently the strikes, protests and riots are working.
“…none of the promised austerity measures have been implemented.”
Apparently the strikes, protests and riots are working.
Our European cousins aren’t pushovers like we are.
“Apparently the strikes, protests and riots are working.”
+1 We’re still under the illusion of expectation fulfillment.
“Our European cousins aren’t pushovers like we are.”
Perhaps there should be some pro-austerity movements in the US. Cutting the FHA and support to Fannie and Freddie are a good start.
I think they had less to begin with. We have more meat before the knife hits bone.
“Our European cousins aren’t pushovers like we are.”
+1 Setting things on fire is cheap even in rich countries.
This just in!
South Pacific Sandy Island ‘proven not to exist’
BBCNews
A South Pacific island, shown on marine charts and world maps as well as on Google Earth and Google Maps, does not exist, Australian scientists say.
The supposedly sizeable strip of land, named Sandy Island on Google maps, was positioned midway between Australia and French-governed New Caledonia.
But when scientists from the University of Sydney went to the area, they found only the blue ocean of the Coral Sea.
So? Develop it anyway.
As long as the properties are flipped and never occupied, it should work just fine.
Bikini Atoll. No Bikini At All.
Be a good place to try out my solar-powered tanning salon concept.
19 hours ago … Debt expands to $16,253,547,000,000…
But that was 19 hours ago
http://www.usdebtclock.org/ - 213k -
It`s $16,280,596,000,000… now
the printing has just begun.
Common sense dictates that someone is going to get stiffed. So then we might ask, why does anybody buy our paper? It sure isn’t for the interest rates.
Might it be that this is how modern nations pay tribute? They “lend” you money at near to zero interest rates, knowing well that it won’t be paid back.
People who used to earn interest on their CDs and savings are getting stiffed.
also the people that buy products and services are getting stiffed.
Do you think the folks chasing aapl will get stiffed too?
No, common sense says as long as it’s a shrinking percentage of GDP, which it is, then we’re fine.
Hey Alpha,
I’m afraid that debt to GDP is still climbing. The deficit is still at 7% of GDP after the declines, which is greater than the growth in GDP.
au contraire, mon frere:
From fiscal 2009 to fiscal 2012, the deficit shrank 3.1 percentage points, from 10.1% to 7.0% of GDP.
Read More At IBD: http://news.investors.com/blogs-capital-hill/112012-634082-federal-deficit-falling-fastest-since-world-war-ii.htm#ixzz2CyNQllXn
What that shows is that the debt is climbing by .07 X GDP this year instead of by .101 x GDP last year. The debt is growing at a slower rate, that’s all.
I don’t understand your math. The debt is shrinking as percentage of GDP. And that’s what matters.
I think I see the problem. Debt and deficit are not the same thing.
Debt is the total owed.
Deficit is how much more is spent in a year over how much is taken in.
A surplus is how much less is spent in a year compared to how much is taken in.
The debt is the total of deficits less surplusses that have accumulated over the years.
The article you found shows a decrease in the deficit, but as long as there is a deficit the debt will continue to grow.
as long as there is a deficit the debt will continue to grow.
But it will not necessarily grow as percent of GDP. And that’s what matters.
“But it will not necessarily grow as percent of GDP. And that’s what matters.”
As covered by the article, the debt is still growing at 7%. GDP growth is much less. Actual was 1.8% last year and projection going forward are around the same level. So for instance, if GDP continues to grow at 1.8% and the deficit drops to 1.8% of GDP, then debt will remain constant as a percentage of GDP even though it’s growing in nominal terms.
Calculation
US GDP approx 15T
US Debt approx 16T
GDP growth: 2%
Deficit: 7% of GDP
Current debt to GDP is around 106% (16/15)
GDP should grow to 15.3T (15 * 1.02)
Debt should grow to 17.12T (16 * 1.07)
New debt to GDP would be around 112% (17.12/15.3)
In short, that article is far from being the all clear signal. The US government is still digging a hole, it’s just slower than before.
As covered by the article, the debt is still growing at 7%
Where is that covered in the article?
I’m not saying it is or isn’t so, I just can’t find where it’s mentioned in the article.
Where is that covered in the article?
Alpha, do you really not understand what a deficit is?
The deficit, as a percentage of GDP, is the percentage of GDP by which the debt grows in a year.
So if the article said that the deficit has shrunk to 7.1% of GDP, then it is ALSO saying that the debt grew by 7.1% of GDP.
Ergo, the debt is currently growing faster than the GDP currently is.
Oops, sorry—7.0% of GDP.
Still the point is simple: a deficit of 7.0% of GDP implies a debt-growth rate of AT LEAST 7.0%; 7.0% is clearly more than the 1.7-ish% GDP growth rate.
So if the article said that the deficit has shrunk to 7.1% of GDP, then it is ALSO saying that the debt grew by 7.1% of GDP.
Huh? That makes no sense to me, but I did have a bloody at noon, and half a bottle of wine since then.
Here’s a chart that says our debt is growing by ~2.5% a year, as percentage to GDP. Not great but fixable, especially if we rein in health care costs.
http://bonds.about.com/gi/o.htm?zi=1/XJ&zTi=1&sdn=bonds&cdn=money&tm=14&f=10&su=p284.13.342.ip_&tt=2&bt=0&bts=0&zu=http%3A//online.wsj.com/article/SB10001424052748703789104576272891515344726.html
Use a simple example:
You have a total income (GDP) of $100
Your debt is $100
Your GDP grows by 1% in one year or $1
Your debt grows by 10% of GDP in one year or $10
At the end of the year:
your GDP is $101
your debt is $110
At the start of the year your debt to GDP ratio was 1 ($100/$100).
At the end of the year your debt to GDP ration is 1.09 ($110/$101).
So every year if you GDP growth rate is slower than the growth rate of your debt as a percent of GDP your debt to GDP ratio gets bigger.
Anything over 1 for a debt to GDP ratio generally means that only austerity will fix it. That’ historically speaking. See the book “This time is different.” Definitely one of the best books on the topic.
This is only true as long as people are willing to keep buying your debt so you can refinance the ever growing outstanding debt. If the Chinese for example decide they want to spend their money and not loan it to the U.S anymore and no one takes their place we not only have to reduce the growth of debt as a percent of GDP we also have to reduce the actual notional value of the debt. This has happened before in history and it will happen again and usually at the worst possible time. That would mean cutting more than 40% of government spending at once.
(US$ 16 280 596 000 000) - (US$ 16 253 547 000 000) = 27 billion U.S. dollars
Really? In 19 hours time?!
This reminds me of a dumb question I have: Are the Fed’s $40 bn / month in MBS purchases part of the fiscal deficit calculation? If so, are these on the table for reducing the deficit? Or does the Fed spend federal monies as it damn well pleases, outside the oversight of Congress?
This reminds me of a dumb question I have: Are the Fed’s $40 bn / month in MBS purchases part of the fiscal deficit calculation?
Nope.
The Fed “spends” money as per it’s mandate as set by congress. It can not do what it “damn well pleases.” The purchase of GSE MBS has an aim to reduce unemployment and maintain the purchasing power of the dollar per congress’s mandate set forth in the charter of the Fed.
The Fed simply exchanges a dollar value in the reserve accounts of the primary dealers held at the fed for the equivalent value of GSE paper from the primary dealer.
The actual outstanding value of the GSE paper (or treasury paper for that matter) doesn’t change when the Fed buys these assets. Therefore the debt outstanding does not change.
GSE paper is moved from the asset column of a primary dealer to the asset column of the Fed. A reserve balance is created at the Fed in the name of the primary dealer which is now a liability to the Fed and an asset to the primary dealer.
The net effect in theory is that the primary dealer has exchanged a less liquid asset for a more liquid asset. Fed money has been created. It increases the capital as required of the primary dealers per Basel III. And it in theory may create more bank money if lent (hot money) via the reserve multiplier. The primary dealer is also paid interest on any excess reserve balance held at the Fed if not lent.
All interest paid on the GSE paper is still paid by the GSE (or by the entity that issued the paper that the GSE guaranteed). The interest is now paid to the Fed instead of the primary dealer. The interest earned by the Fed on the GSE paper is used to pay the expenses to run the Fed and cover and net loss on assets held on the balance sheet if any. And any remaining interest is paid back to the treasury per law.
The GSE paper may be sold in future back to a primary dealer or it could be held to maturity. If held to maturity the face value is paid to the Fed.
In no case does the paper just disappear.
In theory the Congress holds the sole power to change the charter and hence the mandate of the Fed. However, it might be seen as a loss of independence of the Fed if they ever did that. And that could impact confidence in the Fed and hence the value of the dollar.
In total the Fed is attempting to create more “Fed money” due to the decrease in “bank money” aka “hot money” which is created by the reserve multiplier when the banks lend money. But there is no decrease in the amount of GSE debt (or even treasury debt) outstanding.
Outstanding explanation!
Thank You!!!
Political Insight and Analysis From The Wall Street Journal’s Capital Bureau
November 21, 2012, 4:19 PM
The Fiscal Cliff Drama, in WSJ Graphics
By WSJ Staff
The “fiscal cliff,” when a package of spending cuts and tax increases is set to go into effect unless the White House and Congress negotiate an alternative, is fast approaching. Here’s a look at the players, their positions and the fallout if a deal isn’t reached.
The plot. Some things have changed in the American fiscal drama since 2011, writes David Wessel. For one, President Barack Obama is campaigning in public this time to put pressure on the Republicans and spread the view that it’s their fault if the U.S. goes over the cliff. But the plot is very similar: Republicans, particularly Speaker of the House John Boehner of Ohio, continue to balk at raising tax rates, while Mr. Obama and his Treasury Secretary, Timothy Geithner, say they don’t see any alternative to raising tax rates on those with annual incomes over $250,000 if the deficit is to be reduced without eviscerating government programs or raising taxes on the middle class. Here are some proposals for taxing high-income Americans:
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if the govt stops spending we go back into recession.
Markets
The Fiscal Cliff Hits Households
Almost all American households would take a financial blow next year-and low-income families would be among the hardest hit-if the White House and Congress fail to solve the “fiscal cliff.” Damian Paletta reports on Markets Hub.
They were ok before the tax cuts… what changed?
They didn’t get raises and the price of just about everything they consume went up?
I have been saying this on HBB for YEARS, but I will say it again:
Prices on necessities rise to what the market will bear. That is, retailiers will raise prices and dare someone to pay them. As long as people pay, those prices stay high. When taxes were cut in 2001 and 2003, everybody got a slight cash bump. So the next time that retailers raised prices and dared people to pay, people had the money. They paid, and so prices stayed high.
“What changed” is that those tax savings have been soaked up by rising prices of things that we would have bought anyway, like health insurance or gasoline or college or the next car and especially RENT. We got used to paying the prices, companies got used to the extra revenue. The “new normal,” so to speak.
When those taxes go up in a month, do you really expect prices on necessities to drop accordingly? Of course not. The middle class will have to give up yet another little luxury just to live decently. And those luxuries are what make up the consumer economy, which is why the tax rise will result in another recession.
How does the U.S. stock market keep going up and up, despite massive withdrawals throughout 2012?
News Summary: Investors again pull cash from stock mutual funds in Oct, add to bonds
By Associated Press, Published: November 14
STOCK FUND WITHDRAWALS: Investors withdrew cash from stock mutual funds in October, the eighth straight month that withdrawals have exceeded deposits. A net $15 billion flowed out of U.S. stock funds, consultant Strategic Insight said on Wednesday. Year-to-date flows out of stock funds total nearly $57 billion.
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I would rather bury my cash than buy a bond at these yields.
Some company , clarke and rush, found 300,000.00 in gold while doing some duct work in a home in sacramento. 12 baby food jars full of gold. The current homeowners were unaware they were sitting on a small fortune.
http://sacramento.cbslocal.com/2012/11/20/300000-in-gold-dust-found-in-sacramento-home-during-hvac-installation/
The current homeowners were unaware they were sitting on a small fortune.
Sounds like they got a real bargain when they bought that house!
(cue PW in 5… 4… 3…)
Are they now using homeless people’s pictures in those “President waives refi requirement” ads?
If they can fog a mirror they can help the recovery.
+1
Ex-Strawberry pickers, perhaps?
Too soon?
$625,500 in principle can generate a lot of deductible mortgage interest…
Real estate’s fiscal cliff: 5 items to watch out for
11/21/2012 12:04 PM
by Tim Manni from HSH.com in Personal Finance, Real Estate
By now most of us are aware of the term “fiscal cliff.” The term refers to the economic mayhem that is expected if tax increases, spending cuts and the budget deficit rules go into effect in January 2013.
But while a fiscal cliff threatens the economy as a whole, real estate has its own fiscal cliff that’s quickly approaching. And unless certain rules, laws and programs are extended, we could see a huge falloff in the recovery of the housing market.
Potential borrowers might want to get their transactions completed in front of those changes, since they might push rates and fees higher in their respective wakes.
Here are five items with approaching expirations that could seriously threaten the strides we’ve made so far:
Expiration of the mortgage interest deduction
Expiration of the Mortgage Debt Forgiveness Act
Tax-deductible mortgage insurance
Expiration of Operation Twist
Foreclosure reviews
No. 1: The mortgage interest deduction. Not that anyone purchases a home solely to claim the deduction, but the tax break certainly makes homeownership more attractive, affordable, and according to some, a stabilizing factor for housing markets.
But the long-considered cornerstone of American homeownership is in jeopardy as the government still hasn’t voted to extend the tax break. A mounting national deficit is the main reason the deduction could be allowed to expire. Presently, interest on loans of up to $1,000,000 can be deducted, including primary and secondary homes.
“I believe the deduction won’t be eliminated, but scaled back to coincide with the current conforming loan limits for high-cost areas,” says Keith Gumbinger, vice president of HSH.com. “So rather than a million dollar maximum limit, the total might be scaled back to $625,500, for example. Interest accrued on mortgage debt in excess of that figure would no longer be deductible.”
..
“Potential borrowers may want to get their transactions completed in front of those changes, since they might push rate and fees higher in their respective wakes.”
From this is is logical to assume that:
1. The “buy now or be priced out forever” meme is still active.
2. If it is cheaper to borrow now than it will be to borrow after the first of the year, AND if prices are pushed up BECAUSE of borrowed money then prices pushed up by money borrowed now should come down after the first of the year.
Isn’t it amazing how there is always a reason you need to buy a home in the near future, or else face dire consequences of fence sitting?
And who says you won’t lose your MID along with everybody else? It’s quite an assumption that it will be grandfathered in, IMO.
The article does also state that it’s a good time to do your short sale, since the mortgage debt forgiveness is ending. So it’s not just a rah-rah buy article.
Marketing 101.
There’s the price and then there’s howmuchamonth. If howmuchamonth is going to go up for reasons other than the price then the price will have to fall to keep howmuchamonth the same.
Doesn’t the ongoing effectiveness of this marketing strategy depend on an unlimited supply of prospective buyers with buckets of money and boxes of stupid?
At what point will the stupid segment of society’s housing demand finally be fully saturated?
“At what point will the stupid segment of society’s housing demand finally be fully saturated?”
Depends on how many times the stupid segment can go from foreclosure to buying to foreclosure to buying to foreclosure to buying to foreclosure to buying to foreclosure to buying……
“howmuchamonth”
The fact that most if not all buyers currently making purchase are basing their decision on ‘howmuchamonth’ versus net worth considerations suggests that anyone who is smart enough to factor in net worth considerations should sit on their hands and keep renting until purchase prices become more affordable.
Why not let Howmuchamonth Howie enjoy catching himself a falling knife without interference?
I forgot about another slice of the current buyer pool: The all-cash investors and other short-term flippers, who expect myriad federal and Fed-funded housing price support subsidies to deliver a capital gain on their short-term investments.
Once the current wave of flippers tries to cash out in droves, Howmuchamonth Howie is screwed. But it’s all good, as the screwing of Howmuchamonth Howie will provide Democrat politicians with yet another opportunity to show how much they care by passing yet more ‘Save Our Homes’ bailout programs into effect.
it has become all about the payment just like buying a car. that is all most people care about.
“Doesn’t the ongoing effectiveness of this marketing strategy depend on an unlimited supply of prospective buyers with buckets of money and boxes of stupid?”
I hear there’s one born every minute. They’re a renewable resource.
“There’s the price and then there’s howmuchamonth. If howmuchamonth is going to go up for reasons other than the price then the price will have to fall to keep howmuchamonth the same.”
BINGO
Combine the concepts of “howmuchamonth” with the concept of “price equals value” and you have the makings of a bull market. Maybe not a sustainable bull market but nevertheless a bull market.
The degree and the strength of such a bull market depends on the degree and strength of the “howmuchamonth” AND the “price equal value” crowd. Since both concepts have built up a lot of strength during the past few decades such a bull market may have some staying power.
Until it doesn’t, of course.
IMHO.
At what point will the stupid segment of society’s housing demand finally be fully saturated?
Never underestimate the elasticity of supply of the stupid segment.
The all-cash investors and other short-term flippers, who expect myriad federal and Fed-funded housing price support subsidies to deliver a capital gain on their short-term investments.
What makes you think that the all-cash investors are short-term buyers?
It’s quite possible that they will be holders for decades—considering that if Japan is an accurate model of our future trajectory, there may not be another segment worth investing in for a LONG time.
We’ve been over this argument multiple times, I’m not doing it again, except to add this: if we lose the MID, do you think LLs will keep rents the same out of the goodness of their hearts? Or will they raise rents to cover the cost of the lost MID?
‘if we lose the MID, do you think LLs will keep rents the same’
An investment property holder can deduct all related expenses, including mortgage interest if any. They write it off on the schedule for the property and don’t use what is commonly known as the MID, which is an itemized deduction.
No-brainer path to fiscal cliff compromise: Focus on eliminating tax deduction giveaways to the rich, rather than increasing tax rates.
5 tax deductions that favor the rich
By Jay MacDonald • Bankrate.com
It’s good to be rich
When it comes to tax deductions, it is good to be rich — the richer, the better.
Middle-class America enjoys some of the same tax breaks as the wealthy on things like the mortgage interest on home loans, capital gains on retirement investments and donations made to charity.
However, the rich enjoy these deductions and others to a wildly disproportionate degree when compared to the rest of taxpayers. According to the National Priorities Project, America’s top earners will get an average tax cut of $66,384 in 2011 while the bottom 20 percent will realize an average tax savings of about $107.
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dont fight the FED!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
What does the Fed have to do with the fiscal cliff compromise?
If they don’t buy treasuries to fund the US treasury there is no money to raise the debt ceiling.Isn’t 50 cents out of every dollar being spent being borrowed?
We have talked before about the FED not being able to keep the party going.
Can you explain to the readers here how the FED’s manipulation can fail?
I’m just sitting here watching the bubble re-inflate while people sit around talking about meltdown.
With a printing press to keep rates down I’m a little curious what can stop what is going on.
“Can you explain to the readers here how the FED’s manipulation can fail?”
To answer a question with a question, what do you think would happen if a growing number of investors in treasuries decided to redeem? For instance, what US stuff would the foreign holders of treasuries buy with their $54 trillion? Keep in mind we’re talking about treasuries with extremely low yields, and are subject to devaluation every time the Fed runs a QE.
What does the fed have to do with falling housing prices?
Evidence of cooling Canadian housing market mounts in October industry data
Published on November 22, 2012
TORONTO — There’s mounting evidence October was a weak month for sales of Canadian housing.
A new monthly analysis by Teranet shows Canadian housing prices declined last month compared with September _ only the third time in 13 years of data that there was a month-to-month decline in October.
The Teranet-National Bank National composite house price index, released Wednesday, said house prices were up an average of 3.4 per cent across Canada in October compared with a year ago.
However, the index also showed an 11th consecutive month of deceleration in year-to-year price increases and a 0.2 per cent drop in average prices from September levels.
The index also declined between September and October 2008, just before a major recession was sparked by a crisis in the U.S. financial industry.
Several industry groups have noted a moderation in housing sales since the federal government began tightening mortgage eligibility rules. The most recent change, in July, reduced amortization periods to 25 years from 30.
A national association representing Canadian mortgage brokers recently suggested the changes have gone too far and the Canadian Real Estate Association reported that sales of existing homes slowed since the new rules.
The Building Industry and Land Development Association (BILD), representing builders in Toronto and the surrounding area, said Wednesday that last month had the second-lowest sales of any October in the past 13 years.
“In an attempt to cool down the market, the federal government has severely affected the building and development industry in the GTA,” said BILD President and CEO Bryan Tuckey.
“The introduction of stricter mortgage regulations has triggered a decline in new home sales, and if this trend continues, it will affect job creation in the coming years, restricting economic growth.”
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I most certainly have to critique this find.
1) The para that talks about reduced amortizations from 30 to 25 years is leaving out a lot of info. Banks can still offer 30 year ams, but the mortagor won’t be able to get CMHC insurance to protect the lender. And the 25 year am limit for CMHC insurance is the same as it was in 2006 before it was pushed up to 40 years.
2) “In an attempt to cool down the market, the federal government has severely affected the building and development industry in the GTA,” - what isn’t mentioned is that GTA has been on an insane building spree.
3) No mention at all of record levels of personal debt as a possible cause for slowing sales. It’s got to be the government.
Bueller Bueller Bueller
What movie is this from?
You flatter me by giving me this mortgage principal reduction but I can tell you here and now that I accept it for Snorkels the Clown. Snorkels the Clown is the man of courage who should receive the mortgage principal reduction. Mine tonight, it is Snorkel’s tomorrow … I love Snorkels the Clown and I’d like all of you to love him, too. Tonight, when you hit your knees, please ask Fannie Mae and Freddie Mac to love him.
barnies big adventure?
Comment by UNKNOWN TENANT
2012-10-23 14:19:46
Snorkels the Clown
Snorkels the Clown is a clown character very popular in the United States, peaking in the mid 2000s as a result of widespread Robo signing which victimized millions of homeowners, clowns and other fictional characters.
“Snorkels: The World’s Most Upside Down Clown” animated cartoon series
Episodes
Snorkels signs for the HELOC
Snorkels signs for another HELOC
Snorkels signs for yet another HELOC
Snorkels buys a condo
Snorkels buys another condo
Snorkels buys yet another condo
Bad News Cruise
Big Clown Shake-Down
Snorkels Flip Flops
Snorkels misses a payment
Snorkels misses another payment
Snorkels misses yet another payment
Snorkels the squatter
Snorkels the victim
Snorkels gets a lawyer
Snorkel’s Song (2005-2012)
You flatter me by giving me this mortgage principal reduction but I can tell you here and now that I accept it for Snorkels the Clown. Snorkels the Clown is the man of courage who should receive the mortgage principal reduction. Mine tonight, it is Snorkel’s tomorrow … I love Snorkels the Clown and I’d like all of you to love him, too. Tonight, when you hit your knees, please ask Fannie Mae and Freddie Mac to love him.
Brian’s Song (1971)
Screenwriter(s): William Blinn
Now you flatter me by giving me this award. But I say to you here and now, Brian Piccolo is the man of courage who should receive the George S. Halas award. It’s mine tonight and Brian Piccolo’s tomorrow. I love Brian Piccolo. And I’d like all of you to love him, too. And tonight, (when) you hit your knees - please ask God to love him.
Ferris Bueller’s Day Off (1986)
Bueller Bueller Bueller
Snorkel’s Phone message from his mortgage servicer
(2005-2012)
Snorkels Snorkels Snorkels
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