Playing With Fire
A reader suggested a topic on global bubbles. “I recently took a trip to Qatar and India. Doha (Qatar) had a lot of high rise buildings and more in construction with more than 60 floors each. The surprising thing was that all were empty with no occupants. They are just building like Ghost-towns in China. There was a bigh sign that read: ‘Vision 2030′. They are building for 2030. Too much money is being spent in infrastructure (Keynsianism) and it looks to the World that the economy is growing. What happens when these emply buildings find no occupants in the end. Or growth slows.”
“Same was the story in India. Many high rises with residential flats all over the major metros. If you drive at night time, the lights will be on in only a few flats in a building. Most are being bought by investors. Surprisingly, the prices in New Delhi were more than any major big US city. Like a flat in Delhi suburbs was around 3 crores which is roughly $600K. A flat is like an apartment here in US. If you go inside the ciry, they could be anywhere from 6crores to 15 crores. Basically in millions of US dollars. Do Indians really have that much money?”
“The most interesting thing was after talking to some local folks in Delhi, they said we are different. In India they said there is too much black money and prices will never go down. They think what happened in US RE market was local to USA. Indians seemed very content and happy. Almost everbody who owns a house is very rich out there. And most houses they said were paid off. So there is no RE bubble out there as per the locals.”
“I recently met a friend from Toronto and he said Toronto is different. He claim was that RE in Canada will double in price from today’s price in the next few years. The whole World is on dope.”
A reply, “Did you learn the source of the money behind any of these projects? And did you get to tour any of the projects to see what sort of technological/security innovations they may have incorporated? (Or left options for?)”
“Actually, 2030 is right about were I’ve long thought the global economic imbalance would shake out– when the bulk of the Boomers are in mass die-off, and after we’ve cracked the vacuum energy conundrum. I’m betting that not much of the millenial development here in the US was constructed with the next generation at the forethought.”
One said, “Doha is getting it’s money from native promoters who are selling these investments around the world - mostly Europeans and North Americans. They are in a lot of trouble with their backers. Tons of money from Kuwait as well. The only way we Canadians are different than the USA is that when your recovery becomes real we will start to come out of our recession about the same time - on your coat tails ! Therefore, we will have been in a recession for a shorter time than you.”
And finally, “I had some doubts about what you said until I started talking to all of the immigrants I know. Many people seem to have better lives here. Housing may be 5 or 6 times their income, but in their birth country, it would be way more than 12 times. This is especially true of the Filipinos I know.”
The South China Morning Post. “With the property market growth hitting double digits this year, Manila has turned out to be one of the surprise packages. For the past few quarters, the Philippines’ capital has consistently ranked among the top three among Southeast Asian countries - enough to at last catch the eye of overseas investors. Many properties are being snapped up by Filipino nationals working overseas, fuelling the growth of high-rise condominiums. ‘More recently, we have also witnessed an explosion in condo development in the central areas of the city with good public transport links,’ says David Young, managing director of Colliers Philippines, noting that close to 50,000 new units were launched in 2011 and 2012.”
“Foreigners who do buy Philippine residential property purely for investment purposes are attracted by relatively cheap prices compared with the rest of Asia and attractive rental returns of 6 per cent to 7 per cent, Young says. ‘They have seen good capital appreciation since the market bottomed out in 2002, and expect this to continue.’”
The Macau Daily Times. “Combined with the economic instability in global markets, there is a possibility that Macau’s real estate bubble will burst this year if the authority takes no action. Analysts also cited the soaring prices, or inflation, as another reason for concern behind the property bubble, and despite the government’s efforts to deter speculators, including the launch of a special stamp duty on purchase by non-local residents or corporate investors, property prices are still rising. The financial industry is worrying that a burst of the bubble will happen this year.”
“But the real estate industry is more optimistic. Agents cited the chronic shortage in supply of housing as a strong supportive force in the market, while the strong economy means more foreign workers and a greater demand for accommodation. But the industry also admitted that Beijing’s visa restriction is a potential threat, but might not be enough to trigger a burst of the bubble, should there be any.”
From Arabian Business. “The 50 percent cap on UAE expatriate mortgages, unveiled by the central bank earlier this week, will curb rising prices and chances of a new Dubai property bubble, but will hamper efforts to stimulate a recovery in the market, experts said. The move was part of a circular issued to commercial lenders by the UAE central bank and appears to be an effort to curtail any possible new housing bubble. Property prices plunged by more than 50 percent between 2008 and 2011, triggering a corporate debt crisis in Dubai that forced the restructuring of billions of dollars of debt.”
“‘It is good news in the short-term as this will have an effect on prices rising too quickly recently so to curb credit should ensure we have a sustainable property recovery rather than a bubble that will burst,’ Mario Volpi, head of residential sales and leasing at real estate agency Cluttons, told Arabian Business.”
“‘The long-term effect remains to be seen as the region is generally cash rich so leverage is not a major factor in buying property here, although a lot of transactions recently were by expats buying a property to get away from wayward landlords who are doing all they can to increase the rents. So short term happy, long term not so sure,’ he added.”
“Bankers said they were shocked by the circular, which could hurt confidence in the real estate market’s recovery and hurt the share prices of property developers and banks. ‘They are trying to regulate banks, but are controlling consumers by giving them limited choices,’ a senior executive at a local bank told Reuters. ‘It will lead to less investment by end-users.’”
“An Abu Dhabi-based analyst said: ‘If implemented, this will impact on the real estate sector. After the property market improved, some banks had started lending up to 85 percent on some projects.’ The analyst added: ‘It’s positive when we look at the financial and lending perspective, but the question is whether this lending cap is practical.’”
From Andy Xie. “The US and China are the two biggest economies in the world. Both are trying to control asset prices to manage their economies. The global economy depends on how effective their policies are.”
“Manipulating asset prices is like playing with fire. The people who play are either fools, or bubble chasers who want to make money from the fools. Whatever the benefits to the economy in the short term, this would be more than offset by the calamities that follow. In the current scenario, the calamity ahead is inflation. Printing money inevitably leads to inflation, and when asset prices are kept high, the lag time is shortened.”
“Inflation is already high in emerging economies, though their statistics don’t fully reflect the fact. It takes longer for inflation to hit the developed economies, because they are more weighted towards the labour-intensive service sector and their labour market is still depressed. Inflation in emerging economies only becomes a crisis when their currencies tumble. That moment will arrive when the Fed has to raise interest rates quickly to counter inflation in the US. The Fed said that it would react if inflation rises above 2.5 per cent. But US inflation was already close to 2 per cent in 2012. It won’t take much for it to breach 2.5 per cent. This is why the Fed is anxious that asset prices don’t go up too fast. But history is not in its favour; prices rise quickly when the asset market is bubbly.”
“China will have a tougher job controlling its property market for two reasons. First, government officials probably own millions of empty flats. Second, properties under construction - residential and commercial - exceed 10 billion square metres, according to the National Bureau of Statistics. No matter how successful the government is at manipulating expectation, there is just not enough money to marketise the inventory at the current price levels. Hence, any market revival, like the current one, would be short-lived. China must face up to its vast property bubble and prepare for the consequences.”
“Policymakers around the world resort to short-term measures to delay the inevitable. It symbolises a global leadership crisis. The people who led the global economy into the crises are trying to lead it out, but old dogs cannot learn new tricks.”
“A government’s job is to keep the prices low and quality high of basic social goods like education, health care and housing. The labour market should be flexible, and an effective tax system is required to support low-income earners. The worst policy is to inflate the prices of basic goods for temporary gains. But that’s what politicians are doing.”
“This year may seem like one when we muddle through, and a reminder of the good old days from time to time. But another crisis is in the making. Inflation may force the US Fed to raise interest rates quickly next year, which would cause a 1998-style emerging market meltdown.”
‘a reminder of the good old days from time to time. But another crisis is in the making.’
It’s hard to describe this situation. Let’s start with something I discovered in 2005; almost everywhere I look there are signs of a housing mania. let’s take Hong Kong, whose leaders directly charged the Federal Reserve’s QE policies for fueling insane price increases:
‘Hong Kong’s China-backed leader on Wednesday announced plans to tackle the city’s housing crisis in a policy speech aimed at soothing anger following a series of mass protests urging him to quit. In a speech widely seen as an attempt to address rising anti-Beijing sentiment, Chief Executive Leung Chun-ying rolled out a series of policies to increase housing supply, reduce choking pollution and tackle poverty.’
‘The top priority of the current term government is to tackle the housing problem,” the 58-year-old told lawmakers, following a sharp rise in property prices and an outcry over the cramped living conditions of tens of thousands. “We recognise that problems stemming from property prices and rental, cage homes, cubicle apartments and sub-divided units cannot be solved overnight. “But we must acknowledge these problems, understand the gravity of the situation, and take the first step forward to resolve them,” he said.’
And Australia. “Academic Philip Soos has acknowledged that mainstream opinion is opposed to the idea that a housing bubble exists in Australia, as governments, the FIRE sector (finance, insurance and real estate) and many of his colleagues in academia all claim that prices are linked to fundamentals or intrinsic value. But noting entrenched views exist on both sides, Soos has repeated his strong belief that evidence suggests the residential property market was currently experiencing a bubble, with prices detached from fundamental valuations.’
‘This appears to be the largest bubble on record, orders of magnitude larger than all preceding bubbles,’ he says. ‘When it does burst, heavily indebted property owners (recent home-buyers, negative gearers) will experience financial trouble, including the economy at large.’
New Zealand. “Pressure looks likely to stay on house prices in the year ahead, particularly in Auckland, experts say. While we may see some easing of average prices during the Christmas/New Year period, during the prime summer trading months of February and March average prices are likely to return to the low $600,000s,’ said Peter Thompson, managing director of Auckland’s biggest agency, Barfoot & Thompson.’
‘Hayden Duncan, chief executive of New Zealand’s biggest agency network, Harcourts, says lack of new supply and pent-up pressure will keep prices high. ‘The outlook for the country is one of an environment with continued low interest rates and housing stocks remaining tight,’ he said. With limited building planned, particularly in Auckland, it will have the impact of fuelling on-going price increases. If you are pondering on what the best time to buy is, it’s now.’
In Canada. ‘Real estate veteran Lawrence Dale, who founded Realtysellers, says one of issue for agents is they get used to a certain sales level so any pullback seems catastrophic even if it just puts them back to where they were in 2010 — when, at the time, many would have been satisfied with their sales volume. ‘Slow times and everybody panics. It becomes more of a concern for agents to drum up leads as their business starts to otherwise shrink,’ Mr. Dale said. ‘Coming off the run we’ve had, everybody’s expectations are higher than they used to be.’
And India. ‘The current slump in the Indian housing market may end soon. Rapid urbanisation is bound to stoke demand for homes over the next few years, raising prices. A report by property consultancy Knight Frank identifies 13 residential destinations in India - across five metros - likely to witness the sharpest spikes in prices and ranks them on the basis of how quickly prices will double their present value.’
Look at how the US media and REIC rejoices about bidding wars, speculative purchases sight unseen, low low rates. The only thing missing is ‘if you have a pulse…fog a mirror’ quotes.
Part is semantics; this frenzy is ’stabilization’ (quickly followed by boosterism: ‘the bottom has passed’ ‘get in while you can’).
The housing market will be stabilized when there is no anticipation of a bottom and people buy a house when it is a good fit for their life, not because of artificial interest rates, or ’shortage’.
Inasmuch as the Aussie and to a lesser extent, NZ real estate bubbles are driven by Chinese investors, the slow hissing sound we’re hearing from PRC bodes particular ill for our friends down under.
NZ is my back up plan if the SHTF here in the U.S. I hope their prices CRATER!!!11
CRATERRRRRRRRRRRRRRRR
Switzerland for me. I would somehow find a way to take my several lbs of gold coins with me to Switzerland. Would not be a commercial jet flight.
I suspect that when SHTF, Americans will not be welcome anywhere. Anyone wanting to exercise that option, should probably be laying the groundwork now - kind of like Chinese folks who are buying US property as a potential escape hatch.
“Switzerland for me. I would somehow find a way to take my several lbs of gold coins with me to Switzerland.”
Why not add a Swiss wife to your harem?
A few years ago, I looked into a Swiss bank account. Most options are closed to Americans, along with citizens of Afghanistan, Iraq, and Somalia. Wonderful company we’re keeping.
“A few years ago, I looked into a Swiss bank account. Most options are closed to Americans, along with citizens of Afghanistan, Iraq, and Somalia. Wonderful company we’re keeping.”
Bummer. It’s gold then. I’m buying now in 1/4 oz sizes.
BTW, Trader Joe’s in California is no longer able to have the “Two Buck Chuck” nickname for Charles Shaw wines. They are now $2.49 per bottle. A case of 12 used to cost under $26 and now costs under $33.
Still, consider a usual bottle of wine from Napa rated at 88 or 89 could cost you $23. Buy two cases of Charles Shaw and buy one quarter ounce gold eagle. You’d end up spending the same amount as if you bought all Napa Valley. And that’s the low end Napa Valley.
“If you go inside the city, they could be anywhere from 6crores to 15 crores. Basically in millions of US dollars. Do Indians really have that much money?”
I was in Bangalore India in Dec last year. I don’t know about Delhi, but in Bangalore the prices are apparently $150~200k for an apartment (flat). I managed to ask one engineer how people can afford it. His explanation is as follows: For IT professionals at the top, dual income is around $50~70k. So these families put a down of $50k from savings or via borrowing from family (apparently possible in a family with educated members) and then get a loan for 15 years. With an interest of 10~11% they strive to pay it off in 10 by cutting out frivolous expenses.
Me thinks, when India runs out of these high earning people it will be difficult to sustain the building. I also heard that the builders are making out like bandits who are driving Audis and BMWs (cost of ownership in India for these imported cars: $100~120k)!
One more thing, from this engineer: the corruption is extremely high especially the politicians. I suspect that money is freely flowing to their cronies and hence Delhi apartments are very expensive.
But make no mistake about it, the man on the street has nothing to show for all the progress India is supposedly making. Even modest gains have not reached the poor, as I saw on a visit to Hampi, an UNESCO world heritage site.
Even modest gains have not reached the poor, as I saw on a visit to Hampi, an UNESCO world heritage site.
I think it would be really interesting to see a comparison of how each deciles has fared in the booms in India vs Brazil, to see how the gains have been distributed.
Can’t they buy multiple Tatas?
“Manipulating asset prices is like playing with fire. The people who play are either fools, or bubble chasers who want to make money from the fools. Whatever the benefits to the economy in the short term, this would be more than offset by the calamities that follow. In the current scenario, the calamity ahead is inflation. Printing money inevitably leads to inflation, and when asset prices are kept high, the lag time is shortened.”
I agree with Xie’s point that the Fed and other central banks are playing with fire by so much asset price manipulation. However I disagree with his assertion that inflation is an inevitable outcome. My best guess is that the Fed is trying to ‘lock in’ home prices at some target level, and they will take away the punch bowl at the point when they are satisfied that prices are locked in where they want them.
But given the piling in of all-cash speculators trying to make a quick buck off short-term housing price appreciation, and the growing evidence that this investing activity has once again spurred housing price appreciation rates to far above sustainable levels while completely desiccating low-end inventory, I see a substantial risk that the chaos which will ensue when the Fed ends QE-to-infinity-and-beyond and these fly-by-night speculators try to lock in their gains and exit en masse will result in another leg down. The bagholders will be all the saps who recently used VA or FHA loans to buy at prices that were temporarily inflated by the heightened Fed-engineered inflation expectations. Lots of these guys may end up underwater and/or in foreclosure, losing all the home equity gains they anticipated. But it’s all good for Megabank, Inc who funded the loans, as the principle is federally guaranteed.
‘I disagree with his assertion that inflation is an inevitable outcome’
He does qualify it:
‘In the current scenario, the calamity ahead is inflation’
It could play out in a number of ways. The 1998 ‘crisis’ started in Asian currencies, and spread from there.
How can that be???????
“The bagholders will be all the saps who recently used VA or FHA loans”
I think you right on this although most of the bagholders won’t default since their monthly payments are cheaper than renting. Granted, they’ll be bummed that their house has dropped in value, but they’ll rejoice in having a cheap mortgage.
“their monthly payments are cheaper than renting.”
Not at current inflated asking prices of resale housing.
‘most of the bagholders won’t default…they’ll rejoice in having a cheap mortgage’
Millions have walked away from a house worth less than what was owed. Millions.
Why wouldn’t they walk away from a house where their payments were going to pay off principle they would never be able to recover, and just find a cheaper rental?
Why wouldn’t they walk away from a house where their payments were going to pay off principle they would never be able to recover, and just find a cheaper rental?
Apparently most people aren’t financially-rational actors—or else even more would have walked away when prices dumped by 30%.
Maybe they were (and still are) waiting for the Fed’s housing market reflation measures to make them whole again.
Real Estate
The Great Housing Rebound of 2012: How the Fed Helped Sellers Beat the Odds
By Christopher Matthews
Dec. 27, 2012
Construction crews work at the site of the Arista at the Crosby development in Rancho Santa Fe, Calif., on Dec. 21, 2012
Sam Hodgson / Bloomberg / Getty Images
Without a doubt, the U.S. housing market has been the most successful sector of the economy this year, and Wednesday’s Case-Shiller home-price index report — which showed a fifth consecutive month of year-over-year increases in home prices nationwide — was a late Christmas present for homeowners across the country.
The housing-market “bottom” was one of the biggest business stories of 2012. After years of falling home values, the data clearly showed that the bleeding stopped somewhere in the first part of 2012 and that home prices have actually begun to slowly rise since then. In addition, other indicators like housing starts, new home sales and foreclosure statistics all point toward a healing housing sector.
These dynamics have gotten some economists and market analysts excited about the growth prospects for the U.S. economy in 2013. Robert Johnson, director of economic analysis for Morningstar, called housing “the big change factor in 2013″ and believes that “direct housing investment will be a meaningful contributor” to economic growth in 2013. He also sees industries related to housing — like furniture manufacturing and sales — adding to economic growth in 2013 as the housing market begins to pick up.
There’s no doubt that we’re finally seeing the beginnings of what economists call a positive feedback loop when it comes to housing. Rising home prices allow lenders to be more generous with home financing, which allows even more prospective home buyers to access the market, further driving up home prices. And higher home values give consumers and builders more confidence to go out and spend money or make investments, which also stimulates the real estate market and broader economy.
…
I just read the most hilarious article about the restoked San Diego real estate mania, characterized by the return of bid wars and virtually no low-end inventory whatever.
I read it in a free dead-tree version of the San Diego Reader — Volume 42 / Number 3 January 17, 2013.
Luckily it is also available online. Try your best not to read this from start to finish; it is almost as entertaining as watching Glengarry Glen Ross.
“Glengarry Glen Ross”
Coffee is for cloosers.
“They’re sitting out there, waiting to give you their money. Are you going to take it?”
Good luck getting an account and logging in to read this article. If you are in San Diego, it might be easier to hunt down a dead tree copy.
Cover Stories
Realty’s new reality
Bunny, bunny, bunny…
By Siobhan Braun, Jan. 16, 2013
Good luck getting an account and logging in to read this article.
CiBT, any chance you could post the most relevant snippets—e.g. only a fraction that would be protected under Fair Use safe-harbors?
I will type in a passage from the intro, to whet the interest of anyone who might want to obtain a full copy.
My main question for anyone who reads this or the full article: What would motivate the members of any profession to purposely aspire to look stupid?
I am in a conference room at the Hillcrest Keller Williams office among roughly 75 realtors that are pretending to be bunny rabbits. A middle-aged woman places her hands in front of her face, simulating buck teeth. She shouts “bunny, bunny, bunny!”
A man with a microphone hushes the bunnies.
“Very good,” he says enthusiastically. The room applauds.
“That was about lowering your inhibitions” he continues. “Moving out of that fear of this will make me look stupid is really valuable in real estate. This next game pushes that teamwork thing even further.”
He instructs the agents to break into groups of 12. One person will pretend to be a tree; two are to imagine they are something related.
“I’m the tree,” says a man in a three-piece suit. He stretches his arms, making them branch-like.
“I’m a Christmas present!” a petite woman says, rolling herself into a ball at his feet.
“I’m a little girl opening that Christmas present,” says a blonde in a tight blazer. She bends down and pretends to unwrap the woman.
A spikey-gray-haired agent to my left says with a cynical sigh, “And what exactly does this have to do with real estate?” She looks exasperated.
A nearby realtor raises a judgmental eyebrow.
Five minutes later, the announcer again hushes the room. The realtors fill the available seats. Some must stand at the back of the room.
“That game is a great example of what real estate is really about,” says the announcer. “We really have no idea what’s going to happen next.”
…
“That game is a great example of what real estate is really about,” says the announcer. “We really have no idea what’s going to happen next.”
I hope they paid alot of money for that conference, they deserve it.
Its all stolen money.
I remember reading an article about houses purchaseded on the big huge palm tree shaped islands built out in the ocean in Dubai that were purchased ith the assets of the Kabul Bank in Afghanistan(ie US funds).
Nearly all the Dubai property purchased with Kabul Bank funds is registered in the name of Farnood, the former chairman, or that of his wife. Mahmoud Karzai, an American citizen who used to run an Afghan restaurant in Maryland and still has a house in Glenwood, maintains a residence at one of the properties registered in Farnood’s name, a $5.5 million seafront villa on Palm Jumeirah
http://www.washingtonpost.com/wp-dyn/content/article/2010/09/07/AR2010090706645.html
As their criminal penalty, we ought to force everyone who did that to live there without air conditioning. I said a few years ago that, by 2025, Dubai will have ceased to exist. The fact that so much wealth was squandered to speculate on residential real estate in such an incredibly inhospitable part of the Earth should tell us everything we need to know about our mentality, although I suppose the same thing could be said about Florida.
Is it Rory who is sponsored by Jumeirah?
“Policymakers around the world resort to short-term measures to delay the inevitable. It symbolises a global leadership crisis.”
There it is.
“Too much is being spent on infrastructure”
Not all infrastructure is the same. A 60 floor building is not the same as a desalination plant, a power plant, a smart grid, a solar array, a sewage facility, a toll road, an airport expansion, a deepwater port, etc etc. Some of these things are far more useful/necessary/productive than others. “Building for the future” is not always questionable. Building out a port system that can handle post-Panamax freight traffic is smart, building ghost cities is not. But don’t judge one by the other.
It’s also questionable to call any expenditure “Keynesian”. It betrays a misunderstanding of what Keynesianism really is. Most conservatives accept the central tenants of Keynesianism as a starting point. The question is in implementation–to *what degree* should we lower taxes on increase government spending in a recession? To *what degree* should we lessen government spending/increase taxes in a boom time? (Note: We have never really followed Keynesianism precisely because we do not routinely lower gov’t spending in boom times, we increase it. The GOP is very complicit in this. We also usually reduce taxes in boom times, rather than raise them to build a rainy day fund or pay down debt.)
People often try to make basic economic principles into partisan talking points. I question whether these people know much (or anything) about Economics.
One last point - A great deal of skepticism is needed when you evaluate any Economics theory. It’s troubling to see labels tossed about without further examination. Economics, IMO, should be about describing conditions, proposing, theories, and then unpacking the data to see whether we can increase our understanding. It should not be about choosing a theory and then blinding ourselves to the real, physical world, by trying to smash every historical reference or data point into some prepackage box of beliefs.
Rant over….
“Not all infrastructure is the same. A 60 floor building is not the same as a desalination plant, a power plant, a smart grid, a solar array, a sewage facility, a toll road, an airport expansion, a deepwater port, etc etc. Some of these things are far more useful/necessary/productive than others.”
Even among the list of more worthy infrastructure, there are times when they should not be built.
Like a 60 floor building doesn’t need roads, sewers, utilities, firemen, police, etc.
I don’t disagree with this at all. And there are times when sky scrapers make sense. The larger theme of my post is that keynes shouldn’t be tossed around randomly as a substitute for using thought to evaluate projects. keynes has flaws but keynes was well aware of bubbles.
““A government’s job is to keep the prices low and quality high of basic social goods like education, health care and housing. The labour market should be flexible, and an effective tax system is required to support low-income earners. The worst policy is to inflate the prices of basic goods for temporary gains. But that’s what politicians are doing.”
A lot of reasonably conservative people (I consider myself one of these) would say that this is the basic challenge facing our country. We’ve stopped delivering quality public goods, even as prices have risen. More recently, people like David Brooks have discussed this. I remember reading Edmund Burke in college and he expanded this point to say that government should restrain the worst aspects of the market place and help the average individual compete and gain some better quality of life. Industrialists/capital will still receive much/most of the rewards, but the average person should benefit as well.
Contrast this with what True Bootstrapper Job Creators (TM) like Mittens think.
Then think about why both parties are f***ed up. Obama can ignore the average middle class person and focus on the very rich and the very poor. Why? Because the opposition does not have intellectual legitimacy. It’s not hard to see that they are serving other masters which are extremely lucrative. Koch Fluffers are not legitimate alternatives and once the olds start to die off this will become more apparent at the polls (if 2008 and 2012 were not big enough wake up calls).
2010 was a very old electorate and 2014 might be old as well. So it will mask the problem and there will be no legitimate opposition party for another few yrs. Tea Billies and Koch Fluffers will still be running the House.
Having first starting reading Ben’s blog in 2006 or so (maybe even earlier - it’s hard to believe it’s been that long ago), I did not anticipate this level of resolve on the collective part of the world’s reserve banks to keep these markets pumped up. Naively, I had imagined a massive international unwinding, pain followed by some measure of normalcy.
In an oblique way, it reminds me of a Twilight Zone I had seen once. A man goes back in time to the early 60’s to stop the Vietnam War. He shows the McNamara-like general films of the horrid end to the war, and of course the general takes this information as reason to enlarge the engagement to ensure victory. It doesn’t seem to matter what information bankers have, they will always keep pumping. Hopefully, this will all end better than Vietnam.
“It doesn’t seem to matter what information bankers have, they will always keep pumping. Hopefully, this will all end better than Vietnam.”
- Why would bankers not pump? The basis upon which they are rewarded or punished has nothing to do with long term sustainability or the health of the country’s economy. We had a Dem President elected on a change platform and, for a variety of reasons the regulatory framework didn’t change significantly enough. And the vocal opposition frightened the Dems from doing anything else. Then the opposition nominated a guy with profound absence of respect for working, middle class people. He basically whipped his dick out and wizzed all over middle class workers, then slapped them in the face with it. And yet, ironically, he won 47% of the popular vote (the same % he claimed vote based on hand outs). The average person can’t tell who is f***ing them and who isn’t. It’s so sad.
- Vietnam comparison is apples/oranges. But this is going to end profoundly badly. There are still decent-paying jobs in the U.S. for now. But I suspect the demographics will allow Koch Fluffers to keep the House long enough that we’ll get no real change and the next generation will be ever worse off than the current one. Imagine you’re a 15 yr old today. Think about the future of the country during your lifetime. So, so sad. And yet, people are more concerned about some rational limits placed on fire arms. There may be no country left worth fighting for, but at least we’ll have a lot of teabillies with AR-15s in case China ever tries to invade. LOL!
He basically whipped his dick out and wizzed all over middle class workers, then slapped them in the face with it.
Because the middle class is the new minority. And America’s purpose is to enslave minorities for profit.
And America’s purpose is to enslave minorities for profit.
Purpose is rather to support its oligarchy.
I did not anticipate this level of resolve….
Same here Lionel.
It’s not resolve, IMO, it’s panic.
Another possibility is that they are heavily spiking the punch bowl during their own tenures in office in the hope they will be out by the time of the next collapse.
Panic indeed and no surprise.
About 40% of private sector employment during the bubble years was housing related, and a lot of that has gone “poof” to be replaced by what??
Bubble years were peak transaction years as well, so how many millions of Americans are now saddled with house payments on an asset they can’t sell without taking a loss or trashing their credit which in turn can impact their ability to get hired?
‘About 40% of private sector employment during the bubble years was housing related, and a lot of that has gone “poof” to be replaced by what??’
Housing-related employment supported by a hair-of-the-dog cure for the housing bubble collapse hangover…
“Bubble years were peak transaction years as well, so how many millions of Americans are now saddled with house payments on an asset they can’t sell without taking a loss or trashing their credit which in turn can impact their ability to get hired?”
Apparently a key part of the hair-of-the-dog cure is to stimulate housing prices back to levels that erase the unrealized losses incurred by millions of FBs.
Apparently a key part of the hair-of-the-dog cure is to stimulate housing prices back to levels that erase the unrealized losses incurred by millions of FBs.
With the obvious side-effect that these inflated-above-reality price-levels also help to stimulate further building as well.
Hm, what could possibly go wrong?
I remember suggesting to a long-time adviser that I thought we were in a historic financial panic in early August 2007. He thought not.
I have to check up with him some time whether he recalls this conversation…
Days Before Housing Bust, Fed Doubted Need to Act
Doug Mills/The New York Times
[The Fed chairman, Ben S. Bernanke, testified to Congress in November 2007 about the subprime mortgage crisis.]
By BINYAMIN APPELBAUM
Published: January 18, 2013
[Traders at the New York Stock Exchange on Aug. 10, 2007, the day after the market plunged 387 points on housing fears.]
WASHINGTON — When Federal Reserve policy makers convened in August 2007, one of the nation’s largest subprime mortgage lenders had just filed for bankruptcy, and another was struggling to find the money it needed to survive.
Officials decided not to cut interest rates. The Fed did not even mention housing in a statement announcing its decision. The economy was growing, and a transcript of the meeting that the Fed published on Friday shows officials were deeply skeptical that problems rooted in housing foreclosures could cause a broader crisis.
“My own bet is the financial market upset is not going to change fundamentally what’s going on in the real economy,” William Poole, president of the Federal Reserve Bank of St. Louis, told his colleagues at the meeting.
That was on a Tuesday. By Thursday, the European Central Bank was offering emergency loans to continental banks, the Fed was following suit, and an alarmed Mr. Poole had persuaded the board of the St. Louis Fed to support a reduction in the interest rate on such loans. The somnolent Fed was lurching into action.
“The market is not operating in a normal way,” the Fed chairman, Ben S. Bernanke, told colleagues on a hastily convened conference call the next morning. Mr. Bernanke, a former college professor and a student of financial crises, was typically understated as he explained that the Fed was pumping money into the financial system because private investors were fleeing. “It’s a question of market functioning, not a question of bailing anybody out,” he said. “That’s really where we are right now.”
More than five years later, the Fed continues to prop up the financial system, and the transcripts of the 2007 meetings, released after a standard five-year delay, provide fresh insight into the decisions made at the outset of its great intervention.
They show that Mr. Bernanke and his colleagues continued to wrestle with misgivings about the need for action, because at the time there was little evidence of a broader economic downturn. Several officials worried that the economy would instead overheat, causing inflation to rise. By December, as the Fed began to act with consistent force, the economy was already in recession.
Officials lacked clear information, relying on anecdotes like a reported conversation with a Wal-Mart executive who said Mexican immigrants were sending less money home. They were also limited by economic models that could not simulate the problems that seemed to be unfolding.
“This may be a situation in which you will have to resolve your ambivalence quickly,” Timothy F. Geithner, then president of the Federal Reserve Bank of New York, warned in September. “You may not be able to resolve it.”
They questioned, too, the Fed’s ability to stimulate the economy, an issue that is still at the center of the debate about its policies.
…
This whole article is worth reading as well as the comments that follow it. It’ not news here on this blog, but interesting to see where the NYT and its readers are at.
The amazing part is that it is news in NYC.
What a bunch of idiots.
“They show that Mr. Bernanke and his colleagues continued to wrestle with misgivings about the need for action, because at the time there was little evidence of a broader economic downturn. Several officials worried that the economy would instead overheat, causing inflation to rise. By December, as the Fed began to act with consistent force, the economy was already in recession.”
Isn’t it somewhat reassuring to realize that Fed officials are as clueless as the rest of us about what the future economic situation holds in store?
Bits Bucket for January 21, 2013
Americans can open Swiss bank accounts and conduct business as usual. But the IRS mandates Americans report transfers over certain amounts. Because of the added admin work, Swiss banks prefer Americans open accounts with large sums of money, since small sums are not worth the extra headache. It’s not an aversion to Americans, per se, but to IRS imposed restrictions and other regulations. What is difficult is opening an account if you’re a non-resident, period. I’m considering relocating there, but I’d like to maintain my American passport. I understand dual citizenship is possible, but strained relations between U.S. and Bern have compelled dual citizens to renounce U.S. passport. I wish there were an international zillow.com, so I could peruse Swiss properties online.