The Housing Bubble

Um, the information released by Ed Snowden is not vital to national security interests. On the contrary, our nation can’t be secure if we don’t know what our military is doing against us, with our money, and in our name, SECRETLY.

But the NSA says that what he has is far more damaging that what has been released so far.

Frankly, the stuff released so far is very much “DUH”.

If you didn’t know the NSA was tracking the location of your cell phone, and who you were calling and texting, then you’ve really not been paying attention.

The phone companies have said that the NSA has been asking for this info.

What is our military doing against us? They are compiling a database in the case we get credible leads on who may be a terrorist, we can see who he’s been talking to and meeting with.

Ohhhh, scary stuff there.

I’m going to assume you’ve never been in the military. I have.

I’ve held a TS. If you’re not called out as a suspect, you have nothing to fear. 99.999999% of the data collected is never looked at by human eyes. It is collected just in case someone gets flagged as a suspect.

And, the private content that would require a search warrant is not tracked, just the plain sight information that can be gathered without a warrant.

NSA is tracking who you called, not what you said. Where your phone was, not what you were doing there.

Snowden revealed that they can and do listen to your calls and read your e-mails without probabl cause. Well, maybe not YOURS, but someone’s.

The Washington Post also published the Pentagon Papers in the 70s. But does it matter? Are you saying it would be right to raid the Post for possessing classified information?

“…If you’re not called out as a suspect, you have nothing to fear…. It is collected just in case someone gets flagged as a suspect….
And, the private content that would require a search warrant is not tracked, just the plain sight information that can be gathered without a warrant….”

Yet having worked for the government, you believe this.

Yet having worked for the government, you believe this.

I like Darrell, but…yeah. Once I figured out how messed up things were in the army it became sad but amusing to watch the lifer types who were drinking the koolaid have those “teachable moments” where suddenly everything they thought about the way the world was supposed to work crumbled, leaving them to choose between integrity and their career. Apparently that situation never happened to Darrell.

How does one manage not to get in trouble with the government, when one lives in a country ruled by a democratic system? The system depends on dissent. The minute you oppose one government action or employee, you’re in trouble. The minute you run for office against an incumbent, you’re in trouble. On the other hand, the minute people stop doing those things, we’re ALL in trouble.

And no, I don’t think a person should spend their life in jail as punishment for telling the truth.

Besides, I really wish you would stop saying that Snowden somehow threatened the security if this nation. Are there a bunch of Chinese bombers headed our way right now? No, there are not. Why? Because there was nothing in the documents that was threatening to the United States. It was only threatening to certain people who are currently abusing its people.

Glenn Greenwald is an American citizen.

Run Darryl Run!

Again, why do you insist on misspelling my name?

Again, why do you insist spamming your BS here?

“Again, why do you insist spamming your BS here?”

Scrolling up to the post that started this thread we find….

A Darrell post spamming BS?

No.

We find a Housing Analyst post, again spamming the same BS that there are 25 million excess empty houses. This number fails even the most basic smell test.

Why do you insist on discrediting yourself?

These hyperbolic, obviously incorrect assertions brings EVERYTHING you say into question.

You are clearly not interested in truth.

Its been gone over time and time again Darryl…… You just don’t like that truth because you have a stake in the direction of prices.

Furthermore, an addition 40 million houses just began emptying as the boomer generation dies off resulting in 65 million excess empty houses.

You were proven a liar before and you scurried off…… You’ll be proven a liar once again.

I have no stake in the direction of prices, since I’m not planning on buying nor selling nor even taking out a HELOC.

The 25 million excess houses claim is a sick joke considering we’ve only built 30 million houses in the last 20 years, and the population has increased by 65 million people over that time.

AND again, Boomer die off would result in 40 million excess houses, ONLY if there was not a single child that would become an adult over the next 35 years.

Net household formation (deformation) = new household formation - household deformation.

Your assertions imply that there has not been, and will not be a single child moving out of their parent’s house for the last 20 years nor will there be over the next 35 years.

AND, I did not scurry off.

My posts were blocked.

You’re too stupid to realize there were already millions of excess empty houses before the misallocation of capital began.

You’re a sick joke. Now scurry off you liar.

“You’re too stupid to realize there were already millions of excess empty houses before the misallocation of capital began.”

FINALLY!!!!!

You stepped in it!

Population up 65 million. 2.3 people per household = 28 million new households. 30 million housing units constructed.

THE ONLY way there are 20-30 million too many housing units now is IF THEY ALREADY existed, which I’ve been expecting you to eventually go to.

BUT, that was just a bigger trap.

Your assertion is 20-30 million to many houses, with the implication that will cause prices to fall.

Well, IF those 20-30 million houses have existed for 20 years, then why have house prices not already fallen???

Hmmmmm????

There have been 20-30 million too many houses for 20+ years, but DESPITE all those extra house prices skyrocketed.

And now, magically, those extra houses are about to cause the bottom to fall out? Why now if that has not happened for the last 20+ years?

How about you accept the reality.

You can’t simply take “houses - households” and claim that EVERY extra house in an excess, empty house.

Some households own vacation homes.

Some housing units really are vacation rentals.

Some level of vacancy is needed to prevent prices from going up due to no supply.

We did build too many houses, but the number is more like 2-3 million, not 20-30 million.

WORSE is that we built the wrong types of houses. We built 5/3 McMansions on golf courses and high-rise inner-city condos that we hoped to sell for $500K-$1M+, but the actual market is people making $60K that can really only afford $150K-200K.

Is there still a bubble on the national level? YES. Are prices going to fall from here, probably. Are there too many houses? YES! Are the houses the wrong houses for what we need? YES. Are houses in Phoenix about to skyrocket back to bubble levels? HECK NO!

Are there 20-30 million empty excess houses? Not even close.

Is EVERY Babyboomer death going to create another empty house? NO, because there are children that will become adults.

The ACTUAL data is that there are 2-3 million excess, empty houses, and population increases will drop from 3 million a year to something closer to 1 million a year (0 domestic population growth, but continued immigration of 1 million a year).

Housing construction has fallen 60% from peak (from 2+ million housing units a year to 700-800Kish) , and demographics indicate that current level is still probably too high to be supported by our drastically reduced population gains going forward.

“…THE ONLY way there are 20-30 million too many housing units now is IF THEY ALREADY existed, which I’ve been expecting you to eventually go to.

BUT, that was just a bigger trap.”

Look out! Its a TRAP!! Ahhhhhaaaaahahahaahaa!

25 MILLION excess empty houses…. and rising.

The value of the comps determines the value of the company that owns the comps. And the value of the company determines the value of the stock.

But Mr. Market is balking at the company’s estimated value of the comps it holds (the ENAV) and instead wants to see the NAV backed up by actual sales.

What’s screwey about the business model of this company is the company is not bringing to market something that is brand new, instead they are bringing to to market something that already exists. And to obtain this something that already exists they have to go out and buy it from somebody who wants to sell. And the more they do this - the more buying they do - the higher goes the prices.

Which is a good thing if they want to turn around and become sellers but not a good thing if they want to continue to be buyers.

It’s a yield game. The same as it is for industrial real estate, retail real estate, offices, apartments, etc., in other REITs.

You buy something, you rent it, you collect the rents, the market values the portfolio based on the rents you can collect.

Because you have a portfolio of these properties, and are a publicly traded enterprise, the market very often gives you a premium yield because you provide them management and liquidity (if a single asset trades for a y% cap rate, a portfolio in form of a public REIT often trades for an x% cap rate, where x% is less than y%).

So, as long as the market is valuing the portfolio as owned by a public REIT at a lower cap rate than individual properties bought and sold privately, the REIT can continue to buy more properties, and add them to the portfolio, thus growing the value of the company.

Said another way, if a REIT owns, say 50 million square feet of industrial real estate around the world, the public market might value that portfolio at a 5% yield (cap rate) on the whole. Why so low? Because as an owner of shares in that REIT, you have instant liquidity, and maximum diversification, which is a much better strategy for many than trying to build the portfolio on your own, or owning a single building on your own.

If the REIT can buy an individual building for a 6% cap rate, on the open market, then they can add value for the shareholders by doing so, and adding it to the pool, which the market values at a 5% cap. Simply by adding the property to the pool of assets and provide ownership access to the public increases the value of the cash flow stream generated by that property by 20% (1% divided by 5%).

That, in a nutshell, is what a service economy is.

On another note, while driving to work today I heard on the news that AAA is predicting that automobile travel this Labor Day weekend will be the highest in five years. The reasons included “rising home values.”

On another note, while driving to work today I heard on the news that AAA is predicting that automobile travel this Labor Day weekend will be the highest in five years. The reasons included “rising home values.”

Okay, let’s see if I understand this: My house whispers in my ear that it is worth more. So I must jump into the car and take a Labor Day weekend trip?

And here I thought that taking trips was based on the amount of money I had in my pocket.

And here I thought that taking trips was based on the amount of money I had in my pocket.

Sweet sweet equity is just like money in your pocket, isn’t it?

“And here I thought that taking trips was based on the amount of money I had in my pocket.”

Walk into a bank and take out a loan… poof, money in your pocket.

What is so hard to understand about this?

“It’s not what you have, but how much you can borrow that’s important….” Walt Disney.

Sure, he was specifically talking about running a business, but the same applies to real life too. And, once you realize that bankruptcy is not only possible, but a great way to party without having to pay for it…

“Okay, let’s see if I understand this: My house whispers in my ear that it is worth more. So I must jump into the car and take a Labor Day weekend trip?”

That, in a nutshell, is the magic of Alan Greenspan’s fabled ‘housing market wealth effects’: When people feel richer because the perceived value of their house went up, they spend more.

“And this has to do with - what?”

‘Setting’ prices of aluminum.

Only possible if a few major firms have overwhelming market power in commodities trade.

Monday, Aug 5, 2013 09:48 AM PST
Goldman sued over alleged aluminum price inflation
The bank was named in a class action over alleged price fixing by metal warehouse owners
By Jillian Rayfield

Goldman Sachs and the London Metal Exchange were named in a class action lawsuit against warehouse owners for alleged ”anti-competitive and monopolistic behavior in the warehousing market in connection with aluminum prices.”

The suit, filed by the aluminum buyer Superior Extrusion Inc., comes following a New York Times report on purposeful delays in the storage time for aluminum in Goldman-owned warehouses. The Times found that the practice inflates the price of aluminum products like soda cans, and winds up costing consumers around $5 billion a year.
…

I never brought up aluminum and I don’t quite understand why you did.

My posts have to do with houses.

The cases you mention are those where ’setting’ prices is illegal (aka ‘price fixing’).

paying a high price for a representative item of a pool causes the NAV of the pool to increase.

price doesn’t equal value.

(i missed your post earlier)

Blythe Danner, the actress, is Gwyneth Paltrow’s mum.

Where is it a fraction of the mortgage payment? Where I’m at it’s not the same but it isn’t THAT cheap. And the wealthy are looking to push rents higher.

“Where is it a fraction of the mortgage payment?”

Everywhere. 1/2 and 3/2 are both fractions.

Everywhere.

If you are an intelligent renter you have been banking the difference between home-oweing and have some cushion.

In theory. But just ask any accidental landlord how much fun it is to collect the rent.

And in my neck of the woods, that difference is minimal. Nice apts. rent for 1200-1500 a month. You can get a nice house, not a starter house, in my little burg for that monthly nut.

Yet the carrying costs are double that amount then some.

“And in my neck of the woods, that difference is minimal. Nice apts. rent for 1200-1500 a month. You can get a nice house, not a starter house, in my little burg for that monthly nut.”

Yeah, but back to your original premise about it being better to be an ‘ower than a renter in a financial shock, there is all of this that you skipped over:

“You are also unencumbered by the house/millstone and can move elsewhere or look for a more affordable rental or double-up with another renter or… As a home-ower you MIGHT get a year or more of lesser-expensive living (you still have to pay HOA and comply with appearances/maintenance rules, still must pay utilities and taxes, etc..), but they WILL add all of those missed payments back into the loan, plus legal fees, plus interest and penalties and THEN after they kick your ass out- you are still on the hook for all of that. Still sound like a good deal?”

‘Cuz there is NOTHING better in life than going through a BK, getting that 1099 from the IRS, setting up a payment plan to pay that off, having your wages garnished for the next 10-15 years and having creditors hound you for the balance, in perpetuity. Plus, you get the scarlet letter of a BK on your history for a few years, so you’ve got THAT going for you. Which is nice…

Most of Canada is recourse, so walking away without bankruptcy or disappearing won’t work out so well.

Rental leases are also recourse.

In fact, in my state, the mortgage is non-recourse while the rental lease is recourse.

Easier to walk from the mortgage than the lease.

Thorazine does wonders!

Doin’ the shuffle…

“Money can’t flow out of the bond market simply by current bond holders choosing to sell.”

I see the phrase ‘money leaving the bond market’ as a statement of the overall supply/demand situation and the result on price. It’s sort of accurate given the market cap for bonds drops as price falls.

“I see the phrase ‘money leaving the bond market’ as a statement of the overall supply/demand situation and the result on price.”

Interesting, but I do not think that is actually what people asserting a “rotation” actually mean.

A company writes “I will pay the bearer $10,000 in August 2018″ (5 year bond) on a piece of paper, then sells it into the market for $9,000. We just created $9,000 debt and money (the company has $9000 that already existed the debt, while the holder of the bond has exchanged $9000 that existed for a bond that is the new money).

Now, let’s say the price of that bond drops to $8000. We just destroyed $1000 of money and debt. The company could buy back the bond from the market for $8000, so it is no longer $9000 in debt.

IF that is what is meant by “Money leaving the bond market” then how could that $1000 that was just poofed out of existence be used to buy stocks.

Those asserting a “rotation” say that the money moving out of bonds will be used to buy stocks.

I assert that money coming from selling bonds must equal the amount of money being used to buy bonds.

No buy, no sell!

BUT, I may have missed another point.

Bond mutual funds tend to keep a portion of their investors’ money as cash. This way, if they are hit with withdrawals, they are not forced to sell.

Perhaps it is that “cash” portion of the fund’s holdings that are leaving.

OR, better yet. Some people are sitting around with money in the bank, because they don’t want to buy stock OR bonds at today’s prices. There are others of us that have our money in 401K that only offer us stock or bond funds, not an “on the sidelines in the bank” fund.

I think bonds will drop, what can I do when I have the dichotomy choice of stocks or bonds? I move from bonds to stocks, selling the bonds, not to other bond fund holders, but to people that had been on the sidelines, that are lured off the sidelines by higher yields.

In short, the money leaves “bond funds” by selling the bonds to people that had been on the sidelines. The money leaving bond funds is forced into stock funds, because the bond funds were held in 401(k) accounts and the 401(k) offers no “on the sidelines waiting for both stock and bonds to crash” option.

So, I guess I was wrong. Money can flow out of bond funds, even though it can’t, in aggregate, move out of the bond market.

I think you’re making it too complicated Darrell.

Person A buys a new issue bond for $1000. Later he sells it to Person B for $1100. Originally there was $1000 tied up in the bond market for that particular bond, but now it’s gone up to $1100. $100 has entered the market from selling an old issue bond. Later Person B sells the bond for $800. $300 has left the market due to that transaction.

Person A buys the new issue bond for $1000, and $1000 moves from his checking account into the company’s checking account. No money is tied up.

The bond is worth $1000 and is counted in the money supply, so the person that bought the bond has converted $1000 checking deposit money into $1000 bond money.

The company issuing the bond had no money, and now at $1000, so $1000 was created. The company has to pay back the bond at the end of the term, or buy it back before term and tear it up, therefore, the company has $1000 in debt. Debt and money are both created.

Person A sells the bond to Person B for $1100. No money is tied up. $1100 has moved from the checking account of person B into the checking account of person A.

Person C buys the bond for $800. No money is tied up. $800 moves from the checking account of person C into the checking account of person B.

Again, the fundamental issue is that while the buyer’s money gets “tied up”, the seller’s tied up money gets “freed up”.

Ya,I guess I got that one wrong, but I also see a hole in your point as well so I’m okay with it. You said that company had no money, issued debt and then had money so it was created. However the debt was purchased with existing cash. This means the debt was created without new money being created.

I think FHA recently changed their rules. If you meet certain guidelines you can get a loan 1 year after foreclosure.

“Say an individual lost his job during the recession, couldn’t pay the mortgage and eventually was foreclosed upon. Under standard FHA waiting times, that person might not be eligible for a new loan for up to three years. However, if the applicant qualifies as having experienced “an economic event” — defined in the new guidance as “any occurrence beyond the borrower’s control that results in loss of employment, loss of income or both” that causes a 20 percent decline in household income for at least six months — the applicant might be qualified to obtain a new FHA-insured mortgage in as little as one year instead of three. “

Perhaps Joe Underwater’s city government will come to the rescue?

Pricey homes in Richmond’s eminent domain plan
Carolyn Said
Updated 11:07 pm, Monday, August 19, 2013

Richmond’s controversial plan to seize underwater mortgages through eminent domain includes loans for at least two homes purchased for over $1 million as well as other high-end properties - a revelation that appears to undermine the city’s argument that the plan would combat blight.

The city is pursuing mortgages with balances ranging from $98,000 to $1.12 million, according to data collected by Marc Joffe, an analyst who received the property addresses, loan balances, offer amounts and other information through a California public records request and shared them with The Chronicle.

Richmond threatened last month to become the first city in the country to invoke eminent domain for underwater mortgages when it sent letters to 32 banks and other entities asking to purchase 624 home loans at a discount to current property values. If the institutions declined, the city said it would consider forcibly acquiring the mortgages through eminent domain. It would then help the homeowners refinance into smaller, more-affordable loans.

Eminent domain is the seizure of private property for a public purpose. City leaders argued that the public purpose is to keep families in their homes and prevent blight and the destabilizing impact of foreclosures. Banks say the plan is unconstitutional and would drive up lending costs in Richmond.

The data show the targeted loan balances are fairly high. A total of 121 loans are for over $500,000, with 43 above $600,000. The average loan balance is $387,800; the median is $378,920.
…
Point Richmond: Sold for $1.195 million. Loan balance: $888,361. City’s offer: $510,727. Estimated value: $666,461.

Richmond Country Club: Sold for $982,500. Loan balance: $781,996. City’s offer: $257,543. Value: $499,910.

Parchester Village: Sold for $80,000. Loan balance: $205,958. City’s offer: $13,523. Value: $147,000.

This home in the Brickyard Cove area of Richmond, originally sold for $979,000, and has a loan balance of $782,690. The city is offering over $246,000. The home has great views of the bay Monday August 19, 2013. These homes in Richmond, Calif. the city wants to acquire by eminent domain.

Photos: Brant Ward, The Chronicle

5 years post crash, I would suspect most strategic defaults that will happen, have already happened.

I agree even though they may not have actually been foreclosed and the loss booked yet. But I expect prices to head back down to finish what they started at some point. Which will mean a new wave of them.

rjbsite.civil@gmail.com

Prices are topped out and demand is collapsing.

Swing again Darryl.

And demand is collapsing as a result of grossly inflated housing prices.

*THINK*

Traffic, taxes, Marxist-wannabe government, seal poop and hippies- whats not to love?

And don’t forget the cheap black market labor…… A bedwetter libs paradise.

There are plenty out there with carrying costs double the rental rate. A tenth grader could find them. You? Apparently not.

To be fair, Bushwick is considered a hotter place to live than most of Manhattan, at least by younger renters/buyers. It’s a big center of hipster life these days.

“center of hipster life”

Puke. Lena Dunham’s tattoos = trash

I wasn’t judging or praising hipsters, just pointing out that they’ve remade that area of BK. Of course, after the transformation is complete, it will become another massive stroller shitshow full of stay at home moms and overworked dads just like Park Slope, Williamsburg, DUMBO, and previous hipster conquests. Hipsters also seem more tolerable than Frat Bro culture in Hoboken NJ or Murray Hill Manhattan.

My favorite part about Bushwick and BK in general was really good pizza. e.g. http://www.robertaspizza.com/ The food was much better in BK or NJ than NYC, where even mediocre restaurant bills are $100+ for 2 people.

Louis CK coffee shop scene

Cool for hipsters doesn’t translate to Upper East Side prices. I want to see a listing for a $1M studio in Bushwick. Not a loft, a studio.

In Texas, the money would go to the estate.
If there’s no will, wife or kids, the estate goes to the parents.

In this case, there is still a wife. Previously married and not yet divorced still equals married, even if both parties intended to end the marriage in the near future.

You obviously have no idea of what we are referencing.

And you miss the entire point.

“And you miss the entire point.”

Oh, I got what your point was. Freedom from unreasonable search and seizure. Freedom of association. Freedom of speech.

Your point was incorrect as you neglected the freedom of the property owner to restrict access as they choose.

I made the correct, relevant point.

Freedom is a two-way street.

You do not have the freedom to enter without conditions. The owner has the right to set conditions for entry, then you have the right to submit to those conditions or not.

You’re spamming junk again darryl.

You are not that bright are you?

All I was saying was the irony of these sports goers in tearing up for an abstract notion like feedom in a song, while agreeing to give up and sometimes even encouraging the government to take our real rights & freedom one at a time.

We all get it, freedom is 2 way street.

Darryl isn’t stupid. He’s just dishonest.

Darrell:

Are you saying that if I don’t like my tyrant, then I should leave the country? I disagree. Americans don’t beg like pansies for crumbs of freedom from some entitled dictator. Americans demand freedom. If you want to live in a tyranical nation, then YOU are also quite welcome to leave.

“Are you saying that if I don’t like my tyrant, then I should leave the country?”

Not at all.

I was responding to this very narrow statement:
“Most of this teary-eyed people have no clue how much of freedom they have lost just trying to get inside the stadium.”

The “freedom they gave up to enter the stadium was the right to unreasonable search and seizure.”

I was saying, you do not give up freedom when you choose to enter a sports arena. The freedom is in choosing to enter, given the conditions of entry, or to not enter.

If you don’t like the search and seizure conditions required to enter a sports stadium, then exercise your freedom to not enter the stadium.

I’m one of those 23 million Americans (7% of total population, 10% of adult population) that actually served in the Armed Forces (United States Navy, 1986-1993 and United States Naval Reserve 1991-1998).

I simply understand that freedom isn’t free, that it is not without limits, and that it is a two-way street.

“while agreeing to give up and sometimes even encouraging the government to take our real rights & freedom one at a time.”

OK, but you framed it in the context of “getting into the stadium”, so Darrell’s response was valid, even if you feel he missed your point.

Pete,

Depends actually. I’m sure the stadium owners would have some restrictions on what you could bring in if left entirely to themselves, but I bet a lot of places have rules requiring them to do some checking on the way in. Not sure, but I strongly suspect it.

Most obvious example isn’t at a stadium at all. It is going to the 4th of July concert on the west steps of the Capitol Building. Very strict checks. Everyone through the metal detector. And that is the government - National Park Police to be specific. Maybe the Capitol Police too. Could be a few more in there. But, as Darell says, you can chose not to go. There aren’t any searches to see the fireworks on the Mall.

“I’m sure the stadium owners would have some restrictions on what you could bring in if left entirely to themselves”

The stadium owners

Bank of
America Stadium

CenturyLink
Field

Edward Jones
Dome

Everbank
Field

FedEx
Field

Ford
Field

Gillette
Stadium

Heinz
Field

Lincoln Financial
Field

Lucas Oil
Stadium

M&T Bank
Stadium

Mercedes-Benz
Superdome

MetLife
Stadium

Qualcomm Stadium

Ralph Wilson Stadium

Raymond James
Stadium

Sports Authority
Field

Sun Life
Stadium

University of
Phoenix Stadium

‘The article complained about “Assassinating US citizens”

Is complained the best word? It’s one thing to kill a citizen without due process of the law. It’s another to unilaterally claim the right to do so.

‘Dude, calm down’

Since you say that so convincingly, who am I to “complain” about the destruction of freedoms it took 1,000 years to create?

“Is complained the best word?”

Probably not. How about “Pointed out”?

We accept that if we are “at war” then our president has the right to order our military to kill people and blow up things.

I think one of the biggest flaws in our Constitution is that it grants the President unconditional “Command in Chief” authority over the military, without limits.

Oh for a clause like “The president shall not position any military forces in foreign lands, except for the repair or provisioning of naval vessels, or order the killing of anyone, or destruction of property in another country, unless a state of war has been declared by the US congress.”

Unfortunately, that clause does not exist. The Constitution simply grants the president full control over the military.

The Constitution also fails to recognize internal law as being a higher authority than the it. The Constitution, IS the highest law of The United States.

And, as unfortunate as it may be, under the Constitution, the president has the right to order the military to assassinate anyone, at any time.

It sucks, and we should change that!

It is other people that seem unable to grasp the concept that the dollar is borrowed into existence, offset by an equal amount of debt,

it isn’t an equal amount of debt. you’re forgetting about interest.

and the need to get the money to repay the debt is what what creates demand for, and provides value to the dollar.

it isn’t what creates demand for dollars. it might be the biggest part of it’s value, but not the only part.

Interest is just another loan, creating both money and debt. The debt is added to the loan and the money is added to the bank’s revenue.

300 years ago governments around the world were towing with fiat currencies. They’d print “money” on a piece of paper, declare it had value and then spend it into existence. It was a disaster.

Some 280 years ago a genius young Ben Franklin was arguing on the side of those claiming that the problem with these script currencies was that there was no fundamental use for them.. no ultimate demand.

He, and others, argued that if the governments issuing these scripts allowed them to be used to pay taxes, and as long as the number of them in existences was limited (to say a few years worth of total taxes) then there would be demand, and the currency would have value.

Even if you were not a land owner and didn’t need a lot of the script to pay taxes (which were largely property taxes at the time) you could accept that in exchange for goods and services, knowing that the land owners that needed to get the script to pay their property taxes, would exchange goods and services to you so that they could pay their taxes.

So, yes, you can do things with dollars other than use them to repay debt. But the reason it is safe to do so is that you know that someone else, that has debt, will be willing to trade goods and services to get the dollars, because they need the dollars to repay their debts.

Whether it is conscious or not, dollars have value because they are useful to people with debt.

That is, after all, the only government fiat regarding dollars. It is printed on every bill.

This note is legal tender for all debts public and private.

The Consitution says that if a power isn’t granted to a certain branch of the federal government, then that branch does not have that power.

Darrell,

you said that dollars were created with an equal amount of debt. i told you they weren’t and apparently you don’t dispute that now. instead, you go off on a tangent. but i’ll address something you said anyway.

Whether it is conscious or not, dollars have value because they are useful to people with debt.

while we’re at it, you might have missed my other question to you. you always talk about evil trade deficits. so i’m asking you.. how do you calculate trade deficits?

You said that interest breaks the debt=money equality. That is not correct. Interest is just another loan. Every time you are hit with an interest charge, your debt does up and the lender gets the money in the form of revenue.

Dollars are useful for people who don’t have any debt, because you can exchange them for goods and services. AND, you can trust that people will accept them, because somewhere in the economy is someone that has debt that is trying to get those dollars.

“Trade Deficit” is usually used to refer to international trade. I use imbalances, because I’m referring to both international and domestic.

How are they calculated? International trade, there is a clear balance of payment figure released by the Fed.

Domestic, you have to look at the wealth distribution and income disparity statistics. We can see that the “rich”, defined as those that already have more money than they can spend, getting ever richer. It is about $1T a year.

The combined effects of the international ($600B a year) and domestic (almost $1T a year) imbalances are that we need to add about $1.5T a year new debt, and the money that it creates, into the economy every year, just to keep it from collapsing like the house of cards that it is.

So, while the domestic imbalances in trade are not directly tracked and reported, they size can be estimated based on widening wealth disparity and their effects on the economy and money supply.

You said that interest breaks the debt=money equality.

you should stick to what i said rather than trying to interpret it.

Interest is just another loan.

this is another incorrect statement. interest is part of the same loan.

Every time you are hit with an interest charge, your debt does up and the lender gets the money in the form of revenue.

so? what point are you trying to support here?

Dollars are useful for people who don’t have any debt, because you can exchange them for goods and services.

you said dollars have value because people in debt can use them. that is nonsense.

AND, you can trust that people will accept them, because somewhere in the economy is someone that has debt that is trying to get those dollars.

there are lots of people with no debt that are also trying to get those dollars.

“Trade Deficit” is usually used to refer to international trade. I use imbalances, because I’m referring to both international and domestic.

nearly everyone is referring to international trade when they speak of ‘trade’. more often, domestic trade is just called ‘merchandising’. over the years it’s been obvious that you’re talking about international trade.

How are they calculated? International trade, there is a clear balance of payment figure released by the Fed.

this brings back my question.. how do you calculate trade deficits. i didn’t ask you were to find them. i asked you how you calculate them. HOW DO YOU CALCULATE THEM??

Domestic, you have to look at the wealth distribution and income disparity statistics. We can see that the “rich”, defined as those that already have more money than they can spend, getting ever richer. It is about $1T a year.

nobody has more than they can spend. you just speak with the voice of the envious.

The combined effects of the international ($600B a year) and domestic (almost $1T a year) imbalances are that we need to add about $1.5T a year new debt, and the money that it creates, into the economy every year, just to keep it from collapsing like the house of cards that it is.

this statement shows so much lack of understanding at so many levels that it’s hard to respond to. all i want you to explain is how trade deficits are calculated. later we can move on to other things. as of yet, you haven’t answered my question.

So, while the domestic imbalances in trade are not directly tracked and reported, they size can be estimated based on widening wealth disparity and their effects on the economy and money supply.

after we discuss how trade deficits are calculated we can discuss your domestic ‘trade imbalances’.

Fascism with a SNAP card and a free Obamaphone

“Fascism with a SNAP card and a free Obamaphone”

“The people have always some champion whom they set over them and nurse into greatness…This and no other is the root from which a tyrant springs; when he first appears he is a protector.” -Plato

True enough for getting it going, but slowing it down doesn’t seem to have been very effective. Or maybe just timely.

Heres some more Rachel=moreschooling for you Darryl…… cashflow is negative at current grossly inflated asking prices of resale housing.

“Heres some more Rachel=moreschooling for you Darryl…… cashflow is negative at current grossly inflated asking prices of resale housing.”

THAT WAS MY POINT with this particular house.

Get a grip.

Your assertion that EVERY house, EVERYWHERE is grossly overpriced is every bit as ridiculous as your assertions that we didn’t need to build ANY houses as the population increased by 65 million people or your assertion that there are NO children that will be replacing boomers as they die off.

No one could possibly take you seriously. You discredit yourself with your obviously ridiculous assertions.

Your lies will be far more effective if you just dial them back enough so that they can pass the smell test. As they are… they aren’t fulling anyone.

Again “Darryl”……

NOTHING cash flows at current grossly inflated asking prices of resale housing.

And there are 25 MILLION excess empty houses and growing by the day.

Saying “NOTHING cash flows” is just as false as saying “House prices ALWAYS rise”.

Oh Darryl….. you’re backpedalling again.

Let me repeat it;

NOTHING cash flows at current grossly inflated asking prices of resale housing.

You can forgive the debt. That logical construct dissipates - goes away, disappears. The currency constructs will continue to exist.

When the debt is forgiven somebody who had more money now has less money.

When the debt is forgiven somebody who had more money now has less money.

Yup. The person who received the loan money is now richer because they don’t have to pay it back. They can keep the money they borrowed. No money is destroyed, just transferred from lender to borrower.

A forgiven loan is just a money transfer.

“only with the loan were two logical constructs created. This is standard fractional reserve banking.”

So, both debt and money are created?

“With the corporate bond, the company created a promise to pay, and money from the existing money supply was used to buy it.”

The bond is a logical construct providing both an asset denominated in dollars that can be exchanged for cash or ledger entry deposit accounts (money) and an obligation to repay (debt). The money used to buy the bond moves from the seller to the buyer. The buyer gets new money in the form of the bond, while the seller gets the obligation to repay the bond at the end of the term.

“With the Treasury Bill, again, the same thing occurs. Treasury creates a promise to pay, and money from the existing money supply was used to buy it.”

Like the purchase of a corporate bond, the bond itself is a form of money. The buyer exchanges one for of money (cash or checkable deposit) for the bond form of money. The seller, in this case the US government gets the previously existing money and the obligation to repay.

In all cases, taking out a personal loan, creating a corporate bond, or creation of a new US Treasury Bill, new debt and new money are created.

In all cases, taking out a personal loan, creating a corporate bond, or creation of a new US Treasury Bill, new debt and new money are created.

• If I borrow 500 dollars from my cousin Vinny, and he goes to his safe and hands me 500 dollars, no new money is being created.

• If a corporation borrows new money from me, new money is not being created.

You are committing the logical fallacy of “Begging the Question”. You say:

1) “The buyer gets new money in the form of the bond, while the seller gets the obligation to repay the bond at the end of the term.”

2) “Like the purchase of a corporate bond, the bond itself is a form of money. ”

This is pure begging the question that debt is money. You are assuming debt is money and going on to try and prove your case by assuming what you are trying to prove is already true!

Debt is not money. Debt is a promise to pay. Money is a store of value. Two separate logical constructs.

Just because a bond - debt - can be “exchanged” for money doesn’t mean it is money. Here are some things that can be exchanged for money:

• Stocks
• Diamond rings
• Computer programs
• Haircuts
• Houses
• Cars
• Twinkies
• Bonds from my deadbeat cousin Jack’s failing company.

None of those things are money. Including the bond.

Typo:

I wrote:

“• If a corporation borrows new money from me, new money is not being created.”

Strike the first “new”. Should read:

“• If a corporation borrows money from me, new money is not being created.”

‘composing long detailed arguments with an illogical person’

I thought I banned him, but maybe not. Like alphasloth and rio, it’s just argument for it’s own sake.

http://www.youtube.com/watch?v=kQFKtI6gn9Y

Argument Clinic MontyPython

Offshoring is the result of getting rid of our tariffs.

incorrect. ending tariffs helps an economy. tariffs are the most destructive tax there is. you could lower income taxes a lot and raise tariffs a little and end up with a bigger mess. tariffs don’t affect just one area of an economy, they affect the whole economy.

Back when we used to use tariffs (the overwhelming majority of our history), our economy was great, even though taxes were higher.

taxes were lower before they were raised higher. there is a lag effect to everything that is done to or for an economy. it is in low tax eras when wealth is built. in high tax eras wealth gets destroyed.

It has only been with the decimation of our tariffs that offshoring has occured, thereby devaluing US labor.

decimation of our tariffs? you sound like you consider them like family. please explain how ending or lowering tariffs devalues labor..

tj:

“ending tariffs helps an economy”

Sorry, but observation trumps theory. Can you point to the time in US history when we reduced our tariffs to near-zero (like today), and the economy got better? You can’t because it has never happened. Rich countries must keep tariffs to protect their status. This has been known for thousands of years. Free trade has been the demise of every well-off country that tried it.

Sorry, but observation trumps theory

sorry, but logic trumps false associations and illusions.

“Can you point to the time in US history when we reduced our tariffs to near-zero (like today), and the economy got better?”

How about the case of when we increased tariffs to high levels and the economy got worse?

I’m talking about the Smoot-Hawley Tariff Act. Protectionism has been known to backfire.

Protectionism has been known to not cure a debt spree, no matter how logical it might be before the debt spree.

We can, in fact, see that inflation is being kept down AND wages are being kept down even more. That is not an opinion. It’s before your very eyes.

it IS your opinion. correlation doesn’t prove causation. you have to provide logic for your observations.

As far as the imbalance becoming “sustainable”, I’m not sure what you’re alluding to.

darrell said it was unsustainable, so i asked him what would happen.

Are you projecting the US becoming a poor country ruled by corrupt tyrants, so we can “compete” with our Chinese brethren for a bowl of rice a day? Or are you projecting that China, Africa, and Everywhere Else will suddenly adopt an American-style government and economy, thereby becoming more efficient and productive, and demanding higher wages?

i was doing none of that. i was asking darrell a question.

Getting our tariffs back would put a stop to it.

getting ‘our’ tariffs back would put an end to job creation.

With a slight and painful bounce at each tread edge.