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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
Location:Northern Arizona, United States
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China Property bubble vs US property bubble vs JApan Property bubble
Is a QE3 taper postponement rally in the cards for the near term?
Sept. 6, 2013, 8:41 a.m. EDT
Treasury yields dive on payrolls report
By Ben Eisen
NEW YORK (MarketWatch) — Treasury prices rallied, sending yields plummeting after a monthly nonfarm payrolls report came in below expectations. The U.S. added 169,000 jobs in August, missing the consensus estimates of 173,000. At the same time, the Labor Department revised July’s number lower. The unemployment rate edged down to 7.3% from 7.4%. On that news Treasurys rallied. The 10-year note (10_YEAR -2.93%) yield, which moves inversely to price, fell 10.5 basis points to 2.891%, while the 30-year bond (30_YEAR -1.26%) yield fell 6.5 basis points to 3.820%. The 5-year note (5_YEAR -6.08%) yield fell 13.5 basis points to 1.719%.
For clarification, I meant a Treasury bond market rally.
Apparently the bulls are stampeding over the nearest cliff today (and I have no idea why…).
Putin.
Got market whiplash?
Bulletin Fed’s Evans could be persuaded to support taper »
Sept. 6, 2013, 9:34 a.m. EDT
U.S. stocks rise as payrolls data revise Fed views
NEW YORK (MarketWatch) — U.S. stocks opened higher on Friday as a disappointing payrolls report had Wall Street rethinking the notion that the Federal Reserve would begin cutting its bond purchases later this month. Investors now think there’s a “chance that the Fed does not pull money off the table in the next meeting.
…
Extending its longest winning streak since mid-July, the Dow Jones Industrial Average (DJIA -0.65%) rose 30.06 points, or 0.2%, to 14,967.54. The S&P 500 index (SPX -0.44%) added 4.89 points, or 0.3%, to 1,659.97. The Nasdaq Composite (COMP -0.57%) gained 12.92 points, or 0.3%, to 3,671.70.
Bulletin Dow industrials slide 100 points after reported Putin comments »
Sept. 6, 2013, 9:54 a.m. EDT
Putin says Russia will assist Syria if attacked
By Steve Goldstein
WASHINGTON (MarketWatch) — At a press conference at the Group of 20 conference, Russian President Vladimir Putin said his country would “assist” Syria if attacked, according to press reports from there. President Barack Obama said he’s considering military action against Syria for the country’s alleged use of chemical weapons. It’s not precisely clear the form of assistance, as Russia already provides Syria with military equipment and can veto any action from the United Nations Security Council.
Put a different way, the bond market has reacted in anticipation of the punch bowl being taken away, or at least spiked with a less potent view. Will it actually happen, and what will be the consequences if it does?
Take part in our poll — is the Septaper off?
September 6, 2013, 9:23 AM
The August jobs report showed the U.S. economy added a modest 169,000 jobs, missing expectations and fueling speculation that the Fed is now less likely to begin winding down its massive stimulus program later this month.
We have a roundup of reactions from economists and lawmakers to the payrolls report, but we want to hear from you.
The distribution shows no central tendency — it is bimodal, with the modes in the tails, emblematic of extreme uncertainty.
Just as the Fed likes it!
state of your hood- inventory- bidding wars , or normalization?
For sale signs growing like weeds across the mid-atlantic and new england.
So why is the spring selling season in the fall this year?
New York City bubble re-inflated and going higher.
So did Boulder.
i got 10 thousand dollars of instant equity after last night’s win over the ravens
So, turns out Krugman is excoriating the financial policy of the last five years. He says that, it needed to be three times bigger “just like textbook macroeconomics” indicates.
What formula is he talking about? Is this an all or nothing proposition? What textbook is he talking about? If we had spent 3 times as much and it didn’t work, couldn’t he say it needed to be more? Could where we are today have been predicted by the dollars spent?
Also, in this link they say “Keynes was right. That’s settled.” I’m thinking, “He was right… about some things. Wrong about others.” He was wrong in thinking houses had the same economic benefit as buried bottles of currency. Houses have that troublesome suppressive side effect of debt, which unearthing bottles of currency do not have.
Krugman Overboard! Says Economic Policy a ‘Horrifying Failure’
By Morgan Korn | Daily Ticker – 6 hours ago
http://finance.yahoo.com/blogs/daily-ticker/krugman-overboard-says-economic-policy-horrifying-failure-134638756.html
Regardless of how the past five years turned out, one could always argue it was because the bailout was either too big, too small, mistargeted, or some combination of the above.
More generally, any bad outcome under any circumstances can be blamed on the critic’s own preferred policy which was not taken.
More generally, any bad outcome under any circumstances can be blamed on the critic’s own preferred policy which was not taken.
Unless we had followed ___, in which case we’d be through with all this and back on the road to prosperity.
You’ve got it!
And there’s the OTHER problem of government spending. In order to target it effectively you have to do some of the following:
• Identify why the contraction is occurring.
• If it is due to a misallocation of societal resources, you have to make sure that government doesn’t simply become the consumer of those undesired resources. Then, there is no evolutionary pressure for people to move away from that enterprise into a more productive one.
The economy is like a plant. It grows towards sunlight - profit obtained from satisfying individual wants. It grows away from darkness - losses from providing what people don’t want. If government sets up a sunlamp in an area that is otherwise dark, it’s just kicking the can down the road.
When you firehose money at pre-existing contractors you get the following:
• Median DC per capita income: $43,993
• Median national per capita income: $27,915
You get a median income near the money firehose that’s 57 percent higher than the median. For Arlington County, median per capita income is $60,223, which is a solid 115 percent of the national income.
How the government entity is expected to direct money into durable investments which can lay the groundwork for the next economic expansion.
Triple the spending would probably mean that these disparities would be an order of magnitude greater.
Krugman here totally decries tax cuts, which it seems to me would be the most effective way to do this. Hundreds of millions of individuals could seek out ways to spend their money to satisfy their wants, rather than the semi-monolithic government entity rather arbitrarily spending money on what is fastest and most convenient to it.
Krugman here totally decries tax cuts, which it seems to me would be the most effective way to do this
It sounds like you just make this stuff up. Krugman doesn’t totally decry tax cuts, he just claims that infrasturcture spending is more effective. In fact,increasing spending and cutting taxes to fight a recession are really two ways of doing the same thing - increasing spending and employment by running up the deficit. Do you have evidence that tax cuts are the more effective of these two tools?
‘Do you have evidence that tax cuts are the more effective of these two tools’
Yeah, people spending their own money probably will put it toward what they need more than the government. And less would probably be spent on bombing countries that have nothing to do with us.
That’s more of a supposition than evidence. I’m talking about actual research into the effects of tax cuts versus spending increases. The question is which leads to a greater increase in growth and employment. If a person was interested, he could actually look into this research. This would be a way to learn about how the world works, instead of making assumptions based on one’s feelings.
‘a way to learn about how the world works’
Oh yeah, the government know all about that. You mention infrastructure; the interstate highways around here are pothole dodge ball. But we’ve got this:
‘The wildly over budget Joint Strike Fighter project will cost around USD 382 billion after several cuts. That’s near the 2011 GDP of South Africa (USD 408 billion) and above Thailands GDP (USD 345 billion). With unit cost of USD 154m for the F-35A, USD 237.7m for the F-35B and USD 236.8m for the F-35C it is really questionable if the efiiciency gains are still high with this figures. The Pentagon publicly criticized Lockheed Martin’s performance on the F-35 program. MiGFlug’s American branch FlyFighterJet.com recently published an interesting blog post about the extremely expensive Lockheed Martin F-22 Raptor being defeated by German Eurofighters in a dogfight during a joint military exercise.’
http://www.migflug.com/jetflights/uav-replace-fighter-jets.html
We have a proposed $50 million plan to increase sales tax 1% here in Flagstaff for roads, which are crumbling. I’m sure Washington DC can spend this amount of money in a far quicker time span that will filter down to what people need - not!
‘The wildly over budget Joint Strike Fighter project will cost around USD 382 billion after several cuts. That’s near the 2011 GDP of South Africa (USD 408 billion) and above Thailands GDP (USD 345 billion). With unit cost of USD 154m for the F-35A, USD 237.7m for the F-35B and USD 236.8m for the F-35C it is really questionable if the efiiciency gains are still high with this figures. The Pentagon publicly criticized Lockheed Martin’s performance on the F-35 program. MiGFlug’s American branch FlyFighterJet.com recently published an interesting blog post about the extremely expensive Lockheed Martin F-22 Raptor being defeated by German Eurofighters in a dogfight during a joint military exercise.’
Here’s to guessing these were all purchased through sole-source private contracts!
‘a way to learn about how the world works’
Oh yeah, the government know all about that.
I wasn’t referring to what the government knows. I was referring to what we as citizens know. If a person has an interest in knowing whether increasing spending or cutting taxes is a better way of increasing employment in a recession, that person could go and read about it instead of just making assumptions based on intuition.
Government spending in order to spark a a recovery reminds of the Jerry Seinfeld “Yadda yadda” episode.
“Government increases spending, yadda yadda, a new economic expansion takes off.”
The problem is that the yadda yadda - the details - are exceptionally important. They can’t be glossed over.
I do think government can be part of the solution in a recovery. But simply inflating existing channels of spending, hiring more contractors, increasing salaries, is not going to be effective in laying the groundwork for a durable recovery.
The economy is driven by human wants. Sometimes they stop wanting stuff for very good reasons. Government would need a capillary-level network for stimulating the economy effectively. And that might be too complex for government. It might not. But the firehosing doesn’t seem to work very well.
Keynesians can scream, “MOAR SPENDING” but… will that create a durable recovery? Or just continue to increase capital misallocation and local salary increases? And eventually… even Krugman would have to admit (I think) that there is a debt wall that this system would hit.
Like I say, the economy is like a plant. It grows towards light, i.e. profit from satisfying human wants. Government can shine a sunlamp in a dark area and the plant will grow towards it, but in order to maintain that level of economic activity, it will have to continue to shine the lamp, accruing debt in the process.
We have five years of significant stimulus. We have debt at over 100 percent of GDP. I understand that “Japan is the model!“, with 200 percent debt to GDP. But… where does it end? We know HOW it ends. The currency becomes worthless. The question is WHEN, both for us and for Japan.
The response is typically, “Well, interest rates will start going up and we’ll be able to execute an orderly recovery.” Really? Yes, other countries have recovered from hyperinflations. But - that’s the ultimate kicking of the can down the road, as we plunge into recession. But this time, with the added insult of just reducing the value of the currency dramatically.
And the whole inflation increases employment strikes me as a post hoc fallacy. Okay, anonymous internet poster’s opinion versus august economics professors. Are there actual examples of inflation increasing first, with employment following?
And sure, kicking the can down the road can be likened to a cancer patient getting a few more months of life in the hope that something will happen that might create a cure. Reasonable enough. But we don’t have cancer, we have a fever. And taking chemo drugs - debt - for the foreseeable future, will precipitate us into a significant crisis.
And Krugman’s whole claim to fame (besides the Nobel of course) is his prediction that printing money wouldn’t cause inflation. Sure official CPI increases are muted. But in a whole lot of sectors there are significant price increases, and it could be traced to money being injected into the system by government and central banks leading to a demand-pull inflation in those sectors.
He was wrong in thinking houses had the same economic benefit as buried bottles of currency.
When did Keynes think this?
Chapter VI, paragraph 3 of “General Theory of Employment, Interest and Money” by John Maynard Keynes:
“If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.”
http://ebooks.adelaide.edu.au/k/keynes/john_maynard/k44g/chapter10.html
Why was he wrong?
Because houses have a side effect - debt, which generates a multi-decade deleveraging event, suppressing spending by the purchaser.
Bottles of currency have no such side effect.
The argument says that a burst of economic activity is generated by the construction and sale of a new house. Everything from lumber mills to retail stores to architects. However, all that is paid for by the seller who spends the next several decades paying back the money he borrowed to generate that burst of activity.
Several studies have stated that increased homeownership is followed, after a few years, by increased unemployment.
Additionally, when an existing house is purchased, that burst of initial construction-related activity doesn’t occur. But the debt and subsequent deleveraging event does occur.
This is another reason, in addition to misallocated government spending, that any government-spending related recovery, is fated to be tepid and fleeting.
Because houses have a side effect - debt,
You misunderstand his point. He was talking about giving the houses away, not getting people to take out mortgages to buy them.
What about the phony space alien invasion? Jeebus, you people have missed the center piece of the master plan!
‘If we discovered that space aliens were planning to attack, and we needed a massive build-up to counter the space alien threat, and inflation and budget deficits took secondary place to that, this slump would be over in 18 months,’ Krugman says’
http://business.time.com/2011/08/16/paul-krugman-an-alien-invasion-could-fix-the-economy/#ixzz2eAw52TWx
If deficit spending and wars fixed the economy, we’d all be rolling in money right now.
http://soundbible.com/1261-Cuckoo-Clock.html
“It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.”
Obviously Keynes had no way of foreseeing the housing mania that has spread like an uncontrolled wild fire throughout the global economy.