The Housing Bubble

Obama is the Typhoid Mary of Ebola. With regular doses of sizzurp (Arizona Iced Tea brand Watermelon Fruit Punch, Skittles, and Promethazine with Codeine) he will live forever, spreading the Ebola everywhere he goes. After the G20 summit, real journalists in Australia have been muzzled to report on a new Ebola outbreak allegedly originating from a men’s bathhouse in Sydney. I read that on the Drudge Report.

crater

Yesterday I called our veterinarian for an appointment (our Lab is very old and not well.) They hadn’t heard Obama would be speaking at the high school a block away from them Friday; they were dismayed to say the least. Each time has been a disaster for their business.

Why Obama chose Las Vegas to rally public support for immigration plan

From what I’ve heard, you don’t want to be caught being white at Del Sol HS. Run, Forrest!

Deflationary forces have never been stronger…

I’d guess globalism has done in inflation. A race to the bottom of off-shoring….

China over-produces all sorts of stuff nobody buys now. It looks more like asset bubbles floating on a receding sea of deflation..

+1 Ben…Nice post…

‘Given that there is no evidence of the existence of a liquidity trap for an interest rate greater than zero, in modern macroeconomics liquidity trap refers to a situation in which the nominal interest rate is zero. As a consequence of this, a liquidity trap is also known as the Zero Lower Bound Problem.’

‘While this later conception differed from that asserted by Keynes, both views have in common, firstly, the assertion that monetary policy affects the economy only via interest rates, secondly, the conclusion that monetary policy cannot stimulate an economy in a liquidity trap, and thirdly, the inference that interest rate cannot fall below some value. Declines in monetary velocity offset injections of short-term liquidity.’

‘Similar controversy emerged in the United States and Europe in 2008–2010, as short-term policy rates for the various central banks moved close to zero. A well known Nobel prize winner economist Paul Krugman argued repeatedly in 2008–11 that much of the developed world, including the United States, Europe, and Japan, was in a liquidity trap. He noted that tripling of the U.S. monetary base between 2008 and 2011 failed to produce any significant effect on U.S. domestic price indices or dollar-denominated commodity prices.’

‘Some Austrian School economists, such as the Ludwig von Mises Institute reject Keynes’ theory of liquidity preference altogether. They argue that a lack of domestic investment during periods of low interest rates is the result of previous malinvestment and time preference rather than liquidity preference.’

im just the messenger my friends.

The FED wants 2% inflation for whatever reason.

I think that inflation is hurting business myself. If you want to sell more stuff lower the price.

But printing money virtually increase the money supply thus requiring more dollars to buy the same thing.

look at gold. Gold is the same metal it has been for thousands of years. what really changes is the value of the currency.

‘For many China analysts, that seems to be evitable: gross domestic product (GDP) only grew by 7.3% in the third quarter, the slowest rate since the global financial crisis; the official manufacturing purchasing managers index (PMI) was at a five-month low in October, and a flash reading of the index in November by HSBC stands at a new low of 50.0. But will easing monetary policy solve the problem of sluggish growth?’

‘The answer is a clear “no”, says Gan Jie, Professor of Economics at the Cheung Kong Graduate School of Business. According to ‘A Report on China’s Industrial Economy’, Gan’s survey of 2,015 industrial firms conducted in October, only 3% of all firms included “financing” as one of the constraining factors for their fourth-quarter production. Instead, the most common concern, shared by 63% of firms, is “lack of orders”. “Financing is clearly not a bottleneck for growth in the industrial sector,” Gan says.’

‘According to the survey, only 10% respondents said they borrowed new loans in the third quarter, and 88% said that they didn’t have the need for capital. In the past two months, People’s Bank of China (PBOC), the country’s central bank, has pumped more than RMB 769 billion into the banking system through mid-term lending facility operations, but given the industrial firms’ low appetite for capital, enhanced liquidity alone is unlikely to induce healthy expansions.’

‘On the other hand, weak demand has caused excessive capacity for nearly half of the firms (49%) in the third quarter, according to the survey. Forty six pecent of the firms reported that supply exceeded demand in their domestic market, higher than the 42% percentage recorded in an earlier survey done by Gan in July and August.’

‘A comparison between the diffusion indices for overcapacity in the second and third quarter showed that the situation is worsening for capital goods and intermediate goods producers, according to the survey, reflecting that firms hesitated to make new investment to expand their businesses.’

‘To help absorb excessive capacity, Beijing is encouraging infrastructure construction, especially railway projects. In the past few weeks, the National Development and Reform Commission, the country’s top economic planner, has approved projects to build eight new railroads, which are worth RMB 350 billion in total. However, a spending binge is far from a long-term solution, says Gan Jie. “In the short term, it [infrastructure spending] will help [boost industrial demand], but it’s important that the money is spent on the things you actually need,” she said.’

‘Another determinant of China’s industrial need is real estate, which has been undergoing a major correction since the beginning of 2014. Home prices in major Chinese cities continued to fall year on year in October, but the speed at which prices are dropping has slowed. Gan says that the warming up of real estate would help absorb demand and spur growth, but the “golden age” of the sector has gone.’

“The key [for the market] is location,” says Gan, who believes that housing prices may remain resilient in first-tier cities, but not so much in third and fourth-tier cities. “I wouldn’t bet on real estate to save the Chinese economy.”

‘China’s economic downturn has extended to the fourth quarter, which has deteriorated the domestic labor market, adding pressure on policymakers to boost growth, a report from Standard Chartered said on Tuesday.’

‘The bank’s research on sample companies has shown that the impact on employment began with slower wage growth over the past six months, mainly driven by cooling manufacturing and housing investment.’

“This has now extended to rising layoffs and plans to freeze wages in 2015.” A continually softened labor market may drag down consumption and further decelerate the overall economic growth, it said.’

‘Li Wei, a researcher at the Standard Chartered Bank (China) Ltd, said: “Given Beijing’s low tolerance for a deteriorating labor market, we believe we are reaching the point where monetary policy – the most effective way to boost short-term growth – will have to be eased aggressively.”

I’ve asked here dozens of times; why isn’t gold at 5 or 10 thousand bucks? We used to tell ourselves, if money gets printed out the wazoo, here comes inflation, gold goes to the moon along with interest rates. Has there ever been a more thoroughly discredited notion? There is something else going on. The old paradigms of money and stuff don’t work, and haven’t for decades.

IMHO we’re not getting inflation because the money we print quickly leaves the US and heads for the “extremities” - other countries. This “blood” will eventually pool up in the extremities and back up through the system to our doorstep - and then we’ll have a massive stroke. With all the starving people out there willing to work all day for enough calories to eke out a living I think it’ll be a long time before we see inflation. Eventually we will use up the cheapest pool of labor wherever it is…

wherever it is…

China is quickly going to find out it ain’t them…between increased automation* and places like SW Asia and Africa it’s not looking good.

*I call on several large lumber mills in which you can eat off the floors and that employ a staff of only 5-8 for maintenance. Wouldn’t surprise me to see more mfg come back here as automation keeps improving.

Hyperinflation? No.

Steady increase of prices by 1-3% per annum over decades though does make one think about what assets they should hold. If you are heavy in cash, returning less than 1% per year, it might not hurt if you keep lots of cash for a little while, but if you keep cash for a LONG time, you could see a serious erosion of purchasing power.

You need to invest some in riskier assets (stocks, etc.), or that steady drop of the value of a dollar as compared to what you want to buy with the dollar will bite you at some point.

“The old paradigms of money and stuff don’t work, and haven’t for decades.”

Perhaps the Fed’s practice of persistently leaning into the winds of market fundamentals has come home to roost, in the form of markets whose behavior is divorced from fundamentals?

‘Declines in monetary velocity offset injections of short-term liquidity.’

Fancy theory aside, it appears that monetary velocity is currently plumbing unprecedented debts.

Thoughts?

Interesting M2 velocity factoid: The peak was reached in Q3 1997, at onset of the Asia currency crisis. M2 velocity has trended down ever since (17 years and counting!).

Given the persistent shrinkage in M2 velocity, you’d think US housing would eventually catch up…so far, not so (except for the post-2008 dip).

Because there is a significant drop in industrial demand for commodities right now, so the hedger is caught between a rock and a hard place of currency debasement and oversupply of industrial commodities.

+1…Yep…

If the dollar price of commodities is falling, that would mean that the dollar is becoming more valuable, the opposite of debasement.

Neither does a house at current asking prices or prices paid in the last 15 years.

Comment by Jingle Male
2014-11-20 09:27:19

Gold has never been a good investment in high inflation. There is no correlation because gold produces no income.

Gold in the Weimar republic begs to differ.

Know how I know you’ve never taken an economics class?

When and if interest rates eventually increase, gold fundamentals are likely to further deteriorate, at which point the crash to date will be exacerbated.

There are so many fantastic investments I’ve missed out on because I couldn’t get my wife to get on board.

I must admit though that she’s also slowed me down from making some dumb mistakes, so I shouldn’t be too critical.
A good woman is hard to find.

Holy fraud Jingle_Fraud…. you’ve got some imagination.

Some people want the ponzi and corruption to continue as long as they get theirs.

No matter what we want or “need”, an earthquake of sorts is going to happen and it will be crushing.

As is hostility to suburbs, rural areas…

If they ended QE a month ago, then why hasn’t the DOW dropped like a rock? Honest question here, I’m thinking of converting a few equities.

cause now the commercial banks are buying the bonds.

The same reason reducing QE didn’t cause interest rates to spike. There is still a hell of a lot of $ in the hands of relatively few players, and they are looking for somewhere to put it (other than in the hands of workers).

s/Their/They’re/ <–I know better. slip of the keyboard.

Reading these donkey-isms is truly priceless.

I don’t think the central planners give a crap about your 401K, or what your standard of living will be in old age.

Broke ass “loosers” do not “consume” nor and they often default on their debts.

In a voluntaryist society, there would be no limited liability for corporations. Many AnCaps, like myself, welcome that. It would be interesting to see how large businesses can get when they are as liable for whatever they do as individuals are. I would think raising capital for fully liable businesses would be done in a different way.

but once businesses sell their stock the only way for others to buy that stock is from somebody else who wants to sell, and this is what most transactions are about, which is not buying stock from directly from companies but buying stock that already been sold by companies.

Very important distinction to make. Buying stock on the open market is not in fact “providing capital to businessess”. It’s providing capital to other investors.

In the short term I guess you can say that’s correct, but regardless of whether stock is bought on the primary or secondary market it still translates to capitalization for the business.

Work backwards: If the stock value goes up in the secondary market(where the regular investor is buying from), then the value of the next offering on the primary market is increased which translates directly to more money in the bank for the business.

The same increase would also translate to general credit worthiness for the company, making their bonds more attractive, etc.

Of course the same all works in reverse if the price goes down. Negative capitalization, etc.

Probably China.

why would they set up shop in belgium?

EU

Draghi

“why would they set up shop in belgium?”

China needs to recycle all those dollars it gets, and keep their currency low, by buying U.S. Bonds, the same thing Japan and Korea have been doing for years. They just don’t want anyone to know that’s what they’re doing, but it’s hard to hide billion dollar purchases.

“China needs to recycle all those dollars…”

As if they are piling them up in the basement. Where do you suppose all the money spent on building empty cities and trainways to nowhere came from? Why do you suppose the building is winding down?

“Where do you suppose all the money spent on building empty cities and trainways to nowhere came from? Why do you suppose the building is winding down?”

Borrowed money and the end of the credit bubble. Do you think China has trillions of dollars sitting around in the vaults waiting to be spent? All that money is locked into U.S. Bonds, and as soon as they try to cash out, their currency will skyrocket and their economy will crash. They’re in worst shape than most people think.

No we are in much worse shape than most people think.

“No we are in much worse shape than most people think.”

+1 Bankers have more fun than people.

That too, but China is particularly screwed, it just doesn’t know it yet. Or maybe it does. There are a lot of disappearing businessmen lately.

5% lower year after year after year is crater.

We did but the undocumented gentlemen did not.

That’s a different matter (that the laws are not being enforced).

Say the next prez is GOP, but because of Dem filibustering they can’t repeal ACA. President Cruz could simply choose to not enforce the ACA no compliance fines.

It’s basically what Obama is threatening to do tonight. He can’t give the illegals green cards, but he can tell federal law enforcement to look the other way and not deport anyone.

He can’t give the illegals green cards, but he can tell federal law enforcement to look the other way and not deport anyone.

Isn’t that the defacto US policy since Ray-gun? Why are they making it such as big deal, then?

Isn’t that the defacto US policy since Ray-gun? Why are they making it such as big deal, then?

Well, they have been deporting people, the ones they catch for whatever reason. But the idea is a deportation moratorium.

“Well, they have been deporting people, the ones they catch for whatever reason.”

They did not deport the illegal dude who hit and ran my wife.

I found him, the police came and said there was nothing they could do because he wouldn’t come out and no one would tell on him in the complex. Two hours later we got a call from the police, they wanted my wife to come down and ID the dude. There was nothing they could or would do for us but when the dude saw the police looking at his car he called in a false stolen vehicle report and they didn’t like that.

None the less, 3 days in jail, $400 fine and right back to the hood to continue his life in America as an undocumented, uninsured driving immigrant.

Comment by jane
2014-11-20 18:00:44
Prove me wrong.

Agree 100%.

In my old neighborhood, it was understood that if you got into a gypsy cab (i.e. not a NYC legal medallion cab) you took your chances. One news item told of an injured passenger left high and dry by the gypsy cab driver who, after the crash, calmly went about removing the license plates front and back and walked away. (How to go into the gypsy cab business? First you steal a car…) They’ve organized since, so it’s not as bad as it was then.

I had a few conversations with Dominicans who felt we Americans are stupid for being law abiding. None had insurance or registration. I had a plate fall off my car and before I was able to rectify the situation, I found I had a few tickets in my name.

One guy said he was going home for a week to the DR. When my brother said, oh, say hello to my (stolen) car, they laughed uproariously.

Makes you wonder why they have Footy Locker stores in Loot City. The answer, of course, is that demographic, while poor, is their best customer.

There are no Foot Lockers in prosperous Fort Collins or Loveland, but there is one in less prosperous Greeley.

Rockstar, you are a racis

And don’t think that just because you “lived in Mexico City in the 70s” that that is some kind of Get Out Of Jail Free Card for making racis posts about immigrants and coloreds

Bad racis, bad

From what I’ve seen, Foot Locker is in every shopping mall in America. It doesn’t appear to matter what sort of community the mall is located in. There’s a mall a few miles from my house that has a Foot Locker, as well as Tiffany’s, Gucci and Coach.

And don’t think that just because you “lived in Mexico City in the 70s” that that is some kind of Get Out Of Jail Free Card for making racis posts about immigrants and coloreds

Dude, I did more than live there. I’m a citizen. And we are so glad you gringos are more than willing to take and coddle our refuse. Heck, we count on it! And the remesas don’t hurt either.

He could mean that it’s too cold for those cranky Western Rifle clowns to go out and start up go time. Even if they pulled on their camo outfits and headed out in the streets, they’d probably end playing with their smart phones making statist comments on Breitbart.

Maybe they can shift from the noble mission of looting Foot Locker to the slightly less noble but more practical mission of looting Columbia Sportswear.

My liberal betters tell me that it is possible to register all 100+ million guns owned by private citizens in this country, but that it would be impossible to identify and deport 10+ million illegal aliens.

F*ing hypocrites.

Not arguing your point, but maybe that line of thought does make a strange sort of sense, considering one group of people affected is generally law-abiding, while the other is not?

“My liberal betters tell me that it is possible to register all 100+ million guns owned by private citizens in this country, but that it would be impossible to identify and deport 10+ million illegal aliens.

F*ing hypocrites.”

Well, I think mailing a registration form probably is easier than deporting 10 million people, by a long shot.

My liberal betters tell me that it is possible to register all 100+ million guns owned by private citizens in this country, but that it would be impossible to identify and deport 10+ million illegal aliens.

I doubt that any liberal of any significance has actually made that claim.

I think guns should be registered, that way the next time the neo-cons start a war, anybody who owns anything but a shotgun can be drafted and sent to patrol the streets of Tehran. Aren’t they our well regulated militia? I think that’s what the NRA is really afraid of.

He’s still on the Mclaughlin Report, but thankfully that’s pretty much it - even Fox News won’t hire him. I actually agree with some of the things he says about protecting American industries from low wage competition, but he always seems to revert back to that sleazy “southern strategy” talk that certain conservatives still use to this day.

There’s still a McLaughlin Report?

Yeah what happened to Sarah McLaughlin?

If only we weren’t so stupid.