How Empty And Worthless Is The Power Of Kings
It’s Friday desk clearing time for this blogger. “Kenneth Lewis, who retired as Bank of America Corp.’s CEO after the housing crisis almost toppled the firm, is selling a South Carolina island home for less than it cost 12 years ago. The house is in contract to sell for about $2.5 million, its most recent asking price, according to listing broker Sally Papineau. Lewis, his wife and another couple spent $3 million in 2002, public records show. ‘Unfortunately, we did not get there as much as we would have liked,’ Lewis said by e-mail.”
“The recovery of home prices in Arizona appears to have all but stalled. New figures from the Federal Housing Finance Agency show prices paid for Arizona homes during the third quarter of this year were, on average, seven-tenths of a percent higher than the second quarter. Michael Orr, director of the Center for Real Estate Theory and Practice at the W.P. Carey School of Business at Arizona State University, said virtually all of that occurred very early this year.”
“Potentially more concerning is that Orr does not believe the sales price numbers used to put reports like this together are actually accurate. ‘I think they’re too optimistic because people have been making a lot of concessions to buyers,’ he said. ‘And they don’t show up in the recorded prices.’ Orr said, though, that what happens is the buyer demands the seller pay all of the closing costs, including those normally paid by the buyer. ‘That can be the equivalent of $6,000 or $7,000 that the seller eats,’ he continued. ‘So there’s really more discount going on than is really being recorded.’”
“Orr can speak from personal knowledge. A home he listed at $163,000 sold for $165,000. And that’s the figure that shows up on sales documents. But after Orr paid all the costs, the real selling price is probably closer to $160,000.”
“October sales of Santa Clarita Valley homes increased 2.1 percent over September 2014, bucking the statewide trend of flattened home sale numbers. Median prices cooled, however, dropping 6.7 percent from September and mirroring statewide price dips. Median prices have increased year to year for 27 straight months, the realty group reported. ‘The activity we’re seeking suggests the Santa Clarita housing market is much closer to a normal, healthy market than many other areas of the state,’ said Jim Link, the association’s CEO. ‘The slowdown of price increases shows the market is working.’”
“A glut of available properties has cooled Surrey’s condo market, while demand for single-family homes remains hot. The abundance of condominium developments has depressed condo/apartment prices across the city since last October, which Ray Werger, president of the Fraser Valley Real Estate Board, attributes partly to ‘overbuilding.’”
“Housing prices have fallen, thanks largely to a softening Melbourne market, new data shows. Preliminary results from CoreLogic RP Data show average prices in the mainland state capitals were down by 0.4 per cent in the first 26 days of November, compared with the October average. ‘The soft result can mostly be attributed to a more substantial decline in Melbourne where dwelling values are down 2.1 per cent,’ CoreLogic RP Data research director Tim Lawless said. Meanwhile, housing loans rose 7 per cent over the year to October, compared with 5 per cent growth in the previous year.”
“Apartment rentals in south Mumbai, south Delhi and Gurgaon have fallen by 20-30% in the last one year, according to property consultants. Compounding the problem is a rise in supply of apartments and homes in many locations. In south Delhi, rentals have dropped by up to 50% in areas like Vasant Vihar, Greater Kailash and Shanti Niketan. ‘Owners are finding it difficult to rent out their apartments or homes unless they are willing to reduce their demand,’ said Sunil Kapur of Delhi-based KK Real Estate.”
“Two luxury homes in Singapore are on the market at prices that would mean losses of nearly $3 million each as the local property market continues to weaken. The mortgagee sale of the two units in a luxury Sentosa Cove condominium, at fire-sale prices comes amid signs that banks are forcing more cash-strapped owners to offload property to meet loan shortfalls. But the losses are still less than those suffered from the sale of two other 2,777 sq ft apartments in the project earlier.”
“Mr Tan Tee Khoon, executive director of residential services at Knight Frank Singapore, said defaulting borrowers could have had difficulties selling their properties in the tepid secondary market, while an increased supply of new units in the prime districts means that it is harder to find a tenant. ‘Sentosa’s exclusive location makes it less accessible than homes on the main island and harder to lease now,’ he said. ‘Also, borrowers who default are more likely to have been speculators.’”
“With local cash supplies running low, debtors in Ordos, Inner Mongolia Autonomous Region, are reportedly handing over everything from bottles of wine to entire houses to pay off their creditors. Ordos, once a prosperous city, is now mired in debt thanks to local asset price bubbles, unrealistic government planning and a lack of real economic development. Certain creditors may be reluctant to accept the current situation, but the goods being offered now can help them minimize their losses. With local cash stocks running dry, those who refuse other forms of repayment could be left with nothing.”
“Reiterating his earlier pledges, European Central Bank president Mario Draghi said, ‘We will do what we must to raise inflation and inflation expectations as fast as possible.’ ‘He is clearly outright quantitative easing, buying government bonds directly,’ says Gary Jenkins, chief credit strategist for London–based hedge fund firm LNG Capital. As to how effective this path might be, Jenkins has some doubts, although he believes it is still likely to be deployed. ‘Central banks are like Homer Simpson. They keep touching the hot stove and saying ‘D’oh!’ over and over until someone pulls them away.’”
“The experts got 2014 wrong. The consensus at the beginning of the year was that GDP growth would pick up fairly strongly in developed economies, government bond yields would finally rise and commodity prices would hold steady at elevated levels. Wrong, wrong and wrong. It looks like most economists made a fundamental error. They underestimated the power of one of the great economic forces of the epoch – disinflation.”
“Rather than trying to fight even harder against the metaphorical tide, central bankers could learn from the earliest recorded version of the story of King Canute and the literal tide. The 11th century English monarch attempted to tell the incoming sea what to do, but the waters refused to obey. However, the point of the story is often missed. Henry of Huntingdon, who wrote it down, did not want to chastise Canute or his courtiers for having grandiose notions. He wanted to show that Canute recognised ‘how empty and worthless is the power of kings,’ and that the sea obeyed a higher power.”
“In the same way, demographic trends may well make disinflation too overwhelming to fight. Central bankers, along with politicians, employers and voters, might try to emulate Canute’s response. He ‘leaped backwards’ to keep from getting too wet. The big leap for the authorities is to rethink their horror of gently declining wages and prices. There is actually not that much to be afraid of. Workers, shoppers, companies and investors are not stupid. They can easily adjust to a new but basically stable monetary order.”
“Central bankers aren’t stupid either. When they warn about deflation, for the most part they are actually worried about a different but related problem: the excessive levels of leverage in many economies. Deflation automatically increases the ratio of debt to GDP, while managed inflation gently and helpfully erodes it. After years of wanton debt expansion, the 2 percent inflation rate currently considered optimal by the authorities is too low to really be much assistance. Central bankers and their political bosses will have to figure out ways to deal with debt other than shrinking it by inflating wages and prices. In the meantime, a more realistic and less fearful appraisal of the disinflationary tide would lead to better predictions, more appropriate monetary and fiscal policies – and a healthier economy.”
‘Central banks are like Homer Simpson. They keep touching the hot stove and saying ‘D’oh!’ over and over until someone pulls them away.’
Glad that someone finally figured that out!
A letter to the editor:
‘The Federal Reserve’s quantitative easing is a short-term economic fix, that benefits the 1 percent, creates financial bubbles, widens the inequality gap and has eroded middle-class purchasing power.’
‘The gangsters in the Eccles Building report 5.9 percent of people actively looking for work in the last four weeks and call it unemployment, when the number of people seeking a full-time job is over 12 percent. Inflation is at 1.7 percent, calculated without gas and food, or the East Asia effect. Gas in 1971 (before the demolition of Bretton Woods) was 36 cents a gallon. Average price in 2013 is $3.53 and a loaf of bread is eerily similar. That’s closer to 6 percent.’
‘Wall Street money elects politicians of choice to dance to their tune, instead of politicians working with the middle class. Politicians that think “Deficits don’t matter,” “I will balance the budget in 25 years,” “Too big to fail,” and “The money will just trickle down.”
‘The Fed is now continuously creating unsustainable bubbles, a Ponzi scheme on Wall Street (Bernie should be ringing the closing bell), a housing bubble that has not gone away and now the biggest one in the history of mankind. A U.S. government bubble. And the maestros at the Fed keep the party going.’
‘So “read my lips.” Absolutely no more bailouts. End all government subsidies that will bring back supply and demand. Balance the budget with a taxation scheme that lessons the inequality gap. Bring back Paul Volker and Robert Reich.’
“‘The gangsters in the Eccles Building report 5.9 percent of people actively looking for work in the last four weeks and call it unemployment, when the number of people seeking a full-time job is over 12 percent.”
Given my observations from across New England and Mid-Atlantic, 12% is undershot. Possibly by double digits. Even if unemployment wasn’t an isssue, price structure resulting in collapsing demand is a serious problem and it alone is destroying the country. Literally tearing it apart.
I think unemployment really is decreasing. My client company recently hired a bunch of black people. I know it’s a racist thing to say, but it’s true. When unemployment was high, they hired whites. When it was in-between, they hired mexicans. Now they are hiring black people. Just an observation.
Labor participation rate is 63%, the lowest since 1978 according to the BLS. The number of people on welfare was 22 million in 2008 and is now 46 million. Does that sound like a healthy economy?
Busy this morning with the data mining I see Ben…Thanks for all your effort bringing this information to the blog…
^lolz.
Excellent letter. While 95% of the electorate are still vegetables, as evidenced by their votes for the crony-capitalist status quo (Obama, McCain, and Romney), a tiny minority are awake, aware, and pissed off. And their numbers are growing even as the sheeple graze on.
Is there any indication that anyone is pulling away the stove or does it appear to be full speed ahead until the next black swan?
“Central bankers and their political bosses will have to figure out ways to deal with debt other than shrinking it by inflating wages and prices.”
Step one: Forget about the hair-of-the-dog hangover cure…it’s a fallacy!
“In the meantime, a more realistic and less fearful appraisal of the disinflationary tide would lead to better predictions, more appropriate monetary and fiscal policies – and a healthier economy.”
Don’t get caught out swimming naked when the tide goes out.
This assumes you aren’t an exhibitionist.
The whole theory behind Operation Borrow/Print is the concept that government spending during WWII was what brought the country out of Depression.
During WWII, the debt peaked then quickly dropped. After 2008, it’s stayed at a high level, near WWII levels, a high plateau instead of a spike.
It seems to me that the theory needs to be revisited. Central planning doesn’t lead to prosperity, although it does lead to to the enrichment of the planners and their cronies.
Forgot the links:
1) http://en.wikipedia.org/wiki/History_of_the_United_States_public_debt
2) http://research.stlouisfed.org/fred2/series/GFDEGDQ188S
“With local cash supplies running low, debtors in Ordos, Inner Mongolia Autonomous Region, are reportedly handing over everything from bottles of wine to entire houses to pay off their creditors.”
Sounds like movable, hideable wealth could really come in handy right now for debtors who live in empty Ordos.
People are handing over houses to pay off debt collateralized by their houses?
Dallas/FortWorth Housing Demand Plunges 12% YoY; Prices Fall
http://files.zillowstatic.com/research/public/Metro/Metro_Turnover_AllHomes.csv
Las Vegas, NV Housing Demand Plummets 34% YoY; Sellers Slash Prices
http://files.zillowstatic.com/research/public/Metro/Metro_Turnover_AllHomes.csv
Portland OR Sale Prices Down 3% YoY; Plummet 5% QoQ and 15% MoM
http://www.zillow.com/west-slope-or-97225/home-values/
Honolulu, HI Sale Prices Turn Negative YoY; Plummet 7% MoM and 7% QoQ
http://www.zillow.com/honolulu-hi-96817/home-values/
Santa Cruz Sale Prices Plummet 8% YoY; Inventory Balloons As Demand Craters Statewide
http://www.zillow.com/santa-cruz-ca-95060/home-values/
Washington, DC Sale Prices Nosedive 14% YoY As Defaulted Inventory Weighs On Market
http://www.zillow.com/washington-dc-20007/home-values/
Dc Very warm on their meter
But the median sales price per square foot remained the same — Oct 2013 $556 and Oct 2014 $556 per square foot. So NO CHANGE, after you take into account that larger homes sold last year, and smaller homes sold this year! And we are talking about a single zip code in DC, not the entire region. Your headline implies that it is the region. A better headline might be “Georgetown Sales Price per Sq Ft remain Unchanged YoY,” or “Buyers in Georgetown Opted for Slightly Smaller Homes in Oct 2014.”
And last year unit prices didn’t matter.
What happened.
You got busted again.
Oct 2013 DC Sale Price/sq ft $587
Oct 2014 DC Sale Price/sq ft $556
Thanks for the heads up on the falling unit prices. Count on us posting it.
‘The falling oil price will place stress on the global junk bond market, experts say, with US energy companies at increasing risk of default. The plunge in the price is “the most significant risk that could potentially deliver a volatility shock large enough to trigger the next wave of defaults” in junk bonds, Deutsche Bank said.’
‘According to the bank, energy companies now account for about 15 per cent of outstanding issuance in the non-investment-grade high-yield – or “junk” – bond market. It warned in a recent report that many of these issuers would come under severe financial stress if the price of benchmark West Texas Intermediate (WTI) crude dropped from its current level about $US74 a barrel to $US60.’
“Our calculations suggested that a further 20 per cent decline in oil prices to roughly $US60 a barrel on a WTI scale could push the whole US energy sector into distress,” the report said.
Deutsche bases this scenario on average debt leverage ratios of previously distressed issuers in all non-financial sectors. Once the ratio of debt to enterprise value (D/EV) exceeds 65 per cent, a company becomes vulnerable to default, it says.’
“At $US60 a barrel our calculations have shown that the average D/EV ratio could reach 65 per cent,” the bank said. “And historical evidence suggests that issuers exhibiting higher ratios carry significant risk of restructuring.”
‘Keen to cash in on the country’s shale oil and gas boom, exploration, production and services companies have in recent years capitalised on ultra-low lending rates to tap the country’s vibrant corporate debt market for operating funds.’
‘Global bond fund manager PIMCO agrees risks are building in the energy segment of the high-yield market. Chief investment officer for global credit Mark Kiesel said the firm, after years of research, had steered clear of lower-grade exploration and production (E&P) companies and drilling operations.’
“Is there risk in the sector? Absolutely,” he said.
“We are avoiding it; we think the drillers are going to be very vulnerable; we think we’re going to see downgrades. We think some of the higher-cost E&P companies are going to be under significant pressure.”
‘He says the danger level for corporate defaults in the sector ranges widely, depending on the technology in use and the type of hydrocarbon being extracted. “You’ve got companies in the United States that can be profitable at $US45 to $US50 a barrel,” he says. “You’ve also got Canadian oil sands players which need $US70 or $US80. There’s a wide range when it comes to calculating who gets hurt and who can actually survive.”
When I suggested this was going on a while back, a poster quickly told me I was all wrong:
‘Saudi Arabia’s oil minister told fellow OPEC members they must combat the U.S. shale oil boom, arguing against cutting crude output in order to depress prices and undermine the profitability of North American producers.’
I don’t remember who the poster was though. Care to step up and claim your crow?
Let me guess… DepreciationDave or Rental_Fraud.
Maybe it was me, but I like apple pie better. I suggested before the OPEC summit that if OPEC never raised production before the price started dropping, the price collapse might have a cause other than OPEC conspiracy, like a significant drop in demand. I was thinking it might be a sign of slowdown in China. Steel and coal are off as well, which I think might be due to the China miracle winding down. I think I was responding to another poster.
“Our calculations suggested that a further 20 per cent decline in oil prices to roughly $US60 a barrel on a WTI scale could push the whole US energy sector into distress,”
Was this statement made before or after last night’s ten percent crash in oil prices?
Yellen can’t print BTUs, and the oil market is the least rigged and closest approximation to a real market we have left. I’d love to see OPEC detonate the junk bond market and bring down the house of cards Wall Street and the Fed have built.
The problem is, a lot of people will lose their jobs. I’m not desiring this outcome, but I didn’t set up this disaster either. If it’s not the oil, it’ll be something else, IMO. This junk bond market has been nuts for a long time. These companies, many of which should have been shuttered years ago, have been loading up on debt to buy back stock. Sure, the share price goes up and management looks good, but at what cost?
I was north of Dallas a few months ago. Where do you think the money for those zero-down house loans advertised on bill-boards came from? I bet it wasn’t from Lennar’s cash account. And the way oil is going, the jobs to support those far-flung developments might not be around either. And of course, it was all good times and no worries.
Not many oilfields between Dallas and Oklahoma. Most are along the coast or in West Texas. I’ve driven up to OK many times and have never seen an oilfield other than a few small pumps that are not working. There’s the shale areas to the west of Dallas.
‘Keen to cash in on the country’s shale oil and gas boom, exploration, production and services companies have in recent years capitalised on ultra-low lending rates to tap the country’s vibrant corporate debt market for operating funds.’
Guess they ran out of joe public investors to fund their pockets…um er drilling operations. Of course, who would want to when shale oil wells fall off a cliff production wise after 2 - 3 years. ROI on these donkey wells are horrible!!
‘The lowest mortgage rates in 18 months failed to spark the Lake County housing market in October as sales stayed flat and home prices decreased on a year-to-year bases for the first time since mid-2011, according to information gathered from the Lake County Association of Realtors (LCAOR) Multiple Listing Service (MLS).’
‘Closed sales of homes in Lake County totaled 62 units in October, according to the MLS. Sales in October were up from 58 in September but were down 8.8 percent from 68 in October 2013. October marked the 30th straight month that sales were below the 100 level.’
‘The median price of a Lake County home decreased 6.25 percent from September’s median price of $180,000 to $168,750 in October and was down 13.6 percent from $195,250 recorded in October 2013. The countywide median home price has been higher on a year-over-year basis for more than two years and this is the first month that there has been a substantial drop in all that time.’
Thanks! that is good news, Lake Co. is only about an hour away from me in Sonoma Co (calif.)…the market is definitely stalled here, am looking forward to the price drops sure to come in 2015, would especially enjoy seeing the last of the local flippers get badly burned…they are definitely scraping the barrel, here is an example right on the freeway w/ a homeless shelter nearby, 58 days on the market @ $340k, bought earlier this year for $216K
https://www.redfin.com/CA/Santa-Rosa/506-Morgan-St-95401/home/2199184
“…the price drops sure to come in 2015, would especially enjoy seeing the last of the local flippers get badly burned…”
Can’t wait!
‘About 468,000 homeowners received non-foreclosure solutions from mortgage servicers during the third quarter, according to HOPE NOW, a voluntary, private sector alliance of mortgage servicers, investors, mortgage insurers and non-profit counselors.’
‘Of those actions, about 109,000 were loan modifications and about 30,000 were short sales. Other solutions - including repayment plans, deeds in lieu, other retention plans and liquidation plans - made up the rest.’
‘There were about 77,000 foreclosure starts in September, up 18% compared to the approximately 65,000 recorded in August. Eric Selk, executive director for HOPE NOW, says although the housing crisis is largely subsiding on a national level, “there are still pockets of the country in need of mortgage assistance. These areas include Detroit, St. Louis, southern California and Florida among others,” Selk says in a statement.’
“About 468,000…”
2 million a year, and this is nearly a decade after these FBs bought. Now we have another round of FBs of the 2013 vintage.
It’s a flight of stairs.
Here’s a guy who was warning about the housing bubble a long time ago:
‘As obvious as this point may be, the question remains, “will we ever learn?”
‘I know, I know, this may be one of the most overused titles in the history of money management commentary. This is only because; investors never seem to learn from their mistakes … never, ever. A recent front page headline really shocked me. The entire article was based around the fact that as we have watched the local real estate market quickly become overheated (see “overpriced”) the evil home equity loan has re-emerged front and center. You would never know that just a few years ago we experienced one of the greatest recessions of all time.’
‘Yes, that one with the tremendous dual-bubble of both housing and credit. Alan “Mr. Bubbles” Greenspan was the architect of perhaps the greatest dual-bubble in modern history. His cheap money policy was the catalyst for both the credit markets as well as the run up in housing prices. As both fed off each other, the pending outcome was as plain as day, and yet so many were simply left “holding the bag” when the bottom fell out. Hey, there was no shortage of warning shots fired by this weekly diatribe of truth which left many in the “bubble” industry with a high level of disdain for this particular weekly commentary.’
‘Well, fast forward to this week when the headline read “Got Equity?” Yes, this well written piece went into great detail as to the rising popularity of taking money out of the recently overinflated home values in the form of a … drum roll please … home equity loan. No, for those who have any recollection of few years back, that is not a typo, and yes, there seems to be no shortage of homeowners who have put short term reward ahead of long term reality. Folks, the “personal housing ATM” debacle from just a few years back was the catalyst for many of the foreclosures that we are still shaking out of our bloated inventory today.’
‘As much as it seems like pennies from heaven, these are still loans … and loans must be paid back. The article went on to quote a Realtor who stated “with home equity rates so low, why not?” Really, I mean, really? Although it is true that rates are low now, we all know that there is only one direction they can go and that is up. Furthermore, there are numerous financial articles on a daily basis warning investors of all types that rates are on the rise and to beware. I know, it seems obvious but it should have seemed obvious the last time and … well, you know the rest of the story.’
‘Now, here is the real kicker; in the same paper the same day, there was also an in depth piece regarding the pending rise in interest rates. Now, remember, not only does a rising rate environment have a negative impact of both stocks and bonds, but also on the housing markets.’
‘I am completely nonplused that the “personal housing ATM” disaster would rear its ugly head again so soon, with “professionals” in the industry actually endorsing the debt. For many, this left a permanent reminder of a temporary feeling. Will we ever learn?’
‘Speaking of learning, let’s not forget the pending potential for disaster in the financial markets while we are on the subject. I know, there are some who still believe that trees really do grow to the skies … again, “will we ever learn?”
“The article went on to quote a Realtor who stated “with home equity rates so low, why not?””
Realtors truly are corrupt. Dumber than a box of rocks at a very minimum.
i know some states back then you didn’t even have to have a HS diploma, just pass the test and you’re in
“‘I am completely nonplused that the ‘personal housing ATM’ disaster would rear its ugly head again so soon, with ‘professionals’ in the industry actually endorsing the debt. For many, this left a permanent reminder of a temporary feeling. Will we ever learn?’”
Bahahahaha …
… “‘professionals’ in the industry actually endorsing the debt”.
Of course the professionals in the industry endorse the debt, you dummy, this is how they make their money!
Sheesh.
I love Fridays for many reasons. One is because it is desk clearing time on the HBB!
Today’s post is even sweeter because it’s a holiday. It’s like a twofer!
Where is it a holiday? Yesterday was a holiday. Today is work.
“Today is work.”
Yep.
Many people take and extra day off work during Thanksgiving. It makes for a nice 4 day weekend. I got to spend a little extra time on the HBB and go for a hike in the Sierra’s. Two of my favorite things.
One also can be working on home-based business or preparation for it. I did not realize defragmenting a 500GB drive takes days.
after that I have to shrink my partitions to make space for Linux partitions. Then do the dual boot install.
My other machine will be air gapped and pure Linux to deal with crypto coin wallet. And yes I will hide the electronic key. The problems encountered in the last year or two were brought on by people who did not take care of their key(s).
“after that I have to shrink my partitions to make space for Linux partitions.”
Why not add a separate encrypted drive?
I do have a 1 terrabyte external drive and could encrypt it but I want to force myself to use my other computer system - with its own micro SD card that has lots ‘o gigs.
When I transfer information between PCs I will do a virus check each transfer. And it will be via smartcards. I will disable my Wi-fi through the ritual.
“…virus check…”
The av tools are root level; not to be trusted. Booting to a live dvd or a tails image on an IronClad flash drive while working beneath a white sheet would keep you safe while entering credentials and pass along a spoofed mac address to the isp’s dhcp/router.
Careful, it’s a slippery slope toward the teotwawki preppers.
This does require extreme care. One slip and I have to start all over.
‘David Foster, who sold his condo in Chicago last month, isn’t plugged into Capitol Hill’s political games.’
‘But he has banked the financial future of his family on Congress accomplishing at least one thing during the postelection session that just began: Renewing the expired Mortgage Forgiveness Debt Relief Act so that he, his wife and three young children aren’t crushed by unaffordable taxes next year on the $100,000 his lender agreed to cancel as part of a short sale.’
‘In Foster’s case, a condo he purchased for $202,000 in May 2008 began to plunge in value almost immediately, as did many others in the Chicago area.’
‘By the time of his short sale last month, the bank concluded the most it could get for the condo was $50,000, which an investor agreed to pay. Yet Foster’s remaining loan balance was about $150,000, two-thirds of which the bank wrote off.’
Though he never received a dollar of that “income” in his wallet, under the federal tax code he’ll owe a tax payment to the government — $28,000 — on the $100,000 his lender wrote off.
“I don’t know how or where we could come up with that,” Foster said. “I can’t believe anyone would think this is a reasonable thing to do” — hit underwater home sellers with heavy tax bills while they’re struggling to recover from their own financial crises.
If he walked away with $100k in profits David Foster would be walking on the balls of his feet, “strut’n his chit” like a peacock, and he’d pizz-n-moan about his capitol gains tax.
Phuk him.
It gets even better….the linked story says he is a “campus pastor”…wonder if he will work his heartrending tale into a sermon
‘A recession in the next five years could have a devastating effect on the world’s heavily indebted nations, although Australia would emerge relatively unscathed, a report shows.’
‘Global investment manager Standard Life Investments, in its report Defusing the Fiscal Timebomb, said developed nations with high debt could be in trouble if forecasts for economic recovery did not eventuate.’
“Our analysis finds that public finances are highly vulnerable to a shock to these optimistic forecasts,” the report said. “A hypothetical recession in 2017 would punch another hole in public finance positions in the developed world. For the group of countries entering the downturn with already dangerously high debt levels, their public finances would look even more unsustainable.’
‘The report divides countries into four categories based on their level of vulnerability.
1. Greece, Ireland, Italy, Japan and Portugal were most vulnerable. A recession would derail Greece’s attempt to reduce debt, increasing it to 163 per cent of gross domestic product (GDP) by 2020. “The story is similar in Ireland, Italy, Japan and Portugal. This shows just how hard it can be to lower public debt when it has risen to extremely high levels. With the exception of Japan, these countries would probably lose access to market financing in this environment.”
2. Countries with debt of about 100 per cent of GDP, including the United States, the United Kingdom, Canada, Spain and France. In a recession, “sharp declines in nominal growth are painful and small primary surpluses quickly switch to deficits”.
3. Countries with high debt that weather the recession well, primarily Germany, Austria and Belgium. “This partly reflects their strong primary surplus position heading into the downturn, alongside already conservative nominal growth expectations.”
4. Countries with low debt, including Australia, New Zealand, the Scandinavian economies and Switzerland. “While they see debt ratios rise during the downturn, aggregate debt positions do not rise to a level that would provide cause for concern, unless the economic shock was much more asymmetric.”
China escaped mention, hence no worries.
Australian households lead the pack in debt to income ratio. They might not be so insulated from a downturn.
http://www.macrobusiness.com.au/2014/05/household-debt-highest-in-25-years/
‘McAllister Ranch, the southwest Bakersfield residential development project stalled by the housing collapse, is back on the table — still with an 18-hole Greg Norman golf course, but now on 600 acres instead of 2,070.’
‘Irvine-based developer SunCal said Monday it plans to exercise a years-old option to buy the property from the Rosedale-Rio Bravo Water Storage District by late April and market the property to home builders by the end of 2015. The revised project will contain about 1,100 homes, Aguirre said.’
‘McAllister Ranch became an icon of developer ambitions during the housing boom that came to a painful end in 2006-07. New York investment bank Lehman Brothers was a financial partner on the project until the company went belly up in 2008, contributing to the global financial crisis.’
Everybody wants to live in Bakersfield!
‘China’s official passenger rail fare benchmark has remained unchanged at just over 0.059 yuan ($0.009) per kilometer since October 1995. Many may be shocked to learn that this rate has stood for nearly 20 years, especially given recent price jumps in high-speed service. Indeed, in some cases, it costs more to travel by high-speed rail than by plane.’
‘Yet while the cost of train tickets continues to mount, almost all of China’s high-speed rail lines are losing money. Even the country’s most popular line - connecting Beijing and Tianjin - continues to post annual net losses of around 700 million yuan.’
‘High construction costs, poorly-priced loan packages and the ever-present specter of corruption have all taken their toll on the financial health of the country’s railway system.’
he ever-present specter of corruption have all taken their toll on the financial health of the country’s railway system.
On the other hand, the financial health of the corrupt has never been better.
‘Arizona and the Phoenix metro region both rank among the slowest housing markets in the U.S., according to a new report from Freddie Mac. Arizona ranks 45th among U.S. states and the District of Columbia, Phoenix ranks 39th among the largest 50 U.S. markets. Employment indicators both statewide and around Phoenix are lagging the national job market.’
‘Two-thirds of Phoenix borrowers and 69 percent of Arizona mortgage holders are current on their loans, according to the report.’
‘Two-thirds of Phoenix borrowers and 69 percent of Arizona mortgage holders are current on their loans ??
So 31% are not…One-in-three basically…In the best locations there are likely very few which means in the less desirable locations the percentage for that neighborhood must be much higher…That could be one-in-two…
A blogger sent this to me:
‘I track some weekly stats in both Las Vegas and Phoenix. As of this morning the average amount of overpricing on a single family detached home in Phoenix/Scottsdale has risen to just over $213,000 per available listing. It is $132,000 in Las Vegas. In both markets, overpriced listings breed future overpriced listings as both real estate agents and sellers continue to buy in to the absurd listing prices that are causing those homes to remain on the market – often for a year or more – when they should have sold in 60-90 days if they had been priced properly. (Caveat: I’m only looking at non-distressed SFR listings)’
‘Here’s a better way to look at it! A properly priced listing should have a very reasonable chance of being in escrow within 30 days of the listing, given the current supply and demand. Yet, 70% of these listings are on the market over 30 without being in escrow; 50% have been on the market for 60 days or longer due to inactivity resulting from overpricing!
(Las Vegas)
‘It’s again time to address the overpricing issue head on! The average listing price of an available SFR Equity home is nearly $160,000 more than the average closed sales price. The average listing price of all available equity properties dipped to $411,926 compared to the average listing price of $337,704 for new listings. This market continues to carry a large number of older, very overpriced listings in inventory that do not have a prayer of selling anytime soon.’
That’s very interesting…what’s the ultimate effect of this phenomenon?
Seems like whatever the number of official listings, the meaningful number of listings is much lower (ie. those that have a chance of trading).
Does this mean that the reasonably priced listings sell quickly? Likely. Unless and until there are sufficient numbers of reasonably priced listings.
While not in LV or Phoenix, my parents and cousin just sold homes in two different markets (one in CA, one in Utah). Both sold well within 30 days (my parents in 2 days on the market, my cousin in about a week and a half). Neither needed to push pricing, and so they didn’t.
It also means that you should expect a larger number of foreclosures in these markets as long as such an effect continues–I’m willing to bet A LOT of these overpriced listing are by owners who would like to sell, but have debt greater than the true market value of the property. And so they list high with a hope they can find a buyer. If they lose a job, fall behind on payments, or just decide to walk, there is no way out other than foreclosure (normally, they could just sell).
Rental_Fraud…. there are no “reasonably priced” listings anywhere. Not yet anyways.
‘Two-thirds of Phoenix borrowers and 69 percent of Arizona mortgage holders are current on their loans, according to the report.’
The author is misinterpreting the report:
http://www.freddiemac.com/mimi/state.html
The numbers are NOT percentages, but an index value. You can see the graph of the measure the author thinks is a percentage over time. In 2006, the value for “current on mortgage” was over 100.
It can’t possibly represent the PERCENTAGE of mortgage holders that are current on their loans.
Here’s the page on how to read the MiMi report:
http://www.freddiemac.com/mimi/reading_mimi.html
The author’s interpretation of the numbers is incorrect (69 does not represent a percentage, but an index value). 80-120 is the “normal” range. 69 represents fewer people being current on their mortgage than “normal”.
I’ve posted links to the actual Freddie Mac report, as well as the page on how to read the report (yet to post).
It’s the Freddie Mac Multi-Indicator Market Index (MiMi), for those who want to search it on their own.
It’s another organization with a vested interest in self-preservation which simply means they can’t be trusted Rental_Fraud.
So does this mean that I can finally get another rental property soon? I’m getting antsy; I’ve been antsy for like a year now. I kind of want to purchase my own residence, but I need to be mobile. I just applied for a 2nd-shift gig becuase my “boss” at the client company is so cray-cray. If this is what the future holds for me (similar to the past), then I need to be a landlord, not a homedebtor.
Crater.
Have you considered buying REITs instead of a property? Less management hassles, and instant liquidity. Additionally, the implied cap rates of many of the REITs is higher than the implied cap rates of single family rentals…AND for industrial properties (PLD, etc.) those cap rates are on rents that are generally are lower than are necessary to have lots of additional development (which will keep new supply in check for longer, with strong rent growth).
The negative is that REIT stock is frequently valued at less than the sum total of the asset values, and so unlike private real estate, the market sentiment can negatively impact your stock value as compared to the liquidation value of the REIT portfolio.
Hows it going Rental_Fraud?
‘After the value of the Greater Bangkok property market dropped 15 per cent in the first nine months of this year, the top 10 listed property firms’ total inventory as of September 30 was worth Bt269.34 billion, up 14.99 per cent from the same period last year.’
‘Samma Kitsin, director-general of the Real Estate Information Centre (REIC) of Government Housing Bank, said it would take more than two years to sell off such a high inventory worth Bt269.34 billion. This is based on the annual valuation of the residential market of about Bt600 billion, half in Greater Bangkok and the rest upcountry.’
‘The top 10 listed property firms hold about 35 per cent of total market value. They have about half of the Greater Bangkok market. According to a survey by the REIC, the residential market in metropolitan Bangkok dropped 15 per cent in the first 10 months of this year. The condominium market declined by 25 per cent in the period.’
‘Indonesia has been lingering with pros and cons to pass the regulations of strata-title ownership by foreigners in the apartment and condominium sector.’
‘But this has not deterred the likes of many foreigners or expats to own one. Either they were buying under local resident nominees or on their own behalf with a 20-year hak sewa (leasehold) extendable twice for 20 years each time.’
‘There have been growing concerns recently regarding rumors the authorities are to confiscate properties with any legal disputes on ownership by foreigners, particularly in Bali and Lombok.’
‘It is believed that property can provide an economic boost for the country as the mining boom ebbs.’
‘Amid the tough global competition, once again, we are obliged to show the world that Indonesia is open for business.’
‘On the first-ever state visit to China recently, President Joko “Jokowi” Widodo was astounded by a saying that the building of a bridge is not meant to be transported out of the country — for it is not going anywhere — which is true for significance’s sake.’
‘Then, we may rule that everyone who ceases residence is liable to sell their property on the local market.’
‘Dublin property prices have risen by almost a quarter in the past year figures from the Central Statistics Office show. Property prices continue to climb nationwide rising by 2.9 per cent in October; prices are now 16.3 per cent higher than they were in the same period last year.’
‘The increase is most marked in Dublin where prices rose by 3 per cent in October and are now 24.2 per cent higher than they were in the same period in 2013.’
‘However, Dr John McCartney, director of research at Savills Ireland and a former CSO statistician, said he believed that a slowdown in property prices is on the horizon.’
“I think we’re going to see a slowdown in house price growth…because the amount of cash that’s been driving the market for the past two years is starting to recede,” he said.’
‘Dr McCartney said in the case of cash buyers the “mattress money” invested in housing in the past number of years had “mobilised really rapidly but once it’s spent it’s spent and I think that money has washed through the market as this stage”.
‘He said heightened activity by investors in the residential property market had been fuelled by a high yield on rental income relative to the amount paid for the property but added that “yield is becoming suppressed again as prices shoot back up” meaning the market was less attractive to investors.’
‘Dr McCartney said a dampening of interest by investors would be accelerated when the Capital Gains Incentive - an inducement which means certain property investments do not attract capital gains tax in the first seven years of ownership - is withdrawn from December 31st.’
“If investors and cash buyers are out of the market then who is left? It’s the traditional mortgage finance buyer and I think, when you are dealing with traditional mortgage finance buyers they are going to be a lot more price sensitive…and ultimately that will result in a slowdown in price growth,” he said.
“I think we’re going to see a slowdown in house price growth…because the amount of cash that’s been driving the market for the past two years is starting to recede,” he said.’
Dumb borrowed money holding depreciating assets with no intent to consume in an environment of collapsing demand on a global scale.
Got cash?
‘A Phoenix real-estate guru and celebrity broker is facing more than 12 years in prison and $500,000 in fines after a federal jury convicted her on money-laundering charges. Jurors found Tanya Marchiol, 40, guilty this week on one count of conspiracy to commit money laundering, two counts of money laundering and another count of structuring financial transactions.’
“The fraudulent and deceptive nature of the offenses reflect on the seriousness of the criminal conduct, defendant’s poor character, and the need to protect society from a risk of flight and from further harm,” prosecutors said in a motion. “(Marchiol) has only a single property in the Phoenix area that is seriously underwater. … (She) has a track record of walking away from properties that are underwater that she can no longer afford.”
‘On her company’s former Website, Marchiol promoted herself and her ability to create wealth. The site said her “ability to create wealth for her clients after one of the greatest real estate depressions of our time has earned her remarkable awards over the past two years.”
She highlighted the “incredible returns” she garnered for her celebrity clients and her regular appearances on radio and television shows, including CNN, CNBC and Fox Business. In Phoenix, she was interviewed on 12 News about real estate.’
‘Marchiol is a self-described graduate from the “new school of self-made moguls.”
‘She is also the author of a book called “The Prosperity Principles: Secrets to Developing and Maintaining Generational Wealth.” The book advocates “running your life like a business where everything you do can be deducted from your reportable income as a business expense.”
“She is also the author of a book called “The Prosperity Principles: Secrets to Developing and Maintaining Generational Wealth.” The book advocates “running your life like a business where everything you do can be deducted from your reportable income as a business expense.”
Sounds like she’d invoice me, Monday morning.
Sounds like she’d invoice me, Monday morning.
LOL…
At least you’d know what your tab was as you were going, though, rather than finding out at the end of the relationship!!
She made millions of bucks. Only a $500,000 fine? She probably put a lot of money offshore and in stock funds as a foreign bank business. When she is out in 12 years, she will have $millions. Probably will get out for good behavior in four.
data from fed reports?
what’s lazier than a prof=nothing
Michael Orr, director of the Center for Real Estate Theory and Practice at the W.P. Carey School of Business at Arizona State University,
Seattle, WA Sale Prices Plunge 13% YoY
http://www.zillow.com/seattle-wa-98119/home-values/
“Kenneth Lewis, who retired as Bank of America Corp.’s CEO after the housing crisis almost toppled the firm …”
Almost toppled the firm? … bahahahahahahahaha … not even close.
When you are Too Big To Fail then failure is not an option.
Bahahahahaha … truly, you CANNOT LOSE with the stuff I use.
“the buyer demands the seller pay all of the closing costs…”
Brilliant! Now pay interest and taxes on the extra price, for like ever.
“Brilliant! Now pay interest and taxes on the extra price, for like ever.”
“… for like ever.”
YES! And ever and ever and ever and ever and ever …
Yes. Yes yes yes yes yes yes yes yes …
‘Construction has slipped to its worst level since the post Sydney Olympics slump, raising concerns that residential building could struggle to take over from mining to drive the economy.’
‘The slide in housing construction was disappointing, TD Securities Asia-Pacific strategist Prashant Newnaha said. He said the figures suggested dwindling confidence in the sector, although the value of private residential construction was near 25 year highs.’
“This outcome is slightly disappointing in that the Reserve Bank has looked at this sector to pick up the slack and suggests a possible easing in ‘animal spirits’ that have characterised this sector,” he said. “The slowdown in quarterly data suggest that the transition from mining to non-mining is proceeding at a slow pace.”
‘The New York Times recently lit up the Japanese Twittersphere with a cartoon that was a little too accurate for comfort. In it, a stretcher marked “economy” is loaded into an ambulance with “Abenomics” painted on the side; the vehicle lacks tires and sits atop cinder blocks. Prime Minister Shinzo Abe looks on nervously, holding an IV bag.’
‘The image aptly sums up Japan’s failure to gain traction in its push to end deflation. The Bank of Japan’s unprecedented stimulus and Abe’s pro-growth reforms have yet to spur a recovery in inflation and gross domestic product growth, and the country is yet again in recession. Worse, BOJ Governor Haruhiko Kuroda is rapidly running out of weapons in his battle to eradicate Japan’s “deflationary mindset.”
‘Minutes from the central bank’s Oct. 31 board meeting, at which officials surprised the world by expanding an already massive quantitative-easing program, show that Kuroda now has a budding mutiny on his hands. Many of his staffers think the central bank has already gone too far to weaken the yen and buy virtually every bond in sight.’
“The experts got 2014 wrong.”
What a surprise.
“It looks like most economists made a fundamental error.”
A shocking revelation!
“They underestimated the power of one of the great economic forces of the epoch – disinflation.”
This “disinflation” thingy is something that results from another thingy called “lack of money”.
“The big leap for the authorities is to rethink their horror of gently declining wages and prices.”
These people really - REALLY - do need to get out a bit more often.
“There is actually not that much to be afraid of. Workers, shoppers, companies and investors are not stupid. They can easily adjust to a new but basically stable monetary order.”
Stable monetary order? We pukes can easily adjust to a new but basically stable monetary order? Okay, GIVE US ONE and maybe we’ll give it a shot.
“Central bankers aren’t stupid either.”
Well, that’s debatable.
“When they warn about deflation, for the most part they are actually worried about a different but related problem: the excessive levels of leverage in many economies.”
Brought about by who? By Central Bankers perhaps?
“Deflation automatically increases the ratio of debt to GDP, while managed inflation gently and helpfully erodes it.”
“Managed inflation” … managed by whom? These same Central Bankers who managed us into the current situation are supposed to manage us out?
“After years of wanton debt expansion …”
… which is a Central Banker’s ultimate answer to all economic problems …
“… the 2 percent inflation rate currently considered optimal by the authorities is too low to really be much assistance. Central bankers and their political bosses will have to figure out ways to deal with debt other than shrinking it by inflating wages and prices. In the meantime, a more realistic and less fearful appraisal of the disinflationary tide would lead to better predictions, more appropriate monetary and fiscal policies – and a healthier economy.”
“Central bankers and their political bosses …”
So much for the touted independency of Central Banks.
“… will have to figure out ways to deal with debt …”
“… figure out …”
These Central Banker types come on the scene with their degrees and their theories and - really - they haven’t a clue as to ACTUALLY KNOWING what to do, they always seem to be in the process of “figuring out”.
‘U.K. Prime Minister David Cameron introduced an expanded version of the Help to Buy home-loan program a year ago, saying it would boost ownership among young Britons. It isn’t working.’
‘First-time home purchases made with a mortgage rose 1 percent in October from a year earlier as property values increased faster than earnings, LSL Property Services Ltd. said in a statement today. Prices in the U.K.’s 20 largest cities climbed 9.2 percent during that period.’
“It’s the wrong policy for the problems that are present in the housing market,” Rob Wood, chief U.K. economist at Berenberg Bank in London, said in an interview yesterday. “The main problem is a shortage of supply, yet Help to Buy is intended to boost demand.”
‘You hear it all the time, in the mouths of developers, ministers and commentators. The reason for building over unspoilt countryside is that the nation is short of land for housing, thanks to an unduly restrictive planning system.’
‘But it’s wrong, plain wrong. For a start, developers are sitting on enough land for 400,000 houses which have already been given planning permission. That’s enough for nearly four years at the present much too low rate of building – or two years of what would be needed to meet a realistic demand. Put more graphically these would be enough homes, even if built in a traditional terrace, to reach from London to Rome (I’ve done the sums)’
‘Yet developers prefer to hoard the land, leaving it idle, as it gets steadily more valuable – while continuing insisting that planning controls should be undermined so as to allow them to bank even more of it.’
‘Then there’s brownfield land. This week a report by the Campaign to Protect Rural England concluded that there is enough of it in England alone for at least a million homes, enough to meet five years of demand, or to build that terrace from London to Cairo. What is more, it is constantly increasing as factories, hospitals and other institutions are merged or close down.’
‘Since 2010, the amount of space that tech companies occupy in San Francisco towers over 12 stories has jumped from 3.5 million square feet to 7.2 million square feet, according to the commercial real estate brokerage CBRE. That’s the equivalent of more than 14 Transamerica Pyramids and enough space to house about 35,000 workers.’
‘And much more is coming. Of the eight office buildings under construction in the city, 100 percent of the space has been pre-leased to technology companies. Uber, LinkedIn, Dropbox, Salesforce and Splunk have combined to take 2.5 million square feet in buildings that have not yet opened.’
‘Since 2010, the amount of space that tech companies occupy in San Francisco towers over 12 stories has jumped from 3.5 million square feet to 7.2 million square feet, according to the commercial real estate brokerage CBRE. That’s the equivalent of more than 14 Transamerica Pyramids and enough space to house about 35,000 workers.’
‘And much more is coming. Of the eight office buildings under construction in the city, 100 percent of the space has been pre-leased to technology companies. Uber, LinkedIn, Dropbox, Salesforce and Splunk have combined to take 2.5 million square feet in buildings that have not yet opened.’
“The reality is that big finance is contracting, and law is contracting, while tech continues to expand,” said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley. “The tech guys can pay the most. They can’t find what they are looking for South of Market, so they are more open to traditional office towers.”
“In some cases people are going to see their rents double,” Boutwell said. “Without a doubt it’s not an easy pill to swallow. In 2000, we saw the traditional businesses rise right alongside the tech businesses. That is not the case this time. Very few of those firms are growing.”
‘The danger is that the tech wealth is creating an uneven playing field, said Rosen of UC Berkeley — not just for office space but also for housing. “Are we becoming too expensive for traditional industries because of the high cost of housing?” he asked. “Tech seems to be immune to it because of the tremendous wealth created through the capital markets and stock IPOs.”
We all know the capital markets and stock IPO’s never let you down. This is going to be amusing to watch.
What is splunk?
Probably a plucky skunk. Or funky spunk.
It is some web design tool. My colleagues use it. I don’t care much for web design. To each their own…
No its for collecting data and searching it.
Thank for your tireless work on this blog. Real estate sales in the east bay of the San Francisco Bay Area appear to have flattened. There appears to be reduction in inventory rather than increase. I think home sellers have removed their properties from the market until spring hoping for a price rebound that I personally would like to not see. From a different perspective the roads here are full during the week as it appears the tech boom is still fully in tact.
The data shows prices falling and inventory continue to build.
‘We are seeing history in the making in the bond market today, with an all-time low in 10-year yields in each of the following countries:
Germany: 0.70%
France: 0.98%
Italy: 2.03%
Spain: 1.86%
Netherlands: 0.81%
Portugal: 2.80%
Switzerland: 0.31%
Japan 0.41%
‘What do each of these countries have in common? Slow to negative economic and wage growth and extreme deflationary pressures. This makes sense as interest rates are a reflection of both growth and inflation.’
‘The fascinating thing here, though, and why this historic day may go unnoticed by most market participants, is that we have become conditioned to believe weaker growth is a good thing. Why? Because it means more central bank “action” to prop of stock markets in the near-term.’
‘But stepping away from the stock market, is the race to 0% by global central bankers really a good thing? Only if you believe that short-term stock market prices are the economy. Unfortunately, as I wrote recently, this is becoming further and further from the truth. For if it were, the Japanese economy would be booming today as the Nikkei surges higher. Instead, Japan is slipping into it’s fourth recession since 2008.’
‘As it turns out, creating financial bubbles and asset price inflation does not create growth and prosperity for all. But don’t expect central bankers to admit this any time soon; they are what you call in poker “pot committed” to this policy. And thus the race to 0% is likely to continue as central bankers increasingly compete with one another in the greatest financial experiment in history.’
‘Given such evidence, to believe that the Fed is targeting anything but another bubble in stock prices at this point would be an enormous leap of faith. How could one rationally conclude otherwise? Six years of easy money has unquestionably inflated asset prices but failed to have a proportionate effect on the real economy. If maintaining 0% interest rates was really about wage and economic growth, wouldn’t we have seen it by now after six years?’
‘Far from admitting this and starting to normalize interest rates (which if they followed prior cycles would have been done back in 2010), the Fed seems to be doubling down here on their “wealth effect” theory.’
‘The more important question in my view is whether this is really the policy we want to be following five years into an expansion. Have we really learned nothing from the booms and busts of the internet and housing bubbles? Is creating another financial asset bubble the most effective long-term policy to generate economic growth and increase prosperity for all? It is clear by now that the Fed believes so.’
Long Beach, CA Sale Prices Turn Negative 3% YoY; Crater 14% MoM and 12% YoY
http://www.zillow.com/long-beach-ca-90803/home-values/
But after Orr paid all the costs, the real selling price is probably closer to $160,000.”
and he’s their expert?
‘A new report from a Chinese government agency finds that the country has wasted $6.8 trillion invested in “ghost cities,” abandoned apartment buildings and highways to nowhere. The staggering amount accounts for half of all Chinese investment in the economy since 2009.’
Poof!
I wonder if anyone who ordered the cities built is going to die for it? China is prone to execute its bad business practitioners…
“China will pay a very steep price for this investment waste. It is unlikely the country will ever again reap the outsize economic benefits it has enjoyed over the past two decades. It may very well have squandered its potential.”
Consider that this “$6.8 trillion” admittedly wasted by the government is the tip of the iceberg. Add to that the $25 trillion credit expansion, which is money largely squandered by private interests and is not officially recognized by the government as waste.