A Shortage Of Demand Compounds The Oversupply
A report from the Charlotte Observer in North Carolina. “It’s commercial real estate forecast season in Charlotte. Experts and real estate professionals seem agreed that while Charlotte’s white-hot pace of growth in everything from rent to new construction might slow down a bit this year, there aren’t any big, flashing signs warning ‘Crash ahead!’ Put another way, most professionals don’t think we’re sitting on top of another pre-recession bubble here. Still, growth is expected to slow a bit from 2015 and 2016, with words such as ’selective,’ ‘cautious’ and ‘take a pause’ popping up frequently in real estate forecasts.”
“With nearly 24,000 apartment units in development this year throughout the Charlotte region, one of the most frequent questions I get is ‘When are we going to build too many apartments? ‘Yes, you all are building a lot, but you’re also absorbing a lot,’ said Kevin Thorpe, global chief economist for Cushman & Wakefield. But that doesn’t mean average rents are going to keep shooting up at the current burning pace of 35 percent over the past five years. With the big increase in supply, rents are likely to stop growing as fast, and perhaps even fall a bit. ‘I would be anticipating that your apartment sector is going to see a pretty significant softening of rents in the next few years,’ said Thorpe.”
The Sun Sentinel in Florida. “South Florida rents have strongly favored landlords in recent years, but the rental market appears to have peaked, said Marshall Sklar, co-founder of Florida’s Best Realty Services in Boca Raton. While rent increases continue, some tenants are starting to balk at the higher prices, forcing landlords to offer reduced rent hikes and concessions such as free rent, Sklar said. ‘The market is still strong, but it’s not what it was a year ago,’ he said.”
The Anchorage Daily News in Alaska. “Anchorage landlords appear to be seeing more effects of the slowing Alaska economy. Debenham Properties right now is offering prospective new tenants a 5 percent rent discount — more than the typical seasonal deal, Shaun Debenham said. The company is also offering a move-in special that includes $300 off the first month’s rent, something it hasn’t done in the past. ‘I think we have seen a lot of higher-end jobs leave Alaska. Like when oil companies are laying off, it affects a lot of other higher-paying jobs down the line,’ Debenham said.”
From The Gazette in Colorado. “If Colorado Springs’ real estate market and economy were social media topics, they’d be trending - and in the right direction. Single-family housing had a record year for sales in 2016, while apartments filled up and rents soared. The local apartment vacancy rate plunged to 4 percent in 2016 after having been as high as 10 percent in 2008, said Doug Carter, a local commercial broker and part of national real estate firm Sperry Van Ness.”
“But the increases followed years in which rents were stagnant, Carter said. At the same time, Springs-area rents over the last 12 years have increased only about half as much as those in Denver, he said. Denver’s apartment market is cooling, in part, because it’s being overbuilt; 25,000 units are under construction and another 27,000 are planned, Carter said.”
The Las Cruces Sun-News in New Mexico. “New Mexico State University on Friday walked away from a plan to privatize campus housing. NMSU Chancellor Garrey Carruthers said the university has too much housing stock. ‘But you have to keep in mind how we got here,’ he told the Sun-News. ‘Years ago, there were none of these apartments around here. This campus was out here by itself, so the university took it upon itself to build all of this housing. Now we’ve got private apartments all over the place, and we just don’t need it.’”
From Real Estate Weekly on New York. “Rents in Manhattan and Brooklyn continued to trend downward during December, according to the monthly rental market report from Citi Habitats. The last time this much inventory was available on the market was in April of 2009. ‘The most recent data for December shows there is considerable local demand for rental housing. However, there is still a disconnect between the rents that landlords want to achieve and the pricing tenants are willing to pay, which is why concessions remain a significant force in the marketplace,’ said Gary Malin, President of Citi Habitats.”
The Dallas Morning News in Texas. “Dallas-Fort Worth apartment rents weren’t rising as fast in December. The rate of rent increases in the Fort Worth area also declined. ‘D-FW is finally feeling some of the effects of all the new supply hitting the market,’ Axiometrics’ Jay Denton said in the report. ‘While demand has remained relatively steady as job growth has not declined significantly, supply has finally caught up with demand.’”
“Average quoted Dallas-area apartment rents were actually down in December from November — but not by much. About 50,000 apartments are under construction in North Texas, more than any other U.S. metro area.”
The Houston Chronicle in Texas. “Average apartment rents in the Houston area dropped to the lowest level in two years, a new report showed. The Montrose/River Oaks submarket, where many new units have been built in recent years, saw an annual drop of 8.4 percent in December. Houston-area apartment investors and property owners need jobs to be created so demand for their units will increase,” Jay Denton, Axiometrics senior vice president of analytics said in an announcement. ‘Even though construction of new properties is subsiding, a lot of supply is still hitting the market. With occupancy below 92 percent, many units are vacant.’”
Inforum on North Dakota. “Apartment vacancies are on the rise in Fargo-Moorhead. The latest apartment vacancy and construction report, compiled by Appraisal Services Inc. and released Jan. 12, took a snapshot of the community market as of Dec. 1. These reports are for the Fargo-Moorhead metropolitan area, including West Fargo and Dilworth. The latest survey reflects 30,155 units of the estimated 39,050 apartment units now in the metro area. While 236 new units entered the market in the last quarter, vacancies went up by 443, ‘indicating that the market may now be experiencing a shortage of demand to compound the current oversupply of units,’ according to the report.”
“The overall vacancy rate for the metro was 9.21 percent, up considerably from 6.4 percent in December 2015 and 2.9 percent in December 2013. The rate increased in all four communities in the market, with West Fargo having the highest vacancy of 12.55 percent, followed by Dilworth at 12.2 percent, Fargo at 8.85 percent and Moorhead at 7.98 percent. More than 6,000 new apartment units have been built since vacancies hit a recent low of 2.5 percent for the metro, according to the report.”
“But the latest figures are likely a conservative estimate of the reality because the survey only measures physical vacancy, or units that are not occupied, and can’t account for the ‘economic vacancy’ that’s likely more than 10 percent now because of units currently affected by rental incentives or rent delinquencies.”
‘With the big increase in supply, rents are likely to stop growing as fast, and perhaps even fall a bit. ‘I would be anticipating that your apartment sector is going to see a pretty significant softening of rents in the next few years’
Charlotte was one of the last red hot holdouts - until now.
I’m waiting for the NAR to brush off its don’t-worry-be-happy line from 2007: “Now is a great time to buy AND sell.” Cognitive dissonance much?
Now is a great time to run screaming for the hills!
Already staked out my lawn chair on the high ground: am awaiting the floor show with popcorn in hand.
Lets say fiscal stimulus promised by Trump happens: tax cuts + repatriation of cash + infrastructure spending.
All that would lead to inflation. In an inflationary environment, why would rents fall? The rents would rise.
If you believe that Trump is a messiah who’s going to provide huge fiscal stimulus and economic growth, and “create wealth”, why would you believe that rents will fall? It’s counterintuitive.
On the other hand, if we get the loss of jobs and recession (certainly possible with proposed policies of trade wars, taxes on consumption, etc.) - then yes, the rents will fall.
‘why would you believe that rents will fall’
Because they already are.
We are talking about the future direction of prices, based on new policies. The past is irrelevant.
Prices fall due to surplus capacity regardless of interest rates.
But higher rates would cause cap-rates to increase, causing building prices to plummet! That would be fascinating to watch…
In an inflationary environment, why would rents fall ??
Rents are a reflection of a tenants ability to pay…Inflation creates a higher cost of doing business thereby squeezing margins for tenants…Lower the rent so I can stay in business or I am shutting the doors…
“Lower the rent so I can stay in business and/or survive recession” - that’s deflationary environment.
“I’m raising rents because the price of everything else, including my costs, went up, and/or the economy is booming” - that’s inflationary environment.
We’ve been on this blog for several years and we still haven’t been able to get a good trend on inflation. There are too many factors which confound the traditional formulas for inflation. Creating money out of thin air and playing interest rate games is one reason. Another reason is exporting huge amounts of money to foreign countries for factories and/or white collar IT-based services. Real estate pricing is especially confounding because of location. It’s no good to build 24000 apartments in Dallas if Trump’s policies create jobs and stimulus in Pittsburgh.
I’m not sure that suddenly shifting an economy based on low-interest debt to an economy based on goods and services is either inflationary or deflationary. I don’t know what it is. Have we ever had that shift before?
I’d like to see Trump’s tax returns.
If he has a lot of debt - we’ll get inflation. If he has a lot of cash - we’ll get cratering RE prices. LOL.
What? Just as good a method as any, at this point.
“see Trump’s tax returns”
That wouldn’t tell much. Any debt would be buried in the financials of the companies he owns. He did make financial disclosure to the Election Bureau or such according to what was spoken at his press conference last week. That’s where the real information is on his situation. Very little debt.
As for inflation; is the biggest expansion of credit in the history of the world over yet?
Do you really believe wages will triple or quadruple to meet grossly inflated rental rates and housing prices?
Of course not.
Rental rates and housing prices will continue to fall to dramatically lower and more affordable levels meeting wages.
Litchfield, CT Housing Prices Crater 10% YoY
http://www.zillow.com/town-of-litchfield-ct/home-values/
Do you really believe rents will fall in inflationary environment and growing economy?
Rental rates are falling and rock bottom is a long way down.
Past performance does not guarantee future results.
A very long way down.
Keep dreaming. One day you will win that lottery.
“Past performance does not guarantee future results.”
Does this apply to the President’s tax returns too?
“What you see is what you get” applies to the liar-liar-pants-on-fire.
“Past performance does not guarantee future results.”
Does this apply to the President’s tax returns too?
There has been some change. That Kelly Anne woman finally admitted that the audit excuse was a load of BS.
If you believe that Trump is a messiah who’s going to provide huge fiscal stimulus and economic growth, and “create wealth”, why would you believe that rents will fall? It’s counterintuitive.
Why would you insult the intelligence of HBB regulars who by and large are not fans of “huge fiscal stimulus” as a means of creating real, sustainable economic growth and certainly do not look to Trump as some kind of Messiah, but rather see him him as a middle finger to the Establishment status quo? When our Establishment-proferred “alternatives” were HillaryJeb, the arrogant, out-of-touch elites sealed the outcome of this election. And regardless of what Trump does or doesn’t do, to date he’s been a vast improvement over the same-old, same-old we would’ve had otherwise.
A “middle finger to establishment” whose cabinet of billionaires is made of CEOs and Goldman Sachs bankers?
Replacing “lying politicians” with a pathological liar (who tells fact-based truth only 4% of the time) seen as an improvement?
Excuse me, but I don’t understand this logic of replacing bad with worst, just as I don’t understand how people can simultaneously support Trump’s inflationary program, while expecting rents to go down.
The regulars may be not fans of fiscal stimulus, but that is exactly what your boy suggests, so why not own it?
You’ve hit the nail on the head Miss Russia! Probably your corporation wanted the new administration to hire all Grilled Cheese Truck drivers. It is not the skill set of anyone given responsibility that guarantees corruption. It is the heart.
We shall judge by the fruit of the tree if we have what we wanted, an honest administration. The chance is still worth taking, given the proven corruption of what we just rejected.
I’m not happy with some of Trump’s cabinet choices, nor do I care for some of his boorish behavior and comments, especially ill-chosen words that needlessly alienate millions of our fellow citizens. Had the Democrats and Republicans offered me better choices than two exemplars of the crony capitalist, corporate statist status quo - HillaryJeb - I would’ve gladly voted for someone else. But they didn’t, so I didn’t. I especially appreciate Trump’s explicit “America first” commitment, since the globalists have governed for the exclusive benefit of the top 1% while utterly disregarding the needs, aspirations, and concerns of most Americans.
Do I have a lot of reservations about Trump? Absolutely. And I think a lot of your warnings about Russia are valid. But given the choice between Trump and Crooked Hillary, that was maybe the easiest decision of my life, and so far I have no regrets. Oh, and the tears and caterwauling of the precious snowflakes and SJWs fill me with pure joy.
“Cabinet of Billionaires”
But there’s a difference now. As Mikey has been saying for the past couple of days, corporations are duty bound to place profit over people. But in a government position, the same CEOs will be duty bound to put the people over profits.
Oh, I know, they all probably took their positions to feather their nests even further. However, they are no longer in charge of their old companies. They now answer to a man who is very clear about getting jobs for Americans. A man who is famous for firing people on television. And a man who is *well* aware that if he doesn’t deliver, his supporters will fire *him.*
‘the latest figures are likely a conservative estimate of the reality because the survey only measures physical vacancy, or units that are not occupied, and can’t account for the ‘economic vacancy’ that’s likely more than 10 percent now because of units currently affected by rental incentives or rent delinquencies’
When these factors are accounted for, as we’ve seen in Denver, the vacancy can be double or triple the number we’re usually given. In other words, all of these markets are in serious trouble.
Their is low inventory in a lot of areas because no one wants to sell their cash cow.
Your shtick is over. Just a couple months ago it was “QE 4 is eminent!” So much for that:
‘The Federal Reserve is likely to start to shrink its massive bond holdings this year, Philadelphia Fed President Patrick Harker said Friday, putting a slightly more concrete timeline on the pullback. The first step in shrinking the balance sheet would be for the Fed to end reinvestment of maturing securities and allow the balance sheet to run off.’
‘Harker said that the Fed should consider ending reinvestment when the fed funds rate reaches 1%. At the moment, the fed funds rate is in a range of 50 to 75 basis points. “One we get there [1%], which I believe we may this year, we should think about stopping reinvestment,” Harker told reporters after a speech to the New Jersey Bankers Association.’
‘Fed Chairwoman Janet Yellen said in December that the central bank would begin to allow the portfolio to run off “once the process of normalizing the federal funds rate is well underway.”
as soon as the bond market sells off a little they will back off all this rate hike bs.
We saw peak central bank hubris last spring. If you bought a long term German bond last summer, you’ve been wiped out:
‘The European Central Bank can still conjure up policy surprises if needed to combat economic shocks and restore euro-area inflation, Governing Council member Vitas Vasiliauskas said.’
“Markets say the ECB is done, their box is empty,” Vasiliauskas, who heads Lithuania’s central bank, said in an interview on Tuesday in Vilnius. “But we are magic people. Each time we take something and give to the markets — a rabbit out of the hat.”
May 11, 2016
I can’t figure out what idiot would buy bonds at negative interest rates. However they are, they deserve to get wiped out for helping to enable such fraudulent Keynesian monetary policies.
“They have artificially stimulated so many different asset bubbles, whether it’s debt, which is epic, or stock markets, many of which are at historic highs. If we have a crash, it will be in the second half of 2017. The promises, the rate hikes, the dollar being high could collapse into the realities of the stability and this artificialness.” nomi prins
‘can’t figure out what idiot would buy bonds at negative interest rates’
This is where I wonder what the heck you guys have been doing. Are you so wrapped up in drudge headlines that you have missed what’s happened here? Look at these formerly red-hot apartment markets, melting above.
I’ll re-cap: the reason people who manage trillions of dollars would buy negative return bonds was the greater fool theory. There is no other conclusion. Why would one risk losing half of the principle if a 1% rate increase occurred for a .4% return like last summer? Because you expect to sell later for a yugee profit! Meaning, interest rates were going even lower.
That’s right, lower from almost negative. The worlds biggest fund managers bought that hook line and sinker.
Do you guys really not remember all the talk last summer? Interest rates were never going up in our lifetimes. The negative returns were the new normal. It was pure caca all along, and was capped off perfectly by this “Magic People” quote. (Look at the photo of this Lithuanian toady!) That’s what people were really thinking, and it was just 7 months ago. It’s been obliterated.
There’s $4 trillion in global bond market losses since then. That’s about half of the US housing bubble losses a few years ago. And we haven’t even gotten started.
This is where I wonder what the heck you guys have been doing. Are you so wrapped up in drudge headlines that you have missed what’s happened here?
Is this directed at me, Ben? I wouldn’t touch US or EU bonds with a ten-foot-pole, not with Keynesian fraudsters at the helm of our central banks. I’ve been well aware for some time that these ludicrously low bond rates were unsustainable no matter how many times the shill financial media assured me they were headed lower.
Interest rates hit a 5,000 year low last summer. Yellen said last month that on top of a 1% increase in the overnight rate, the QE selloff will raise rates another 2%. A 3% increase in 2017 will end the housing bubbles and slaughter bonds.
Yellen the Felon has a long and inglorious history of incessant jawboning about mythical rate hikes, then pulling her patented Lucy-and-the-football routine of failing to actually hike so as not to implode the Fed’s asset bubbles and Ponzi schemes. This year, though, it looks like the jig is up - rising inflation and investor refusal to buy US debt at interest rates far lower than the real inflation rate (as distinct from our Soviet-style CPI statistics) is going to force her hand, regardless of any countermanding orders from her Goldman Sachs handlers.
Are you so wrapped up in drudge headlines that you have missed what’s happened ??
Exactly Ben….Its the Pied Piper effect…Look this way so you won’t see what is really happening over there….
I wouldn’t touch US or EU bonds with a ten-foot-pole ??
Thats because you don’t have enough money to justify and understand the investment…You look at your resources and ask yourself where can I get a rate of return with acceptable risk…People, institutions and even Governments sometimes don’t give a rats ass about rate of return…Its all about “Preservation of Principal” in a diversified portfolio…Sometimes, not losing it all is the driver…Don’t we see a lot of small investors just “sit on their cash” even in the face of higher bond yields and inflation ?? Thats because they don’t care…The cash is there for them, even if its worth a bit less than it was the day before…
Interest rates became detached from risk. Last summer one report marveled at how Spain had borrowed $50 billions at 3% for 30 years. For those that don’t know, Spain is kinda iffy about paying money back. What are the chances that in 30 years Spain might stub its toe and bail on that 50B? I’d say close to 100%.
The same article pointed out that oxide could borrow for 30 years at an even lower rate (adjustable). What are the chances that she might lose a job or get sick, etc? Around that time I listened to a Houston apartment owner (had 1,000 units) talking about how he had refinanced into a 3 year note at under 3%. Houston apartments! Nobody was pricing risk into loans.
chances that she might lose a job or get sick, etc ??
Yep Ben…Fundamentally that is the “real” risk in assuming long term debt…In my early years I understood that if something happened to me my family might lose it all even if at the time it did not amount to that much..
Knowing this, I hedged with a term life insurance policy on both me & the Mrs…That works, as long as you die but it does not work if you are just incapacitated so the 2nd hedge was disability insurance on me…
As time went on, insurance was not necessary as the safety net…Cash reserves were and still are today…
Or the risk that her house might fall in value. Or the risk of inflation happening in the next 30 years. Where was that? It was simply priced to perfection.
Or the risk that her house might fall in value ??
I get that Ben but if you have the resources to service the debt then at least you still have the roof over your head…When the house falls in value and you “don’t” have the resources to service the debt then thats when the SHTF…
I can’t figure out what idiot would buy bonds at negative interest rates.
Especially when there were other options that actually paid interest. Even at the bottom, 91 Day T-Bills paid 0.25% interest. Meanwhile, German 10 year bonds were offered just last summer.
I’ll re-cap: the reason people who manage trillions of dollars would buy negative return bonds was the greater fool theory. There is no other conclusion. Why would one risk losing half of the principle if a 1% rate increase occurred for a .4% return like last summer?
Couple of thoughts, Ben…
I’m one of those people who have consistently bought some government bonds over the course of the downturn, even during the interest-rate trough. The reason is not that I expect to sell to a greater fool; instead, I expect to hold to maturity, as the market rate for the bonds will be less than what I bought them for. But I don’t care about the market price if I’m holding to maturity.
The reason? I’m strongly prioritizing return-of-capital over return-on-investment. By laddering some Treasuries, I get some return, with high confidence that I can re-invest the principal in something else later at better prices than today. And I don’t care that the rate will eventually be below-market, either; the theory is that by laddering, I get a higher average rate than the risk that I’m otherwise willing to take; I’ve been buying 5yrs to reduce interest-rate risk and keep my duration short. Consistently getting 5yr rates with 2.5yr duration, I might add.
While I haven’t invested at negative rates, similar principles can apply there: large funds do not have the luxury of stuffing money in a mattress, like we can at home. They simply can’t process billions of dollars of paper bills. And personally, I don’t like the risk-profile of keeping that much cash at home. I’d prefer it be in the bank, but not above the FDIC/FSLIC limits.
YMMV, of course.
91 Day T-Bills paid 0.25% interest. Meanwhile, German 10 year bonds were offered just last summer ??
I strongly suspect that the institutions and large private net worth individuals bought both…
“was the greater fool theory”
I would add the word CRONY to the greater fool theory - these funds weren’t planning to sell to some guy on the street caught up in bubble-mania. They fully expected to sell to the ECB. Japanese bond investors expected to sell to the BoJ.
It was monetization, pure and simple, enabled by central banks making the bondholders who played along rich.
“institutions and even Governments sometimes don’t give a rats ass about rate of return. Its all about “Preservation of Principal””
Um, no. It’s all about collateral, rehypothecating bonds into debt to increase leverage. You think hedge funds justified 2 and 20 on preservation of principle? You think Calpers is cool with losing money when they pay out at an annual (fictional) 8% return? “Preservation of principle” while investors are farther out on the risk spectrum for lower returns than at any time in history? Ludicrous.
Um, no ??
Um Yes….
The safest investment in the world right now is German & USA bonds…The bonds are only one vehicle that Calpers or hedge funds have…Its called diversified but I suspect you know that…
The statement I respond to originally was “I would not touch negative yield bonds with a 10 foot pole”…I just made the rationale why many institutions and large net worth individuals would buy negative rate bonds…And, you really don’t need me to tell you that…They are selling them aren’t they…
Yellen the Felon will never raise rates of her own volition, as the Fed is bilking savers and the prudent out of hundreds of billions a year in interest rates and forcing yield-seekers to “invest” in Wall Street’s rigged casino. But in 2017, rising inflation due to the central bankers’ debasement of global currencies, and the dumping of US Treasuries by former buyers of US debt, is going to force Yellen’s hand, detonating the Fed’s asset bubbles and Ponzi markets.
And in 12 months when the 10yr yields 8%?
Game over.
And the economy won’t recover until that happens.
the 10 year is being held hostage by all the central banks. Do you think these folks want to bankrupt their hosts?
Don’t confuse the parasites with the hosts.
Yellen the Felon will never raise rates of her own volition, as the Fed is bilking savers and the prudent out of hundreds of billions a year in interest rates and forcing yield-seekers to “invest” in Wall Street’s rigged casino.
As far as I know, the Federal Reserve only directly controls the interest it pays to banks who park cash there.
FRB much more importantly controls the interest bank has to pay to get secured overnight loans (the federal funds rate), and that rate determines what banks will be willing to pay depositors in interest.
“Your shtick is over.”
And wallet empty.
I’m glad I never listened to any of your investment advice. You dont take any risk and leave a lot of cash on the table.
If you tell me what food bank you’ll be frequenting, I promise to donate from the pile of cash I left on the table (or invested in precious metals).
raging ray take your meds today?
Why dont you watch this video and listen to this woman!
https://www.youtube.com/watch?time_continue=639&v=UtVMBCOaaUo
Get what you can get for your house today because it’s going to be much less tomorrow for many years to come.
The idea is not that you left money on the table.
The idea is to gain so much cash wealth that gambling is unnecessary. Any financial plan with great risk is great gambling.
You’ll laugh at a guy with a system on horse racing, but laud the guy who says he makes money on market risk….
No one here is admiring of your 10 percent imaginary stock return on your $15k life savings.
I think dirty Scottsdale coined the term:
Thirtythousandaire
Many to most here don’t qualify….
The idea is to gain so much cash wealth that gambling is unnecessary.
+infinity, Fang Nu. And while I definitely will and have taken calculated risks, the current stock-market casino does not really allow for risk to be calculated, IMO. So I’m making my way slowly to FI by saving, not gambling.
My 1% savings account makes me a 1%er.
“My 1% savings account makes me a 1%er.”
Now that’s just too funny right there, I don’t care who y’are!
Remember my good friends….. Nothing accelerates the economy like falling prices to dramatically lower and more affordable levels. Nothing.
Ashland, OR Housing Prices Crater 10% YoY
http://www.zillow.com/ashland-or/home-values/
The first step in shrinking the balance sheet would be for the Fed to end reinvestment of maturing securities and allow the balance sheet to run off
Just how many Treasuries held by the Fed are scheduled to mature this year? Apparently, they own $2.4T in Treasuries, but I haven’t been able to find any data on their mix regarding when they mature.
If say $1T were to mature, that could have quite an effect. But if the number is just a few billion, then it’s just a blip.
yeah it would be nice to see what mix of treasuries the FED has.
Even if the bonds mature does the issuer have the money to pay back the principal? The issuer in this case would have to issue more treasuries to pay off the old. Who’s is gonna buy them at these yields? It seems like any bonds that mature on the Feds balance sheet are quickly bought back. That’s why the balance sheet hasn’t shrunk. In order to get real buyers rates have to go up. Traders were buying these bonds not for the yield but for the capital appreciation. At some point the appreciation runs out as you get closer to 0 rates. That’s why there was a push for negative rates.
I would think they would have structured the portfolio to buy as much time as possible.
I finally found this:
https://www.bloomberg.com/news/articles/2016-01-18/fed-s-216-billion-treasuries-rollover-recalls-crisis-era-buying
“Portfolio has $1.1 trillion of U.S. debt maturing through 2019″
“The $216 billion of Treasuries the Fed has maturing in 2016 amounts to almost half the net new government-debt issuance that JPMorgan Chase & Co. forecasts for this year. And there’s no letup in sight: $194 billion comes due in 2017, about $373 billion in 2018 and $329 billion in 2019.”
So it’s not trivial. Though I suppose that if push comes to shove and buyers for new debt are scarce, then the Fed will probably buy new bonds to roll over the debt.
And there’s no letup in sight: $194 billion comes due in 2017, about $373 billion in 2018 and $329 billion in 2019.”
Interesting; that’s far from the uniform distribution over 30yrs that I speculated about a few min ago…
The first step in shrinking the balance sheet would be for the Fed to end_
You could just put your period right there.
If say $1T were to mature, that could have quite an effect.
You missed a key point: they won’t wind down the Treasuries, but rather the agency/GSE debt first. The Treasuries are likely there for the long haul.
And the run-off will be relatively small in effect; we’re talking $3T spread over 30yrs, so only about $100B/yr.
Still, it’s an important milestone, if/when it actually happens. I’ll believe it when I see it. This very well might just be a new variety of jawboning.
“That ensures the legacy of the Fed’s quantitative-easing programs, which boosted its Treasuries holdings from less than $500 billion in 2009, will extend even further into the future. As officials roll maturing issues into new debt, that swells the amount coming due later in the decade.”
Just as everyone here has speculated that since there is no money to pay back the maturing 216 billion more bonds are sold to pay off the maturing ones.
What is the limit to this? Seems like this balance sheet could expand to whatever number feels good and keep rolling the treasuries over. It really seems like a gravy train that once you enter that path you cannot return.
Why cant the fed keep expanding to 50 trillion? what is holding it back?
Seems like this balance sheet could expand to whatever number feels good and keep rolling the treasuries over.
Works great, right up until suddenly it doesn’t!
What is you described is called monetizing the debt; when done with true conviction (think Zimbabwe), it is not long until the end.
If the Fed were actually stop reinvestment rather than just talking about it, they would be making a strong policy statement against monetization.
Still, it’s an important milestone, if/when it actually happens.
Thanks for pointing that out, as the article didn’t make a distinction to Treasuries vs. MBS’s as to what won’t be rolled over.
But, are MBS’s rolled over? If it expired after 30 years, wouldn’t that kind of imply that the mortgages had been paid back or refi’d into new mortgages that would be covered by new MBS’s?
Also, it seems to me that most of those MBS’s were issued at most 10 years ago. So they wouldn’t be non-maturing for another 20 years? Maybe I’m missing something.
Why cant the fed keep expanding to 50 trillion? what is holding it back?
Inflation?
@Colorado,
MBS have monthly payments of principal and interest. By NOT investing these payments in new MBS, the amount/balance of MBS on the books of the FRB will be dropping each month even if they are long-dated MBS.
Note the difference from USG Tresaury debt, which does NOT have monthly principal payments (bit sometimes have interest payments), and become due at maturity, for the most part.
seems like inflation is good if it ends up in stocks and homes right?
what is holding it back?
I’m going to go out on a limb and answer; Debt Exhaustion.
But, are MBS’s rolled over?
Yes, the Fed has an explicit policy of rolling those over—and they are. The balance sheet shows it.
$4trillion in toxic mortgages is a hefty load.
It’s not $4trillion in toxic mortgages; the Fed’s balance sheet clearly shows that only $1.74T in MBS is held. The remainder is largely Treasuries…
Amesbury, MA Housing Prices Crater 12% YoY
http://www.zillow.com/town-of-amesbury-ma/home-values/
‘Denver’s apartment market is cooling, in part, because it’s being overbuilt; 25,000 units are under construction and another 27,000 are planned…’
’supply has finally caught up with demand.’ Average quoted Dallas-area apartment rents were actually down in December from November — but not by much. About 50,000 apartments are under construction in North Texas’
‘words such as ’selective,’ ‘cautious’ and ‘take a pause’ popping up frequently in real estate forecasts. With nearly 24,000 apartment units in development this year throughout the Charlotte region, one of the most frequent questions I get is ‘When are we going to build too many apartments?’
‘Years ago, there were none of these apartments around here. This campus was out here by itself, so the university took it upon itself to build all of this housing. Now we’ve got private apartments all over the place, and we just don’t need it.’
‘West Fargo having the highest vacancy of 12.55 percent, followed by Dilworth at 12.2 percent, Fargo at 8.85 percent and Moorhead at 7.98 percent. More than 6,000 new apartment units have been built since vacancies hit a recent low of 2.5 percent for the metro’
Parts of North Dakota had the highest rents in the US, summer of 2014. Higher than Silicon Valley.
Another Colorado article says that commuting from Colorado Springs to Denver “isn’t that bad.” Yeah, well I-25 isn’t getting another lane between Castle Rock and Monument until 2019 at the earliest. Add a few inches of snow and crossing Monument Hill could take you 3 hours, LOLZ.
http://www.denverpost.com/2017/01/22/housing-market-colorado-southern-front-range/
Monument hill is notorious for being a bottleneck even in good weather. I’ve been caught in accident free traffic jams there coming back from Springs on a summer Sunday afternoon. And fun doesn’t stop when you reach the south end of the Denver metro area. I suppose though that if you work in Cherry Creek or the Tech Center, that cheaper houses in Springs could be tempting.
The Springs lane addition isn’t scheduled to start until 2019, if they can come up with the money.
http://www.denverpost.com/2017/01/06/widen-interstate-25-denver-colorado-springs/
The hope is to begin construction by the summer of 2019 — pending funding — with work complete between Castle Rock and Monument in five years.
Better make sure that the Tech Center job allows you to telecommute a few days a week, especially in the winter.
Briargate in northern Colorado Springs is being hit by a surge in late-night break-ins of garages and cars parked out on the street, with the probable culprits being anti-Trump activists, shall we say, who come up from Denver, engage in a little redistribution of the wealth, then hit I-25 and high-tail it back to their blue zones.
In the very liberal, left-coast Oregon apartment complex where I currently live, the corporate landlords posted notices on everyone’s doors the other day. It said, “Due to economic conditions, there has been a significant increase in car theft, car break-ins, smash-and-grabs.” Then it went on to tell people the obvious — don’t keep anything of value in your car, etc. Well, good news for me, I ditched the car six months ago, nothing to break into or steal. But it goes to show, things are going on a downward slope.
That seems like a big chore just to steal a lawnmower. Why not just hit Highlands Ranch? It’s just as red and lot closer.
Don’t look for logic from Ray. It’s a typical suburban reaction - must be people from the big city.
MikeyMite is a paid employee of Correct The Record.
Don’t look for logic from Ray. It’s a typical suburban reaction - must be people from the big city.
That’s not my reaction; a colleague whose garage was broken into said that’s who the police suspected was responsible, based on information they had developed. Colorado Springs is well stocked with larcenous riffraff, especially in the areas south of Constitution Avenue that bisects the city.
Leave the army out of this :-).
So this guy told you that the police told him that the suspect was “anti-Trump activist” and you believed it. There’s a sucker born every minute.
“So this guy told you that the police told him that the suspect was “anti-Trump activist” and you believed it. There’s a sucker born every minute.”
Like watching Mike Tyson fight Little Richard.
So this guy told you that the police told him that the suspect was “anti-Trump activist” and you believed it. There’s a sucker born every minute.
I rarely side with Mike, but this time I will. How did the police figure out that the thieves were anti-Trump activists? Did they leave a calling card? It seems to me that there are plenty of opportunities for their “activism” in Denver. Driving an hour+ south to Springs to break into garages makes no sense. Plus it sounds like a great way to get shot, as we have the “Make my Day” law in the Centennial State, meaning that if you break into someone’s house, they can shoot to kill and not be charged. It’s a lot safer to spray graffiti, like the the “Kill Trump” scribble I saw on Colfax today.
Another Colorado article says that commuting from Colorado Springs to Denver “isn’t that bad.”
Probably written by a displaced coastal Californian. They have a skewed idea of “not that bad”.
Boulder, CO Housing Prices Crater 10% YoY On Skyrocketing Housing Inventory
http://www.zillow.com/boulder-co/home-values/
But…but…recovery!
http://www.businessinsider.com/department-store-holiday-sales-are-worst-since-resession-2017-1
The Limited suddenly shut down all of its stores and laid off thousands of workers:
http://www.businessinsider.com/the-limited-shut-down-all-its-stores-and-laid-off-4000-workers-2017-1
And of course, this will be attributed to Amazon and the failures of retail and that sort of thing, and some of that will be true.
What will not be attributed is the feral climate that now exists in many malls, the “teens” flash mobbing and robbing, the potential for terror attacks at large retail venues, or something as small as a person off their meds stripping down and having a freakout, that sort of thing. Can’t even wear a MAGA hat and go out anymore, so why not order over the internet?
Or their filthy sicknesses they breathe all over.
As the economy continues to decline, even more I would never, ever eat at any restaurant. Cooks, waiters, etc., with 100-degree fevers and barely alive will not take sick days out of fear of losing their jobs, further spreading their foul sickness to the masses.
I was just thinking along those lines. I used to enjoy a stop at the food court, wouldn’t dream of it anymore, I often brown-bag it when I go out. No one gives a rat’s patootie about washing their hands after using the restroom, either, despite the signs posted up.
Nah, instead they freak out about imposing vaccinations on everyone. Will your kid win the hypodermic lottery? Stay tuned…whoops, oh, too bad, but here’s your consolation prize: a special needs designation and a lifetime supply of Adderall. Good luck! And remember, there are no losers in life, just runners-up. Everyone gets a prize!
I’ve worked in restaurants all through my college years. In no cases would the restaurant owners or shift supervisors allow visibly sick employees to come to work or stay at work. You could always find a replacement to cover for you, and there was no penalty associated with calling in sick unless it turned out you were skipping work to screw off.
Sounds like parinoia…
Just because yer paranoid doesn’t mean they aren’t out ta get ya!
True story: When we rolled into town in 2000, we stopped by a local franchise that was a combo gas station, convenience store and burger joint. Middle Eastern owned, Mexicans working the food prep. NTTAWWT. We’d just stepped up to the counter at the convenience store to pay for the gas, and all of a sudden we hear all this commotion. Some girl over in the burger joint was yelling “OMG, I can’t believe you just did that! Manager, manager!”
Turns out, some Mexican kid at one of the griddles was trying to impress her and took a sleeve of meat, stuffed it down his pants and pulled it out. We looked around the corner just in time to see him grinning and gesturing. The poor girl was practically hysterical trying to tell what had happened and the manager was trying to calm her down. I don’t know what the upshot was, we had been contemplating having a bite to eat but instead thought the better of it and got out of there fast. I’m sure the poor kid just thought he was playing some sort of youthful prank, which was perfectly acceptable in his own culture.
scdave, maybe so.
On another angle, try going to any restaurant in a major city wearing a Trump hat. Guaranteed 100% you will get your food spit on or some disgusting thing done to it.
Go to a downtown mall in Seattle, scdave, and you may change your mind. I was at one last year and there were several domicile-challenged individuals in there, some of them keeping to themselves and sleeping at the dining tables, while one other was wandering around the food court, ordering items from several vendors, and then screaming obscenities at them when he was asked to pay. Great environment to take your kids into!
Heck, these days, simply wearing an American Flag hat or t-shirt will get you mugged in the major cities.
‘parinoia’ - I have a client whose house got broken into, nothing much was stolen as they don’t even live there, it is vacant more or less. In any regard I ask if they notified the police and they said no, I ask why to which they respond ‘Well, how do you know it wasn’t the police that broke in?’
I think that qualifies as parinoia. Like Nixon said, it isn’t parinoia if they really are out to get ya!
‘Well, how do you know it wasn’t the police that broke in?’
They weren’t from Central or South America, were they?
Did you consider that they may have just been joking? Considering that the police don’t do anything except file a report that your insurance will demand, I concur that there isn’t much point in calling them if your losses don’t justify an insurance claim…
-> “Turns out, some Mexican kid at one of the griddles was trying to impress her and took a sleeve of meat, stuffed it down his pants and pulled it out.”
Ah yes, the ‘ole stuffing meat in your pants trick. 60% of the time, it works every time.
Macys is laying off 10000 workers and shutting down 68 (69?) stores.
American Apparel laid off 2400 workers and is shutting down 110 stores.
More to come. A “border tax” will kill retailers.
Kohls is notorius for its retail gimmicks. They have a shirt for instance that says 50% off a grossly inflated number. Even @ 50% off the grossly inflated price I cant see any value.
I often find auto parts 50% off on ebay compared to autozone and orilleys. The only thing they have going is time it takes to get your parts. That is gonna change soon.
A lot of auto parts on E*Bay are Chinese knockoffs and counterfeits. You get what you pay for in those cases.
“A lot of auto parts on E*Bay are Chinese knockoffs and counterfeits.”
Yep, any query better have oem in there.
A “border tax” will kill retailers.
Why? Nothing they sell is made in Mexico. It’s either from places like the Dominican Republic or Asia.
That’s a good point. If Trump focusses only on China and Mexico, there are dozens of other poor countries to manufacture in.
So the government will pick which countries to do business with.
Drain the swamp and fill it in with poop.
Interesting thread, kind of reads like the beginning of the Great Disgorging.
While rent increases continue, some tenants are starting to balk at the higher prices, forcing landlords to offer reduced rent hikes and concessions such as free rent, Sklar said. ‘The market is still strong, but it’s not what it was a year ago,’ he said.”
The Place I am watching in S. Florida has lowered listed rents by $100 over the last 9 or so months.
annual drop of 8.4 percent in December. Houston-area apartment
I posted in 4Q 2014 that Goldman Sach expected Houston to get hit big time by 4Q 2016. I was thinking around 25-35%. Down 8.4 percent underwhelms me. But then, I lived in Houston in the early 80’s so maybe I am just jaded!
That number doesn’t include incentives or rent delinquency. Around 3 months ago I posted a report with one Houston complex offering 12 months free rent.
Check this out:
https://houston.craigslist.org/search/apa?query=free+rent&availabilityMode=0
Wow, 3mo free looks pretty common now, from that query…
Reminds me of when I was a young pup able to afford living off campus because of the late-80s oil bust. Super-cheap!
Rage, globalists, rage!
http://asia.nikkei.com/Spotlight/Trump-era-begins/US-announces-withdrawal-from-TPP
The meat-axe cometh. The disconnection of greedy mouths from the US goobermint teat, at home and abroad.
This is the only place I have seen that, it must be because of the wall to wall floor to ceiling lunacy coverage of the well organized woman’s Hissy Fit yesterday.
Watching some of that you would think they represented all women which they clearly do not.
TPP was America’s chance to form alliances in order to counterweight the growing influence of China. Now we remove ourselves from the chessboard. Stupid move.
The “growing influence of China” is due to our globalist Quislings off-shoring our manufacturing base to the PRC and then allowing them to dump their slave-labor products so our corporate titans could reap bigger profits. Stupid move.
The quislings were just doing their jobs - maximizing profits. Corporate management has a fiduciary responsibility to put the bottom line above all other concerns.
We’ve pretty much ensured immeasurable carnage in China by facilitating the biggest credit expansion on the planet there. They may want to conquer the world too, but it’s not happening anytime soon. No need to waste trillions on a bad deal like TPP.
Militarization and attempted conquest is one way to unite a country that is experiencing massive economic carnage… It keeps the hungry folks focusing their blame outside the country, rather than focusing internally. See Post WW-I Germany, for example…
Many blamed their fellow Germans for the loss of the war.
The stab-in-the-back myth (German: Dolchstoßlegende, pronounced [ˈdɔlçʃtoːsleˌɡɛndə] ( listen))[1] was the notion, widely believed in right-wing circles in Germany after 1918, that the German Army did not lose World War I on the battlefield but was instead betrayed by the civilians on the home front, especially the republicans who overthrew the monarchy in the German Revolution of 1918–19. Advocates denounced the German government leaders who signed the Armistice on November 11, 1918, as the “November Criminals” (German: Novemberverbrecher).
https://en.wikipedia.org/wiki/Stab-in-the-back_myth
Yes, you know something’s really, really wrong in your country when a) Entire ghost cities are built, but nobody wants to live in them, and b) Everyone is trying to get their money out of the country any way they can.
I don’t get it. Globalists keep saying that America is irrelevant when it comes to trade, what difference could it make if we go our own way.
The only thing “being on the chessboard” has bought us is the hollowing out of our economy. The wholesale decimation of the middle class and rampant debt, both public and private, have been our take aways. Buying stuff from someone other than China won’t change that. If anything, the TPP would have only made things worse.
I don’t think that it would have made much difference at all. The TPP countries are various Pacific country that include Mexico, Canada, Malaysia, and Japan. We already import so much from those places. The tariffs must already be quite low.
It’s easy to confuse a butcher block with a chess board.
Miami, FL Housing Prices Crater 6% YoY
http://www.zillow.com/miami-fl/home-values/
So the Davos gold-collar crowd doesn’t think BREXIT was a good idea. Good. Anything that curtails their ability to control and loot sovereign populations should be regarded as a good idea.
http://www.businessinsider.com/davos-liberal-billionaire-bubble-brexit-2017-1
Pigmen gonna pig.
Don’t forget the Pig-women like convicted fraudster and IMF head Christine LaGarde.
“The establishment will get its revenge on Trump. The Federal Reserve is its weapon of choice.”
Good, give him a real incentive to abolish the Fed. That will make the Davos crowd worry. Of course, were he to do that he might find himself at the wrong end of an assassin’s gun.
“The Federal Reserve is its weapon of choice.”
Not if it doesn’t exist.
What do people propose to do, if the Fed is abolished? I always hear the rants about ending the fed but never any suggestions on what to do afterwards. Give the function of money-printing to Congress and/or the Treasury? How would that be any better or different? Or maybe allow regional or local town banks to issue their own currency again, backed by metal?
Has anyone read the “End the Fed” book by Ron Paul? I haven’t, which is why I was asking, but as far as I can tell, it’s more of a series of criticisms and complaints, but not much for a plan of what to do afterwards.
Markets set the price of money.
Bill Still did a great documentary on that very subject years ago, in fact I think someone posted it on the blog and brought it to my attention. I’ll see if I can find it.
“Give the function of money-printing to Congress and/or the Treasury? How would that be any better or different?”
This is always the argument to keep the Fed in place. Well,how’d we make out prior to the Fed? No income tax, (except for Abie the Linc) no war. We get the FED and presto, income tax and endless war.
Oh, I think I see. Sorry. It sounds like he wants to go back to a strict gold-standard. That would be funny. The price of gold would be like $100,000 per ounce or something.
I think the boom-bust cycles are the direct result of human’s two most powerful emotions — greed and fear. As long as we have those raw animalistic drivers, we will get boom and bust cycles, in everything.
IMO, the problem isn’t so much having boom and bust cycles, that is a given. It’s that our leaders have been trying to remove the “bust” part of it out of the equation. So that we only have booms and no busts. I think that is just postponing the inevitable, and will only make it so much worse some day.
When I saw the words pig women I thought you were talking about the protesters yesterday. Dayum! And how come they gotta die their hair all these whack colors? Its like they go out of their way to make themselves as fugly as possible.
If you simply cease reporting monthly price data, you can halt an imploding housing bubble in its tracks. Precisely what is occurring in the US.
http://www.zerohedge.com/news/2017-01-20/its-housing-bubble-pops-chinese-real-estate-firms-halt-monthly-pricing-data
I don’t understand why globalism, which enriches a corrupt and venal .1% at the expense of everyone else, is suddenly so unpopular.
Oh, wait….
https://www.bloomberg.com/politics/articles/2017-01-21/eu-populists-see-trump-victory-as-beginning-of-end-for-old-order
Has janet yellen taken the risk out of risk assets? Seems like they are leading folks down a dangerous path. It has worked so long people seem to have put their guard down.
Seems like the only risk is not being at the party.
I have to admit being wrong about how long this stock party could last.
It sure feels like the fed has given people the feeling their is no risk cause it has lasted so long.
It does seem that if stocks were to crater people would flow to bonds which yellen has lots of.
Chinese banks to issue more securities backed by non-performing (bad) loans in 2017. Gosh, where do I sign up?
http://www.scmp.com/business/markets/article/2064372/chinese-banks-issue-more-bad-loan-backed-securities-2017-fitch
Looks like the hug-a-thug era is over at the Justice Department.
http://www.americanthinker.com/blog/2017/01/felony_charges_awaiting_hundreds_of_inauguration_day_violent_rioters.html
Do u guys remember all those excess reserves sitting on the banks books? There is still about 2 trillion there.
That was the money the FED created to buy the bonds it has on its balance sheet from the primary dealers. The banks were encouraged to keep it from entering the economy with a little interest dangled in front of them.
Isn’t the ultimate goal to get those reserves back to the FED? That would have to mean primary dealers get some bonds and the FED got some cash.
When the treasuries actually mature on the balance sheet the issuer actually pays back the principal involved. If there is no money to pay back the principal then more bonds have to be issued to pay off the old.
It seems that in order to really get these bonds finally off the balance sheet the bonds mature and issuer pays back principal or they are sold back to the primary dealers.
Right now it just seems that nothing is changing in the net balance sheet. I would bet the treasury maturity dates are moving further out.
What does it matter if the FED keeps a huge balance sheet for a long time? Seems like they could keep rolling bonds forever. Plus the interest on the bonds is revenue for treasury.
Not really considering those bonds about to mature are collateral for millions of houses, commodities and other junk at grossly inflated prices.
True price discovery, when it finally asserts itself, is going to be cataclysmically awesome.
good inflation= rising stock and home prices
bad inflation= food and energy
Neither one is inflation.
>>Do u guys remember all those excess reserves sitting on the banks books? There is still about 2 trillion there.
>>That was the money the FED created to buy the bonds it has on its balance sheet from the primary dealers.
Yes. Sort of. I believe the correct way to look at reserves is that that reserves get created when banks deposit collateral (bonds) with the FRB. In some sense, the FRB is buying the bonds, because it is a permanent transaction and the FRB cannot demand that the banks takes the bond backs, at least not demand it directly. The second piece of the puzzle is that reserves ARE money, in the sense that it is the currency used to settle all overnight debts of banks with each other. That’s what reserves are, the currency of interbank debts. So when FRB decides to “buy” certain bonds from certain banks, they are not so much creating money from thin air FIRST, but rather accepting a new (and typically less safe) class of debts as backing for the money (reserves) issued. All money is a claim on some underlyingcollateral, whether gold (as was traditionally the case), bonds or even another un derlying asset that is backing each bond, such as land or factories or housing (real estate and capital goods in general).
All money is a claim on some underlyingcollateral,
Then by that definition, the dollar bills in your wallet aren’t money—right? They aren’t a claim on anything.
Dollar bills are claims on specific bonds posted by the USG at the FRB. These bonds are in effect backed/secured by all the land, equipment, buildings and future tax revenues owned by the USG.
So, yes, dollar bills have a value. Whether it is easy to realize the claim in the underlying collateral is a different story, though.
But it does happen, but only in poorer and less powerful debtor nations. The IMF and private investors routinely take over collateral such as infrastructure, power plants, electrical networks, and other utilities when such poor countries default on their debts.
Dollar bills are claims on specific bonds posted by the USG at the FRB.
False. Please provide a reference for your ridiculous false claim.
https://www.newyorkfed.org/aboutthefed/fedpoint/fed01.html
QUOTE:
“Each Federal Reserve Bank is required by law to pledge collateral at least equal to the amount of currency it has issued into circulation. The bulk of the collateral pledged is in the form of U.S. Government securities and gold certificates owned by the Federal Reserve Banks.”
So, I will refine my original statement as follows: “Cash (Federal Reserve Notes bills of any denomination) are claims on specific USG bonds OR specific gold certificates, held as collateral at a FRB, and originally posted at the FRB by the member bank that originally requested the cash.”
Can we then agree?
Nope. Those member banks may have some requirements regarding posting of collateral, but that’s not the same thing AT ALL as saying that the dollar bill in my wallet is a claim on anything—it’s not.
@Prime_Is_Contained,
US currency is a claim on some collateral in the same way as a bank deposits are claims on some collateral. You may say that you do not believe the claim is worth anything, and I will disagree. You may say that the claim cannot easily be enforced in the form of a direct transfer to you of the collateral, and I may say “okay, there is some truth to that”. But to say that US money is backed by nothing is just false.
PIC, I respect and appreciate the comments you post here, and at least lately I have seen many that made me nod my head in agreement. But on the topic of this particular technicality I think you are simply making the monetary system out to be worse than it really is. And that really is saying something, because it already is quite bad as it is!
Justme, I’m just not seeing what a dollar has a claim on. There is a market value, clearly—it is worth whatever someone else will exchange for it, in terms of their goods, services, time, etc. I would call that scarcity value. But that’s not the same as saying that it is backed by something—if it is, tell me how I go about making a claim for that collateral.
I would differentiate the dollar from say a US Gov bond (denominated in dollars); in that case, there is a definitely claim: if I loan money to the government, there is a promise that they will pay me back with dollars, even if that means that they have to tax the base sufficiently hard to pay me back in the future. That’s a claim I can understand—the “full faith and taxing authority of the US Gov”.
But the dollar itself? I don’t see anything that it is a claim upon.
But the dollar itself? I don’t see anything that it is a claim upon.
guys like him are trying to convince themselves they understand why the dollar has value. none of them know, because if they did, they wouldn’t talk about it like this.
there are two things to consider when looking at the value of the dollar.
1. it has ‘a’ value because people are confident enough in it to use it.
2. it has ‘the’ value it does because people work for it. they expend effort to get it. more simply said, the ‘efficiency of labor’ gives it its value. there’s much more to be said about this, but that’s the bottom line.
I agree, tj.
congrats. you’re one of the very few that see it.
in case you’re interested, one of the very next things people will want to know is: “what is the efficiency of labor?”.
the value of human labor alone is immutable. some have estimated it at 1/10 hp. something has to amplify it in order for it to gain value.
skill sets and automation amplify the value of labor, while taxes, regulations and a few other things attenuate it.
if by chance you don’t see the truth of that now, i think you will over time.
Seems like a logical assessment there dude.
To reduce the balance sheet and get the reserves back wouldn’t they have to do business with the primary dealers?
If they keep rolling the bonds over the balance sheet never goes down.
It seems the treasury can keep buying time if the bonds stay on the fed balance sheet.
If these bonds do get back to the primary dealers and mature off the FED balance sheet it appears a lot more bonds will have to be sold to the public to pay the maturing ones off. A lot more supply could be met with little demand and rates go up.
The way this has been set up appears to be a temporary loan by the FED that has turned into a long term gig.
@azdude. Likewise. I have no specific disagreement with any of those statements of yours that I am now replying to. It is all pretty much spot on.
>>The way this has been set up appears to be a temporary loan by the FED that has turned into a long term gig.
Indeed. That is why QE is also referred to as being a POMO (PERMANENT Open Market Operation) by the Fed. Those POMO bond purchases are permanent in the sense that FRB cannot contractually force the primary dealers (which are also the biggest member banks) to buy them back, as they can with TOMO (temporary) bond purchases (repos). But the FRB can in a sense force the reversal of POMO in two ways.
One method is, as has already been mentioned, by not reinvesting the proceeds of maturing securities. A second method would be to institute negative interest rates on reserves. That will generally compel banks to withdraw the reserves, or else pay interest to FRB. The withdrawal of the reserves would take the form of buying back some of the securities that FRB is holding as collateral for the reserves, or buy new securities issued by the USG or others, with payment being debited from the reserves held by FRB.
How bout them falling housing prices!
Kenmore, WA Housing Prices Crater 9% YoY
http://www.movoto.com/kenmore-wa/market-trends/
all we need to do is keep stock and home prices rising and the economy will recover someday.
Meanwhile, the fact that most municipal pension funds remain woefully underfunded and based on utterly unrealistic rates of return is starting to percolate up as an issue.
http://www.voiceofsandiego.org/topics/government/despite-reforms-city-county-pension-funds-billions-short/
Beautiful. Both videos.
http://www.chicksontheright.com/wretched-old-hag-harasses-trump-supporter-on-a-flight-and-totally-gets-whats-coming-to-her/
From a different article
Matthew Edwards • an hour ago
Donald Trump got more fat women to walk in one day than Michelle
Obama did in 8 years.
BWAHAHAAHAHaaaaaaaaa!
Nasty people at 4:00 people at a rally for women assault a woman because she isn’t on their side.
:50 - 1:50
What do you think about Saudi Arabia that stone women to death? That’s awful. Did you support Hillary Clinton? Yes. Did you know Hillary Clinton took millions of dollars from Saudi Arabia? Um compared to what Donald Trump raised he used the money he raised to pay for a portrait.
https://www.youtube.com/watch?v=Vk_x4Bm98Rw
VIDEO: WRETCHED LIBERAL HAG Removed From Plane After Harassing Trump Supporter
https://www.youtube.com/watch?v=bjFc9TkhrWk
Time to start institutionalizing some of these freaks.
In a way that video is sort of surreal, because it seems to me that even just a month or two ago, the young man would have been urged to change seats to accommodate the woman’s whims and had he resisted, he might have been the one escorted off the plane, perhaps even with a lecture on wearing provocative apparel.
I could be wrong on this, but that’s the sense I get.
In any organization, things come from the top down. There’s a different captain at the helm.
Daaaaayum……. For some strange reason I have the feeling Donk Craterton is just like that one.
Hardly.
Wait, you mean me? I’m not as old the the older lady and I’m not as overweight as the one in the window(?) seat.
0:51 No, I paid for this seat and I am sitting in it. He is in my space.
0:33 after being told you don’t have the right to have the dude moved the wicked beast played the “that man does not (finger quotes) believe in Climate Change” card.
phony would have hit her with…
Yes, let the joyous news be spread
The Climate Change Hoax at last is dead!
PS
I think we should all observe a moment of silence for her whipped husband and the abuse he has obviously taken lo these many years.
Yah, I felt sorry for the guy. Well, that video has gone viral and I’d bet money there are a few folks out there that have had encounters with her who are experiencing some schadenfreude right about now.
Aaron Rodgers looks like he just bought a house from Susanne.
He’s enraged
What was there one NFL Playoff game that didn’t suck this year?
Although I didn’t watch any closely Green Bay vs. Dallas is the only one I can recall that wasn’t a blowout and over early.
San Francisco, CA Rental Rates Plunge 7% YoY
http://www.zillow.com/san-francisco-ca/home-values/
if you posed this questions to most of america what would you think would be the answer?
Would you rather be paid a historical interest rate on your savings account or have a below historical avg interest rate on your home loan?
Most people are debt donkeys, don’t you think?
That’s true. So more people would certainly be harmed from a rise in interest rates.
Jeebus, California is really taking it on the chin. Mudslides, flash flooding, mountainous surf, according to this story. From Norcal all the way down to San Diego.
http://hosted.ap.org/dynamic/stories/U/US_CALIFORNIA_STORMS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2017-01-22-18-43-17
anyone here on the blog with a report from the ground? No natty today, no PB.
I haven’t seen any problems in San Jose. But it seems like every day for a long time now we get at most an hour or two of sunshine in the late morning and I think maybe it’s going to clear up, and then by mid afternoon it’s raining again. I wasn’t here for the drought but I’m assuming we’ve put a big dent in it by now.
Had enough rain in north San Diego county it flooded a flower bed and caused water to seep into my rental property. First time in the 9 years I’ve owned the place there’s been enough rain for that to happen.
MAGA!!
http://www.marketwatch.com/story/foxconn-may-team-with-apple-to-build-7-billion-manufacturing-facility-in-us-2017-01-22?link=MW_latest_news
Many Arrested Inauguration Day Protesters Will Face Felony Rioting Charges, Prosecutors Say
January 21, 2017 7:34 PM
WASHINGTON (CBSNEWS/AP) – Most of the approximately 230 protesters arrested on Inauguration Day will be charged with felony rioting, federal prosecutors said.
The U.S. Attorney’s Office said the offense is punishable by up to 10 years in prison and a fine of up to $250,000. The office said most of those arrested will be released without having to post bail and must return to court in February.
http://dfw.cbslocal.com/2017/01/21/many-inauguration-day-protesters-will-face-felony-rioting-charges-prosecutors-say/
“thirtythousandaire” great stuff!
Lots of flooding in CA where it is not flat and concrete flood channels (buttttugkly). Great beach area Campground in SB got wiped out.
http://www.keyt.com/news/flooding-causes-damage-and-forces-rescues-at-el-capitan-campground/281777677
Matty Light’s bro
Big waves pounded NorCal coast Saturday: Record breakers in Monterey Bay
By Amy Graff, San Francisco Chronicle Updated 1:58 pm, Sunday, January 22, 2017
The National Weather Service (NOAA) buoys recorded waves from 20 to 30-plus feet between Cape San Martin to the south and Point Arena to the north.
Monterey Bay recorded the largest waves it has seen in 30 years with the swell reaching 34.12 feet at one point. The previous record was 32.8 feet in 2008.
“The big storm out over Pacific and all the wind way out there turned into big waves that worked their way to the coast,” said Suzanne Sims, a meteorologist in the NOAA’s Monterey office. “There was a lot of water that washed up in places like Capitola and Aptos. Water got up on the roads.”
The surf is going down today with waves expected to range from 13 feet to 18 feet.
California snowpack near 200 percent of average
JANUARY 22, 2017 ROBERT
The Los Angeles Times ran a story today warning that the biggest storm in years is about to hammer California. The article concentrates mainly on heavy rainfall, mudslides and flooding.
I kept waiting for any mention of snow, and finally, in the 16th paragraph down, it did just that.
“The storm is expected to hit the Sierra Nevada (mountains) hard,” the story said. “The weather service warned of “crippling snow amounts on top of existing snow cover” and urged residents to stock up on food, water and firewood, and “essentially prepare for being stranded at home for multiple days.
”It also warned that the heavy snowfall could bring multiple-day power outages, roof failures and avalanches.
The story ends with the admission that “The storms have built up the snowpack for the whole Sierra Nevada, with the southern third of the range at nearly 200% of average for this time of year.”See entire article:
http://www.msn.com/en-us/weather/topstories/evacuations-ordered-as-biggest-storm-in-years-moves-into-southern-california/ar-AAm5Ugw?li=BBnb7Kz