Aces High Bulletin Board
General Forums => The O' Club => Topic started by: Eagler on October 03, 2008, 03:55:40 PM
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monday the bottom drops out because they did not pass the money to wall street
tuesday it gains with the speculation they will pass it later in the week
add another billion plus and the thing passes, bush signs it and the stockmarket drops...
now the criminals on wall street state:
Stocks fall on fears bailout won't save economy
http://news.yahoo.com/s/nm/20081003/bs_nm/us_markets_stocks_90 (http://news.yahoo.com/s/nm/20081003/bs_nm/us_markets_stocks_90)
anyone wanna bet we give away another pile of billions by the end of this year?
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We probably will.
But I heard the stocks lost their gain because of news about the unemployment rate for last month. :huh
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No way I take that bet.
This is a monetary system collapse driven by untenable debt levels. Its what has happened to pretty much every fiat based currency system ever devised and it has been building for a long time.
AS I see it, the question at this point is not whether or not the US is heading into a full blown depression... its whether this will be an Inflationary Depression or a Deflationary Depression like the one in the 1930s.
Bernanke has made it clear many times that he believes an Inflationary depression is preferred as it is ultimately easier to recover from. That's not to say that it is not as destructive to assets, but simply that the ultimate bottom is reached sooner and thus the rebuilding process can begin sooner. I do tend to agree.
What has me stumped is how exactly the Fed plans to distribute to consumers the money it creates as it works to inflate the system and ultimately monetize all the debt. The traditional means for the Fed is to filter liquidity into the system through the banking system and lending. But despite the Fed pumping over $800 Billion into the system this year, banks are NOT lending largely because consumers are already tapped out and cannot afford to service additional debt. So the Fed may WANT to push money into the hands of consumers... but it has no operating facility to do so.
So how is Bernanke going to ultimately achieve the inflation he will seek to drive? Ongoing stimulus checks is one way.... massive Govt. works projects like the 1930s is another.... big time expansion of unemployment and entitlement programs is another. It will be interesting to watch, and painful to live through either way.
Maybe Bernanke will drop money from helicopters as he once suggested....
Fang
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the market is run by speculators/gamblers, if you change the gambling rules the market will be stable , but nobody can make millions per day in a stable market.
there are two kinds of people in the market, the investors who have a time line of 5 -10 years and the gamblers who have a time line of 5 - 10 minutes.
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"massive Govt. works projects like the 1930s is another"
I think that should be the way to go.
I say build the best friggan' internet node in the whole world here in the US (I know it is already but I mean BIGGER! Full fiber optic & shat).
Build effective and efficient railway systems (bring japanese engineers here to show how its done) nation-wide. That means EVERY city or town with more than 100k people gets to be in the grid.
Build the Texas Canal. Screw Panama. Also doubles as border security with mexico. Hard to sneak in when there's ships going through with armed people on the deck.
Supersize NASA. When the Chinese reach the moon charge them for parkin'!
...amongst others. ;)
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Welcome to the board fang. What level of inflation are we talking about? Post WWI Germany (an extreme, obviously) or something more reasonable? What will be the real world impact from an employment and quality of life standpoint, in your opinion, since you seem to have some knowledge in the area?
Charon
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Welcome to the board fang. What level of inflation are we talking about? Post WWI Germany (an extreme, obviously) or something more reasonable? What will be the real world impact from an employment and quality of life standpoint, in your opinion, since you seem to have some knowledge in the area?
Charon
Thanks for the welcome....
Honestly, I have no idea. That's the $10 question.
I have read a great deal from some really smart folks who believe the Fed will not be able to prevent a Deflationary Depression and we are going to see asset values crash. This argument is supported by what is happening now in real estate. Folks who think this is the direction thing will go believe the Fed will either not be capable of channeling enough created money to consumers to drive inflation or that consumers will refuse to spend even if they do benefit from fundings. Mike Shedlock feels this is the direction things will go.
http://globaleconomicanalysis.blogspot.com/
Then again, lots of folks think as I tend too that the Fed will end up doing anything and everything to flush the system with cash as required until it DOES drive spending. This is what Bernanke has indicated..... before he became Fed Chairman. Bernanke is a top expert on the Great Depression and has written a good bit about it and his critique of actions taken then do clearly indicate that he believes monetary policy driven inflation would have made the entire event much less severe.
When I look at the bigger picture I see the events and issues that are playing out currently as truly the tip of the iceberg. Strip away all the political rhetoric and blame games and what your left with is the reality that all of these problems boil down to housing prices having gotten totally out of control. Home prices soared to levels that were simply unaffordable. Period. These absurdly inflated home prices drove absurd levels of debt. Levels of debt that simply were impossible to pay back.
How much debt? Between 2004 and 2007, the time frame when the overwhelming majority of the mortgage loans in default were closed, the mortgage markets funded around $8.5 Trillion in total mortgages. About 50% of those were subprime or Alt-A or non-traditional conforming loan programs. In other words the kind of loan programs that drove this mess. This means about $4.25 Trillion in "questionable" loans were done. About 10% of these have experienced delinquencies and around 6% or so are in default. So all we are experiencing is the result of perhaps $255 billion in mortgage loans going to foreclosure. So why does that lead to the need for over $1 Trillion to bailout and another $ Trillion in Fed funds to prop up the system? LEVERAGE..... the banks too the hard asset (the mortgage and the house behind it) and they leveraged it and sold derivatives and CDO's and packaged it all up into complicated pools of mortgage loans that nobody was really sure what was in there but the ratings agencies called it AAA....
The end result is that we are facing a possible systemic collapse.
Here is what really worries me: IF we are facing problems of this scope as the result of debt defaults on less than $1 Trillion in actual bad loans..... what happens when the US Federal Govt. cannot fund its over $58 Trillion in currently unfunded liabilities?
It is clear that these obligations cannot be funded. At least not in todays dollars. But they can be funded in printed dollars.
So I feel that just as the Fed has so far responded to this crisis they will respond to the far greater crisis that is looming relative to entitlement funding shortfalls. They will expand the balance sheet, create money and purchase Treasury bonds thus providing the Govt. with new funds.
This will yield inflation. How much and how fast? There is no way to know. How quickly will a specific crisis explode? How willing will the rest of the world be to buy up US debt even though it is obvious that the US is incapable of redeeming the paper? How long will world oil markets continue to base their trade on a currency that is clearly being devalued by its backer?
I do not think things will deteriorate as quickly as they did in the Weimar Republic. In that case, once the monetary supply inflation began the inflation rate immediately exploded. They went from inflation running 10% to over 10,000% in something like 8 months. I do not see that happening. I think it is more likely that things will expand from current levels to something like 25% over a period of several very painful years and then it will rapidly crash to something approaching 3 figures before we get intervention and the deployment of a new currency system.
But thats just my guess....
Fang
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I do not think things will deteriorate as quickly as they did in the Weimar Republic. In that case, once the monetary supply inflation began the inflation rate immediately exploded. They went from inflation running 10% to over 10,000% in something like 8 months. I do not see that happening. I think it is more likely that things will expand from current levels to something like 25% over a period of several very painful years and then it will rapidly crash to something approaching 3 figures before we get intervention and the deployment of a new currency system.
But thats just my guess....
Here you are, new to the board, and I'm going to bug you one more time :)
What would you do if you happened to be fairly cash heavy and very low debt? Where would you park the cash before it inflates into nothing? All the debt is basically 7 years left on a modest 15-year low fixed rate mortgage, and the cash will cover about 1/2 of that in total with 2 years of living expenses set aside.
Again, welcome to the board, sorry to be such a parasite :)
Charon
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Here you are, new to the board, and I'm going to bug you one more time :)
Okay, maybe I'm retarded, or my computer is, but I see him registered in 2001. Is that a bug? Or am I just stoopid?
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Fangio, absolutely impressive read. As Charon said, it seems you have a good grasp of the situation and fantastic insight.
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Fang, as a little kid, once I knew what the boogy man in the closet looked like, I was able to sleep.
Thanks for making nodding off tonight possible.
seriously.
<S!>
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fang is old school, he has been on the agw-ot boards until recently. Luckily he resurfaced on this board.
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Hi Fang,
OK I get it up to this point .....
LEVERAGE..... the banks too the hard asset (the mortgage and the house behind it) and they leveraged it and sold derivatives and CDO's and packaged it all up into complicated pools of mortgage loans that nobody was really sure what was in there but the ratings agencies called it AAA....
I have heard about this on the news and this is the bit where my brain circuit breaker trips. Could you explain this bit in idiot level english :confused:
Considering the absurd price of housing in the UK I wonder if we are due for the same train wreck ????
Sparks
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I have read most of the smart people and it seems that they all agree....
They don't have a clue. Nothing of this scale has ever been tried before in this kind of an economy. Most of the indicators do not show a depression.. we are way better off for now at least.
It could go either way or it could become a mild but fairly long recession that will adjust the markets.
There is a huge pent up demand for credit and for housing.. that will not go away... not until it is met. It is my hope that those who planned well and are not tooooo... debt heavy and have good credit and a medium fair steady source of income will weather it just fine so long as they have some inflation protection.
That is my hope anyway and I will retire soon sooo.. even tho it is not the best time.. I think I am set up well enough to still have a roof over my head and not have to eat the cat.
The real pressure will come from socialist programs and the real villan.. The frigging EPA.. all of us will be paying about $500 a month or more for things that are mandated to "end man made global warming" and "protect the environment" many of these things we will see... $150 a month sewer bills.. water bills tripled... fuel prices double.. new storm water fees for watering you lawn and such and the treatment of storm water (it is coming believe me)... others will be hidden.. everything you buy will have given some portion to the EPA socialist monster...
In kalifornia for instance.. every company that uses diesel powered anything will have double or more operating costs due to them being forced to throw away most of their diesel engines every few years. No matter what condition they are in. They will pass the cost to you.. "carbon caps"
Then again.. maybe the economy will tank so bad that we can't afford to pay the EPA gestapo.
lazs
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the EPA's budget for 2009 is $7.14 billion, that money could be used for something else.
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Welcome (back) to the board, Fangio.
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Here you are, new to the board, and I'm going to bug you one more time :)
What would you do if you happened to be fairly cash heavy and very low debt? Where would you park the cash before it inflates into nothing? All the debt is basically 7 years left on a modest 15-year low fixed rate mortgage, and the cash will cover about 1/2 of that in total with 2 years of living expenses set aside.
Again, welcome to the board, sorry to be such a parasite :)
Charon
I would say it depends on your objectives and time threshold. Also, whether or not you need whatever you park the cash into to yield income or simply grow to exceed the inflation rate.
Personally, I am taking advantage of the real estate crash to buy up dirt cheap homes for rental. Where I am located (Atlanta), the real estate market never saw the absurd appreciation like in Florida, California, Arizona, Nevada and many other areas. Between 2000 and 2007 homes went up in value on average around 3% - 4% a year max. But during that time in many inner city neighborhood the mortgage fraud was just crazy. There are some areas where literally 80% of the homes are now owned by banks after having foreclosed. These banks are reaching the "capitulation stage" on pricing these homes to sell. So there are great opportunities if you have cash to use to buy the homes and rent them out. The rental market is very strong and the homes cash flow like crazy. Real Estate has also historically been an excellent hedge against inflation. So this accomplishes my goal of investing in hard, real assets while yielding strong monthly income and protecting against longer term inflation.
But in many markets out there, particularly those that were red hot 2 years ago, I think real estate values have a long ways to go down. I would NOT buy real estate in California or Florida....
I hope that helps.... its just my opinion... YMMV
Fang
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Okay, maybe I'm retarded, or my computer is, but I see him registered in 2001. Is that a bug? Or am I just stoopid?
No bug.... I played AH a bit when it very first came out and thus had an account and posted a few times but I didnt post much or fly much. I flew Warbirds going back to the beta days of 1995 and I have fond memories of monthly bills over $500 back when it was billed at $3 an hour or whatever it was. Ahhhhhh the good old days..... Handle was (is) Fang which was always short for Fangio after Juan Manuel Fangio the greatest race car driver of all time. Warbirds back in the day only allowed a 4 character handle you know.
Anyhow, nice to make your acquaintance. :)
Fang
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Hi Fang,
OK I get it up to this point .....
I have heard about this on the news and this is the bit where my brain circuit breaker trips. Could you explain this bit in idiot level english :confused:
I can take a crack at it... BUT, I honestly am not 100% clear on how it was all done myself and I have not only read a good bit about it but a friend whom I used to work with in the mortgage business and who went on to deal with collateralizations and SIV's explained how they did theirs but some of it still makes no sense to me. I suspect that a situation may have developed where nobody really know what they were doing but everyone was making lots of money so nobody cared.
Ok.... So a lender puts together a set of mortgage loan underwriting guidelines. That includes credit requirements, program parameters (term, amortization...), collateral requirements, loan to value and debt to income ratios and a whole mess of other areas to evaluate for approval. Underwriting guidelines often run 100+ pages or more for a given loan program.
The lender then has these guidelines reviewed by a ratings agency like Standard and Poors or Moody's and the loan pool that is to be made up of the mortgage underwritten to the guidelines is given a rating, hopefully AAA or AA.
Now the lender takes the loan program to market and begins closing and funding mortgages. This may be through direct retail channels but more often it is through offering the products to the huge network of independent mortgage brokers across the nation. The lender will then fund the closed loans through a warehouse line of credit, basically a short term lending credit line used to fund mortgage short term until they can be packaged up into a large pool of loans and sold off. Depending on the size of the lender, they may pool up a bunch of loans (usually less than $500 million) and sell off the entire pool in once package to a much larger lender. Many of the largest lenders actually do nothing buy buy up smaller pools and then package them into much larger pools and securitize them.
Once a pool of loans that is very large is acquired.... the lender will confirm the ratings agency rating and then structure up securities or bonds to sell that will be backed by the mortgages. These are Mortgage Backed Securities (MBS). This market is fairly simple and determining the assets value is also simple.
But Derivatives.... thats a mess. Here is what Wiki says...
A credit derivative is a derivative whose value derives from the credit risk on an underlying bond, loan or other financial asset. In this way, the credit risk is on an entity other than the counterparties to the transaction itself.[1] This entity is known as the reference entity and may be a corporate, a sovereign or any other form of legal entity which has incurred debt.[2] Credit derivatives are bilateral contracts between a buyer and seller under which the seller sells protection against the credit risk of the reference entity.[3]
The parties will select which credit events apply to a transaction and these usually consist of one or more of the following:
* bankruptcy (the risk that the reference entity will become bankrupt)
* failure to pay (the risk that the reference entity will default on one of its obligations such as a bond or loan)
* obligation default (the risk that the reference entity will default on any of its obligations)
* obligation acceleration (the risk that an obligation of the reference entity will be accelerated e.g. a bond will be declared immediately due and payable following a default)
* repudiation/moratorium (the risk that the reference entity or a government will declare a moratorium over the reference entity's obligations)
* restructuring (the risk that obligations of the reference entity will be restructured).
Where credit protection is bought and sold between bilateral counterparties this is known as an unfunded credit derivative. If the credit derivative is entered into by a financial institution or a special purpose vehicle and payments under the credit derivative are funded using securitization techniques, such that a debt obligation is issued by the financial institution or SPV to support these obligations, this is known as a funded credit derivative.
This synthetic securitization process has become increasingly popular over the last decade, with the simple versions of these structures being known as synthetic CDOs; credit linked notes; single tranche CDOs, to name a few. In funded credit derivatives, transactions are often rated by rating agencies, which allows investors to take different slices of credit risk according to their risk appetite.
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So... investment bankers who were selling off the MBS's decided that these relatively simple investment vehicles needed more goodies to be associated with them. Goodies to supposedly help mitigate or spread around the risk. These default swap derivatives could be bought supposedly as a means of spreading risk from a position in just one pool of MBS to MANY such pools. So the simplest way to think of these derivatives is to think of them like insurance in the sense that the derivative itself has value as a security and can be traded and the yield and value from the derivative is meant to offset potential loss from the MBS itself.
The problem is that delinquencies and defaults on MBS's have exceeded by a large margin ratings agency projections and this has caused the value of the supposedly hedging against such risk derivatives to become impossible to determine. The mortgages backing the MBS's are not servicing as they were supposed too and the values of the derivatives were based on the MBS's projected servicing expectations. This is not on just a few pools of MBS's..... but LOTS (all???). This is made much worse by the fact that these MBS's are not publicly traded and those holding them do not release data on how they are performing and in fact do not want to do so because if they did it would push the MBS's value much lower and potentially make the holder insolvent (mark to market anyone?).
The way the risks on these MBS's SHOULD have been managed was with insurance. But insurance does not pay like derivatives do and who wants to be an insurance salesman when you can be a Hedge Fund manager?
I hope that helps. If you do not really understand it, you have lots of good company as I am not really sure ANYONE does and that is itself a huge part of the problem. One of the reasons an RTC type of solution to this is difficult is the crazy complicated nature of this debt paper.
Fang
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Date: 27 Jul 2007
This may help people understand when MBS wheels came off...
http://cyberjournal.org/show_archives/?id=2693&lists=newslog
And this is where we are at now:
http://news.yahoo.com/s/ap/20081003/ap_on_bi_ge/treasury_fannie_freddie;_ylt=As8IGQ502CIey3V12DCSMk5v24cA
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Houses have depreciated so much in some areas that now you can buy one and rent it out for as much or more as the payment. this has not happened in Kalifornia for many decades.. it won't happen again for many decades..
If you have money... you can make money in housing right now. some will come out of this owning 3 or four houses that are all worth twice as much as they paid for em.
some will just slit their wrists once they have said "we are doomed" enough times.
lazs
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Houses have depreciated so much in some areas that now you can buy one and rent it out for as much or more as the payment. this has not happened in Kalifornia for many decades.. it won't happen again for many decades..
If you have money... you can make money in housing right now. some will come out of this owning 3 or four houses that are all worth twice as much as they paid for em.
some will just slit their wrists once they have said "we are doomed" enough times.
lazs
Completely agree.....
In fact, you can do much better than simply having the house payment covered by the rent. That is, at least here in Atlanta. With the values where they are you can buy a foreclosed home and renovated it and when complete and rented out you may have $65K invested in a home that will rent for $800 - $950. The cash flow is great AND the resale market in these prices ranges is fairly strong.
The only downside is that it does take a lot of work and looking to find the decent houses from among all the horrid crap and if you do not have cash to use in buying the terrible credit markets situation pretty much excludes you from the opportunities.
Fang
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Stupid question time again:
In an inflationary depression, isn't carrying debt not so much of a bad thing? If you were to buy the same item, say a car, in 2012, wouldn't its increased price more than offset the terms of your financing (assuming the very low 2 to 4% deals I see on TV now)?
Or will everything cost that much more that you'll be burdened buying bread, milk and gas?
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Here is a wide ranging letter from an investment advisor with a following on the whole mess.
May not want to jump into those good housing buys just yet.
http://www.forexfactory.com/news.php?s=fd247bb9d52c7ceac723d6d560bb6245&do=news&id=111657
The Curve in the Road by John Mauldin
...The reality is that the rescue plan does not fundamentally alter the US economic landscape. There can be no doubt we are in a recession. I think it will be dated from the beginning of the year, notwithstanding the odd 2nd quarter growth. The manufacturing ISM was a dismal 43.5 (under 50 means a contracting US manufacturing industry). Such a level is typically associated with recessions, as the chart below shows. Given the financial crisis and the freefall in auto sales, this index is likely to fall further...
....Next week we will explore the economic landscape in detail, but let me provide a few thoughts. As I have said for a long time, we will be talking about deflation this time next year. Recessions are by definition deflationary events. Given that we have had two bubbles burst (housing and credit), there is even more potential for deflationary pressures. Add into the mix the deleveraging process, which will take years to finally abate, and the recent bout of price inflation caused by energy and food will pass, as demand destruction for oil will hold oil prices in check.
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just in case this thread gets locked like some of the others,
like to thank you, Fang, for some of the best insight on this entire mess
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http://blogs.ft.com/wolfforum/2008/10/why-federal-reserve-policy-is-failing/
Also read this guys reply at the bottom: Ernst G. Walter Langmann
Informative piece
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Ive read all you have written Fangio and found myself nodding. You have basicly put into more detail and simple to understand wording what i have said here since the mess started.
Oh and happy hunting. I am in the market for a couple of appartments . Over here the prices on dwellings are falling but the demand for dwellings in the center of Oslo is rising as it always have been. What has happended is that people are less willing than before to borrow to buy so as demand is still growing, that demand has now gone to renting rather than buying and the prices are rising. I plan to buy two high end appartments with some of my savings and then rent them out for a year or two, or until the prices for selling them are up again. :) The rest of my savings will stay in the bank where they now get between 7 and 10% interest.
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Fang.. what is happening in kalifornia is that for the first time in decades you can buy a home (with a decent downpayment) and rent it out for about what the payments are.. it is pretty much impossible still to make much of a profit on the rent unless you tie up a whole bunch of your money in the downpayment.
This is a state where people want to live. If you stop building then the rent side goes crazy. We are also a state of high illegal and "low income" people with a very active socialist machine.. section 8 is very active here and will pay several thousand a month for an illegal family to live in any house that is available.
With no building going on this will continue for some time.. until more are built.. by that time.. any homes you have bought and rented out will have doubled in value.
The fly in the ointment is a possible "fix" by the government. I fear that the more socialist the government that is in the easier it will be to sell the idea of the government taking over not only the lending but the building of new homes.
I know this sounds... a bit far fetched but.. they have made forays.. habitat for humanity is about taken over now by the government.. think of it as a pilot program. here.. most builders are forced to build so many "low income" houses before they can get permits to build.. the cities force them because the state forces them to have so many because.... well... It is easy for me to see where this is going.
They have always been active in the craphole large cities with "the projects" but people won't move to the city and everyone knows what the projects are and what life in them is like. imagine whole tracts of project homes in the suburbs.
lazs
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Maybe Bernanke will drop money from helicopters as he once suggested....
Fang
He should put whiteface on when he does that, dress up in a purple vintage suit with a purple fedora. Then he can fly overhead and yell "Who loves ya, baby! Free money! Who do ya trust!" from a bullhorn.
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Juan Manuel Fangio the greatest race car driver of all time. Warbirds back in the day only allowed a 4 character handle you know.
Fang
FYI - Fang was quite a good Ferrari driver in GPL.
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They have always been active in the craphole large cities with "the projects" but people won't move to the city and everyone knows what the projects are and what life in them is like. imagine whole tracts of project homes in the suburbs.
lazs
In Chicago, Cabrini Green was replaced with nice upscale condos on Division street. The city permits require forced integration. Condos were selling for $250k or so, but then the city would subsidize a low income family to live in the next unit over. This has been a huge success, and has been huge in wiping out crime and vandalism on the near west side.
As this thread shouldn't be closed, I won't target what you think of Habitat for Humanity, as we know that was Carter's baliwick, and well.. we get what you think.
Again, home valuations were speculation, and Fangio speculated what happens if the $58B is not enough to remove the default securities.
I feel, as do others, that the Fed will keep injecting money in. We will start to see signs of hyperinflation. That's why we are seeing all the world markets crash out this week - the dollar is going to get replaced as a global currency. The World Bank finances world debt in dollars. I think we are going to see that change.
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I can take a crack at it...
Fang
the fed is responsible for the monetary environment that allowed inflation to be used as a core investment vehicle for capital... so new laws for wall street won't solve the root cause... old laws governing the federal reserve would tho.
instead of socializing wall street they should nationalize the fed.
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....or abolish the Fed
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In Chicago, Cabrini Green was replaced with nice upscale condos on Division street. The city permits require forced integration. Condos were selling for $250k or so, but then the city would subsidize a low income family to live in the next unit over. This has been a huge success, and has been huge in wiping out crime and vandalism on the near west side.
Odds are that the crime has relocated, not been wiped out.
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FYI - Fang was quite a good Ferrari driver in GPL.
WOW! Someone has a pretty long memory!
Actually, I used to be a pretty good Ferrari driver in real life. That is until I sold my baby earlier this year. It was the smart thing to do and all.... but I miss that dang car every single day. :( Maybe if the economy does dump for a couple of years I will get the opportunity to buy her back at a more realistic price.
As to the real estate thing, I have bought 7 houses in the past 6 months and have contracts on 2 more. Its a ton of work finding the gems among all the garbage and then managing the rehab projects but ending up with $50K in a nice 3 bedroom, 2 bath home located 5 minutes to downtown Atlanta and rented for $900 a month just HAS to work out longer term. I hope. Some of these houses I plan to keep long term, some I am going to sell to other investors who agree on the opportunity but have no time nor desire to do all the leg work.
The Fed announced today that it will be buying up commercial paper included non-asset backed. This is going to be yet another $500 Billion + Fed program. Ouch.... monetary supply is SOARING.
But... we still do not know if all of this Fed liquidity is going to make it into the hands of actual consumers. The Fed has already pumped over $1 Trillion into the system and it has done NOTHING to expand credit availability (the exact opposite has happened). Banks have simply used the Fed funds to offset massive asset value degradation in order to maintain solvency ratios, they have not been lending it out to Joe consumer. Unless this changes and banks DO open up the spigots then I do not see how the Fed will manage to push the liquidity into the hands of consumers and thus promote spending and upward price movement. Typically, a huge increase in monetary supply would drive inflation at the consumer price level. But not if the Fed cannot get the cash into the hands of the consumer.
Every way I look at this it always boils back down to one simple reality: Housing prices are too high.
Until housing prices get back in line with incomes and we see a bottom clearly defined in housing and inventories get cut in half or better... there will be no recovery regardless of what the Fed does or whatever bailout plan Washington decides to push next.
In many markets, housing is already there. In the largest and worst hit markets (Kalifornia, Florida, Nevada, Arizona, the northeast, DC area, Seattle area.... yes, Seattle... that RE bubble is just now starting to pop and has a long way to go) there is a long way to go before the median house price is back in line with the median income.
Fang
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Every way I look at this it always boils back down to one simple reality: Housing prices are too high.
Until housing prices get back in line with incomes and we see a bottom clearly defined in housing and inventories get cut in half or better... there will be no recovery regardless of what the Fed does or whatever bailout plan Washington decides to push next.
Exactly!
I just don't understand why people think that we need to do SOMETHING to keep things where they are now.
Where they are now is not where they should be and things need to be allowed to correct.
Fang, your posts are easy to follow and you seem to have a firm grasp on what's going on (instead of just regurgitating what the theme of the day is as dictated by the MSM)....thanks for your insight. :aok
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Oh.. I see dos equality.. they are no longer projects but simply a forced introduction of scum for a certain percent.. the idea being that the people who are actually working and responsible will so outnumber the scum that it will take to much effort for the scum to blight it.
sorry.. we in kalifonia are ahead of you.. we have been trying that for decades.. it takes some time but the scum will win. all of a sudden the neighborhood starts to look a little shabby.. crime goes up.. older people move or die out and no one wants to buy sooo.. the government uses the neighborhood to dump their section 8 people in...
pretty soon.. it is rap music and people sitting out on their unmowed lawns and cars all day long buying whatever is illegal from the "low income" residents. values drop even more...
lazs
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Oh.. I see dos equality.. they are no longer projects but simply a forced introduction of scum for a certain percent.. the idea being that the people who are actually working and responsible will so outnumber the scum that it will take to much effort for the scum to blight it.
sorry.. we in kalifonia are ahead of you.. we have been trying that for decades.. it takes some time but the scum will win. all of a sudden the neighborhood starts to look a little shabby.. crime goes up.. older people move or die out and no one wants to buy sooo.. the government uses the neighborhood to dump their section 8 people in...
pretty soon.. it is rap music and people sitting out on their unmowed lawns and cars all day long buying whatever is illegal from the "low income" residents. values drop even more...
lazs
Damn lazs, try and take a chill pill. All that hate is burning you up.
Not all disadvantaged people are black. The ones that are black are not automatically scum.
Here is the full story:
http://www.goodmagazine.com/section/Features/two_tales_of_one_city
Former Cabrini-Green residents get something called a Section 8 voucher. The ones that apply for Federal housing amongst the high priced condos go through extensive credit and criminal checks.
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dos equality... I never once mentioned negros. I also realize exactly what section 8 is. You are saying nothing to disprove what I have said.
The more "low income" people you move into an area the more the property values drop and the more crime. Again.. it is simply more of you socialist crap that got us in this mess to begin with. Not everyone deserves a home in the same area as people who have earned the right.
lazs
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The more "low income" people you move into an area the more the property values drop and the more crime. Again.. it is simply more of you socialist crap that got us in this mess to begin with. Not everyone deserves a home in the same area as people who have earned the right.
lazs
If your hypothesis is correct, then crime rates would directly correlate against median income, on a neighborhood by neighborhood basis.
You think that's true?