patrick.net

Logan Mohtashami says

So we will dominate the world economy but isn't our economy still based on a 70% consumption model and with anemic wage growth isn't that going to be problem to promote very strong GDP growth

We have bankruptcy which clears people's debt. Our consumers just went through a phaze of bankruptcy in 2007, 2008, and are now again qualified buyers.

We lowered debt load for a lot of consumers, but not enough.

I persoanlly think there is a lot of work available, but for me, as an employer, I am choosey, and really concerned about these new taxes.

I was looking at the pay checks I was signing yesterday, and can see the differences.

We would need to raise our pricing again to pay our employees more. Our other choice is to continue to expand, but that means another layer of management, higher insurance, and more taxes.

Hiring is a mine feild that needs to be cleared. We'll get there, but it will take time.

The rules of Bankruptcies have changed and Chapter 7 is much different than Chapter 13 these days.

Majority of the de leveraging done on the household side has come through foreclosures, short sales and bankruptcies but the capacity on consumption for those who filed Chapter 7 is limited to a degree.

Not to mention the massive rise of student loan debt that taken place here in the US. Unless we get income growth in a big fashion the after tax/expense incomes of Americans for the bottom 90% isn't that great. The top 10% will be ok

This is only on the federal loan side of the equation. However, the massive debt taken on by students will limit consumption going forward.

You can't file for BK on Student loans

Do you have a point in here professor? because what I'm saying is one hundred per cent correct. We over built housing units. They are still there.

Those units are being bought, sold, and traded, some with, and some without benefit of the Multiples.

That low inventory you are looking at is Multiple Listings, the same as you only look at sales data from the same sources.

David Losh says

I have been saying for the past ten years that the United States is in no way like Japan, because Japan is a rock, surroundded by water, and they do NEED to import everyhting.

Japan is dependent on trade.

We are a consumer economy. We will continue to trade, especially with Asia. We are now exporting technology, the same as we exported our financial markets business model. We will dominate the global economy.

So, in my opinion we will have a period of deflation, but it will be much different than Japan. I call it an equalization, an equilibrium, but once we hit a stride our economy will see GDP growth.

Your posts do amuse me. You were just blathering on that the country should close its borders as it doesn't need to import and then here you are saying that the US is a consumer economy (and therefore needs to import). And the US is still the major economic power, but its position is diminishing, so why on earth anyone would talk about '...will dominate the global economy' at this point in history is beyond me.

Bigsby says

You were just blathering on that the country should close its borders

David Losh says

We don't need anything from anywhere any more. We don't even need to procalim protectionism, we have the goods they need globally.

You don't read my comments.

We are a trading partner, and great consumer economy. We have bankruptcy which has freed up a lot of people from debt. We can continue to buy when some countries, like the Euro zone, are still mired in debt.

We exported our financial systems without the benefit of that carrot, which is bankruptcy.

Now this is where it gets muddled. Russia, China, India, and South America are still awash in cash. They are still creating loans on assets, like Real Estate, then buying, selling, and trading those Notes for cash, the same as we did.

Where would you want to put your cash? Where would you call a safe haven?

You'd have to show me how the position of the United States is diminishing. The way I see it we are ahead of the curve.

Logan Mohtashami says

You can't file for BK on Student loans

I'm sorry to have highjacked your thread. You make excellent discussion.

The way I see it the student loan debt is another problem that will need to be resolved to get more people educated in today's trades.

Education keeps people out of the work force so unemployment looks better the more students we have in school. The second thing is that, in theory more students will bring a better set of skills to the market place.

The changes in bankruptcy didn't go far enough, that's for sure. Isn't it an odd coincidence that the government tightened the bankruptcy laws just before a major global economic collapse?

Chapter 13 should have allowed for principal reduction, but it does have some latitude in loan restructuring. It's unfortunate that student loans aren't a part of the process, but they aren't.

All of this debt will need to be resolved. People will need to pay. People need to pay less for goods, and services while the economy still needs more jobs.

I see a deflating of pricing.

People can still take on good debt if it makes sense. Housing can be good debt if you aren't over paying for it. If people make smart choices, if they substitute, and if they produce more, to get more cash, people can pay debt.

The bubble just created unreal expectations that we will all get rich quick. We're just feeding that dream right now, but it's coming to an end.

If people want a house (or a home as Realtor's like to call them), put down 20%, have decent credit, and have a bank carry the loan. The government needs to get out of the housing business.

David Losh says

Bigsby says

You were just blathering on that the country should close its borders

David Losh says

We don't need anything from anywhere any more. We don't even need to procalim protectionism, we have the goods they need globally.

You don't read my comments.

Yeah right, 'we don't need anything from anywhere any more.' What is that supposed to mean then?

David Losh says

We can continue to buy when some countries, like the Euro zone, are still mired in debt.

a. The eurozone is not a country.
b. Yes, the US can continue to import despite it and other countries being in debt, just as EU nations can continue to import despite it being in debt along with the US.
c. What is your point?

David Losh says

You'd have to show me how the position of the United States is diminishing. The way I see it we are ahead of the curve.

Of course the position of the US is diminishing. What do you want me to show you? How about its share of the global economy? Would that suffice? And for a nation ahead of the curve, there certainly seems to be a lot of hand-wringing going on.

Bigsby says

What is that supposed to mean then?

Bigsby says

c. What is your point?

I would ask you the same questions, because you aren't saying anything.

We are a great economy that is being mismanaged by our governments continued intereference. While I applaud what Obama has done, I think Bernanke needs to reign in the Fed so we can move on to resolving our debt crisis.

What this thread should be about is the Debt Crisis, because I sure don't see a shortage of housing.

Bigsby says

How about its share of the global economy?

That would be a start.

robertoaribas says

FED has nothing to do with the debt crisis,

Like I said, you aren't worth engaing.

Lower interest is creating higher debt.

robertoaribas says

FED has nothing to do with the debt crisis,

Here is a valid point. On the fiscal side the Federal Reserve doesn't add anything to the national debt on the budget side of the equation. The fed's balance sheet has expanded greatly but it has nothing to do with our budget.

When you read the budgets the top 4 items always are going to be

1. Medicare
2. Social Security
3. Defense
4. Net interest payments

( Not counting the unfunded liabilities here)

Obviously the recession took a bite out of revenue, but that is slowly coming back. YOY % declines on the actual deficit is happening. However the nominal number keeps growing

The longer term problem we have is that starting years 2022 and out our expansion on mandatory payouts are going to blow through potential GDP growth.

Still at current pace without any tax/spending reform in 13-18 years mandatory payouts will exceed government revenue. Every single cent will go to Medicare, S.S. and net interest payments. That is a payout problem especially when you have long term potential growth running at 2.5%. We are simply getting old and older Americans cost a lot money.

Without Fed, the interest rate on US bonds will skyrocket.

A few years later, with high interest rate, you will see that Fed is LOSING money.

robertoaribas says

David Losh says

We are a great economy that is being mismanaged by our governments continued intereference. While I applaud what Obama has done, I think Bernanke needs to reign in the Fed so we can move on to resolving our debt crisis.

FED has nothing to do with the debt crisis, that is congress, president... but hey, don't let complete and utter ignorance stop you from posting your opinions! It certainly hasn't stopped you in the past!

You are mistaken here, the FED has its place in the debt crisis. It buys treasury bonds which yield interest and issues fiat money AKA federal reserve notes in return.

Here is a look at the Fed's balance before the financial crisis and just a few years after. We had deficits in the budget in 2003.
Right now the Fed's balance sheet is a bit over 3 trillion dollars and looking be north of 4 trillion next year after all the MBS purchases

The two are completely separate items.

David Losh says

We are a great economy that is being mismanaged by our governments continued intereference. While I applaud what Obama has done, I think Bernanke needs to reign in the Fed so we can move on to resolving our debt crisis.

What this thread should be about is the Debt Crisis, because I sure don't see a shortage of housing.

I never said it wasn't. The point was that you said the country doesn't need anything from anywhere else, which is complete bullshit. Mind, and as is your way, you then proceeded to say something that was basically contradictory. A bit of clarity in your argument would help.

The Professor says

Has The Fed's holdings ever spiked like this before?

David Losh says

We have two attorneys here in Seattle that have a discount Brokerage. They
have found a larger niche of people doing direct contract transactions without
the use of the Multiple.

All anyone has to do is put a for sale sign in front of the house, or mention
at a cocktail party they are thinking of selling.

Tried the FSBO sign. Did not work too well for me. Maybe you should tell me where the cocktail parties are.

But you do have a point. When people cannot afford the commission, they are forced to be creative.

robertoaribas says

The Professor says

mell says

You are mistaken here, the FED has its place in the debt crisis. It buys treasury bonds which yield interest and issues fiat money AKA federal reserve notes in return.

Yep.

Colloquially known as "Print money".

you are equating the money supply to the deficit, when in truth they have nothing to do with each other.

The FED could do what they are doing today, even if we had a balanced budget or a surplus.

Likewise, they could NOT have any Q.E, with our deficits, in fact, until 4 years ago, we had deficits with zero action by the Fed.

FED needs collateral to "print money" and government bond/note is an important class of collateral. But it is more of the government uses FED to eat up the bond/note supply and surpress the rate.

Mobi says

Tried the FSBO sign. Did not work too well for me.

There are two sales on my street without the benefit of the Multiple.

It is tough to get a deal, and have it work out when you don't have the broader exposure of the internet, which is somehting Brokerages bring.

There is however a niche of people who are teetering on the underwater mortgage marks who can afford to bring some money to the table to get out, but not the commission.

Some other people just don't want to deal with Real Estate Brokers. The information about pricing is there on the internet through sites like redfin, and Zillow, and other than that there is the mechanics of the transaction.

What I also think is getting some sellers down is the amount of work it takes to get you in that position to get multiple offers. Real Estate Brokers are telling people the house needs to look really good in order to compete. Some people don't want to spend that kind of money. The way they look at it is that they can sell direct, save the money for fixing up the house, and save the commission.

Bigsby says

David Losh says

We don't need anything from anywhere any more. We don't even need to procalim protectionism, we have the goods they need globally.

That is just complete nonsense.

Geez, we were talking about the comparison to Japan.

Our economy is much different from Japan so that argument wears on me.

As far as clarification, these are my comments on a blog that isn't mine. The only person here that is being the most clear is Logan.

David Losh says

Geez, we were talking about the comparison to Japan.

Our economy is much different from Japan so that argument wears on me.

As far as clarification, these are my comments on a blog that isn't mine. The only person here that is being the most clear is Logan.

So? How does that then lead to the comment you made?

Our economy is different. We are a big country with natural resources.

We have also been a highly protectionist country. We could, and should open our borders more with Canada, and Mexico, but we don't.

We have the capacity to be a Euro Zone type economy.

So, any of these comparisons to Japan, don't make sense to me.

In terms of the lower interest rates we can float that, and the debt, because we have great capacity to expand.

I looked at the rust belt for a long time. Detroit is a complete mystery to me. We can manufacture goods, but we don't.

We are hell on wheels coming up with financial schemes, and technology, but we aren't producing. Our infrastructure, roads, bridges, transportation are lagging.

I can easily see us increasing GDP.

Now, I'll get a lot less clear for you. I think we can have a bout of deflation that would broaden our economic base. If our consumers can pay less for goods, and services they will have more money.

Deflation would also cut our costs of production.

I just don't see why we are attempting to inflate our way out of the mess we have, when it hasn't been working.

All we are doing by getting to ZIRP is funneling more money to upper incomes.

David Losh says

What I also think is getting some sellers down is the amount of work it takes
to get you in that position to get multiple offers. Real Estate Brokers are
telling people the house needs to look really good in order to compete. Some
people don't want to spend that kind of money. The way they look at it is that
they can sell direct, save the money for fixing up the house, and save the
commission.

That's what I did back in 2007. I had a ace realtor telling me all these I needed to do to sell at a certain price. And I looked at my friend who did all those for a few thousands with a comparable house in the same neighborhood. I decided to pay a flat fee ($500) to a realtor to get into the MLS (after the FSBO failed.) It ended up we sold the house to an investor at the same price my friend sold their house. It did save me a lot of works but we were lucky to have that investor b/c pretty much no homeowner was interested in our house.

David Losh says

All we are doing by getting to ZIRP is funneling more money to upper
incomes.

Here is the answer. I believe if we pulled the plug 10, 20 years ago to let it deflate. We are probably in a very good shape now. The challengings we face nowadays is to deflate and keep the governments functional at the same time. Not a easy job but it will only get worse.

A look at the FED QE effect on the markets.
You can chart out unemployment claims to equity rise as well

Their response to the financial crisis

A recent look at our bonds and mortgage rates

I think people forget how bad it was back in 2009 and that deflation was everywhere back then. The Fed needed to inject liquidity into the system as even commodity prices were screaming deflation back then

Our economy was frozen so we needed capital to flow back on line.
Anyone can make the argument that the velocity of QE wasn't great. However, the FED isn't God, they can only do so much. Things have gotten better since 2009, which is understanable since 2009 was the bottom in terms of economic weakness here T

Unemployment claims have gotten better since 2009 as well.
Yes participation factor is big reason why the unemployment rate is dropping fast. However, looking back at the last two economic cycle peak employment came at the top both financial bubbles and then we saw jobs go away. We shouldn't try to measure success on 2 previous economic cycles that were juiced up

Social Security is not an entitlement: You pay extra for it, ON TOP OF Taxes.

When you pay today for the chance to have dinner tomorrow, that's not an entitlement.

thunderlips11 says

Social Security is not an entitlement: You pay extra for it, ON TOP OF Taxes.

When you pay today for dinner tomorrow, that's called a contract, not an entitlement.

Whatever you want to call it is fine. However, it doesn't fix the math problem of it. Simply put, Madatory payouts will exceed government revenue in 13-18 years.

Let me give you a bullish look at long term debt. Before the financial crisis even happened so this payout model is as good as it gets. Obviously it looks much different now.

However, this gives you a idea of how unrealistic our long term mandatory payout problem is

Logan, I got you. However, SS can be easily saved by cutting the DoD in half, so the USA only spends 25% of the world's military spending instead of as much as everyone else combined.

Actually, I think the age should be lowered to 60, because we desperately need more spending and more jobs. There is too much money chasing too few opportunities, the only way to create more opportunities is if more money goes into the hands of the many, where it will be mostly spent on new goods and services.

Looking at your chart, it's not S.S. or even MC payouts that's the problem, but the interest on it. This GAO assumes the budget will remain where it is.

It will get worse before it gets better, but when Grandpa Jones has to choose between getting his Soc Sec check or being able to watch more drone strikes on CNN, he'll choose the former.

Nothing makes politicians tremble than large groups of angry, old (and reliable) voters.

Even though I lose heart sometimes, in a boxing match between the AARP and the Mil-Industrial Complex, I say the AARP by TKO in 3 rounds or less.

thunderlips11 says

Actually, I think the age should be lowered to 60

That will never happen! There isn't one democrat that would propose lowering the age on S.S.

However, in terms of a long term concern Medicare has a 5 time larger payout ratio than S.S.

So S.S. can be saved with some adjustments but mind that we don't have the worker to payout ratio advantage this century

Logan Mohtashami says

However, in terms of a long term concern Medicare has a 5 time larger payout ratio than S.S.

We can fix MediCare, and MedicAid by fixing our Health Care system. That's a long debate, but there are solutions to Health Care that we are tinkering with now.

Social Security can also be tinkered with. I just don't see the long term problem if we take a more socialist approach to our safety net.

The problem is the interest payments. The problem we have is the debt.

So we need some returns on our debt to retire it. We can do that with increased production, employment, and tax revenue.

The question is where do we get the jobs that will pay the taxes we need to retire the debt?

thunderlips11 says

Looking at your chart, it's not S.S. or even MC payouts that's the problem,

The reason we will have a net interest payment problem is because S.S. and Medicare cost so much. Medicare cost are insane looking out long term. Also, this has to do with our demographics problem.

We are getting older and more fat. Then add our bloated Defense budget and we have long term problems.

We simply can't grow fast enough to off set the massive cost that are coming years 2022 and on