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Buy when interest rates are high?


By OCmonitor   Follow   Wed, 27 Feb 2013, 5:17am   1,623 views   38 comments
In Newport Beach CA 92660   Watch (2)   Share   Quote   Permalink   Like   Dislike  

Anyone still holding for the day when interest rates might go up and could push prices back down? Though manycash buyers are jumping in these days.

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  1. Reality


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    1   7:49am Wed 27 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike (1)  

    When the FED starts to raise rate, it usually lags behind inflation for a few years. That means different price segments of the market will respond differently:

    The really low price segment, say around $100k national average rental market (adjust for regional differences), there are enough cash buyers that interest rate won't matter much. In fact due to the increase of renters from the next consumer segment, the price may actually go up despite rising interest (but still negative real interest). Things change at the end of a series of interest raises, if and when real interest rate (nominal minus inflation) comes close to net rental yield.

    The $200k-$750k single family house that the government has been subsidizing heavily will be hit hard due to the high percentage of borrowers in this segment. At around 4% interest rate, each 1% of interest increase result in nearly 25% (Edit note: as Roberto mentioned in the next post, should be 11+% here, but still the logic here carries on) in payment increase, there's no way wage increase among the middle class can match that in the time span of 4 FOMC meetings. Also, the brain fart called ownership premium (over rent cost on comparable house) will get squeezed out of the market as owners can no longer count on house appreciation to supplement rent income in this segment, gradually going back to normal market condition where rent is comparable to 30yr PITI, people rent for flexibility and lack of 20% down payment money.

    The $million+ single family market has its own dynamics that is not dependent on government subsidized loan interest rates. At the moment, IMHO, it's a matter of how long it will take to burn through the foreign dumb money.

  2. Reality


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    2   8:28am Wed 27 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike (1)  

    Roberto,

    You are correct on the detailed numbers break-down. It does not however affect the gist of my previous post: what are the chances that the average middle class family income can see 11.7% raise in the time span of 4 FOMC meetings? or 22.3% over 8 FOMC meetings? assuming the FED doesn't raise 1/2 point instead of 1/4 at any of the meetings and doesn't raise between meetings. If the average nominal wages were rising double digits annually, the FOMC would be jacking the interest rate into double digits like Paul Volcker did.

    Of course, it's not as simply "as rates rise prices will have to fall." That's why I broke it down into 3 wide segments, each probably have different responses.

    However, the house that rents for $1500 a month will probably be worth much less than $200k to the non-occupant owner when mortgage interest rate is back to the historical average of about 7-8% and rapid capital appreciation is distant memory. In fact, I'm dragging my feet on paying anything more than, or even close to, 100x monthly rent. There is a thing called vacancy, and that is bound to happen once every few years for repairs even if one is outstanding at marketing. If you are borrowing, the safety margin for vacancy in this business is usually set at 75% occupancy, which perhaps gives you a couple sigma's margin of safety in most markets.

  3. FortWayne


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    3   8:44am Wed 27 Feb 2013   Share   Quote   Permalink   Like (2)   Dislike (1)  

    Buy it not based on interest rates, buy it if it makes financial sense. Patrick has a good calculator for it, so use it. You have all the information in the world to make a proper financial decision for yourself. Sometimes buying makes sense, sometimes doesn't.

    I don't like low interest rates, but it's not the only thing in life. Markets can stay unreasonable longer than you can stay solvent.

  4. Reality


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    4   8:52am Wed 27 Feb 2013   Share   Quote   Permalink   Like   Dislike (2)  

    Good summary of the last three episode of serial interest raises. The "opposite" phenomenon is due to FED action lagging behind inflation. Nominal interest rise does not mean real interest rise until the later part of a series of nominal interest raises.

  5. CameronCrazy


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    5   5:55pm Wed 27 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    Historically, housing prices fall when interest rates are increasing. Here's an interesting article posted yesterday on Patrick.net outlining what determines housing prices: http://ochousingnews.com/news/future-housing-markets-will-be-very-interest-rate-sensitive?source=Patrick.net

    Even if the US is able to drop the unemployment rate to 6.5%, assuming all or a majority of those people will be entering the housing market is ridiculous. But even if they did, "shadow inventory" has been estimated between 20-30 million homes. Add in the real inventory and we're currently looking at a 10 year supply of homes based on the past two years of monthly sales (http://seekingalpha.com/article/1151771-the-housing-market-recovery-is-a-complete-myth).

    Eventually interest rates will go up and, coupled with strict loan qualifications, less people will be able to borrow money for a home causing prices to go down. If the equity firms and hedge funds--which have been buying up large quantities of houses the past few years--see rising interest rates as a sign to start selling off their inventory, prices will drop further. And if certain politicians are successful in getting rid of Freddie Mac and Fannie Mae, prices drop further. Housing prices are still greatly inflated and anyone who tells you differently has other motives. Or is delusional.

  6. Mobi


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    6   8:44pm Wed 27 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    SFace says

    Chances are if you waiting for interest rate to be high to buy, you will be sorely dissappointed.

    You are not really answering the OP's question. I think the question is whether higher rate would push down the price (so you can buy cheap). I guess the answer is no and yes. From the experience of 2004-2007, prices did not go step-by-step with the rates. It crashed after rate gets high enough. So, you should hold out until when the next crash happens if recent history repeats itself.

  7. CameronCrazy


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    7   6:47am Thu 28 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    robertoaribas says

    Phoenix homes that are 30/60/90 days late or in foreclosure have fallen from a high of 14%

    I guess housing prices are relative because someone would have to pay me to live in Arizona.

  8. Mobi


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    8   7:44am Thu 28 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    robertoaribas says

    Mobi says



    So, you should hold out until when the next crash happens if recent history repeats itself.


    sooo, everyone on this site said don't buy the last several years, because it was still crashing... then it start going up and it's "don't buy, now wait till the next crash..." lather, rinse, repeat?


    why not just say "don't buy." it is simpler!

    I am just saying, to those people who want to hold out. IMO, should buy now and sell for gain later.

  9. CameronCrazy


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    9   9:05am Thu 28 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike (1)  

    robertoaribas says

    And, as a college professor

    Probably community college. And since you're also a realtor, I don't expect you to think differently. It would be like a butcher telling people to be vegan.

  10. errc


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    10   9:15am Thu 28 Feb 2013   Share   Quote   Permalink   Like (2)   Dislike  

    It doesn't matter because rates are never going up. They've been dropping for over thirty years. Rates will have to fall further to keep house prices propped up at their current levels

  11. EInvestor


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    11   10:22am Thu 28 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    When interest rates go up borrowers qualify to buy a lower priced home and therefore prices go down or at best do not go up. Interest rates and house prices are always in inverse ratio.
    Low rates fuel buying frenzy which result in artifical high prices which end up in bust when rates go up.

  12. david1


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    12   10:56am Thu 28 Feb 2013   Share   Quote   Permalink   Like (2)   Dislike  

    Interest rates do not rise in a vacuum. If interest rates increase, it is because inflation has risen.

    House prices to not fall in times of high inflation. Ever.

    To summarize, increased income = increased inflation = increased interest rates. In that order.

    If payments rise 11%, and incomes rise 11%, then house payments maintain affordability as a % of income.

    Inflation is rising prices. Without increased demand for goods, inflation goes nowhere. Increased demand for goods in general cannot exist without increased income.

  13. Reality


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    13   11:11am Thu 28 Feb 2013   Share   Quote   Permalink   Like (2)   Dislike  

    People need to differentiate between nominal rate vs. real rate. The big price decline took place between 2007 and early 2009 when nominal rate on mortgage was around 6%, whereas inflation was negative! Oil dropping from a high of ~$140 to a low of ~$40. The real interest rate was incredibly high during that time.

    After the start of 2009, mortgage rate dropped to 5% range, and inflation came back to the low single digits. That reduced the rate of price decline in nominal terms.

    Starting in late 2011, mortgage rate dropped to 4% range or lower, and inflation picked up to upper single digits(Money supply, not numbers from the Bureau of Lying Statistics). The negative real interest rate is the reason behind the rapid recovery / "echo bubble" (depending on your POV) that we have witnessed in the past 18 months or so.

    FED action usually lags inflation. That's why we have exaggerated bubbles and busts.

  14. RentingForHalfTheCost


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    14   11:15am Thu 28 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    robertoaribas says

    So, you get your negative effect of interest rate on housing, at the same time the general economy is doing well, and both rents and house prices have other reasons to climb, thus blunting or in fact completely erasing the effect of the rates...

    Good luck with that theory! Hell, I hope you are correct, it will be years from now anyways, and I'll buy a few more.

    Also, at the same time that your real investments (you know that kind that make things) go up 2x. You were the one saying that the general economy was better. If they are buying houses, they also buy appliances, cars, electronics, etc.

    So, the real question is has your rent gone up faster than your investments. My guess is No, so I'll stick with the investment side is a much better place to be in an improving economy.

  15. david1


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    15   11:44am Thu 28 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    Reality says

    (Money supply, not numbers from the Bureau of Lying Statistics).

    If you want to use money supply for inflation, can you explain the net effect of this graph below on overall inflation please?

    http://research.stlouisfed.org/fred2/graph/?g=g28

  16. Reality


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    16   12:05pm Thu 28 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    david1 says

    Reality says

    (Money supply, not numbers from the Bureau of Lying Statistics).

    If you want to use money supply for inflation, can you explain the net effect of this graph below on overall inflation please?

    http://research.stlouisfed.org/fred2/graph/?g=g28

    That pair of graphs just shows how "velocity of M2" is derived from M2: Vm2 = nT / M2 "Velocity of M2" is not a measured quantity but derived quantity from GDP(?) and M2

  17. david1


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    17   12:24pm Thu 28 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    Reality says

    GDP(?)

    Correct, using the same notation you took from wikipedia, nQ.

    But what does it tell you? Does adding $1T to the money supply effect prices if it does not compete for goods and services? What if it sits in a bank account untouched?

    Imagine an island where the money supply is $100 in gold coins. If someone finds another $100 in gold coins, but never uses it, what happens to the price of bananas?

    If someone finds another $10 in gold coins but uses it, what happens to the price of bananas?

    Unless you define inflation as something other than a general rise in prices, how can you use money supply to define inflation without taking into account how often (if at all) that added money supply competes for goods?

    If you define inflation in some other way, who the fuck cares about inflation? If all of the goods and services I would ever want to buy do not increase in price - except gold or some other useless material - what do I care about the money supply?

  18. Reality


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    18   12:30pm Thu 28 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    david1 says

    But what does it tell you?

    Nothing. Who told you I was using M2 as money supply?

    david1 says

    If someone finds another $100 in gold coins, but never uses it, what happens to the price of bananas?

    Goes to show the defect in defining M2 as money supply

    david1 says

    Unless you define inflation as something other than a general rise in prices,

    "General rise in prices" is very different from what BLS pulls into an arbitrary basket and calls it "general rise in prices."

    david1 says

    If you define inflation in some other way, who the fuck cares about inflation? If all of the goods and services I would ever want to buy do not increase in prices, except gold or some other useless material, what do I care about the money supply?

    Do you go out and buy every item exactly in the same weighting according to what BLS bureaucrats rig the basket? Of course you don't. Then according to your own logic you should not care "the fuck" about BLS basket price either.

  19. HEY YOU


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    19   12:44pm Thu 28 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    Buy when interest rates are high. I'm not sure.
    Never pay more than 50% of asking price. I'm not interested in helping the seller, commissioned sales people or flippers. Let other suckers pay more.

  20. CameronCrazy


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    20   2:10pm Thu 28 Feb 2013   Share   Quote   Permalink   Like (2)   Dislike  

    robertoaribas says

    you are an idiot....

    You're clever. How many classes at community college did you have to skip to think of that one?

  21. epitaph


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    21   2:23pm Thu 28 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike  

    david1 says

    Inflation is rising prices. Without increased demand for goods, inflation goes nowhere. Increased demand for goods in general cannot exist without increased income.

    That's why we are going through stagflation and not inflation.

  22. Raw


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    22   2:41pm Thu 28 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    Reality says

    People need to differentiate between nominal rate vs. real rate.

    True!
    Real estate is more concerned with real interest rates (interest rates adjusted for inflation), not nominal rates.

  23. Mark D


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    23   3:11pm Thu 28 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    OCmonitor says

    interest rates might go up and could push prices back down

    historically this has not always happened.

  24. Philistine


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    24   3:59pm Thu 28 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    Mark D says

    OCmonitor
    says



    interest rates might go up and could push prices back down


    historically this has not always happened.

    Historically, interest rates go up as a result of a booming/improving economy--part of that being higher prices, not lower prices.

  25. OCmonitor


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    25   4:28pm Thu 28 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    Philistine says

    Mark D says

    OCmonitor

    says

    interest rates might go up and could push prices back down

    historically this has not always happened.

    Historically, interest rates go up as a result of a booming/improving economy--part of that being higher prices, not lower prices.

    I agree that in a booming economy interest rates would go up.

    During the housing boom a few years ago, I recall interest rates went low and prices skyrocketed. But would that not be part of the bubble since money was loose and there were many stated-loans (no verifications)? So lots of money being passed around which made someone who should not qualify for a large loan, suddenly qualify for a very large loan. Those same loans are not available today for the most part.

    I think the basic philosophy could be that if as a regular Joe can afford 1K payment and interest rates go up then maybe I can now only afford an $800 payment. (if salaries don't go up and other things are more or less constant). Of course there are many other factors to consider. But I would think for the general population their buying power is less. So if the general public can't make the payments, the owners would need to drop prices to sell or offer concessions to get people in the door. That is unless investors are buying everything up to keep the market moving (especially with low inventory).

    Now maybe that's all skewed with many in California having money in the bank and buying properties. Such as the all-cash investors running around buying up places right and left. Maybe that's skewing things? I know my friend put her house up for sale and she had 20 all cash buyers in 2 days.

  26. Philistine


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    26   5:45pm Thu 28 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    OCmonitor says

    During the housing boom a few years ago, I recall interest rates went low and
    prices skyrocketed

    Yep, the Roaring 2000's were quite a special time. Time will tell if that permanently screwed the pooch or if we will ever revert to "historical" economics.

    OCmonitor says

    all-cash investors running around buying up places right and left. Maybe that's
    skewing things? I know my friend put her house up for sale and she had 20 all
    cash buyers in 2 days.

    Well, in markets like LA, I have observed that investors aren't touching a lot of areas because they either don't cash flow as rentals or there are no more rehabs with built-in margin . . . also, foreclosures are drying up.

    If I were an owner/occupant home shopper who had all cash (aka, $700-900k in non-ghetto LA), the last thing I would do is buy a house with that cash given how cheap money is right now.

  27. evilmonkeyboy


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    27   7:24pm Thu 28 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    Philistine says

    Well, in markets like LA, I have observed that investors aren't touching a lot of areas because they either don't cash flow as rentals or there are no more rehabs with built-in margin . . . also, foreclosures are drying up.

    If I were an owner/occupant home shopper who had all cash (aka, $700-900k in non-ghetto LA), the last thing I would do is buy a house with that cash given how cheap money is right now.

    Bingo! Why risk that kind of cash on a house, in fact why risk a 20% down payment in crazy markets like LA or the Bay Area. Unless you think that interest rates will stay at sub 4% rates for the next 10 years it doesn't make since. WHY ARE 20% DOWN BUYERS MISSING FROM THE MARKET????
    Interest rates are at historic low they can go up or stay flat. We are in uncharted territory as far interest rates go.

  28. GraooGra


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    28   8:29pm Thu 28 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    donjumpsuit says

    When interest prices increase, affordability (list price) decreases. So a $2000 a month mortgage payment only buys a $400k house, not a $550k house.

    In other words, all the flippers are out on their nuts, because they are buying $400k houses to sell for $600k, because the average dope can afford a monthly payment on $600k at 3.5%, but not at 5%.

    I often bitch, but in the end I guess I would rather pay a bank more money to borrow (a credit union mind you), than a flipper who inflates the sale price of a house. Also the taxes will be lower (even if by a little), and I assume insurance is lower on a less expensive house.

    Also it is better to have lower principal than lower interest rate. You can always refinance in the future to a lower interest rate or pay more money to effectively pay lower interest rate. Principal, on the other hand, you are basically stuck with.

  29. GraooGra


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    29   8:36pm Thu 28 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    You all assume that the Feds have always total control of the interest rate and it is always going to stay the way they design it. The Feds don't have too much of the control over the bond market and if the bondholders decide to dump our bonds, the interest rate goes up as well.

  30. Philistine


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    30   8:58pm Thu 28 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    GraooGra says

    Also it is better to have lower principal

    It's also better to eat unicorn for dinner every night and crap bars of gold.

  31. E-man


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    31   9:01pm Thu 28 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    Philistine says

    GraooGra says

    Also it is better to have lower principal

    It's also better to eat unicorn for dinner every night and crap bars of gold.

    Not sure about the taste of the unicorn, but crapping gold bars sounds painful though.

  32. david1


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    32   6:09am Fri 1 Mar 2013   Share   Quote   Permalink   Like   Dislike  

    Reality says

    Nothing. Who told you I was using M2 as money supply?

    Reality says

    Goes to show the defect in defining M2 as money supply

    M2 is a broad measure of money supply as you know. Based on your comments above, perhaps you would prefer to use M0 or M1. I can assure you falling velocity occurred as money supply grew by thorse measures as well.

    Measuring inflation as money supply growth (by whatever metric you use for money supply) has no basis in reality. Money supply itself (again chose a measure) has grown significantly since 2007, yet prices of nearly every good (save gold, a material with little to no industrial value) have not risen in a manner that would imply correlation with money supply.

    Oil - flat. Houses - down. Cars - flat. Food - up slightly, but nowhere near the level of increase in money supply. The only services that have increased at a level equal to money supply would be educaton and health care.

    In either of those examples, I would point to increased demand (and supply issues, as in health care) as the main drivers of cost inflation, not money supply.

    Now, as far as CPI, it was never intended to be, nor should it be, a measure of constant utility. It makes little sense to continue to track the price of obsolete goods, like telegraphs or 35mm film. *In theory* these types of things need substitution as replacements are developed. I don't know if that warrants replacing filet with hamburger as the price of filet increases..but in general I don't question the methodology. My school of economic thought does not require that I believe in vast government conspiracies and data manipulation in order for the data to fit.

  33. RentingForHalfTheCost


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    33   6:22am Fri 1 Mar 2013   Share   Quote   Permalink   Like   Dislike  

    OCmonitor says

    I know my friend put her house up for sale and she had 20 all cash buyers in 2 days.

    She obviously didn't price it right. I price my properties so there is just 1 serious buyer. If 20 showed up at my door, I would fire the realtor on the spot. Idiot.

  34. Reality


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    34   8:25am Fri 1 Mar 2013   Share   Quote   Permalink   Like   Dislike  

    david1 says

    M2 is a broad measure of money supply as you know. Based on your comments above, perhaps you would prefer to use M0 or M1. I can assure you falling velocity occurred as money supply grew by thorse measures as well.

    IMHO, all the M-whatever numbers smack of the economometrician's desire to measure something that is easy to measure, instead of something that has any real meaning in the economy. Ask yourself, in terms of how rich you feel about yourself, does it make any difference if your latest rise in wealth is in cash, checking account, term deposit, bonds, stocks, house, a stash of gold or a cellar full of French wine? It doesn't. Whatever asset rises has the same effect on the asset owner. Money supply should be whatever can be and the owner potentially willing to pledge for credit money. Credit money, not just base money, is what causes the gyrations in the economy. Of course, it's hard to measure money supply that way (would entail a judgement on what is pledgeable asset, a subjective judgement just as subjective as economic value itself); that's why the econometricians hide in their caves and tally up what can be easily counted, and invent the entirely artificial concept of "Velocity of Money" that has no real life meaning or direct measurability but only guaranteed to pick up the slack between countable bank deposits and GDP.

    david1 says

    Measuring inflation as money supply growth (by whatever metric you use for money supply) has no basis in reality. Money supply itself (again chose a measure) has grown significantly since 2007, yet prices of nearly every good (save gold, a material with little to no industrial value) have not risen in a manner that would imply correlation with money supply.

    That's another fallacy in Keynesian econometrics: supposition of concurrency between cause and effect. In real life, prices do not move magically, but only through bids and asks among market participants. There is an information propagation process involved, and that takes time. Some sectors react to the new money supply faster than others. There is a time-shifted correlation between M2 and stock market. Likewise, there is a time-shifted correlation between stock market performance and real estate and consumer product prices. Gold has historically always responded faster to M-whatever increase faster than any other tangible products. It's a leading indicator of inflation. Likewise, bond market leads the stock market, which in turns leads the RE market with a long delay, then the consumer products. The reason may have to do with participants in the "dumber" markets trying to resist overt price changes by adapting in ways that are not picked up by econometricians. For example, ground beef producers had for years kept mixing in Pink Slime to help hold the ground beef price down, and it's never picked up econometricians for quality adjustment, nor apparently any of the genetically engineered food in order to increase production ("of what?" i.e. is it still "corn"?). It's kinda hard to mix pink slime into 99.99% pure gold.

    david1 says

    Now, as far as CPI, it was never intended to be, nor should it be, a measure of constant utility. It makes little sense to continue to track the price of obsolete goods, like telegraphs or 35mm film. *In theory* these types of things need substitution as replacements are developed. I don't know if that warrants replacing filet with hamburger as the price of filet increases..but in general I don't question the methodology. My school of economic thought does not require that I believe in vast government conspiracies and data manipulation in order for the data to fit.

    Yet your school of economic thought involves assuming saintly bureaucrats that are not motivated by basic human self interest. We live in a real world where welfare bureaucrats routinely use the government credit card on themselves instead of on their supposed clients, Pentagon have trillions missing due to essentially employee theft, academics falling over themselves writing up proposals linking every research to "global warming" just because that's the latest theocratic angle . . . No conspiracy is needed for my school of thought, but only the assumption of bureaucrats as real life human beings with self-interest, not saints. The BLS statisticians certainly know which side of their bread gets buttered.

  35. david1


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    35   9:18am Fri 1 Mar 2013   Share   Quote   Permalink   Like   Dislike  

    Reality says

    supposition of concurrency between cause and effect. In real life, prices do not
    move magically, but only through bids and asks among market participants. There
    is an information propagation process involved, and that takes time.

    Well thats a fancy way to say - it hasn't happened yet with other prices. It is more beleivable for me to assume a gold bubble than a lack of bubble in everything else.

    Reality says

    t your school of economic thought involves assuming saintly bureaucrats that are
    not motivated by basic human self interest.

    Not at all - I find it doubtful that all bureaucrats would move in tandem and keep their mouth shut about it.

    Reality says

    No conspiracy is needed for my school of thought, but only the assumption of
    bureaucrats as real life human beings with self-interest, not saints.

    Shouldn't the market in your model have sorted out the self-serving bureaucrats by now?

  36. david1


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    Reality says

    Money supply should be whatever can be and the owner willing to pledge for
    credit money.

    If you want to define money supply in this way, then for the US economy money supply should be "GDP." Which is exactly what I was getting at with M-whatever and M-whatever velocity.

    If French wine increases in relative value, and that added value is converted to credit money, and that added credit money is used to generate economic activity, isn't that added GDP?

  37. Reality


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    37   9:56am Fri 1 Mar 2013   Share   Quote   Permalink   Like   Dislike  

    david1 says

    Not at all - I find it doubtful that all bureaucrats would move in tandem and keep their mouth shut about it.

    It goes beyond bureaucrats, but practically anyone that needs a government license to maintain or improve their own standards of living. i.e. knowing which side of their bread gets buttered. Check this video out:

    Do you really think that is mere co-incidence?

    david1 says

    Shouldn't the market in your model have sorted out the self-serving bureaucrats by now?

    Why? Market is not magic, just expressions of the wishes of the participants under given conditions. It's just like voting in democracy, but takes place every minute instead of every few years.

    david1 says

    If you want to define money supply in this way, then for the US economy money supply should be "GDP." Which is exactly what I was getting at with M-whatever and M-whatever velocity.

    No, it is not. It's the asset valuation, not the transaction volume.

    If French wine increases in relative value, and that added value is converted to credit money, and that added credit money is used to generate economic activity, isn't that added GDP?

    Not if the owner counts his wine like people counted their stocks in the late 90's, and houses in 2005-07, and money sitting in a bank account. The "money" is not spent right away, although it does affect their spending pattern.

  38. HEY YOU


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    38   12:52am Sat 2 Mar 2013   Share   Quote   Permalink   Like   Dislike  

    robertoaribas says

    HEY YOU says

    Never pay more than 50% of asking price. I'm not interested in helping the seller,

    you are an idiot....

    Your absolutely correct. I should not pay more than 40% of the asking price. Why should I pay extra commission? Thanks for bringing this to my attention.

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