patrick.net

tovarichpeter says

and current housing bubbles

stopped reading here.

Analyzer says

QE is lowering the unemployment rate. As I posted on another thread my favorite

Lowering or raising?

"Sure it is, it is forcing down household income (through a loss of purchasing power) it is creating savings to the government and those who benefit from inflation."

A weaker currency does not necessarily result in inflation.

We also need jobs, and for that, we need a weaker currency, so our workers can compete with the ROW.

http://research.stlouisfed.org/fred2/series/MANEMP

Housing -- everyone's dominate life expense -- is up 10% since the economy bottomed:

http://research.stlouisfed.org/fred2/graph/?g=qK2

and QE has had fuck-all to do with that.

indigenous says

Analyzer says

QE is lowering the unemployment rate. As I posted on another thread my favorite

Lowering or raising?

"The FOMC last month renewed its pledge to press on with bond purchases until the outlook for the labor market has “improved substantially.”

control point says

Basically you have a misalignment of incentive. As AF notes - the incentive (profit) for the Countrywides of the world was big profits by taking short-term risks - and passing off the long-term risks to someone else.

Countrywide's game was to sell 100% financing to the homebuyer, giving the 80% piece to the GSEs and finding suckers to buy the CDOs of the 20% piece.

Plus all the negative-am / teaser-rate NINJA crap that allowed thousands and thousands of infomercial geniuses like Casey Serin to take out millions in suicide loans, each.

Loans that set the market prices of 2004-2007, but required continued appreciation to actually pay back.

When the appreciation music stopped in 2006, the system was going to crash, hard.

http://research.stlouisfed.org/fred2/graph/?g=qK3

shows a ~$4T overhang that we're still trying to work our way out of.

Another factor nobody understands is that everyone was doing cash-out refis 2002-2007. This was a significant stealth stimulus to the overall economy.

Wallison, btw, was the dissenter in the financial crisis commission.

http://www.americanprogress.org/issues/housing/report/2011/07/12/10011/why-wallison-is-wrong-about-the-genesis-of-the-u-s-housing-crisis/

guy's full of shit on everything. That he's an AEI man should be enough of a tell.

Analyzer says

"The FOMC last month renewed its pledge to press on with bond purchases until the outlook for the labor market has “improved substantially

So you buy the government figures?

indigenous says

Analyzer says

"The FOMC last month renewed its pledge to press on with bond purchases until the outlook for the labor market has “improved substantially

So you buy the government figures?

If you don't buy the government figures you are considered to believe in the 'conspiracy theory' and a doomsdayer.....

Analyzer says

If you don't buy the government figures you are considered to believe in the 'conspiracy theory' and a doomsdayer.....

Just the two choices?

indigenous says

Analyzer says

If you don't buy the government figures you are considered to believe in the 'conspiracy theory' and a doomsdayer.....

Just the two choices?

How could you not believe everything the government tells us?.................NSA spying, IRS scandal, Benghazi, "if you like your plan you can keep it, period".

Bellingham Bill says

and QE has had fuck-all to do with that.

Say what, the entire purpose is to prop up the price of housing?

The thing that creates economic activity and jobs is investment. Currently we have mal investment which does not create jobs.

indigenous says

The thing that creates economic activity and jobs is investment. Currently we
have mal investment which does not create jobs.

Wrong again, kemo sahbee.

GDP vs. Private Investment
http://research.stlouisfed.org/fred2/graph/?g=qKu
Private Investment vs. Jobs
http://research.stlouisfed.org/fred2/graph/?g=qKt

control point says

indigenous says

The thing that creates economic activity and jobs is investment. Currently we

have mal investment which does not create jobs.

Wrong again, kemo sahbee.

GDP vs. Private Investment

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

Private Investment vs. Jobs

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

Good articles.

control point says

Wrong again, kemo sahbee.

No I'm not

I will give you the one about the CRA that was not true.

The Fed did increase the money supply causing the housing bubble. I noticed you just faded on this one, don’t get too smug.

What your graphs don’t show is malinvestment. This is where the money is overinvested in things that do not have value.

Such as “shovel ready jobs”, minimum wage forcing inexperienced workers into unemployment, bridges to nowhere, high speed trains to Fresno, solyndra , GM, worthless degrees, democracy in Iraq, weapons beyond what is needed for national defense, etc., etc., etc.

Investments that do create jobs are home computers, Macintosh home computers, mp3 players, cell phones, smart phones, computer controlled equipment, digital cameras, gopro digital cameras, electric cars, cars that drive themselves, hydrogen cars, led lights, lasers, bio engineering, a search engine that finds relevant items, etc.

The problem with the above is that as soon as the money quits flowing so does the economic activity, you might say .5 economic activity from government investment, which is what you see in your graphs.

I think that more than a few government officials were in on lending fraud and intentionally didn't do anything to stop it. First because they needed to create the illusion of wealth so that the minions would generate wealth effect from equity paper wealth and more insidiuously government officials would execute insider trades to short banks/homebuilders knowing that the house of cards was gonna fall. This was not a case of govt vs business, this was classic alliance of government and business.

indigenous says

Such as “shovel ready jobs”, minimum wage forcing inexperienced workers into
unemployment, bridges to nowhere, high speed trains to Fresno, solyndra , GM,
worthless degrees, democracy in Iraq, weapons beyond what is needed for national
defense, etc., etc., etc.

The graphs show private investment, none of your examples of malinvestment above are private investment.

http://en.wikipedia.org/wiki/Gross_private_domestic_investment

You could make the argument that the housing bubble (ie jobs created by and materials purchases for housing starts) was malinvestment.

But what does that have to do with the price of tea in China? You said private investment, I showed a graph of private investment and jobs and GDP, and you start talking about government malinvestment? WTF?

control point says

But what does that have to do with the price of tea in China? You said private investment, I showed a graph of private investment and jobs and GDP, and you start talking about government malinvestment? WTF?

So you don't think that out of 6 trillion dollars spent by the FED, none of it made it's way into the market? How come the high end retailers have been exploding in recent years, the current housing bubble, collectibles, all this while the credit market has shrunk.

Real asset price histories show bubbles very well.
Real Homes, Real Dow
http://www.showrealhist.com/RHandRD.html
But these histories are rarely shown to the people — what do you call this?
I call it “The Establishment are conpersons first.”

indigenous says

So you don't think that out of 6 trillion dollars spent by the FED, none of it
made it's way into the market?

Where do you get this 6 trilliion number?

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

11T-8.3T = $2.7T

Do I think that it all has not gotten into the market? No, if it all hadn't gotten into the market there would be zero inflation. But I think most of it has not.

indigenous says

How come the high end retailers have been exploding in recent years, the current
housing bubble, collectibles,

Capitalism flows wealth up. Luxury goods are largely dependent on high earners with disposable income - high earners earn from the rest of us. Growth is driven by demand from the rest of us.

Take a look at corporate earnings in general and wages and salaries, post crash.

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

indigenous says

all this while the credit market has shrunk.

Consumer credit market has remained stable and is ticking up since mid-2010. We are 2.5 years after this, now.

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

dublin hillz says

This was not a case of govt vs business, this was classic alliance of government and business.

regulatory capture at least, yes.

"In the summer of 2003, leaders of the four federal agencies that oversee the banking industry gathered to highlight the Bush administration's commitment to reducing regulation. "

http://dorkmonger.blogspot.com/2008/11/cutting-red-tape.html

whether they were "banking" on a resulting crash is more dubious. After all, the crash came on their watch, which wasn't very helpful to their overall cause.

But they certainly haven't lost any money on this policy disaster, so it's all good for them I guess.

indigenous says

It was both the prior is covered in this article, that you won't read,

http://mises.org/daily/2936

You can fetch the latter.

I read through it, every word. Mr. Murphy is trying to draw distinction between the rate of change of Vault Cash and Bank Reserves and demand deposits - and causing the housing bubble.

Using a chart to show an increasing rate of change (essentially the change in a change) as "irresponsibly fueling the housing boom from 2000 to 2004" is silly. Its bush league.

The rate of change in the money supply most likely averaged 5% from 2000 to 2004. It peaked at 10% around 2002, falling to around 5% in 2004.

The rate of change in the money supply went from 5% to 11% to 5% from 1990 to 1996. It went from 5% to 11% to 5% to 11% to 5% every 2 or so years from 1980 to 1988. The average rates of increase in the money supply were higher in the 80s and 90s, ie the derivative of this function from 1980 to 2006 would be downward sloping.

I don't recall a housing bubble in the 80s or early/mid 90s. FWIW, the acceleration of the stock market bubble STARTED in 1996.

Therefore, just because the change in the rate of change in money supply is sloping upward from 2000 to 2004, does not mean that money supply was expecially loose. It was more restrictive, on the average, than previous decades.

Happy to explain to you what this article is trying to say. It is complete and total hogwash.

control point says

Where do you get this 6 trilliion number?

I don't remember maybe I read it in the NYC or heard it on NBC for Chris Matthews. control point says

Capitalism flows wealth up. Luxury goods are largely dependent on high earners with disposable income - high earners earn from the rest of us. Growth is driven by demand from the rest of us.

The wealth comes from inflation trough the low interest rates in other words they can buy ahead of the inflation. Which is why you see an expansion in high end retailers. In an organic economy you are right the wealth would flow up from commerce. In this economy it flows down from the FED. This is what is meant by the inflation is not even.

control point says

Take a look at corporate earnings in general and wages and salaries, post crash.

How could it not go up after 2008?

control point says

Consumer credit market has remained stable and is ticking up since mid-2010. We are 2.5 years after this, now.

that is a 3 year window with a .16 spread which applies only to consumer credit. What about commercial credit. That does not indicated anything.

control point says

Happy to explain to you what this article is trying to say. It is complete and total hogwash.

Professor Murphy has a doctorate in economics, I don't know your credentials.

What I do know is that a bubble was created and it was not created by the market.

It may be that the money came from foreign lending. It may be that a lower interest rate would not require more money immediately.

Ok lets try this one:

http://mises.org/daily/3130

indigenous says

Ok lets try this one:

http://mises.org/daily/3130

Whoever set up their registration form is an idiot so I tend to distrust the content too.

Bellingham Bill says

clearly rising M2 is more than just printing, since the yen strengthened in
the late 80s . . .

http://research.stlouisfed.org/fred2/series/M2V

http://research.stlouisfed.org/fred2/graph/?g=qP9

(look of astonishment)

FYI I added 100 to GDP because you couldn't see both lines if I didn't as they overlapped.

indigenous says

So the increase in prices would come about without an increase in the supply of
money?

Yes.

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

Blue(prices) start higher than red(money supply), goes lower, then higher.

control point says

Blue(prices) start higher than red(money supply), goes lower, then higher

Ok for that time period. Not that it is conclusive but a lowering of the money supply certainly caused deflation in the early 30s.

indigenous says

lowering of the money supply certainly caused deflation in the early 30s.

Lowering of demand caused deflation.

control point says

Lowering of demand caused deflation.

So the money supply dropping by 30% was just a coincidence? That would mean that banks went under the money supply dropped but the real underlying reason was a drop in demand. And the fact that they both occurred at the same time was mearly coincidence.

That does not seem plausible.

indigenous says

we have had the longest recession since the great depression.

What recession? As long as I can remember when I take a cruise the ship is full. Every restaurant I go to is packed. The mall is full of people buying crap. Most people are driving new cars. I hear we're in bad shape on the TV. On the Internet too. I just don't see it.

Losers have always used the economy for an excuse for being a loser. That's nothing new.

indigenous says

So the money supply dropping by 30% was just a coincidence? That would mean that banks went under the money supply dropped but the real underlying reason was a drop in demand. And the fact that they both occurred at the same time was mearly coincidence.

Well, take a look at the image, and tell me what it appears to you is most correlated to the inflation rate.

Inflation rate is the line with the squares.

seeitnow says

Well, take a look at the image, and tell me what it appears to you is most correlated to the inflation rate.

It doesn't seem to me that a lack of correlation, is proof of the money supply not be connected to inflation.

control point says

(look of astonishment)

yes, this is because money velocity is defined as GDP/supply

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

blue is average wage

red is m2

green is m2 velocity (right)

all indexed at 1969 = 100.

1990 we had a regime change in velocity for some reason.

China? Windows 3?

Greenspan clearly responded in the mid-90s by letting the money supply go.

How much control he had over this is not something I know, this could be just rising credit ballooning via fractional reserve lending.

2002-2006 shows the bubble times as both m2 and m2v were increasing.

but then m2v crashed as people ran out of money to borrow, yet the debt remained and $3T has been QE'd into existence to grow m2 by $3T.

Just for fun, I'll add Japan m2 in yellow:

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

showing how they inflated early 1970-1990, but we've caught up 1995-now.

"green is m2 velocity (right)"

Does the plummeting green line indicate why we are not seeing more inflation?

Call it Crazy says

ELC says

What recession? As long as I can remember when I take a cruise the ship is full. Every restaurant I go to is packed. The mall is full of people buying crap. Most people are driving new cars. I hear we're in bad shape on the TV. On the Internet too. I just don't see it.

Thank God for plastic, sub-prime and cash out refi's....

Artificial propped up market, that's where I want to invest!

yes, velocity is correlated with inflation:

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

but:

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

shows how money supply is growing faster than GDP now.

The Fed throws a dollar into the economy, and it functionally disappears somewhere.

sure not hitting wages:

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

no wage inflation, no inflation, just reallocation.

Bellingham Bill says

shows how money supply is growing faster than GDP now.

Is this a ticking time bomb?

Although we do see it in the high end of the market.

hrhjuliet says

sure not hitting wages:

To me this indicates mal-investment.

You are good with these graphs where did you learn how to use them?

The money supply is a ticking time bomb, maybe.

http://research.stlouisfed.org/fred2/graph/?g=qT1

is Japan's experience.

blue is M2, red is CPI, both 1955 = 100

shows their money has doubled since 1990 while the price level is up ~10% (lack of inflation is due to lack of population growth and the strengthening yen making imports cheaper and putting downward wage pressure on export jobs)

We're not Japan, so I don't know what's going to happen. But as long as the 1% keeps taking all the money:

http://research.stlouisfed.org/fred2/series/GINIALLRH

inflation is going to be hard to find IMO.

>You are good with these graphs where did you learn how to use them?

just screwing around on the FRED site over the years.

To make a new graph I just google "PAYEMS" which gets me to their graphing portal where I can search for what I want to see.

Bellingham Bill says

is Japan's experience.

I have read where Japan has made it's money is by manufacturing goods and buying commodities at lower prices. With the current devaluing of the Yen it has made the margin on this very thin.

Bellingham Bill says

To make a new graph I just google "PAYEMS" which gets me to their graphing portal where I can search for what I want to see.

Thanks

I'm thinking that the real cause of inflation is demographics, which rarely gets mentioned. But that is still a symptom because the money supply could simply be adjusted downward. But the entire economy is so leveraged that downward adjustment causes big problems so the FED cannot do this without creating these problems. Same reason China builds empty cities. But the reality is that it only exacerbates the problem.

sbh says

3. Deflationary depression: def. "an increase in standard of living"

You say that like its a bad thing.