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It's not all demographics.
You're correct, it's not all demographics
Globalization and Technology have killed inflation in the sense of it spiraling out of control and rates can stay low for a long time as the History of the U.S. has been low rates
We can have pocket inflation where we see it in some sectors
The one thing to note... PCE inflation vs CPI have been deviating from each other for some time now and PCE inflation has been below 2% 50% of the time over the last 20 years and in time where the Fed Funds rate has been over 4%
(it has taken 8 years already)
What is that definition of insanity, something like doing the same thing over and over again and expecting different results? Maybe Janet Yellen needs counseling.
The last time people trusted the Fed to keep their real estate values stable, look what happened, Logan.
Poor underwriting leading to mass speculation and a cash out craze from 2004-2006.
In this cycle we have none of that.
Rates went up once in this cycle on the long end and what happened
18 months of negative purchase application numbers leading to an adjusted to population the lowest level on Mortgage Demand ever recorded U.S. history in 2014 and
Prices still went up because inventory is too low and their are no distress homes coming onto the market
Low rates haven't spurred any speculation
It was the over inverted thesis on non capacity owning debt that lead to the massive spike in housing inventory
Professor Sufi from Chicago Booth and I have talked about this over the years, there is a great You Tube Clip at the Conference in San Francisco in 2013 talking about this very subject
And Logan, home builders don't build too quickly when there are low interest rates and banks are not lending.
That's more an economic issue and working from an over investment thesis from the last cycle. Demographic economics were good from 1996-2007, that was a real warranted economic fact but still the cycle lead to speculation and all over heated speculation economic sectors end badly
New homes are just simply expensive too and factor why we have had the worst recovery ever on new home sales even with the lowest rates ever post WWII
Had the Fed kept the money supply stable,
If the lending standards of today were allowed to take hold back in 1996 ... the housing market would have looked a lot different from 1996-2007
That is where I see the Fed as being part of the conspiracy
:-) you're certainly an interesting man Gary, I remember our chats going back to the BusinessInsider days, now Joey is at Bloomberg
I am trying to get to the bottom of it,
tenacity is always an admirable trait
If you learn;
Teach.
When you yearn;
Reach.
If you're last;
Run.
Catch up fast
Son!
If you're stopped;
Go.
Make your fast
Slow.
Let your last breath
Be your last blow.
mispricing risk?
I believed that the Fed and a lot people didn't understand what the concept of non capacity debt is and how that multiplier impact can be damaging to the economy as it gives a false reality.
Hence why many of my articles have been consistent with the theme that lending standards are not tight today and nor we should ever ease them for the sake of financially engineering growth.
House Of Debt is a good book you might want to read.
However, in bigger context it takes more variables than just one to create a bubble, speculation is a dance that needs many partners
The Fed does create inflation, it is just not clandestine it is obvious.
Mr. Glibert
You can take this chart, it's very popular among a set of economic friends I have
BTW that peak at 1980 in your graph was caused by Chairman Martin forced to print money by LBJ who held his job over his head.
Since the US has seen globalization which has mitigated the effects of money printing.
Yes that is a very good graph, you should consider the effects it has had
"Many women, especially those in the booming textile industry, earned between $5 and $7 a week for working more than 50 hours"
http://www.historynet.com/the-first-minimum-wage.htm
Call it $7 for 50hrs, that's 14c/hr. in 1912
So by the resident kook's numbers, mill workers in Boston were making $2.80/hr. (2015 dollars) back then
But at least it was 'honest money', LOL.
The bottom line is that money -- spending power -- creates demand.
In economies with excess, idle capacity to create wealth to satisfy this demand, fiat money distributed to the masses just results in a rising standard of living and increased employment. In economies like Zimbabwe and Weimar Germany, it results in hyper-inflation (though the Wiemar inflation was such a brief event something else was going on).
As for the 1800s, so much opportunity was going idle due to an artificial scarcity of capital. People, towns, and governments had to beg the Captains of Industry to build rails, bribing them with immense gifts of the unclaimed commons to get them to invest in capital improvements that would make them billions anyway.
The 2000s is a different dynamic than then, or the 1900s for that matter. Fiat is also allowing us to float on a colossal negative investment position:
http://www.bea.gov/newsreleases/international/intinv/intinvnewsrelease.htm
This is ~$25,000 per capita right now. I don't feel good about this, not at all.
I guess buybacks are up 11%?
I read where small business lending is trending lower. Because of Dudd Frany
Commercial and industrial loans at banks rise by $11.9 billion in a week to $2.043 trillion
chart even way into 2008,
That was the Housing Bubble, the mother of all over investment thesis on the most toxic debt build up and packaging economic cycle we have ever seen. :-)
It takes a village to raise a child, it takes a entire country to work together to mess things up that bad
it takes a entire country to work together to mess things up that bad
You underestimate the Fed.
How so?
Way to much velocity power....It's like when people think Presidents can really change economic cycles,
If the Fed moved against inflation up or down, that would be a valid thesis but that hasn't been the case.
The recessions pre 1900 were longer and harder on the American people only 2 Recession post 1900 were dramatic in terms of length ...
A lot my Gold Bug Anti Fed friends always say
The Fed allows speculation to happen
However, if underwriting standards today were placed back in 1996, a lot of the excess speculation would have been taken out of line
Way to much velocity power
? velocity is beyond the reach of the Fed as we see today.Logan Mohtashami says
If the Fed moved against inflation up or down, that would be a valid thesis but that hasn't been the case.
That is not the case with Volcker.
The recessions pre 1900 were longer and harder on the American people only 2 Recession post 1900 were dramatic in terms of length ...
But there were "stimulated" with inflated/printed out of thin air money.
However, if underwriting standards today were placed back in 1996, a lot of the excess speculation would have been taken out of line
So you are saying that banks knowingly wrote bad loans?
So you are saying that banks knowingly wrote bad loans?
The loan that were created I termed them back then as Band Aid Loans
These loans had no capacity to work long term, they were only needed to bridge until the next refinance happened.
Those lenders are all gone, none exist because they created Non Capacity Owning debt .... Which allowed home ownership to be a speculation and then from 2004-2006 the cash out craze happened which made things even worse
A lot debt on debt leverage
That is not the case with Volcker.
The economy that Paul V. had to deal with is much different now. That time frame was the birth of globalization and the start of the export/import side of the U.S. where we began to import deflationary factors, hence our trade surplus now.
Technology , Globalization, Demographics killed inflation ... while creating pocket inflation
Technology , Globalization, Demographics killed inflation ... while creating pocket inflation
Seems like a stretch, as Volcker's actions correlated with the lower inflation.
These banks knowingly committed suicide?
Greed is a sickness that all men can't see when $$$$$$$$$ are around...
I call it Gold's disease
We export inflation $
We import Deflationary $
For a consumption based economy, it's not a bad deal
Greed is a sickness that all men can't see when $$$$$$$$$ are around...
Behind all bubbles are policies that create them.
Let me ask you guys this
Is the Fed 100% responsible for the oil production of all oil nations?
;-)
The same as always.... too many $ cashing too few goods...
And who controls M2?
Behind all bubbles are policies that create them.
Yep--repealing Glass Steagall is a big part of the last one.
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