patrick.net

DinOR,

A neoclassical economist would say that we "make it so easy for them" because it is in our interest to do so. This is because they equate standard of living with per capita GDP. I don't think per capita GDP really captures standard of living beyond a certain threshold (but it definitely does below that threshold; for example developing/third world countries aren't concerned about the finer points of living, just living).

newsfreak,

Since so much of this bubble has been in truly uncharted waters I think there was a certain level of curiousity on the part of the Fed and Fed watchers to see if this couldn't be a new "lever" to add to their tool bag. You've got to admit, initially it worked well. The recession was kept shallow and brief with very little pain and the HB kick started the recovery in grand fashion! I think there was a level of temptation to see if it could be used for more than just a way to stave off recessions?

skibum,

I agree that on your opinion of the Fed. I think they are good people who take their mission seriously. I was just trying to help people think through the "conspiracy" logic so they can understand the proposition and decide for themselves. Like I said, I really don't believe in conspiracy theories. People don't generally cooperate well enough to make them work (it's basic game theory).

@SFWoman

BHs = Bubble Heads = all of us here

Get the vomit bowl ready

www.msnbc.msn.com/id/12288548/

Key quote "Boomers are no strangers to drugs,” said Sallie Foley, author of Sex & Love for Grownups. “They see drugs as their friends.”

FAB,

"As we talked about before most Hummer drivers are not trying to “piss people off”, but trying to “feel bigger even they may be short (or have something else that is short)”…"

I phrased my point a bit poorly. What I meant to say the things offered by an H2 or H3, the sense of being unique and above the fray, manifests themselves as nuisance to other drivers, ie indifference to traffic situations, blocking other driver's views, and general bad driving. So, not that Hummer drivers buy H2 to be jerks, but that they become jerks when they buy the Hummer.

Or maybe it's just a self selected sample, as per your observation on Hummer drivers' height.

DinOR,

Correct me if I'm wrong, I'm just learning from you economic geeks. In fiat money systems increased liquidity is the same as increased money supply, no? So facilitating the HELOC boom with low rates, easy credit, favorable cap gains laws, and inflated appraisals of paper "equity" is a neat way to expand the money supply?

Randy H says:
Especially given that this will create very real social implications: where different classes of people can live, what schools they can attend, what colleges they can afford, etc. Land Barons, courtesy of the “free market”, and defended by fair-weather free-market fundamentalists

Several of your posts show an anti free market bias. Free markets did not cause this bubble, easy money thanks to Uncle Sam did. Do you think that banks would be so easy with credit is they did not have gov backing on loans? Would loans be so cheap if banks had only depositors money ("retail money") to lend, and not from the Federal Reserve? Think back to the Carter era for another example. Carter (in what would seem a Republican thing to do) raised the federal deposit insurance from $10,000 per depositor to $100,000. The result was that S&Ls made riskier loans and we ended up with a large bailout. You may think that bank regulation would negate the negative effects of gov insurance, but as you may recall, a few bought off politicians kept the regulators off the backs of Lincoln S&L and others.

The bubble was caused by easy credit and will pop unless the gov finds ways to pump more borrowed cash into the hands of a free spending public.

Newsfreak,

Right. I guess I meant to ask DinOR whether increasing the availability of credit is the same as increasing the money supply. I think it has something to do with the concept of creating paper money in the first place. That is, the government is somehow really just making a loan by printing money or a bank "note".

It's all new to me so you'll have to explain if you don't want your disciples wandering around half-blind.

Garth,

We are awash in capital. We're literally gagging on it. No question. The question is (in my mind anyway) after the Fed had adeptly avoided a deeper recession or even a depression why were they so reluctant to close the valve? It was so obvious that the penny ante rate hikes were having NO EFFECT of the bubble and yet they maintained this snails pace in addressing it with measured language. The now famous "froth" comment didn't come until when?

Headset,

Several of your posts show an anti free market bias.

Perhaps you haven't read enough of my posts. I am a strong proponent of free markets; probably about as close as one can get without being a free market fundamentalist ideologue. However, in the real world no markets are truly free; all of them exist within legal frameworks, fiscal policy, and monetary reality.

I don't generally make value statements about whether these policies are good or bad. I'm not smart enough and don't have the data the policy makers do. I just think through their strategy (or apparent strategy) and point out the logical benefits and shortcomings.

I do maintain a perspective which is sometimes disagreed with here: free market mechanics tend to find optimizations with unmatched efficiency. However these same mechanics favor getting "stuck" on early efficiencies and eschew taking "pain" in order to discover greater efficiencies. This is local maxima theory. Only government intervention can unstick a non-optimizing market (more precisely, one that is maximizing at a lower maxima point than is possible given the entire market function).

My favorite SpamBot from today's filter:

I am jealous of this blog. Very few comments are wrong, if any at all. I set your site as one of my favorites.Be back blogging shortly.

And I am blogous of this jell.

The average American is in over $8500 in credit card debt. That aught to mean something to a few economists.

Randy H,

You're kidding right? Thanks for sharing that. Something indeed is "in the air!"

I read a lot about “sheeple” here. It rings false to me. Arrogant psuedo-intellectual superiority. Like it or not, we are part of the herd. If you don’t accept it you’re likely to get trampled or left behind. None of us is nearly as strong as all of us.

Perhaps I'm just kidding myself, but I like to think there are two alternatives to being a sheeple: 1. shepherd, 2. wolf :-)

From the wisdom of Pink Floyd (Animals):

Most people fall into three categories:

* Pigs
* Dogs
* Sheep

I don't fancy the outcomes for any of the above. I'll chose to be one of those rare foxes and take my chances running from the farmer and his dogs, thanks.

Correct me if I’m wrong, I’m just learning from you economic geeks. In fiat money systems increased liquidity is the same as increased money supply, no? So facilitating the HELOC boom with low rates, easy credit, favorable cap gains laws, and inflated appraisals of paper “equity” is a neat way to expand the money supply?

Exactly. And because this method of money expansion is dificult for your average sheeple (sorry Garth ;-) ) to understand, it is a lot more "stealthy" than simply running the printing presses night and day, al-la Weimar Republic. Unfortunately, it is also notoriously difficult for the Fed to "steer" the money in any particular direction. The money gets lent to whomever and for whatever purpose the banks believe will maximize their return. So a lot of it ends up in sub-prime RE lending and the international carry trade.

...and by disavowing home owners of their equity savings accounts the Fed very effectively changes the overall money multiplier. It's a way to increase the money supply without printing any money.

Garth,

They're called sheeple because they're (1) easily lead (by shysters) (2) to their (financial) slaughter. This isn't pseudo-intellectual anything, it's everyday observation of people killing their financial future in an end stage pyramid scheme.

As for me, I'm going to be clam when RE fallout happens.

Those of you who fancy yourselves to be wolves, go ahead run wild.

I will continue to believe that the natural state of man, outside of society, "is solitary, poor, nasty brutish and short." But you are surely a better man, an ubermensch. (sp?)

@Garth,

You only read part of what I wrote. The other alternative is to be a shepherd. You can try to guide the flock away from the cliff of self destruction. It's a thankless and frustrating job, I know, but someone's got to do it. :mrgreen:

Die Schafleute

Literally sheep-people

Hey, isn't it about time for DinOR's "ideal buyer in a bear market" thread?

Garth,

Sounds like you're mixing your Locke and your Hobbes. Just because we live in society doesn't mean we're all equal. This isn't a binary choice.

SF Woman,

There are three material things I cherish. First, and foremost is the rocking chair I rock my son to sleep in.

Second, my computer and accompanying paraphernalia.

Third, my F150. I may not be very big around, but I'm short.

Overconfidence Bias, well established and studied.

It's 80% of all drivers believe themselves to be above average, which highlights the contradiction. I only know of one self-admitted below average driver, and he blogs here.

I only know of one self-admitted below average driver, and he blogs here.

Who is he?

Who is he?

I'd never reveal.

Since I also admit to be a below-average driver, perhaps you know two now. :)

arg. it won't post my stuff

SQT,

Now there are two people who get me, you and my psychiatric social worker.

I just have a visceral reaction to the contempt many Patrickans display for the general public. A little bit of moral superiority goes a very long way.

Spam or NotSpam: You make the call (reasonably sophisticated SpamBot, perhaps) --

http://www.realestateabc.com seems to be have better response and less clicks to find the house price when compared to zillow.com.

By the way I see the price trending down (Bay Area,CA) and the http://www.realestateabc.com pricing is more conservative than zillow.com pricing.

But chances are we all belong to one group or another. I’m ok with belonging to the Patrick.net herd.

True. While I'm revealing obvious bias by saying this, I believe that Patrick.net bloggers are --on average-- a good deal sharper and more aware of what's going on in the world than your average sheeple. This may sound arrogant or even elitist, but I believe it it's true, especially when you look at some of the occupations and education level of the regular contributors here (unless everyone's lying through their teeth, of course ;-)). For the most part, we appear to be a fairly intelligent self-selected group of contrarians and skeptics. Perhaps this holds true for most contrarians.

Contrarianism requires a careful mix of rare intellectual insight and a borderline neurotic need to do things the hard way.

I just have a visceral reaction to the contempt many Patrickans display for the general public. A little bit of moral superiority goes a very long way.

Garth,

The real question is, is this contempt justified by the real-life behavior and actions of the general public. Do you see evidence of mass/herd psychology with regard to the housing bubble, and the Dot.com bubble before that? How much actual time/thought does the average NAAVLP homedebtor give to the largest purchase of his/her life?

How good would you say the average American's critical thinking skills really are? Be honest.

Senator-X (aka Tailgunner-X) has never been able to prove that I am now or ever have been a troll. But it's obvious by now that I'm a fellow traveler.

That said, I'll offer up this little dish of shadenfraude for my friends at Patrick:

http://www.kcra.com/employmentadvice/8768224/detail.html

And, h/t to http://www.sacramentolanding.blogspot.com/

I hope the markups work.

Harm,

How good would you say the average American’s critical thinking skills really are? Be honest.

Not so much. I'm just not that sure about my own either.

I must admit I've learned a lot from Patrick.net.

New thread c/o DinOR: Negotiating 101

Sometimes the herd gets lost. Even highly intelligent "herds" of whales sometimes throw themselves upon the sand. Questioning the wisdom of the herd makes one an elitist wacko unless s/he turns out to be right, then s/he's labeled an opportunistic profiteer.

Randy,

I agree, but when in doubt I'll ususally tend to follow the herd. Call it survival instict.